Year 2011 in brief

Key Figures
CEO's Review
Business segments in 2011
Operating environment in 2011
Case Gallery

Digia now and in the future

Digia in brief
Digia's mission and vision
Implementing the strategy
Personnel

Governance

Board of Directors
Group Management Team
Corporate Governance Statement
Statement on Digia Management Emoluments
Board of Directors' Report

Financial Statement

Consolidated Income Statement
Consolidated Statement of Financial Position
Consolidated Cash Flow Statement
Changes in Shareholders' Equity
Basic Information of the Group and Accounting Policies
Notes to the Consolidated Financial Statements
Calculation of Financial Ratios
Parent Company's Income Statement
Parent Company's Balance Sheet
Parent Company's Cash Flow Statement
Basic Information of the Parent Company and Accounting Policies
Notes to the Parent Company's Financial Statement
Signatures to the Board's Report and Financial Statement
Auditor's Report
List of Accounting Books

Investor information

Information for Shareholders
Shares and shareholders
Stock Exchange Releases
Offices
Contacts

CASE: S GROUP

Key figures

	2011	2010	2009	2008	2007
Net sales, MEUR	121.9	130.8	120.3	123.2	105.8
Operating profit, MEUR ¹	8.1	17.2	16.9	13.4	11.1
Cash flow from operations, MEUR	8.8	11.1	20.2	15.5	6.2
Earnings per share before extraordinary items, EUR ²	0.32	0.56	0.53	0.36	0.29

¹ Extraordinary items are not included in operating profit for the segment. A goodwill writedown of EUR 23.8 million and a restructuring provision of EUR 0.9 million were included in extraordinary items for 2009. EBIT after extraordinary items totalled EUR -7.8 million in 2009. A customer relationship and goodwill writedown of EUR 25.4 million and a restructuring provision of EUR 4.9 million were included in extraordinary items for 2011. EBIT after extraordinary items totalled EUR -22.2 million in 2011.

² Earnings per share before extraordinary items has been calculated from earnings for the period before the deduction of extraordinary items. Taking account of extraordinary items, earnings per share were EUR -0.67 for 2009 and EUR -1.08 for 2011.

CEO's review

In the future, Digia will look different, and we are confident that the change will be positive. Our gaze is firmly set on the future; in response to market changes, we have revised our strategy and restructured our organisation.

The year 2011 was a transition period for Digia. Market changes in the mobile sector had a major impact on our operations. We took tough steps to adjust to the new market situation. Some of the measures taken involved letting go a significant segment of mobile area experts, as well as to close offices in the cities of Pori and Lappeenranta.

Regardless of the difficult year for all of us, we achieved a good result in Enterprise Solutions. Early in 2011, we acquired the Qt Commercial licensing and service business from Nokia. We have been able to develop this positively, and in accordance with the expectations. We have also continued to market our multi-channelled and wireless solutions, while working hard on the user experience of our product range.

Eyes firmly on the future

In the future, we will focus even more on our scalable product business, as a complement to our profitable and stable customer specific business. Through scalability, we will seek growth both abroad and in Finland. We will also focus on growth in chosen new markets, especially Russia. In addition to the above, key success factors in Finland are closeness to the customers and deep industry knowledge. Our technological expertise and innovativeness will help us to achieve these goals.

I am excited about our new direction. I strongly believe that Digia will become an even more preferred solution partner, a more popular place to work, and an increasingly profitable investment.

Inspired experts behind the success

I am thrilled by what our talented employees have achieved during the year. Customer satisfaction remained high and we brought a huge number of projects smoothly home. Our expertise achieved national recognition, when Excellence Finland chose our Oiko.fi cloud service as Quality Innovation of the Year.

Digia has also provided many employees with new challenges. In buying the Qt Commercial business, we warmly welcomed new members, based in the US and Norway, to Digia. Some employees also moved from Mobile Solutions to Enterprise Solutions.

Into the new year together

I want to thank our customers for their cooperation, and our shareholders for trusting in our success. My special thanks go out to all Digia employees, not only for your top-level expertise, but your resilience and persistence during the year.

Juha Varelius President and CEO

Business segments in 2011

Enterprise Solutions grew and demand is expected to remain high
Development of ERP system solutions and services expanded into new sectors
Digia's mobile business expertise will have special focus on developing multichannel business solutions

Digia's Enterprise Solutions segment grew moderately. The company expects high demand for these solutions to continue.

Solution and service development is focused on industry specific solutions, and product support from a strong partner network.

Digia's long history and expertise in the mobile business will have a special focus on creating multichannel business solutions. Delivery projects will emphasise customer-oriented usability planning.

Enterprise Solutions grew moderately, as expected

Demand for ERP systems and industry verticals is steadily growing
New products and customer relationships were developed within the financial sector
Novel products for association business sector were introduced

Digia's IT solutions satisfy the daily business needs of companies and organisations. These solutions are based on our own or third-party software products and include services for their entire life cycles.

The Enterprise Solutions business developed according to the plans, excluding a few exceptions, and grew moderately in 2011. Towards the end of the year, consumer caution increased in the general economy. Regarding major investment decisions in early 2012, slight delays are expected. Nevertheless, in the longer term, Digia forecasts that the demand for these solutions will remain high.

Broader demand for industry verticals

The demand for ERP systems has remained strong, and the business has grown steadily. Last year was characterised by marked growth in the role of industry-specific sector verticals. Digia's recent vertical deliveries include solutions for the retail and logistics sectors.

Companies face growing integration demand

The demand for Digia's integration solutions grew steadily in 2011 and growth is expected to continue. In particular, demand for service-oriented architecture (SOA) as well as event-driven architecture (EDA) delivery projects increased throughout all sectors.

Recognised partner in Portal management solutions

Digia's Portal Services invested in developing Oracle WebCenter and Microsoft Sharepoint 2010 competences. This led to Digia being chosen as the top Oracle Fusion Middleware partner for 2011. Customer demand was strongest for electronic desktops, document management and self-service solutions.

Large market share retained in financial sector and for associations

Digia maintained its major market share in software for the financial sector and associations. Financial sector portal and mobile products were actively developed, and Digia expanded its customer base for banking systems.

Digia renewed its e-services system for unemployment funds and trade unions. Document management and electronic membership cards were added to the offering.

Mobile Solutions business reduced significantly

Digia is a long-term provider of mobile services
Major changes in mobile market ─ personnel capacity readjusted to demand
Efficient, customer-oriented services will continue

Digia has a long, successful history as a provider of mobile solutions. That is based on unique expertise and broad experience. High customer satisfaction reflects Digia's reliability and commitment to high quality.

Product creation services hit by permanent fall in demand

The year 2011 was a time of huge change in the mobile business. A key customer announced a major strategic change early in the year. This had a permanent negative impact on demand for Digia's product creation services.

In certain technology platforms, the change was extremely swift and Digia experienced the main impacts in 2011. As a result, Digia was forced to reduce its capacity in Mobile Solutions. Adjustment measures included closures of offices in Pori and Lappeenranta, plus staff reductions elsewhere in Finland.

Usability expertise as part of delivery projects

Digia has reorganised in response to the market transformation mentioned above. This restructuring will ensure the continuity of efficient, customer-oriented services also in the future.

In Mobile Solutions, Digia will continue to offer comprehensive solutions covering the entire mobile product development life cycle – from designing inspiring user experiences, to launching and maintaining new solutions.

Digia's offering will shift more strongly towards early stage product development. Here, Digia's usability expertise can be brought even closer to delivery projects. Independent management and delivery of software entireties are the basis of this business.

Regarding technologies, Digia will continue to support its previous platforms, with a focus on Qt, Linux and E2E solutions.

Major changes in Digia's operating environment in 2011

Interest in opportunities provided by multichannel services increased
Cautiousness related to the global economy situation increased towards the end of the year
Changes in the mobile sector forced Digia to readjust, but also spurred growth and innovation

Many customer segments faced major changes in 2011. The mobile sector experienced the most fundamental shift: fiercer competition between technology platforms and strategic choices by Digia customers.

The weakening economic outlook led to uncertainty towards the end of the year. Demand for information system solutions was high, almost year-round. However, decision-making in Finland began to reflect the uncertainty in the Eurozone and global market.

Demand accelerated for multichannel solutions and services. With markets waking up to the clear benefits of mobile operations, a roadmap started to form for the overall development of mobility. Digia believes that 2012 will be a breakthrough year. Multichannel solutions, independent of time and place, will yield efficiency, productivity and good customer experiences.

Use of financial sector services, regardless of time and place

In 2011, Digia strengthened its position in back-office systems for asset managers and small and medium-sized banks. Digia extended its banking system and online banking functionality, leading to higher demand. As smartphones and tablets proliferate, Digia has also expanded its mobile solution range for the financial sector.

Radical changes in the public sector: serving more people, with fewer resources

In public sector system projects, competition intensified in 2011. Projects aimed to provide services to more public sector clients, but at lower cost. Some public sector services were digitalised, for online self-service. The Finnish public sector also relied on tailored software suitable for their solutions. In some sectors, these were even internationally compatible systems, which is a significant change.

Competition for consumer loyalty, and improved customer service, intensified in retail

In 2011, there was a growing need to manage value chains using real-time data. Demand grew for information systems that give timely access to labour and improve in-store efficiency. These systems optimise time use, freeing up time for developing the in-store customer experience.

Digia responded to retail sector needs with the Digia Smart Store concept. This combines retail chain management and store solutions into a package covering the key needs of general and specialist retailers. An increased interest in the mobile aspects of Digia Smart Store developed during the year. Mobility and real-time data, independent of time and place, enable retail professionals to focus on their work and customers.

Radical changes in mobile sector create new opportunities for Digia

In the mobile sector, Digia is known for its strong expertise in chosen technology platforms. Excellent knowledge and closeness to the customer constitute the strong foundations of Digia's business. In early 2011, a crucial customer announced a fundamental strategic change. This had a permanent negative impact on demand for Digia's product creation services.

In certain technology platforms, changes were extremely swift. The major effects of this were felt by Digia's business in 2011. To adjust to this major shift in the market, Digia had to reduce its capacity in Mobile Solutions.

Digia's strengths include outstanding technological expertise and the ability to acquire knowledge in new technologies that respond to businesses' demand. To better serve its clients, Digia is channelling its mobile competence into new areas. The company has a very broad customer base in enterprise solutions. Digia also understands the multichannel needs of business and consumer services, in various sectors. Combined with mobile technology competence, this understanding and expertise provides Digia with unique opportunities to build new, growing business in the rapidly developing mobile market.

Business environment 2011 in other customer segments and internationally

Key forces for change in other customer segments included an increasing need for efficient workforce and mobile workforce management. Another was demand for the creation of good, differentiating customer experiences.

Internationally the year 2011 can be described as a year of breakthroughs. In Russia the company expanded its clientele especially in ERP systems. Russian companies make up a significant amount of new customers.

Case Gallery

Digia's customer

Digia is known for its ability to listen to customers. We are also valued for our agility. This agility is often seen in the way we swiftly adapt direction, according to customer needs.

Service Level Management improves Elisa's customer deliveries

Improved customer experience
Systematic troubleshooting

Service providers must enable customers to monitor their actual service levels. With continuous and consistent service level management, customers can verify that purchased services are cost-efficient and meet their business requirements. In addition, service level management reports help service providers to locate problems in their business processes.

Systematic service level monitoring

Digia and Elisa have been collaborating for years on Service Level Management (SLM) and Service Level Agreement (SLA) monitoring and reporting.

Elisa is the leading Nordic countries' producer of communication services. The company also operates in Russia and the Baltic countries. Elisa offers a wide range of subscriptions with services. It serves about 2 million consumers in the region, and around 150,000 companies and public sector organisations internationally. Globally Elisa cooperates with Vodafone and Telenor.

Digia's collaboration with Elisa has included service level management definitions and conceptualisation. In terms of SLA reporting, Digia has been responsible for defining, implementing and testing reporting methods and the related services. Service level management and reporting are based on data gathered from Elisa's various operative source systems, and on the CA Business Service Insight monitoring and reporting system.

Controlling malfunctions

Both SLM and SLA were focused on Elisa's internal operations, supplier network and end customers. The benefits for Elisa have been improved customer deliveries, more effective fault management, higher operative efficiency, closer monitoring of suppliers and a better service experience for end customers.

Better production management for Ojala Group

Greater precision in material and production management prevents over- and under-loading
A more flexible production ensures better customer service

Ojala Group is a contract manufacturer of sheet metal mechanics, with long experience. It makes sheet and flat bar engineering products and components, for international machinery and equipment manufacturers. Ojala Group's services include manufacture and assembly of high-quality engineering components, as well as turnkey system deliveries.

Challenging offer calculation

Ojala Group needed to modernise several tools, as well as its offer calculation, and ERP systems. Production management required development to provide better business support. In addition, all units in Finland, Central Europe and Asia needed to be aligned under the same system.

The new ERP system had to be capable of extremely challenging offer calculations and fast, high-volume production. All products are made to short lead times, against fierce competition.

Preparing for the future

In early 2011, Ojala adopted the Digia Enterprise ERP system in Finland and Europe.

The new system provided greater precision to production cell management; prevention of cell overloads and under-loads is even more efficient. Using pre-made models, offer calculation now takes account of all product cost components. This allows sales to process more offers in less time, with less risk of human error.

"The main purpose of our new ERP system is to meet future challenges," explains Ojala Group's Director of ICT, Erkki Kontiokari.

Next, reporting and wireless solutions will be connected to the system.

Automated loan system for Risicum

Invoicing, payment monitoring and ledger become automated
The system is suitable for continuous business growth

Risicum Plc is Finland's biggest provider of small and short-term loans. The firm lends unsecured sums of up to EUR 1,000 to private individuals. Risicum is owned by the US consumer financing specialist DFC Global Corporation and provides services to approximately 200,000 customers.

When Risicum was founded in 2005, loan approval was handled internally. As the business grew and developed, the company wanted to improve its loan management system. This change induced a complete modification of the earnings logic component of Risicum's business model.

Digia began cooperating with Risicum in 2009 and in 2010 the company adopted Digia's loan management solution. The system traces all 'back office' functions after a loan has been granted.

Automatic invoicing and reminders

Around 95 per cent of Risicum's customers apply for loans online.

When a loan is granted, the money is transferred to the customer's bank account. The following day, a bill is automatically sent by the Digia system, which also monitors loan repayment. If no payment arrives by the due date, it sends an automatic reminder by both email and text message.

If, despite reminders, the loan is not paid off on time, the system automatically forwards the case to credit control.

Small sums, large quantities

Digia's loan system handles daily cash balancing. In addition, it also works as a ledger, recording account withdrawals and income information, and making payments to banks. Information is sent straight to bookkeeping. The solution is integrated with Risicum's CRM system.

Risicum's small loans are quite different from traditional financial solutions; while each sum is small, the number of transactions can be significantly large. Such amount of data requires extensive automation of the entire process.

Transparency and cost efficiency for Trafi's Information Management

Harmonised practices benefit a multi-organisation agency
Efficient use of resources improves customer service

The Finnish Transport Safety Agency (Trafi) regulates and monitors Finland's transport system. It also develops the transport system's safety and promotes the environmental friendliness of traffic. Trafi was formed by merging the Finnish Vehicle Administration Centre, the Civil Aviation Authority, the Maritime Administration's Maritime Safety Training Centre, and the Rail Administration.

As a new agency, Trafi aspires to improve its information management support services. The system that was implemented supported the agency's start-up through shared processes.

Framework agreement basis

Under a framework agreement signed by Digia Plc and Hansel Ltd, Trafi adopted Digia's Service Desk Management system. The system is used to manage internal service request handling. This can involve workstations, telephones, data traffic, applications, office technology, and user IDs or rights.

Shorter solution times

Thanks to Service Desk Management, Trafi's information management support services are more efficient and customers get smoother, higher-quality service. Higher efficiency also means faster trouble-shooting and better use of resources. Improved reporting raises the efficiency of process monitoring and steering. Since they are more transparent, processes are now easier to manage.

The project benefited from specifications and implementations previously made under the Hansel agreement. As a consequence, Trafi gained a localised and comprehensive event management support system at a reasonable effort and cost.

Managed content creation for TUT

Content creation is distributed easily
New technology platform enables system scalability

Tampere University of Technology (TUT) is an international institution that specialises in technology and architectural research and teaching. Initially formed as a foundation, it employs around 2,000 people, of which 80 per cent work in teaching, research and support functions.

Distributed Tutka

TUT needed a new system platform for its staff intranet, Tutka. The university has long experience of distributed content creation practices for news content in particular. These practices are ruled by strong principles, therefore TUT wanted to develop this further. Quality classification of content was fundamental to this overhaul.

Together with Digia, TUT chose Oracle UCM Content Server as the new platform. This comprehensive content management package is a durable, reliable basis for diverse content production and management, which also enables user-specific functionality.

Help from automated classification rules

The new platform allows intranet content to be classified (during the creation phase) through built-in, automatic classification rules.

Based on the organisational structure, an in-built Site Admin level is utilised so that departments can produce and manage their own web pages. User friendliness means anyone can create content for a chosen news item depending on the data security classification of the publication channel.

Through this new technology platform, system content and functionality can be expanded as needs grow. As content diversifies, users can be provided with, say, increasingly refined and targeted services, which will help them find the information they need.

Facilitating shift management at SOK

Tempus 'shift management' service facilitates workforce mobility and organisational learning
Improved and user-friendly service is available 24/7

S Group has around 1,600 outlets in Finland. The group consists of regional cooperatives and, under their ownership, the SOK Corporation.

Efficient shift allocation

Previously, S Group managed shift allocation through several channels; some store supervisors used mass text messages, other contacted staff directly by calling or texting. In many cases, employees are also offered extra hours outside their own cooperative.

S Group decided to improve its shift management, particularly by integrating and stardadising the shift offering practices. The aspiration was to improve extra hour allocation for part-time staff. Such staff account for more than half of the Group's employees.

Help in everyday management

With Digia's Tempus service, offering shifts to suitable staff is made easy and efficient; the supervisor selects the store and shift times and Tempus automatically finds employees with the right skills and availability and desire to work at the store.

The system then sends the work offer by text message and a confirmation is later sent to employees deemed suitable by the supervisor. Unsuccessful candidates are also informed of the decision.

Digia iSuite has been used to integrate Tempus with S Group's shift management system.

"User-friendliness was important from the start and our supervisors appreciate this Tempus' characteristic. They are also pleased with the automatic transfer of shift data to the shift management system. This reduces duplicated work and improves supervisors' time management," reports HR expert Anna-Kaisa Hakala, of SOK's HR unit.

Banking functions for SAV-Rahoitus

Automated account handling, bookkeeping and payment traffic
Modularity provides easy scalability and modification

SAV-Rahoitus is a Finnish financing company that specialies in vehicle finance. It is listed on the OMX NASDAQ First North list in Finland. SAV-Rahoitus has been operating for over a decade. During that time, around 100,000 Finns have applied to the company for credit or financing.

SAV-Rahoitus is planning to apply for a banking licence. This would allow the company to accept deposits from the public, thus becoming a savings bank rather than a financing firm. Operations would then be based on online banking.

Digia built SAV-Rahoitus, a system for banking deposits, based on its Financial Systems suite. The system provides basic banking functionality such as deposits and withdrawals and also includes report and interface supporting features.

Automation is critical to online banking

Digia's system allows SAV's clients to register as banking customers, make transfers from other banks and set up savings accounts online. Interest payment and maturation functions for savings accounts guarantee effiency, thus manual action is rarely required from the bank. Internal invoice processing, data updates, bookkeeping, and payment transactions are nearautomatic.

TUPAS, the Finnish banks' shared authentication system, guarantees data security.

To make the system easy to expand and develop, the online bank was created in modules. The Digia Financial Systems solution includes loans and credit accounts as well as banking functions. It also provides all reports needed by the customer and the authorities.

Comprehensive solution

"In testing, the system has functioned well and met our needs. I believe it will also serve us well in our financing operations, even if we don't diversify into a savings bank," says SAV-Rahoitus' CEO Harri Kalliokoski.

CASE: OJALA GROUP

Digia in brief

Digia is a Finnish software solutions and services company. Our nearly 1,200 professionals create inventive solutions and bring success for people, businesses and communities in everyday life. We improve our customers competitiveness with multi channelled enterprise solutions that improve effectiveness and customer experience. Our customers trust our insightful specialists, our deep industry comprehension and recognised wide-ranging technology know-how. Our innovative products are within reach of people around the world.

We deliver ICT solutions and services to various industries, focusing especially on finance, public sector, trade and services and telecommunications. Digia operates in Finland, Russia, China, Sweden, Norway and in the U.S. The company is listed on the NASDAQ OMX Helsinki exchange (DIG1V).

www.digia.com

How success is created: Digia's strategy in brief

Competitive service business creates a strong cash flow
Scalable software-based product business and new market areas motivate growth
Continuity is guaranteed by motivated personnel and a healthy balance between short-term earning power and future growth

Fulfillment of Digia's vision for 2014 is based on these strategic cornerstones:

Maintaining competitive and innovative service operations, which ensure a steady cash flow and moderate growth. The key is to create value for the customer's business through customer-based operating models and solutions.

Scalable business models will be developed alongside the current portfolio, for accelerated growth. To achieve this, services will be productised into duplicable, industry specific packages of solutions and the related services. In addition, software and services will be developed for international online distribution.

Growth potential will be increased by expanding the domestic market into new areas of rapid growth such as Russia. Short-term earning power will be balanced with long-term sustainable growth through steady investment management.

Employee motivation and commitment will be a focus. The company's image as an attractive employer will be developed.

It will be ensured that the company's management, structure and operating models create a parallel support in order to achieve the strategic goals.

From vision into action: implementing the strategy

Understanding customers' needs and creating value
Strategic portfolios and different business models
Organisation and management focus

Success lies in the ability to understand customer needs and respond by creating value. Nevertheless, the value creation method varies.

Some solutions are carefully tailored to their unique operating model. On the other hand, some solutions include established industry models and practices, tailored whenever necessary. Some benefit from quickly adopted software or services, delivered online.

Ability to understand customers' needs and produce just the right solutions is critical to sustainable and profitable growth, as well as for greater shareholder value.

Strategic focuses

In order to ensure the fulfillment of its strategy, to secure a promise-fulfillment-chain optimised for various business models, and to provide a return on its investments, Digia has divided its business into four strategic focuses. These form Digia's business units from the beginning of 2012:

Solutions & Services business unit: Customer specific solutions and services
Industry Verticals business unit: Industry specific, duplicable software solutions
International Products business unit: International product business
New Market Areas business unit

Support operations such as key customer industries and marketing, expertise and capacity management, strategic development, and business support will be led horisontally across all business units.

Customer specific solutions and services

Architectures and technologies that conform to changing business needs
Digia's in-depth technological expertise and comprehensive services support the entire system development cycle
Innovative mobile and online solutions satisfy multiple customers' need

Digia's Solutions & Services business unit delivers technological applications and services that support the customers' business.

As the business environment becomes global, and web services increase Digia helps its customers to build highly competitive and personalised customer experiences, and offer 24/7 services that are valued by end customers, therefore they stand out from the competition.

Architectures and technologies lasting long into the future

To meet the fast technological changes and the needs of businesses, users and customers, IT systems must enable integration, data security and personalisation. Users should have access to relevant information on various devices, independent of time and place.

Based on services and off-the-shelf products, Digia's solutions link the customer's business strategy to a supportive IT solution. This means success in flexible information sharing between users and systems, and in leveraging new channels such as social media.

Digia aims at producing and commercialising leading technological platforms that allow systems to be connected to new electronic services, through standard interfaces.

Services for the whole system development cycle

Digia's portfolio includes solutions and services that cover the entire system development cycle from architecture, concept and user interface design in to software development, integration and maintenance. Digia's portfolio specialises in:

Product creation services and technology or customer-specific centres of expertise
User experience services and conceptualisation
Consulting and architecture services
Mobile and online solutions

Digia offers innovative mobile and online solutions for customers

Long-term customer relationships, industry-specific expertise and mobile solutions; this combination provides a strong platform for Digia's innovative, end-to-end service production. Operations are based on leading technology platforms, strong technical expertise, knowledge of the customers' business, and conceptualisation.

Digia's productised design process covers user, business and technology needs. It combines these with the opportunities created by rapidly changing markets. Digia innovates successful solutions for its customers' needs.

Industry specific, duplicable software solutions

Duplicable business concepts and solutions introduced to chosen industries
Multichannel capability in ERP and operating systems, as well as portal and integration solutions increase efficiency
Deep knowledge of industries facilitate project implementation

Digia's Industry Verticals business focuses on duplicable business concepts and solutions, in chosen industries. For retail, Digia has developed the comprehensive Digia Smart Store concept. This solution will solve the challenges posed by growing competition.

Complete system portfolio based on own and third-party products

Wholesale and retail, manufacturing industry, services, financial sector and associations are among the chosen sectors. In each sector, Digia offers customers a complete system suite. Digia's own products and those from suitable technology partners are included. Digia's service range covers high-quality implementation services and comprehensive system life cycle services, from support services to maintenance and hosting.

Product based system projects are easier to implement

Industry Verticals offers product-based software solutions and related services to new and current customers. This is supported by in-depth industry knowledge. The portfolio's core comprises ERP systems, financial sector and associations operative systems, and related portals and integration solutions.

Technology partner solutions and ERP sector verticals flexibly supplement the portfolio, which means faster implementation and less risk in system implementation projects.

Multichannel solutions improve efficiency and user experience

Because Digia's product solutions increasingly support multichannel use, they can be used on mobile terminals where needed. Mobile technology expertise makes Digia a unique developer of mobility in corporate ERP systems.

System mobility will be important in the future and will allow more-efficient system use. The objective is that the right information will be in the right place at the right time. In addition, systems will become more user friendly and the overall user experience will be significantly improved.

International product business

Development of existing products, and new investments are the basis for growth
A strong international office network contributes to growth
Digia Ventures develops easily scalable cloud solutions, Qt Commercial produces licences and services for 3,500 businesses

Digia's International Products aims to grow by developing existing products and their sales, and by investing in new growth projects. The backbones of this business unit are the Qt Commercial business, acquired in March 2011, and Digia Ventures.

In a challenging international software market, specialised expertise and broad customer knowledge are needed. During 2011, Digia responded to these challenges by opening new branches in Norway and the United States. These new offices are located in Oslo and Santa Clara, California. For Digia, an international office network and experienced international sales force will be major factors in achieving strong growth.

Broad client-base for Qt Commercial

The Qt Commercial development environment is actively used by some 3,500 desktop and integrated software customers. These customers represent a wide variety of sectors, including consumer electronics, finance, aeronautics, energy, defence and media. The main markets for the licence sales are the United States, Germany, Italy, United Kingdom and Japan. The majority of the Qt Commercial turnover is generated by licence sales.

Digia has invested in Qt Commercial licensing and service operations. This forms a solid operational basis and speeds up development of business solutions using Qt. It also means that more and more customers can benefit from Digia's services.

The growing use of Qt has increased the need for reliable commercial support and services. As well as avoiding the restrictions of open-source licences, many Qt Commercial customers appreciate a business relationship offering professional, efficient support and services. These ensure the success of the customer's own software-intensive business solutions.

Digia Ventures innovate in next-generation software solutions

A source of growth opportunities, the international software business also needs investment in the future. Digia Ventures is developing the next generation of software solutions.

Digia Ventures is approaching the market through easily scalable cloud solutions, which are provided directly online. Its browser-based and mobile products are independent of place and time. The business models are also innovative: aside from a small fixed charge, customers only pay for what they use. Start-up costs are generally very low, or non-existent.

International product business as a growth driver

Digia's strategic objective is to be an internationally operating growth company. It will continue investing in this area in the future. As a return on its investment, Digia seeks growth clearly above market average, while keeping profitability in focus.

New Market Areas

Rapidly growing markets constitute the main focus for the future
ERP system solutions and services are tailored for specific groups
Local market solutions are being aligned with overall product portfolio

Digia's New Market Areas segment seeks growth, by expanding local business into new markets. The short-term emphasis will be on business development in the rapidly growing Russian market.

The people from Russia value Finnish quality. Knowledge of the local business culture, and the ability to network in a new market are the key factors for success in that market.

Software-based solutions adapted to the local market, and the related support services, lie at the unit's core. A new offering is also being developed for the target market that has synergies with Digia's general offering. This provides market potential in Finland too.

Service operations and duplicable software solutions

The operational focus is on duplicable, industry-specific software solutions. Nevertheless, service operations that support recognition and market capture will also be developed. Nearshore services will also be offered to ensure the competitive edge and resource availability of Finnish operations.

In particular, the unit offers ERP and BI solutions aimed at the retail, distribution and logistics sectors. It also provides software development services for operators and other selected focus groups.

Growth based on active customer gain

New Market Areas aims at rapid organic growth, mainly by developing new customer relationships. It will also achieve this by expanding its product range for existing customers. Carefully considered mergers and acquisitions are another way of achieving this objective. An initial, small-scale acquisition was made in 2011.

Digia's Russian branches are located in St. Petersburg and Moscow. At the end of 2011, they employed 48 persons.

Creating value by understanding changes in the customer's industry

Creating efficiency, productivity and competitive edge as change accelerates
Understanding industry changes leads to value-generating solutions
During change, commitment to value creation requires partnership

Information system investments are made to improve efficiency or productivity. Specific competitive edge, or support for deep operational change are also sought after from these investments.

Digia is known for its ability to listen to customers. The company is also valued for its agility. This agility is often seen in the way Digia swiftly adapts and changes direction, according to customer's needs.

Digia is a reliable partner during customer's industry changes

Digia's customers face new, rapidly changing challenges in the fast-changing global economy and competitive environment. For example, a swift change forces a company to re-examine its vision and update its strategy at shorter intervals.

Through industry leadership, Digia aims to be a reliable partner for its customers during their industry change. For this, Digia must be able to identify with the customers' vision and understand its strategy, from the perspective of industry change. Together with the customer, Digia seeks answers to the following questions: How to support efficiency, productivity and competitiveness? How to achieve fundamental business transformations with a modern IT strategy and information systems?

Growth partner for telecom operators

In general, the telecom industry faces the challenge of growing in highly competitive markets. Consumer behaviour has changed: customers change operator at will and no longer settle for basic subscriber services. The range of handsets is growing fast. While offering new possibilities, this challenges operators to develop innovative service concepts.

Digia's long history, as an expert in mobile technology and enterprise solutions, is an excellent basis for solid telecom partnerships. It enables Digia to create value for customers through new services and systems.

Better services for financial industry, at lower costs

Recent years have seen significant changes in the banking and insurance industry. The market is consolidating, as companies merge. At the same time, new operators and services are appearing, alongside new modes of service provision. Industry change drivers include global economic uncertainty, increased regulation and capital requirements.

Digia has a long history in providing financial management solutions. In recent years, its solutions have expanded into banking systems and online services. For Digia's customers, these increase cost efficiency, make winning new customers easier, and enable excellent customer experiences.

Digia as a gateway to public services

Public sector cooperation is intensifying, as management centralises. Public service users are growing in number, but there are shrinking resources for producing them.

Digia provides a firm basis for deepening cooperation, through its solid experience of the public sector and its changes, and its ability to produce e-service solutions.

Digia optimises all parts of the retail value chain

The retail industry is continually changing. Fiercer competition, globalisation, the need for greater efficiency throughout the value chain and new consumer expectations – these are putting change pressure on retailers.

Already a renowned partner of retailers, Digia provides solutions for multichannel service provision, and value chain integration and optimisation. Digia's Smart Store concept rises to today's retail industry challenges, all the way to store automation.

Competence and teamwork as basis of success

Holistic grip on competence development supports high-quality solutions
Effective teamwork guarantees quality in customer solutions
Strong project expertise ensures holistic control in customer projects

Holistic competence development

Strong industry specific expertise and understanding of customer needs through the delivery chain gives Digia a solid base for operation. Digia will strongly invest in customer, industry, technology, usability and project management expertise to ensure value-added, high-quality solutions for customers.

Our new organisation seamlessly supports competence development. Teams are built by business areas, based on competence areas.

Training programmes as basis for career development

The work of Digia's experts was recognised by several technology certificates, for example in IBM, Microsoft and Oracle partnerships. Globally, Digia was among the first companies to obtain Microsoft Mobility Gold Competency certification.

In a rapidly changing business environment, Digia secures a competitive edge through strong internal and external training programmes. Besides expertise oriented training, change training is also organised in order to diversify competencies.

Effective project management and delivery capability create reliability

Digia is continuously developing its project management expertise. Our centralised project management unit continually trains project managers, in both traditional and agile project management methods. This is accompanied by the required certification. We have certified project managers in areas such as Microsoft Surestep.

We are developing our training to cover the whole delivery chain, from initial sales to project maintenance. The objective is to guarantee higher quality customer solutions.

Professional Digia

Digia staff form a unique group of professionals. Looking after them is extremely important to us. In all operations, the starting point is direct interaction throughout the organisation. We will continue our long-term focus on comprehensive operational development and systematic management training.

A year of changes from personnel perspective

Due to market changes Digia was forced to reduce its mobile business experts by a significant number of people. Around 100 employees were relocated from the mobile business area to the enterprise business area
Overseas operations were strengthened
Following this year of upheaval, employee commitment will be emphasised

Market changes in the Mobile Solutions segment had a major impact on Digia's personnel. To adjust the size of the staff to demand, Digia conducted four rounds of cooperation negotiations. During the year 2011 Digia's personnel was reduced by 344 employees (a reduction of 24.6%).

After the downsizing, at the end of year 2011, Digia employed 1,175 persons including overseas divisions. Additionally, some of the employee reductions agreed in 2011 will be effective in early 2012.

Internal job transfers

During the negotiations, some employees were successfully relocated within Digia. Acquired last spring, the Qt Commercial business employed nearly 50 people at the end of the year. All of these are former experts from the Mobile Solutions division.

Suitable jobs were also found for more than 50 employees, elsewhere in the Enterprise Solutions segment.

Supportive actions were carried out during the year, for those that stayed and those laid off. In addition, in this difficult situation, support was provided for managers to improve their ability to cope and fully utilise their expertise.

New branches in Norway and the United States

The company's overseas functions grew in scope and relevance. With the Qt Commercial acquisition, Digia opened new offices and welcomed new staff in Oslo and Santa Clara, California. Business was transferred and offices opened with commendable ease in just a few months. After the initial phase, product development and support functions were started in Finland.

Digia significantly strengthened its presence in Russia, recruiting new employees for its operations in that important market. In China, staff numbers fell slightly due to the reduction in product creation services.

Resurgence in 2012

Digia has revised its strategy and towards the end of the year, it also renewed its organisation to support the strategic objectives. The reorganisation and new approach will reinforce good practices and processes. Where necessary, they will also lead to improved methods.

Process and management competence, employee commitment, managing the fit and amount of expertise, and operational efficiency were identified as key areas of leadership. Digia aims at improving these areas in particular.

In 2012, the focus will be on employee motivation and commitment. Digia will also further develop its image as an attractive employer.

Personnel in figures

Total number of employees: 1,175
Average age of employees: 37.9
Emphasis on internal transfers rather than recruitment

At year-end there were 1,175 employees, of whom 13.6% worked outside Finland.

The average age of the personnel was 37.9 years – slightly higher than the year before. Women accounted for 25.6% of the personnel.

Due to the readjustment measures, there was little recruitment. Instead, the emphasis lay on internal transfers from the Mobile Solutions segment to the Enterprise Solutions segment.

Regarding recruitment, increasing use was made of social media, as well as online advertising. However, all open posts were first advertised internally, excluding some specialist positions that were also publicly announced.

Operational readjustment due to reduced demand for product creation services

Personnel readjustment measures were implemented in stages
Four rounds of co-operation negotiations were conducted, beginning in March
The first three negotiation rounds aimed at downsizing and the fourth round concerned reorganisation

During the year, a major customer's change of strategy had a fundamental impact on jobs within the Mobile Solutions segment. The reduction in product creation services work forced Digia to adjust its staff numbers accordingly.

The customer's decision-making progressed in stages, with Digia making adjustments in step with this. Digia engaged in its first round of personnel negotiations in March, deciding to close the Pori office. At the beginning of the negotiations, the Pori branch employed around 70 people. Some were offered positions in Digia's Rauma office, with around 15 transferring there.

The second negotiation round began in August. This led to the closure of the Lappeenranta office and product creation staff reductions in other offices. When the negotiations began, the Lappeenranta branch employed around 75 persons. Digia was able to re-employ only a few of these in other offices.

The third round of negotiations began in May, and the fourth and final round in September. As a result, staff numbers in 2012 will match the expected business volume. However, some contracts will not be terminated until the end of certain projects in spring 2012.

A buoyant job market in the sector and the long schedule and geographical distribution of the layoffs, made job finding easier.

Employee support during a transition year

To support faster re-employment for laid off personnel, Digia worked together with Finland's Centres for Economic Development, Transport and the Environment
Other staff were offered help to cope, for instance through the Proactive care model
Leisure activities were supported through employee benefits and club activities

Together with local Centres for Economic Development, Transport and the Environment, Digia obtained change coaching for laid-off personnel. This coaching was provided by Saranen Consulting. The aim was to enable swift re-employment in similar ICT jobs, or completely new careers. The coaching covered the job market and employment situation in the ICT sector, various opportunities for employment, and the recruitment needs of companies in all sectors, efficient job-seeking, personal career planning and motivation for swift action.

Regarding Pori and Lappeenranta, it is estimated that approximately 70% of those laid off were reemployed by September.

Those laid off retained access to their employee benefits during the notice period; for example, above-average use was made of dental services. The obligation to complete the notice period was minimised whenever possible.

Training to cope with a challenging situation

Support was provided for staff in difficult times through the 'Proactive care model'. Managers and project leaders were coached by the occupational health care provider on how to perform management work and apply the Proactive care model during a change situation. Managers were further supported, through training on how to cope with challenging interaction during radical change. This training was highly praised and was valued useful by attendees.

In addition, depending on demand, the occupational healthcare arranged psychology sessions on coping with difficult transition.

Employee benefits

Through various benefits, such as luncheon and meal vouchers for daily dining, Digia encouraged staff to strive for healthy lifestyles and well-being. Occupational health care was offered, as either health insurance or agreements with health clinics. Dentistry services were another employee benefit. Fitness and culture vouchers were also offered as a means to encourage exercise and recreation.

Various leisure activities

Digia supports employee leisure activities through clubs. Through OpenClub, various free-time activities are arranged locally.

As an example, Digia's support of musical activities can be mentioned; OpenStones, a band integrated by Digia employees reached the final stage of the national 2011 Firmarock competition.

Board of Directors

From left: Kari Karvinen, Pekka Sivonen, Martti Mehtälä, Pertti Kyttälä, Robert Ingman, Marjatta Virtanen, Tommi Uhari.

Pertti Kyttälä, b. 1950, M.Sc. (Econ.)

Board member since 2005 and Chairman of the Board since 2010. Chairman of the Board's Audit Committee and member of the Nomination Committee. Previously Vice Chairman of the Board. Currently Managing Director of Peranit Ltd. His previous posts include CEO of Radiolinja Ltd (1999–2003), IT Director of Helsinki Telephone Company (1997– 1999), Managing Director of Samlink Ltd (1994–1997), and Managing Director and Deputy Managing Director of Sppalvelu Ltd (1991–1994). Previously, he has held various positions at SKOP Bank (1985–1990) and OKO Bank (1973– 1985). Moreover, he is Chairman of the Board of Directors at ASAN Security Technologies Ltd and a Member of the Board at Ubisecure Solutions Ltd.

Independent of the company and its significant shareholders.

Martti Mehtälä, b. 1957, M.Sc. (Tech.)

Board member since 2007 and Vice Chairman of the Board since 2010. Chairman of the Board's Compensation Committee. Until June 2007, served as Managing Director of Microsoft Oy for 12 years. Previously held managerial sales and marketing positions at Nokia Data and ICL Data Oy, as well as serving as Dava Oy's Managing Director and Country Director of Computervision Inc. Over 25 years' experience of IT implementation and of sales and marketing in various industries, and broad experience of working in cooperation with Finland's most extensive IT partner network and various international partners. Positions of trust have included membership of the National Information Security Advisory Board established by the Ministry of Transport and Communications and of the National Board of Economic Defense.

Independent of the company and its significant shareholders.

Robert Ingman, b. 1961, M.Sc. (Eng.), M.Sc. (Econ.)

Member of the Board since 2010. Chairman of the Board's Nomination Committee. A member of the Board of Arla Ingman Oy Ab and a full-time Chairman of the Board of Ingman Group Oy Ab. Previously he has served as the Managing Director of Arla Ingman Oy Ab (2007–2011), Ingman Group Oy Ab and Ingman Foods Ab (1997–2006). In addition, Robert Ingman is a member of Etteplan Oyj's and Evli Pankki Oyj's Boards.

Dependent on significant shareholders.

Kari Karvinen, b. 1959, MA

Member of the Board since 1990. Member of the Board's Audit Committee and the Nomination Committee. Co-founder of SysOpen Plc (the predecessor of Digia Plc). Chairman of the Board (2002–2005) and Vice Chairman (1999–2002, 2005–2007). Currently board professional and independent investor. CEO and Chairman at Tuulenhenki Ltd. Member of the Board at NOMO Jeans Corporation Ltd. Member of the Finnish Association of Professional Board Members. Member of FiBAN (Finnish Business Angels Network). Previously at SysOpen Plc, held the posts of deputy Managing Director (1990–1999), Director of Business Planning (1999–2000) and full-time Chairman of the Board (2002–2004). His previous posts include Managing Director and Product Manager at Helsingin PC-Konsultit Ltd (1988–1990), and various IT industry posts at Sycon Ltd (1982–1988).

Independent of the company and its significant shareholders.

Pekka Sivonen, b. 1961, Secondary school graduate in Political Science

Member of the Board since 2005. Member of the Board's Compensation Committee. Previously full-time Chairman of the Board of Directors of Digia Oyj (2005–2010). Founding shareholder of Digia Inc., Board member (1997–2005) and Chairman (2000–2005). CEO of Digia Inc (1997–2000). Chair of the National Emergency Supply Agency's Technology Pool since 2007. Currently also Chairman of the Board at BlueWhite Resorts Ltd and Comma Group Ltd. Member of the Finnish Association of Professional Board Members since 2005.

Dependent on the company and significant shareholders.

Tommi Uhari, b. 1971, M.Sc. (Eng.)

Member of the Board since 2010. Member of the Board's Compensation Committee. Uhari currently holds board member and strategic advisor roles in selected startups and public companies. Previously Uhari has served as a management team member of ST Microelectronics (2006–2010). In addition, he has held various managerial positions at ST's joint ventures in the wireless business ST-NXP Wireless and ST-Ericsson (2008–2010), and he has also acted as head of ST's Wireless Business Unit (2006–2008). Prior to that, Uhari was in charge of Wireless and SW platforms units at Nokia (1999–2006).

Independent of the company and its significant shareholders.

Marjatta Virtanen, b. 1950, M.Sc. (Econ.)

Member of the Board since 2010. Member of the Board's Audit Committee. Currently Managing Director and IR consultant at IRMA Advisors Oy. During her long career in communications and investor relations Marjatta Virtanen has worked as Market Supervisor at the Financial Supervisory Authority (2006–2009), as Head of Communications and IR at Hartwall (1988–1993) and at Tamro (2001–2004). She has also worked as an IR consultant and Managing Director at Viherjuuri Communications (1994–2001) and at IRMA Advisors Oy (2004–2006). Member of the Finnish Association of Professional Board Members since 2010.

Independent of the company and its significant shareholders.

Group Management Team

From left: Juha Varelius, Asko Hakonen, Mika Pälsi, Harri Savolainen, Antti Lastunen, Harri Paani. Tommi Laitinen is missing from the picture.

Juha Varelius, b. 1963, M.B.A.

Digia's President and CEO as from the beginning of 2008. Reporting to the Board of Directors, Varelius is responsible for the company's operative business. Previously, he has served as the President and CEO of the technology company Everypoint Inc of Boston (2006–2007). He has also held managerial positions at Yahoo! and Everypoint in London (2002–2006). Moreover, he has served in various managerial positions at Sonera (1993–2002), acting in his last years there as Managing Director of Sonera Zed and a member of the Sonera Management Team.

Asko Hakonen, b. 1961, vocational qualification in business and administration

Senior Vice President, software and service products, Management Team member since 2008. Responsible for software and service products as well as their development. Previously held managerial positions at the Digia Industry and Trade division (2007–2008). Prior to joining Digia, Hakonen worked as a project and unit manager at Sentera Plc (1998–2006), where he was in charge of internet, mobile and ERP systems. Previously also held the post of project manager at Solagem Oy (1990–1997). Hakonen has worked in the IT sector since 1985.

Tommi Laitinen, b. 1968, vocational qualification in business and administration

Senior Vice President, new products and international product business, Management Team member since 2005. Previously, he has served at Digia as SVP of Competence organisation (2009–2010), SVP of Telecommunication division (2007–2008) and SVP in charge of the company's strategy and development (2005–2007). His previous positions at Digia Inc. included Vice President, Engineering (2002–2004); Director, Quality and Processes (2001– 2002); and Business Unit Manager (1999–2000). Prior to that (1991–1999), he was in charge of various project and product management duties and software development duties.

Antti Lastunen, b. 1964, vocational qualification in business and administration

Senior Vice President, sales and marketing, Management Team member since 2008. Responsible for sales and marketing operations. Previously, he has been in charge of Business Operations at SAP Nordic (2005–2008), and Large Enterprise Sales (2003–2004) and Manufacturing Industry Sales (2000–2002) at SAP Finland. Prior to that, he held positions in international customer management at SAP and Computer Associates Finland (1995–1997) and sales at Inter Marketing (1988–1994), respectively.

Harri Paani, b. 1963, M.Sc.

Senior Vice President, competences and projects. Management Team member since 2010. Paani is responsible for the development and management of competences as well as project resourcing. Previously he has served as Business Development Director at Logica (2007–2009) and was responsible for specific large-scale sales projects and application outsourcing. Prior to that Paani worked at Computer Sciences Corporation in Finland and abroad (1997– 2000). During that time he spearheaded software development unit located across several countries and acted as the CEO of CSC Finland. He was responsible for customer relations for a major international client and in charge of service provision in Finland, Sweden and Norway. Prior to that, he was the Chief Information Officer for the Sampo Group and Director of the Systems Development unit, also at the Sampo Group.

Mika Pälsi, b. 1970, LL.M.

General Counsel, Management Team member since 2009. In charge of legal matters and stock exchange communications at the company. Trained on the bench, post-graduate LL.M studies at the Universities of Helsinki and Leicester (U.K.). Pälsi has over ten years' experience in international business law, both as an attorney and in-house counsel. Before joining Digia in 2009, Pälsi worked for Tieto Corporation, where he was in charge of providing legal counsel to one of their business units. Before moving into corporate practice, Pälsi worked as an attorney at Castrén & Snellman and as a solicitor at Allen & Gledhill Advocates & Solicitors (Singapore).

Harri Savolainen, b. 1965, M.Sc. Business Economics

Chief Financial Officer, Management Team member since 2010. Savolainen is in charge of Group Finance and Administration. Prior to joining Digia he worked for Logica Finland Ltd. where he, as a Member of Management Team was in charge of Logica Finland's finance, internal IT, HR and administration. Previously in his career, between 1997 and 2006 Savolainen worked at Siemens Ltd. as Director for Accounting, Controlling and Financing in Finland and the Baltic States, and between 1992 and 1997 at Mars Incorporated.

Corporate Governance Statement

General issues

This Statement has been issued separately from the company's operating and financial review.

Digia's corporate governance system is based on the Companies Act, the Securities Markets Act, general corporate governance recommendations, and the company's Articles of Association and in-company rules and regulations on corporate governance.

Digia's corporate governance principles are integrity, accountability, fairness and transparency. This means, inter alia, that:

The company complies with the applicable laws, rules and regulations.
The company organises, plans and manages its operations, and does business abiding by the applicable professional requirements approved by Board members, who demonstrate due care and responsibility in performing their duties.
The company demonstrates special prudence with respect to the management of its capital and assets.
The company's policy is to keep all market participants actively, openly and equitably informed of its business operations.
The company's management, administration and personnel are subject to the appropriate internal and external audits and supervision.

Adherence to the Governance Code

Digia adheres to the Governance Code for Listed Finnish Companies issued by the Finnish Securities Market Association and entered into force on 1 October 2010.

The Governance Code can be read on the website of Finnish Securities Market Association at www.cgfinland.fi.

Shareholders' Meeting

Digia's highest decision-making body is the Shareholders' Meeting at which shareholders exercise their voting rights regarding company matters. Each company share entitles the holder to one vote at the Shareholders' Meeting.

AGM will be held annually within three months of the end of the financial year. An Extraordinary General Meeting will be held if the Board of Directors deems it necessary or if requested in writing by a company auditor or shareholders holding a minimum of 10 per cent of the company's shares, for the purpose of discussing a specific issue.

The Finnish Limited Liability Companies Act and Digia's Articles of Association define the responsibilities and duties of the Shareholders' Meeting. Extraordinary General Meetings decide on the matters for which they have been specifically convened.

Board of Directors

Operations and duties

Elected by the Shareholders' Meeting, the Board of Directors is in charge of company administration and the appropriate organisation of company operations. Under the Articles of Association, the Board of Directors must consist of a minimum of five and a maximum of eight members. The Nomination Committee prepares a proposal for the Shareholders' Meeting regarding the composition of the new Board of Directors to be appointed.

The majority of Board members must be independent of the company and a minimum of two of those members must also be independent of the company's major shareholders. The Managing Director or other company employees under the Managing Director's direction may not be elected members of the Board.

The term of all Board members expires at the end of the Annual General Meeting following their election. A Board member can be re-elected without limitations on the number of successive terms. The Board of Directors elects its Chairman and Vice Chairman from amongst its members.

The Board has prepared and approved a written agenda for its work. In addition to Board duties prescribed by the Companies Act and other rules and regulations, Digia's Board of Directors is responsible for issues on its agenda, observing the following guidelines:

Good board practices require that the Board of Directors, instead of needlessly interfering in the details involved in day-today operations, concentrate on elaborating the company's short- and long-term strategies.
The Board's general duty is to steer the company's business with a view to maximizing shareholder value in the long term, while taking account of expectations set by various stakeholder groups; and
Board members are required to perform on the basis of sufficient, relevant and updated information, in order to serve the company's interests.

In addition, the Board's agenda:

defines the Board's annual action plan and provides a preliminary meeting schedule and framework agenda for each meeting;
provides guidelines for the Board's annual self-assessment;
provides guidelines for distributing notices of meetings and advance information to the Board and procedures for keeping and adopting minutes;
defines job descriptions for the Chairman, members and secretary of the Board of Directors (the secretary is the Company's General Counsel or, if absent, the CEO); and
defines the framework within which the Board may set up special committees or working groups.

During the 2011 financial year, the Board convened 22 times. The meeting attendance rate averaged 99 per cent.

The Board evaluates its activities and working methods annually, employing an external consultant for this evaluation, if necessary.

Board Members

In 2011, the Digia Plc Board of Directors comprised:

Pertti Kyttälä, b. 1950, M.Sc. (Econ.)

Board member since 2005 and Chairman of the Board since 2010. Chairman of the Board's Audit Committee and member of the Nomination Committee. Previously Vice Chairman of the Board. Currently Managing Director of Peranit Ltd. His previous posts include CEO of Radiolinja Ltd (1999–2003), IT Director of Helsinki Telephone Company (1997–1999), Managing Director of Samlink Ltd (1994–1997), and Managing Director and Deputy Managing Director of Sp-palvelu Ltd (1991–1994). Previously, he has held various positions at SKOP Bank (1985–1990) and OKO Bank (1973–1985). Moreover, he is Chairman of the Board of Directors at ASAN Security Technologies Ltd and a Member of the Board at Ubisecure Solutions Ltd.

Martti Mehtälä, b. 1957, M.Sc. (Tech.)

Robert Ingman, b. 1961, M.Sc. (Eng.), M.Sc. (Econ.)

Member of the Board since 2010. Chairman of the Board's Nomination Committee. A member of the Board of Arla Ingman Oy Ab and a full-time Chairman of the Board of Ingman Group Oy Ab. Previously he has served as the Managing Director of Arla Ingman Oy Ab (2007–2011) and Ingman Group Oy Ab and Ingman Foods Ab (1997–2006). In addition, Robert Ingman is a member of Etteplan Oyj's and Evli Pankki Oyj's Boards.

Kari Karvinen, b. 1959, MA

Member of the Board since 1990. Member of the Board's Audit Committee and the Nomination Committee. Co-founder of SysOpen Plc (the predecessor of Digia Plc). Chairman of the Board (2002–2005) and Vice Chairman (1999–2002, 2005– 2007). Currently board professional and independent investor. CEO and Chairman at Tuulenhenki Ltd. Member of the Board at NOMO Jeans Corporation Ltd. Member of the Finnish Association of Professional Board Members. Member of FiBAN (Finnish Business Angels Network). Previously at SysOpen Plc, held the posts of deputy Managing Director (1990–1999), Director of Business Planning (1999–2000) and full-time Chairman of the Board (2002–2004). His previous posts include Managing Director and Product Manager at Helsingin PC-Konsultit Ltd (1988–1990), and various IT industry posts at Sycon Ltd (1982–1988).

Pekka Sivonen, b. 1961, Secondary school graduate in Political Science

Tommi Uhari, b. 1971, M.Sc. (Eng.)

Marjatta Virtanen, b. 1950, M.Sc. (Econ.)

Of the aforementioned members of the Board, Pertti Kyttälä, Martti Mehtälä, Kari Karvinen, Tommi Uhari and Marjatta Virtanen are independent of the company and its major shareholders. Robert Ingman is independent of the company.

Committees of the Board of Directors

The Digia Board of Directors had three committees in 2011: the Compensation Committee, the Audit Committee, and the Nomination Committee. The working principles of the committees for year 2011 were confirmed by the Board in its meeting on 28 April 2011.

These committees do not hold powers of decision or execution. They assist the Board in decision-making concerning their own areas of expertise. The committees report regularly on their work to the Board, which governs and assumes collegiate responsibility for the committees' work.

Purpose of Digia's Compensation Committee is to prepare and follow up compensation and remuneration schemes in order to ensure that the company's targets are met, to guarantee the objectivity of decision-making, and to see to it that the schemes are transparent and systematic. In 2011, the members of the Compensation Committee were Martti Mehtälä (Chairman), Pekka Sivonen and Tommi Uhari. In 2011, the committee convened four times. The meeting attendance rate averaged 92 per cent.

Purpose of the Audit Committee is to assist the Board of Directors in ensuring that the company's financial reporting, accounting methods, financial statements and other reported financial information are legitimate, balanced, transparent and clear, as further specified in the agenda. In 2011 the Audit Committee was composed of Pertti Kyttälä (Chairman), Kari Karvinen and Marjatta Virtanen. The committee convened four times in 2011, with full attendance by all members.

Nomination Committee's duty is to prepare a proposal for the Annual General Meeting concerning the number of members of the Board of Directors, the members of the Board of Directors, the remuneration of the Chairman, Vice Chairman and members of the Board and the remuneration of the chairmen and members of the committees of the Board of Directors. In 2011, the members of the Nomination Committee were Pekka Sivonen (Chairman), Kari Karvinen and Robert Ingman and as of 9 December 2011 Robert Ingman (Chairman), Kari Karvinen and Pertti Kyttälä. The committee convened once, with full attendance by all members.

Chief Executive Officer

The company's Chief Executive Officer is appointed by the Board of Directors. The CEO is in charge of Digia's business operations and administration in accordance with the instructions and regulations issued by the Board of Directors, and as defined by the Finnish Limited Liability Companies Act. The CEO may take exceptional and far-reaching measures, in view of the nature and scope of the company's activities, only if so authorised by the Board of Directors. The CEO chairs the Group Management Team's meetings. Moreover, the CEO is not a member of the Board of Directors, but attends Board meetings.

The CEO's service contract, approved by the Board of Directors, defines the key terms and conditions which govern his/her position, in writing.

M.B.A. Juha Varelius (b. 1963) has been the company's CEO since the beginning of 2008.

Internal control and risk management related to financial reporting

Control functions and control environment

The company has a controller function tasked with verifying monthly reports. This controller function reports to the management, the Board of Directors and the Board's Audit Committee regarding the financial performance of the company and its divisions.

The company uses a reporting system which compiles separate subsidiaries' reports into the consolidated financial statements. There are written directives for completing the financial reports of subsidiaries. Compliance with these directives is monitored by the controller function. The company also has the necessary, separate reporting facilities for monitoring business operations and asset management.

The Group finance unit provides instructions for drawing up financial statements and interim financial statements, and compiles the consolidated financial statements. The finance unit has centralised control over the group's funding and asset management, and is in charge of managing interest rate risk.

Internal risk control

As a general principle, authorisation is distributed in Digia in such a way that no individual may independently perform measures unbeknown to at least one other individual. For example, the company's bookkeeping and asset management are managed by separate persons, and two authorised persons are needed to sign on behalf of the company.

The Group's business is divided into business units lead by Senior Vice Presidents (SVPs) reporting to the CEO. Reporting and supervision are based on annual budgets that are reviewed monthly, on monthly income reporting and on updates of the latest forecasts.

The SVPs in charge of the divisions report to the Group Management Team on development matters, strategic and annual planning, business and income monitoring, investments, potential acquisition targets and internal organisation matters related to their areas of responsibility. Each division has its own management team.

Digia's operational management and supervision take place according to the corporate governance system described above.

The Group's administration unit is in charge of HR management and policy, as well as properties and the viability of working conditions in each facility. The legal affairs unit provides instructions for and monitors contracts made by the company and ensures the legality of the Group's operations.

Communications

The Group's General Counsel is in charge of the company's external communications and their correctness. External communications include financial reports and other stock exchange communications. The General Counsel is responsible for the publication of interim reports and financial statements, as well as for actions related to convening and holding Shareholders' Meetings. Most communications take place through the company's website and using stock exchange releases.

Risk management

The purpose of the company's risk management process is to identify and manage risks in such a way that the company is able to meet its strategic and financial targets. Risk management is a continuous process, by which the major risks are identified, listed and assessed, the key persons in charge of risk management are appointed and risks are prioritised according to an assessment scale in order to compare the effects and mutual significance of risks.

The main operational risks handled by Digia's risk management function are customer risk, personnel risk, project risk, data security risk and goodwill risk.

The company manages customer risk by actively developing its customer portfolio structure and avoiding any potential risk positions. Personnel risks are actively assessed and managed using a goal and development discussion process for key personnel. To improve personnel commitment, the company strives to improve the efficiency of internal communications systematically, using monthly personnel events and increasing the visibility of management. Key project audits are carried out with a view to enhancing project risk management and securing the success of project deliveries to customers. In addition, the Group's certified quality systems are regularly evaluated and the Group has increased the efficiency of its project delivery reporting practices in relation to corporate governance and finance. Data security risk is managed through data security audits and continuous development of working models, security practices and processes. Risks associated with the integration of businesses, shared operating models and best practices, as well as their integrated development, are managed according to plan under the supervision of the Group Management Team. With respect to IFRS-compliant accounting policies, the Group actively monitors goodwill and the related impairment tests, as part of prudent and proactive risk management practices within financial management.

In addition to operational risks, the company is subject to financial risks. Digia Plc's internal and external financing and the management of financial risks are coordinated by the finance function of the Group's parent company. This function is responsible for the Group's liquidity, sufficiency of financing, and the management of interest rate and currency risk. The Group is exposed to several financial risks during the normal course of its business. The objective of the Group's risk management is to minimise the adverse effects of changes in the financial markets on the Group's earnings. The primary types of financial risks are interest rate risk, credit risk and funding risk. The general principles of risk management are approved by the Board of Directors, and the Group's finance function is responsible for their practical implementation together with the business divisions.

Statement on Digia Management Emoluments

This management emolument statement sets forth a summary of the financial benefits, remuneration system and thereto related decision-making pertaining to Board members and operative management of Digia Plc.

Board Emoluments

The Shareholders' Meeting decides on emoluments payable to the Board of Directors and grounds for the compensation of expenses. The 2011 AGM decided to pay monthly emoluments of EUR 2,500 to Board members, EUR 3,500 to the Vice Chairman and EUR 5,500 to the Chairman for their work on the Board. In addition, the AGM approved EUR 500 in fees per Board or committee meeting for all Board members. Moreover, the Shareholders' Meeting decided that standard and reasonable costs resulting from work on the Board would be reimbursed against invoice.

In the 2011 financial year, a total of EUR 317,500 was paid in emoluments to the members of the Board of Directors for their work on the Board, as follows:

Pertti Kyttälä	EUR 75,300
Martti Mehtälä	EUR 50,400
Robert Ingman	EUR 37,400
Kari Karvinen	EUR 39,300
Pekka Sivonen	EUR 38,400
Tommi Uhari	EUR 37,900
Marjatta Virtanen	EUR 38,800

All emoluments were monetary. The company does not grant stock options or share-based remuneration for work on the Board.

Emoluments of the CEO and other management

Summary of the CEO remuneration system

The Board of Directors decides on the CEO's salary, and other remuneration and benefits.

CEO Varelius's remuneration package comprises a monthly salary in accordance with his director agreement and the bonus possibly payable pursuant to CEO's share incentive scheme.

CEO's regular monthly salary is based on a target salary model comprising a fixed and variable parts. According to said model the remuneration finally payable to the CEO is linked to the company's profitability and revenue targets set by the Board for each quarter respectively. In the event the set targets are not met, the agreed target salary will be reduced accordingly by a maximum of 17 percent variable part. On the other hand, exceeding the set targets will lead to remuneration above the target level.

CEO's share-based remuneration plan was decided by the Board pursuant to authority given by the AGM in in Spring 2010.

The scheme has four earning periods, which are years 2010-2013. The scheme provides the CEO with a possibility to earn a maximum bonus equal to the value of 100,000 shares in each earning period 2011-2013 respectively pursuant to the earning criteria to be annually decided by the Board for the respective earning period. Regarding year 2012 the bonus shall be determined based on the earning per share (EPS) and revenue of the company. The minimum bonus (5,000 shares) requires an EPS of EUR 0,21 and revenue of EUR 92,0 million. Maximum bonus (100,000 shares) will become payable if the EPS amounts to a EUR 0.32 accompanied by a revenue of EUR 100,0 million or if the EPS amounts to a EUR 0.23 accompanied by a revenue of EUR 122,0 million.

Based on the results of financial year 2011 the CEO will be paid with a total bonus equal to the value of 39,266 company shares in connection with the April 2012 salary payment.

Bonuses payable under said scheme will be paid in a 50/50 combination of shares and cash after the adoption of the financial statements following the close of the respective earning period. The cash payment is used primarily to cover taxes and other applicable fees and levies incurred from the bonus payment. The scheme includes no lock-up periods designed to restrict the disposal of shares already granted to the CEO.

Share bonuses paid in 2011 have been paid pursuant to an agreement on management of company's share bonus schemes by Evli Alexander Management Ltd. Payments have been made with shares managed by Evli, which the company has financed to be acquired for the purpose of being used for management incentives.

CEO Financial benefits and main terms of service

In 2011 the CEO was paid EUR 595,736 in salary and benefits, of which salary and fringe benefits account for EUR 345,176 and bonuses for EUR 250,560.

The company may terminate the CEO's service contract with six months' notice. Upon such termination, he will receive remuneration for the notice period plus severance pay equalling 12 months' salary. The CEO's retirement age is as stipulated by law, and he has no supplementary pension agreement with the company.

Summary of the remuneration system of other management

Based on a proposal submitted by the CEO, the Board of Directors decides on the salary, other remuneration and other benefits to be paid to members of the Group Management Team (GMT).

GMT members' total remuneration package comprises a monthly salary and the bonus possibly payable pursuant to two share incentive schemes.

As with the CEO's pay, the Management Team members' pay is based on a target salary model, where 85 per cent of the salary is fixed and a 17 per cent portion is linked to the company's profitability and revenue targets set by the Board for each quarter respectively.

In addition to the monthly salary the GMT members will receive, in each January of years 2010-2013 respectively, a bonus decided by the Board in 2009 based on the results of said accounting period. The bonus amounting to an aggregate total value of 79,000 shares will be paid in four equal slots assuming that the recipient is still employed by the company on each payment date.

Moreover, the GMT members accompany the CEO in the share incentive scheme decided by the Board in Spring 2010 and covering the earning periods of 2010-2013. The maximum total bonus payable for the GMT members in aggregate under the scheme amounts to the value of 100,000 shares in 2011-2013 respectively. Bonuses shall be payable against the same earning criteria as for the CEO. Based on the results of financial year 2011, the GMT members will be paid with a aggregate total bonus equal to the value of 39,266 company shares in connection with the April 2012 salary payment.

All bonuses payable under both of said schemes will be paid in a 50/50 combination of shares and cash. The cash payment is used primarily to cover taxes and other applicable fees and levies incurred from the bonus payment. The schemes include no lock-up periods designed to restrict the disposal of shares already granted to the GMT members.

Each Management Team members' retirement age is stipulated by law, and no member has a supplementary pension agreement with the company.

Markets and Digia's business operations

Realigned technology-platform strategies and changes in the competitive situation for phone manufacturers markedly changed the business environment for the company's Mobile Solutions segment. As a result of the changes and the ensuing reduction in contract engineering orders, the Mobile Solutions segment's consolidated net sales and profitability fell significantly throughout the financial year. This had a major negative impact on the whole company's consolidated net sales and operating profit compared to the previous year.

The negative impact strengthened as the year progressed. For this reason, the company conducted four rounds of personnel negotiations during the period, leading to the closure of the Pori and Lappeenranta offices and the dismissal of 344 employees. The personnel negotiations caused non-recurrent costs of approximately EUR 4.9 million.

As a consequence of the change in the operating environment of the Mobile Solutions segment, and of the downward revision of long-term profit expectations for mobile operations in general, the company made a one-off writedown of EUR 25.4 million in relation to the segment's customer relations and goodwill.

With regard to international operations, the product selections, expertise and ability to serve local customers of the Chinese and Russian units were improved during 2011. The Chinese unit generates product development and maintenance services, thanks to which the company is able to serve customers at various points in their product development cycle. The unit's capacity is utilised both in projects within China and for global customer relationships. The decrease in demand for contract engineering also affected the Chinese unit's operations.

The Russian unit operates as a near-shore resource for Digia's Finnish customers and also sells services directly to local customers. The unit's direct sales to local customers were actively developed during the year and operations progressed according to plan.

Enterprise Solutions

The customers of Digia's Enterprise Solutions segment are companies, organisations and public bodies. The segment's product and service strategy is based on multi-channel solutions that increase the efficiency of customers' business operations, and on services that cover the entire product lifecycle. An innovative development partner for its customers, Digia introduces to the market products, services and business models that employ new technologies. The segment's core market consists of the Nordic region and Russia, where it seeks to increase its operations mainly through organic growth.

In addition, the segment includes a commercial Qt licensing and service business acquired from Nokia Plc during the year, and whose start-up and development progressed according to plan. The majority of the Qt Commercial turnover is generated by product-based, scalable business operations. Around half of the turnover is generated in the North American market, with Central Europe and Great Britain being the other significant markets.

Demand for ERP systems continued at a moderate level during the period. Demand for e-business and financial sector systems was lower than expected.

The net sales of the Enterprise Solutions segment grew slightly. Taking into account the Qt licensing and service business, the segment's growth rate exceeded that of the market in general.

Operational profitability also increased towards the end of the year, flattening out at the high level previously encountered. Further segment-specific information is presented in Note 1 to the financial statements.

Mobile Solutions

The customers of Digia's Mobile Solutions segment are globally operational smart phone, machine and equipment manufacturers and telecom operators that utilise Digia's contract engineering services.

Due to major changes in the operating environment, the Mobile Solutions segment's contract engineering business shrank significantly compared to the previous year. Because the effect of the changes was permanent, during the period the company revised the entire segment and its long-term profit expectations. The result was a writedown of EUR 25.4 million in relation to the segment's customer relations and goodwill. Further segment-specific information is presented in Note 1 to the financial statements.

Financial indicators

The consolidated profit was positive before extraordinary items. After extraordinary items there was an operating loss of EUR 22.2 million. The company maintained good solvency and liquidity. The group's financial indicators are presented in the following table:

	2011	2010	2009	2008	2007
Net sales	121,940	130,825	120,335	123,203	105,839
Operating profit	−22,168	17,164	−7,796	13,437	11,080
Operating margin, %	−18%	13%	−6%	11%	10%
Return on equity, %	−42%	18%	−21%	11%	9%
Equity ratio, %	48%	59%	52%	47%	47%
Net gearing, %	34%	20%	34%	53%	65%

More detailed key figures for the last five years and the formulae for the key figures are provided in the notes to the financial statements (Note 30).

Net sales

Digia's consolidated net sales for the fiscal year were EUR 121.9 (130.8) million, down 6.8 per cent on the previous year.

The Enterprise Solutions segment posted net sales of EUR 82.7 (75.7) million, up 9.2 per cent. The Mobile Solutions segment had net sales of EUR 39.3 (55.2) million, down 28.8 per cent. The Enterprise Solutions segment's growth in net sales was mainly thanks to the Qt business, which accumulated EUR 6.0 million in net sales starting in the second quarter. Total net sales were negatively affected, especially at the beginning of the year, by lower licence sales than expected, which had an impact on billing. In Mobile Solutions, net sales fell because of a sudden and considerable decline in demand for services, following a change in the business environment.

During the financial year, the product business accounted for EUR 25.7 (19.7) million or 21.0 (15.1) per cent of consolidated net sales.

International operations accounted for EUR 14.7 (10.6) million or 12.1 (8.1) per cent of consolidated net sales.

Profitability and financial result

Digia's consolidated operating profit (EBIT) before extraordinary items for the fiscal year was EUR 8.1 (17.2) million and profitability (EBIT %) was 6.6 (13.1) per cent. Digia's consolidated operating profit after extraordinary items was EUR -22.2 (17.2) million and profitability (EBIT %) was -18.2 (13.1) per cent. The extraordinary non-recurrent items for 2011 comprised a EUR 25.4 million goodwill writedown and a EUR 4.9 million restructuring provision related to the closure of sites and to personnel negotiations. The reduction was mainly due to the negative development in net sales of Mobile Solutions.

The Enterprise Solutions segment's operating profit before extraordinary items was EUR 8.4 (11.0) million, down 24.0 per cent. Operating profit after extraordinary items was EUR 7.9 million. The decrease in the Enterprise Solutions segment's net sales was caused by lower-than-expected Finnish licence sales, combined with higher operating expenses. During the period, the cost structure was particularly burdened by personnel turnover. Recruitment, subcontracting and training expenses related to resolving resource shortages in certain competence areas, and the launch expenses for the Qt business, were also major costs.

The Mobile Solutions segment's operating profit before extraordinary items was EUR -0.3 (6.2) million, and after extraordinary items, EUR -30.1 million. Lower profitability in the Mobile Solutions segment was due to a sudden, major and unpredicted change in the operating environment at the beginning of the review period. As a consequence of this change, throughout the period the segment had excess personnel in proportion to the continuously falling demand for its services. The cost of keeping employees without work caused a financial strain.

The Group's net financial expenses for 2011 totalled EUR 1.0 (1.4) million. Consolidated earnings before tax for the year totalled EUR -23.1 (15.7) million, and net profit was EUR -22.5 (11.5) million.

Consolidated earnings per share were EUR 0.32 (0.56) before extraordinary items, and EUR -1.08 after extraordinary items. Other per-share key figures are presented in Note 30 to the financial statements.

Financial position and capital expenditure

At the end of the fiscal year, the Digia Group's consolidated balance sheet total stood at EUR 87.8 (115.4) million and the equity ratio was 47.8 (58.8) per cent. Net gearing was 34.5 (20.2) per cent. At the year-end, the Group's liquid assets totalled EUR 8.2 (9.7) million.

At the end of the year, the Group had interest-bearing liabilities of EUR 21.9 (23.3) million. These consisted of EUR 20.0 million in loans from financial institutions and EUR 1.9 million in financial leasing liabilities. During the period, the company repaid EUR 2 million in loans from financial institutions.

On 31 October 2011, Digia revised its three-year loan arrangements, replacing the company's old loan portfolio totalling EUR 17 million. The loan agreement is financed by Pohjola Bank and Nordea Bank. The total sum of the new loan was EUR 22 million, of which the company withdrew EUR 17 million. As part of the financing package, the company committed to covenants concerning the maintenance of the company's financial standing and liquidity, which were similar to the previous package. One difference lies in the fact that the company can now distribute a maximum of 50 per cent (previously 30%) of the Group's net profit for the year, without separate agreement. Further information on financing loans is presented in Note 22 to the financial statements.

The Group carries out quarterly impairment testing of goodwill and intangible assets with an indefinite useful life. Impairment testing is described in more detail in the notes to the financial statements, under Note 15 'Intangible assets'.

The company has financing, framework and delivery agreements with special terms and conditions for any situation in which control of the company changes hands.

The Group's cash flow from business operations for 2011 was positive by EUR 8.8 million (positive by EUR 11.1 million), cash flow from investments was negative by EUR 2.7 million (negative by EUR 2.0 million) and cash flow from finance was negative by EUR 7.6 million (negative by EUR 9.9 million). Cash flow from operations was negatively affected by the fact that the company paid EUR 2.2 million more in tax than in the previous year. Cash flow from finance was negatively affected by a repayment of loans totalling EUR 2.0 million, as well as by the payment of dividends with a total effect of EUR 5.6 million.

The Group's total investments into fixed assets were EUR 2.7 (2.0) million. Acquisitions of tangible fixed assets totalled EUR 2.1 (1.7) million.

Return on investment (ROI) for 2011 was -28.7 (19.3) per cent and return on equity (ROE) was -41.9 (18.3) per cent.

Report on the extent of research and development

The Group made research and development efforts and engaged in product development in all of its divisions. In the 2011 fiscal year, the Group's R&D costs totalled EUR 4.8 million (2010: EUR 3.0 million and 2009: EUR 2.6 million), corresponding to 3.9 per cent of net sales (2.3 per cent and 2.2 per cent).

This PDF is generated from Digia's online annual report and it may not contain all content from the report. You can find the complete report at annualreport2011.digia.com

Personnel, management and administration

At the end of 2011 the number of Group employees totalled 1,175, which shows a decrease of 344 employees or 24.6 per cent from the end of the previous year (1,558). The number of employees averaged 1,453, which is a decrease of 55 employees or 3.6 per cent from the 2010 average (1,508).

Cumulative employee turnover was 16.0 per cent in 2011 (8.5 per cent).

Employee indicators:

	2011	2010	2009
Average number of personnel	1,453	1,508	1,387
Wages and salaries	68,564	65,172	59,907

Employees by segment, year-end 2011:

Enterprise Solutions	68%
Mobile Solutions	28%
Administration and management	4%

As of the end of the year, 161 (196) employees were working outside Finland. The overseas decrease in the number of employees was mostly due to reductions made in Chengdu, China in response to lower customer demand.

The Digia Plc Annual General Meeting of 16 March 2011 re-elected Robert Ingman, Kari Karvinen, Pertti Kyttälä, Martti Mehtälä, Pekka Sivonen, Tommi Uhari, and Marjatta Virtanen as members of the Board. At the organisational meeting of the Board, Kyttälä was elected Chairman of the Board and Mehtälä as Vice Chairman.

Juha Varelius has been Digia Plc's President and CEO since 1 January 2008.

In 2011, Digia's Board of Directors had three committees: the Compensation Committee, the Audit Committee, and the Nomination Committee.

Digia's Compensation Committee's task is to prepare and follow management remuneration schemes in order to ensure that the company's targets are met, that the objectivity of decision-making is maintained, and that the schemes are transparent and systematic. The members of the Compensation Committee in 2011 were Martti Mehtälä (Chairman), Pekka Sivonen and Tommi Uhari. The Committee convened four times in 2011. Board members' meeting attendance rate averaging 92 per cent.

The purpose of the Audit Committee is to assist the Board of Directors in ensuring that the company's financial reporting, accounting methods, financial statements and other financial information provided by the company are in accordance with the law, balanced, transparent and clear. In 2011 the Audit Committee was made up of Pertti Kyttälä (Chairman), Kari Karvinen and Marjatta Virtanen. The committee convened four times in 2010, with full attendance.

The Nomination Committee will prepare proposals for the Annual General Meeting of the shareholders concerning (a) the number of members of the Board of Directors, (b) the members of the Board of Directors, (c) the remuneration for the Chairman, Vice Chairman and members of the Board of Directors and (d) the remuneration for the Chairman and members of the committees of the Board of Directors. In 2011, the Nomination Committee comprised Pekka Sivonen (Chairman), Kari Karvinen and Robert Ingman until 9 December, and from 9 December 2011, Robert Ingman (Chairman), Kari Karvinen and Pertti Kyttälä. The Nomination Committee convened once with full attendance.

Ernst & Young Oy, authorised public accountants, are the Group's auditors, with Authorised Public Accountant Heikki Ilkka as the principal auditor.

Digia adheres to the Governance Code for Listed Finnish Companies, issued by the Finnish Securities Market Association and entered into force on 1 October 2010. Digia's corporate governance system is based on the Companies Act, the Securities Markets Act, general corporate governance recommendations, and the company's Articles of Association and in-company rules and regulations on corporate governance. The Governance Code and a separate review of the group's corporate governance and management system made for this annual report can be seen at www.digia.com.

Business acquisitions

On 7 March 2011, Digia concluded an agreement with Nokia Plc for the acquisition of its commercial Qt business. The acquisition came into effect on 22 March 2011. This transaction included a right to sell commercial software licences for Qt technology, as exclusive supplier for the first three years.

The purchase price for the business acquired includes fixed and variable components. Fixed components amount to EUR 150,000, which were paid with the company's cash reserves. In addition to fixed components, the seller is entitled to an additional purchase price in the event that the sales targets agreed upon for said business for 2011–2013 are met. For 2011 the additional purchase price came to EUR 1.0 million, which is EUR 0.8 million higher than the original estimate. The additional price will be paid in cash as agreed. Due to the higher-than-expected sales of 2011, the additional purchase price is now estimated to total EUR 1.5 million.

On the basis of the initial purchase price allocation, the majority of the acquisition price (EUR 0.8 million) is related to the exclusive sales rights and customer relationships acquired. The transaction carried no goodwill subject to testing.

Group structure and organisation

At the end of the year, the Digia Group consisted of parent company Digia Plc and its active subsidiaries Digia Finland Ltd (parent company holding 100%); Digia Sweden AB (100%); Digia Estonia Oü (100%), Digia Hong Kong Ltd (100%), Digia Norway AS (100%), Digia USA, Inc. (100%), and Digia Partners Oy (100%). The previously wholly owned subsidiary Sunrise Resources Oy (100%) merged into Digia Finland Oy on 31 March 2011.

Digia Finland Ltd has the wholly owned active subsidiaries Digia Financial Software Ltd (100%), Digia Service Ltd (100%), OOO Digia RUS (100%) and Microext Oy (100%). Digia Hong Kong Ltd has the wholly owned subsidiary Digia Software (Chengdu) Co. Ltd (100%), with a registered branch in Beijing. Digia Estonia Oü, Digia Hong Kong Ltd, Digia Partners Oy and Microext Oy are inactive.

In 2011, Digia's business operations were divided into two main business segments: Enterprise Solutions and Mobile Solutions. Enterprise Solutions is divided into ERP and Financial Administration, Digital Services and Integration Solutions. The Mobile Solutions segment is divided into Contract Engineering Services and User Experience Services.

Towards the end of the year, the company carried out a reorganisation which came into effect at the start of 2012. In the new organisation, business is managed according to four strategic portfolios: Solutions & Services, Industry Verticals, International Products, and New market areas (e.g. Russia).

Based on this reorganisation, Digia will employ single-segment reporting from the beginning of 2012.

Shareholders' meetings

Digia Plc's Annual General Meeting (AGM) was held on 16 March 2011.

The AGM adopted the financial statements for 2010, released the Board members and the CEO from liability, specified the dividend payment, determined Board emoluments, resolved to keep the number of Board members at seven (7), and elected the company's Board of Directors for a new term. The AGM granted the following authorisations to the Board:

Authorisation of the Board of Directors to decide on the buyback of own shares

The AGM authorised the Board to decide on the buyback and/or acceptance as collateral of a maximum of 2,000,000 shares in the company (9.6% of the shares and votes). This buyback can only be executed by means of the company's unrestricted equity. The Board shall decide on how these shares are to be bought. Own shares may be bought back in disproportion to the holdings of the shareholders. The authorisation also includes acquisition of shares through public trading organised by NASDAQ OMX Helsinki Oy in accordance with the rules and instructions of NASDAQ OMX Helsinki and Euroclear Finland Ltd, or through offers made to shareholders. Shares may be acquired in order to improve the company's capital structure, to fund acquisitions or other business transactions, for offering share-based incentive schemes, to sell on, or to be annulled. The shares must be acquired at the market price in public trading. This authorisation supersedes that granted by the Shareholders' Meeting on 3 March 2010 and is valid for 18 months – i.e., until 16 September 2012.

Authorising the Board of Directors to decide on a share issue and granting of special rights

The AGM authorised the Board to decide on an ordinary or bonus issue of shares and the granting of special rights (as defined in Section 1, Chapter 10 of the Limited Liability Companies Act) in one or more instalments, as follows: The issue may total a maximum of 4,000,000 shares (19.2% of shares and votes). The authorisation applies both to new shares and to treasury shares held by the company. By virtue of the authorisation, the Board has the right to decide on share issues and the granting of special rights, in deviation from the pre-emptive subscription rights of the shareholders (a directed issue). The authorisation may be used to fund or complete acquisitions or other business transactions, for offering sharebased incentive schemes, to develop the company's capital structure, or for other purposes. The Board was authorised to decide on all terms related to the share issue or special rights, including the subscription price, its payment in cash or (partly or wholly) in capital contributed in kind or its being written off against the subscriber's receivables, and its recognition in the company's balance sheet. This authorisation supersedes that granted by the Shareholders' Meeting on 3 March 2010 and is valid for 18 months – i.e., until 16 September 2012.

The Annual General Meeting will take place on Tuesday 13 March 2012 from 10 a.m. at the company's headquarters at Valimotie 21, 00380 Helsinki.

Share capital and shares

The nominal share price is EUR 0.10. The number of shares at the end of 2011 totalled 20,875,645. At the year-end, the company held 159,576 of its own shares.

On 31 December 2011, according to Finnish Central Securities Depository Ltd, Digia had 6,296 shareholders. The 10 biggest shareholders were:

Shareholder	Shares and votes
Ingman Group Oy Ab	16.0%
Jyrki Hallikainen	10.2%
Pekka Sivonen	8.8%
Kari Karvinen	6.5%
Matti Savolainen	6.1%
Ilmarinen Mutual Pension Insurance Company	3.8%
Varma Mutual Pension Insurance Company	3.6%
Nordea Bank Finland Plc (nominee-registered)	1.4%
Etola Oy	1.0%
Olli Ahonen	0.9%

Distribution of holdings by number of shares held on 31 December 2011

Number of shares	Holding (%)	Shares and votes
1 – 100	22.2%	0.5%
101 – 1,000	58.9%	8.1%
1,001 – 10,000	17.4%	14.4%
10,001 – 100,000	1.0%	9.9%
100,001 – 1,000,000	0.3%	19.6%
1,000,001 – 3,000,000	0.1%	47.6%

Shareholding by sector on 31 December 2011

	Holding (%)	Shares and votes
Non-financial corporations	4.6%	21.4%
Financial and insurance corporations	0.2%	3.9%
General government	0.0%	7.5%
Not-for-profit institutions serving households	0.3%	0.5%
Households	94.4%	65.6%
Rest of the w orld	0.4%	1.1%

Share-based payments

Stock options

Digia Plc had no outstanding options at the time of writing.

Share incentive scheme and management ownership

The company has a share bonus system as a part of its key personnel commitment and incentive scheme.

With authorisation received at the AGM, the Board made a decision on the CEO's share-based incentive scheme in spring 2010.

The scheme comprises four earning periods, which are the calendar years 2010-2013. According to the scheme, rewards totalling a maximum value equivalent to 100,000 shares will be paid for each of the earning periods from 2011 to 2013, based on the fulfilment of earning criteria set by the Board. For 2012 the reward will be determined based on the company's earnings per share and net sales, according to principles set separately by the Board.

For the 2011 fiscal year the CEO will receive, in April 2012, a reward equivalent to the value of 39,266 shares in conjunction with his salary payment.

In addition to the CEO, the scheme applies to the company's other management team members, who are entitled to share the same share bonus that the CEO receives.

Furthermore, the company has a share incentive scheme for specific key persons, who, based on the financial results for 2009, could receive a total maximum bonus equivalent to 200,000 shares, paid out 50/50 in shares and cash in four equal annual instalments beginning in January 2010.

The rewards based on the share incentive scheme are paid half in shares and half in cash, after the financial statements for the period in question are approved. The cash portion of the bonus will primarily be used to cover taxes and other comparable costs of the scheme. The system involves no vesting periods limiting the sale of shares.

The payment of bonuses according to the share-based incentive schemes is subject to the employee in question being employed by the company on the payment date.

According to the list of shareholders dated 31 December 2011, Digia's Board of Directors and CEO owned shares in the company as follows:

Pertti Kyttälä	0
Martti Mehtälä	0
Robert Ingman	20,000
Kari Karvinen	1,353,901
Pekka Sivonen	1,831,613
Tommi Uhari	0
Marjatta Virtanen	3,000
Juha Varelius	147,625

At the year-end, the shares held by the Board members and the CEO represented 16.1% of the company's shares and votes.

Reported share performance on NASDAQ OMX Helsinki in 2011

During the fiscal year Digia Plc shares have been quoted on the Main List of the NASDAQ OMX Helsinki Ltd, in the Information Technology sector. The company's short name is DIG1V. The lowest reported share quotation was EUR 2.30 and the highest was EUR 5.79. The share closed at EUR 2.42 on the last trading day. The trade-weighted average was EUR 3.88. The Group's market capitalisation at the year-end was EUR 50,519,061.

The company received the following flagging notifications during the fiscal year:

The Ingman Group announced on 16 August 2011 that the total holding of said group and entities under its control had grown to exceed the 15% flagging threshold and was 15.15% of the company's shares and votes.
Pekka Sivonen announced on 19 December 2011 that his holding in the company had fallen below the 10% flagging threshold and amounted to 8.77% of the company's shares and votes.

Risks and uncertainties

The key risks under Digia's risk management in 2011 were customer, personnel, project, data security, integration and goodwill risks.

Measures for managing customer risks included the active development of the customer structure and the active prevention of potential risk positions. Personnel risks were assessed and managed using a regular goal and appraisal discussion process for key personnel. To develop personnel commitment, measures were taken to produce more systematic and effective internal communication through regular personnel events and increased management visibility. The Group carried out key project audits with a view to enhancing project risk management and securing the success of project deliveries to customers. In addition, the Group's certified quality management systems were re-evaluated and approved, and the Group streamlined its project delivery reporting procedures. In order to manage data security risks, the Group carries out data security audits and continuously develops operating models, practices and processes that promote data security. The management team is tasked with managing risks associated with the integration of business operations, unified operating models and best practices, as well as their integrated development. With respect to IFRS-compliant accounting policies, the Group actively monitors goodwill and the related impairment tests as a part of prudent and proactive risk management practices within financial management. Short-term uncertainties are related to any major changes occurring in the company's core business areas.

The business risk associated with the mobile market was realised during the period, fundamentally changing the operating environment. However, this mostly eliminated the company's business risk associated with the mobile market.

In addition, the Eurozone debt crisis has deepened and the risk of economic recession has grown, which may affect customers' investment decisions and liquidity, and thereby the company's sales and profits. There have already been signs that the greater uncertainty is affecting customers' investment decisions, and some planned projects have been delayed. However, these signs have not assumed alarming proportions in recent weeks.

Furthermore, the growth in customer project sizes increases the risks related to projects and their profitability.

Future prospects

The main objective for 2012 is to grow the scalable product business's share of the overall product selection. This will mainly be achieved organically, but carefully planned strategic acquisitions are also possible. Digia will continue developing its international operations, particularly in Russia. The main cornerstone of the company's operations remains the maintenance of high profitability and a positive cash flow.

The company expects the IT market to remain at roughly the previous year's level in 2012. However, risks associated with the Eurozone debt crisis and general inflation may affect demand for IT services and the development of business profitability. Slightly greater uncertainty is therefore related to the economic prospects for 2012.

With regard to its own operations, the company expects demand for contract engineering services to continue falling in the first quarter of 2012. This will cause the company's first-quarter net sales to fall from the level of the last quarter of 2011. The reduction in net sales and the start-up of the new organisation will also tax the company's profitability, which is expected to fall temporarily from the fourth quarter's level.

The company expects the new organisation to begin impacting on efficiency from the second quarter of 2012, upon which it will have a positive impact on the company's net sales and profitability.

The company expects its commercial Qt licensing and service business to grow in 2012 compared to the previous year, while maintaining a good profitability level. The Russian functions are also expected to develop favourably and to have an even greater impact on positive development of consolidated net sales and profitability during 2012.

On the whole, the company predicts that its operational profitability will improve as the year progresses, reaching a good level in the second half of 2012.

Major events after the balance sheet date

There have been no significant events after the end of the financial year.

This PDF is generated from Digia's online annual report and it may not contain all content from the report. You can find the complete report at annualreport2011.digia.com

Board's dividend proposal

At the end of 2011, the distributable shareholders' equity of Digia Plc was EUR 35,142,569.13, of which EUR 1,409,098.31 was the net loss for the year. At the Annual General Meeting, the Board of Directors will propose that a repayment of capital totalling EUR 0.10 per share be paid according to the confirmed statement of financial position for the fiscal year ending 31 December 2011. Shareholders listed on the shareholder register maintained by Euroclear Finland Oy on the reconciliation date, 16 March 2012, will be eligible for the capital repayment. The repayment date is 23 March 2012.

The company's loan covenants were changed under the new loan arrangements. In the future, this means that the company can distribute a maximum of 50 per cent (previously 30%) of the Group's net profit for the year without separate agreement. This does not affect 2012, when a maximum of EUR 3 million can be distributed.

Consolidated Income Statement (IFRS)

€	Note	1/1/–31/12/2011	1/1/–31/12/2010

Net sales	1, 3	121,939,859.61	130,825,208.92
Other operating income	6	360,686.48	317,471.09
Materials and services		-10,720,951.64	-10,156,889.49
Depreciation, amortisation, and impairment	9	-29,267,910.22	-3,719,067.09
Other operating expenses	4, 5, 7, 8, 10	-104,479,707.34	-100,102,287.26
		-144,107,882.72	-113,660,772.75
Operating profit		-22,168,123.11	17,164,436.16
Financial income	11	294,711.71	126,541.87
Financial expenses	11	-1,257,847.04	-1,565,317.44
		-963,135.33	-1,438,775.57
Earnings before tax		-23,131,157.44	15,725,660.59
Income taxes	12	679,523.90	-4,251,316.59
Net profit		-22,451,634.54	11,474,344.00
Other comprehensive income:
Exchange differences on translating foreign operations		42,128.23	292,272.49
Total comprehensive income		-22,409,506.31	11,766,616.49
Distribution of net profit:
Parent company shareholders		-22,451,634.54	11,474,344.00
Minority interest		-	-
		-22,451,634.54	11,474,344.00
Distribution of total comprehensive income:
Parent company shareholders		-22,409,506.31	11,766,616.49
Minority interest		-	-
		-22,409,506.31	11,766,616.49
Basic earnings per share, undiluted		-1.08	0.56
Diluted earnings per share		-1.08	0.56

Consolidated Statement of Financial Position (IFRS)

€	Note	31/12/2011	31/12/2010

ASSETS

Non-current assets
Goodw ill	15	44,542,601.76	65,544,601.75
Other intangible assets	15	3,944,064.46	8,969,615.85
Tangible assets	14	3,156,451.96	2,925,938.19
Available-for-sale investments	27	626,983.95	627,964.34
Long-term receivables		60,253.05	13,996.95
Deferred tax assets	16	789,920.06	875,669.02
		53,120,275.24	78,957,786.10
Current assets
Accounts receivable and other receivables	17	26,523,003.08	26,798,906.70
Cash and cash equivalents	18	8,170,023.36	9,681,630.64
		34,693,026.44	36,480,537.34
Total assets		87,813,301.69	115,438,323.44
€	Note	31/12/2011	31/12/2010

SHAREHOLDERS' EQUITY AND LIABILITIES

Equity attributable to parent-company shareholders
Share capital	19	2,087,564.50	2,086,464.50
Rights issue		-	39,710.00
Issue premium fund		7,899,485.80	7,899,485.80
Other reserves		5,203,821.24	5,203,821.24
Unrestricted invested shareholders' equity		35,525,037.82	35,486,427.82
Translation difference		208,429.18	166,300.95
Retained earnings		11,279,866.64	5,054,438.38
Net profit		-22,451,626.51	11,474,344.00
		39,752,578.89	67,410,992.69

Total shareholders' equity		39,752,578.89	67,410,992.69

Non-current liabilities
Deferred tax liabilities	16	772,021.00	2,177,566.16
Financial liabilities	22	15,441,727.64	16,609,379.77
		16,887,748.64	18,786,945.93
Current liabilities
Accounts payable and other liabilities	24	12,268,915.89	9,462,612.75
Income tax liabilities		99,819.04	1,368,676.49
Provisions	21	748,080.24	133,452.00
Accruals and deferred income	24	11,625,936.55	11,569,401.32
Interest-bearing liabilities	22	6,430,222.66	6,706,242.26
		31,172,974.38	29,240,384.82

Total liabilities		48,060,723.02	48,027,330.75

Total shareholders' equity and liabilities		87,813,301.69	115,438,323.44

Consolidated Cash Flow Statement (IFRS)

€ 000	1/1/–31/12/2011	1/1/–31/12/2010

Cash flow from operations:
Net profit	-22,452	11,474
Adjustments to net profit	34,780	9,409
Change in w orking capital	2,791	-5,828
Interest paid	-781	-703
Interest income	35	21
Taxes paid	-5,532	-3,306
Net cash flow from operations	8,842	11,066
Cash flow from investments:
Purchases of tangible and intangible assets	-2,733	-1,965
Cash flow from investments	-2 733	-1,965
Cash flow from financing:
Proceeds from share issue	-	79
Acquisition of ow n shares	-	-
Repayment of current loans	-19,044	-6,082
Repayments of non-current loans	-	-1,000
Withdraw als of current loans	3,500	-
Withdraw als of non-current loans	13,500	-
Dividends paid and other profit distribution	-5,577	-2,885
Cash flow from financing	-7,621	-9,887
Change in liquid assets	-1,512	-786
Liquid assets at beginning of period	9,682	10,469
Change in liquid assets	-1,512	-786

Liquid assets at end of period	8,170	9,682

Changes in Shareholders' Equity

				Proportion belonging to parent company shareholders
€ 000	Share capital	Rights issue	Share premium	Unrestricted invested share holders' equity reserve	Other reserves	Translation difference	Retained earnings	Total share holders' equity
Shareholders' equity, 1 January 2010	2,085	0	7,899	35,448	5,204	-126	7,673	58,184
Available-for-sale investments
Gains/losses on fair valuation	-	-	-	-	-	-	-	-
Amount recognised through profit or loss	-	-	-	-	-	-	-	-
Taxes associated w ith items recognised or derecognised in shareholders' equity	-	-	-	-	-	-	-	-
Net profit (+) / loss (-)	-	-	-	-	-	-	11,474	11,474
Total income and expenses recognised during the period	-	-	-	-	-	-	11,474	11,474
Increase in share capital	-	-	-	-	-	-
Dividends	-	-	-	-	-	-	-2,885	-2,885
Share-based transactions settled in equity	1	40	-	39	-	-	267	346
Stock options exercised	-	-	-	-	-	-	-	-
Other comprehensive income	-	-	-	-	-	292	-	292
	1	40	-	39	-	292	-2,619	-2,247
Shareholders' equity, 31 December 2010	2,086	40	7,899	35,486	5,204	166	16,529	67,411

€ 000	Share capital	Rights issue	Share premium	Unrestricted invested share holders' equity reserve	Other reserves	Translation difference	Retained earnings	Total share holders' equity
Shareholders' equity, 1 January 2011	2,086	40	7,899	35,486	5,204	166	16,529	67,411
Available-for-sale investments
Gains/losses on fair valuation	-	-	-	-	-	-	-	-
Amount recognised through profit or loss	-	-	-	-	-	-	-	-
Taxes associated w ith items recognised or derecognised in shareholders' equity	-	-	-	-	-	-	-	-
Net profit (+) / loss (-)	-	-	-	-	-	-	-22,452	-22,452
Total income and expenses recognised during the period	-	-	-	-	-	-	-22,452	-22,452
Increase in share capital	-	-	-	-	-	-
Dividends	-	-	-	-	-	-	-5,577	-5,577
Share-based transactions settled in equity	1	-40	-	39	-	-	171	171
Stock options exercised	-	-	-	-	-	-	-	-
Other comprehensive income	-	-	-	-	-	42	-	42
Other items	-	-	-	-	-	-	157	157
	1	-40	-	39	-	42	-5,249	-5,207
Shareholders' equity, 31 December 2011	2,088	0	7,899	35,525	5,204	208	-11,172	39,753

Distributable funds, 31 December

€ 000	2011 Parent	2010 Parent
Unrestricted invested shareholders' equity	35,525	35,486
Retained earnings	1,027	3,487
Net profit	-1,409	2,946
Total	35,143	41,919

Basic Information on the Group and its Accounting Policies

Basic information on the company

Digia Plc is a modern, agile software company providing and implementing ICT products, services and technologies for its customers to improve their competitive advantage – solutions for the needs of a transforming world.

Solutions that are independent of the terminals and technologies used provide true freedom and enable the right information to reach the right people in the right place at the right time.

As a comprehensive solution provider and system integrator, Digia provides its customers with an extensive range of IT products and services, strong software expertise in mobile environments and extensive industry knowledge.

The company is based in Finland, operating globally and employing nearly 1,200 professionals. Digia is listed on NASDAQ OMX Helsinki.

The Group's parent company is Digia Plc. The parent company is domiciled in Helsinki and its registered office is at Valimotie 21, 00380 Helsinki.

Accounting policies

Basis of preparation

The consolidated financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS), observing the IAS and IFRS standards, as well as SIC and IFRIC interpretations valid on 31 December 2011.

Consolidation principles

The consolidated financial statements include the parent company Digia Plc and subsidiaries in which the parent company directly or indirectly controls more than 50 per cent of the votes associated with shares or over which the parent company otherwise exercises control. Acquired subsidiaries are consolidated using the cost method, according to which the assets and liabilities of the acquired entity are measured at fair value at the time of acquisition, and the remaining difference between the acquisition price and the acquired shareholders' equity constitutes goodwill. In accordance with the exemption permitted by IFRS 1, acquisitions prior to the IFRS transition date have not been adjusted to correspond to the IFRS principles. Their values remain unchanged from Finnish Accounting Standards. Subsidiaries acquired during the fiscal period are included in the consolidated financial statements as of the date of acquisition, while divested subsidiaries are included until the date of divestment. Intra-Group transactions, receivables, liabilities, unrealised margins and internal profit distribution are eliminated in the consolidated financial statements. The profit for the period is divided between the parent company shareholders and the minority. The minority interest is also presented as a separate item within shareholders' equity.

As of 1 January 2011, the Group has applied the following new or amended standards and interpretations:

Changes to IAS 24, Related Party Disclosures. The purpose of the changes is to clarify and simplify the definition of related parties, especially as regards significant influence or shared control of parties. The Group does not expect the change to have a significant effect on upcoming consolidated financial statements.
Changes to IAS 32, Financial Instruments: Classification of Rights Issues. The change applies especially to the handling of share issues in foreign currencies. In future, subscription rights related to share issues in foreign currencies can under certain conditions be classified as shareholders' equity rather than derivative instruments. The Group does not expect the change to have a significant effect on upcoming consolidated financial statements.
IFRS Annual Improvements 2011, changes to several standards.The changes for 2011 apply to six standards and one interpretation. The Group does not expect the change to have a significant effect on upcoming consolidated financial statements.
The following interpretations have not been significant for the group: IFRIC 12: Service Concession Arrangements IFRIC 15: Agreements for the Construction of Real Estate IFRIC 16: Hedges of a Net Investment in a Foreign Operation IFRIC 17: Distributions of Non-cash Assets to Owners IFRIC 18: Transfers of Assets from Customers

The preparation of financial statements under IFRS means that Group management must necessarily make certain estimates and judgments concerning the application of the accounting principles. Information about such considerations made by the management when applying the corporate accounting principles with the greatest influence on the figures presented in the financial statements are explained under the item 'Accounting policies requiring consideration by management and crucial factors of uncertainty associated with estimates'.

Segment reporting

Digia's business operations were in 2011 still divided into two main business segments: Enterprise Solutions and Mobile Solutions. Enterprise Solutions comprised ERP and Financial Administration, Digital Services and Integration Solutions. The Mobile Solutions segment comprised Contract Engineering Services and User Experience Services. The divisions have been specified as primary reporting segments in accordance with IFRS 8 Segment Reporting. Geographical areas have been specified as secondary segments.

Foreign currency translation

Items referring to the earnings and financial position of the Group's units are recognised in the currency that is the main currency of the unit's primary operating environment ('functional currency'). The consolidated financial statements are given in euros, which is the operating and presentation currency of the parent company.

Receivables and liabilities denominated in foreign currency have been converted into euro at the exchange rate in effect on the balance sheet date. Gains and losses arising from foreign currency transactions are recognised through profit or loss. Foreign exchange gains and losses from operations are included in the corresponding items above operating profit.

The income statements of non-Finnish consolidated companies have been converted into euro at the weighted average exchange rate for the period, and their balance sheets have been converted at the exchange rate quoted on the balance sheet date. Translation differences arising from the application of the cost method are treated as items adjusting consolidated shareholders' equity.

Tangible assets

Property, plant and equipment (PPE) is carried at cost less accumulated planned depreciation and impairment. Assets are depreciated over their estimated useful lives. Depreciation is not booked for land areas. Estimated useful lives are as follows:

Buildings and structures 25 years
Machinery and equipment 3–8 years

The residual value and useful life of assets is reviewed on each balance sheet date and, if necessary, adjusted to reflect any changes in expected economic value.

Capital gains and losses on elimination and the transfer of tangible assets are included either in other operating income or expenses.

Government grants

Grants received as compensation for costs are recognised in the income statements at the same time as the expenses related to the target of the grant are recognised as expenses. Grants of this kind are presented under other operating income. Government grants attributable to fixed assets are recognised as deductions in the value of intangible fixed assets. The grants are recognised as income over the life of the asset through reduced amortisation.

Intangible assets

Goodwill

Goodwill corresponds to the proportion of the acquisition cost of an entity acquired after the period between 1 January 2004 and 31 December 2011 that exceeds the Group's share of the fair value of the entity's net assets on the date of acquisition. The acquisition cost also includes other direct expenses related to the acquisition, such as professionals' fees.

As of the beginning of the 2010 fiscal year, goodwill has been defined according to IFRS 3, i.e. as the difference between points 1 and 2 below:

1. Sum of the following items:
1.1 the fair value of the consideration paid at the time of acquisition
1.2 the amount of any non-controlling interest in the object of acquisition
1.3 the fair value of any previously held non-controlling interest in the object of acquisition, in the case of a phased business combination
The net sum of the acquisition date assets acquired and liabilities assumed.

The goodwill for business combinations prior to 2004 corresponds to goodwill in accordance with previous accounting standards that has been used as the deemed cost. A portion of the goodwill of acquired entities is allocated to customer relationships or products originating in acquisitions and recognised in intangible assets. The portions of acquisition cost recognised in intangible assets are amortised over their useful life.

No regular amortisation is booked on goodwill but it is tested quarterly for impairment. For this purpose, goodwill is allocated to cash generating units. Goodwill is recognised at the original cost from which the impairment is deducted. Any adjustments of acquisition cost are booked no later than 12 months after the date of acquisition.

Research and development costs

Research costs are recognised as expenses in the income statement. Development costs arising from the design of new products are capitalised as intangible assets in the statement of financial position, until the product is ready for commercial utilisation and future economic benefit is expected from the product. Depreciation begins once the product is ready for commercial utilisation. The useful life of capitalised development expenses is 2 to 5 years, during which time the capitalised assets will be recognised as expenses by straight-line depreciation.

Other intangible assets and long-term expenses

Patents, trademarks and licences with a limited useful life are booked in the statement of financial position and recognised as expenses in the income statement by straight-line depreciation over their useful life. Amortisation is not booked on intangible assets with an unlimited useful life but they are tested annually for impairment.

Long-term expenses are capitalised and depreciated over their financial lifetime, which is defined as somewhere between 3 and 7 years.

Leases

Leases on property, plant and equipment in which the Group bears a significant part of the risks and benefits characteristic of ownership are categorised as finance leases. A finance lease is recognised in the balance sheet at the fair value of the leased asset at the start of the lease period or at a lower current value of minimum lease payments. Assets acquired on finance leases are depreciated over the asset's useful life or the lease period, whichever is shorter. Lease obligations are included in interest-bearing debt. Leases in which the risks and benefits characteristic of ownership remain with the lessor are treated as operating leases. Leases payable on the basis of other leases are recognised as expenses in the income statement in equal instalments over the lease period.

Financing assets and liabilities

Financing assets are divided into receivables and liabilities, either as held-to-maturity, held-for-trading, or available-for-sale. Financial instruments are at first measured at fair value, with any fees deducted. Usually, the fair value corresponds with the sum paid or received for the instrument. Loans are included under non-current and current liabilities. Interest expenses are recognised as expenses in the period during which they have arisen. Loan arrangement costs are periodised during the loan period using the effective interest method.

Accounts receivable and other receivables

Accounts receivable and other receivables are measured at nominal value. A provision for impairment of accounts receivable is established when there is evidence based on a case-by-case risk assessment that the Group will not be able to collect all amounts due according to the original terms of receivables.

Cash and cash equivalents

Cash and cash equivalents consist of cash and withdrawable bank deposits and other short-term investments. Accounts with a credit facility are treated as short-term loans under current liabilities.

Amortisation

On each balance sheet date, the Group estimates whether there is evidence that the value of an asset may have been impaired. If there is evidence of impairment, the amount recoverable from the asset is estimated. In addition, the recoverable amount is estimated annually on the following assets regardless of whether there is an indication of impairment or not: goodwill, and intangible assets with an unlimited useful life. The need for impairment is reviewed at the level of cash generating units, which refers to the lowest level of unit that is mainly independent of other units and whose cash flows can be separated from other cash flows. If the carrying amount exceeds the recoverable amount, an impairment loss is recognised in the income statement. An impairment loss recognised for goodwill will not be revoked under any circumstances.

Employee benefits

Pension liabilities

The Group's pension schemes are arranged through a pension insurance company. The pension schemes are mainly defined contribution plans, and payments are recognised in the income statement during the period to which the payment applies. The Finnish Employees' Pensions Act (TyEL) pension scheme was treated as a defined contribution plan in 2010 and 2011.

Stock options granted

The Group has incentive schemes where payments are made either in equity instruments or in cash. The benefits granted through these arrangements are measured at fair value on the date of their being granted and recognised as expenses in the income statement evenly during the vesting period. Correspondingly, in arrangements where the payment is made in cash, the liability and the change in its fair value is recognised as a liability on an accrual basis. The impact of these arrangements on the financial results is shown in the income statements under the cost of employee benefits.

Provisions

A provision is recognised when the Group has a legal or factual obligation based on previous events, the realisation of a payment obligation is probable and the amount of the obligation can be reliably estimated.

A restructuring provision is recognised when the Group has prepared a detailed restructuring plan, begun its implementation and disclosed the matter. The provision is based on expected actual costs, such as agreed compensation for termination of employment.

The Group recognises a provision for onerous contracts when the expected benets to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract.

A guarantee provision is recognised once a product or service subject to guarantee terms has been sold and the amount of potential guarantee costs can be estimated with sufficient accuracy.

Shares, dividends and shareholders' equity

Dividends proposed by the Board of Directors will not be deducted from distributable shareholders' equity before the Board's approval has been received. Immediate costs relating to the acquisition of Digia Plc's own shares are recognised as deductions in shareholders' equity.

Earnings per share

Earnings per share are calculated by dividing the period's earnings after tax belonging to the parent company's shareholders by the weighted average of shares outstanding during the fiscal period, excluding own shares acquired by Digia Plc. Diluted earnings per share are calculated assuming that all subscription rights and options have been exercised by the beginning of the next fiscal year. In addition to the weighted average of shares outstanding, the denominator also includes shares received from subscription rights and options assumed to have been exercised. The subscription rights and options assumed to have been exercised will not be taken into account in earnings per share if their actual price exceeds their average price during the fiscal year.

Income taxes

Taxes recognised in the income statement include taxes based on taxable income for the financial period, adjustments to taxes for previous periods, as well as changes in deferred taxes. Tax based on taxable income for the period is calculated using the corporate income tax rate applicable in each country. Deferred tax assets and liabilities are recognised for temporary differences between the taxable values and book values of asset and liability items. The biggest temporary differences arise from depreciation of fixed assets, unused tax losses, and the revaluation of financial and derivative

instruments at the fair price resulting from the purchase. Deferred taxes are determined on the basis of the tax rate enacted by the balance sheet date. Deferred tax receivables are recognised up to the probable amount of taxable income in the future, against which the temporary difference can be utilised.

Revenue recognition

Work carried out by people is recognised monthly in accordance with progress. Long-term projects with a fixed price are recognised on the basis of their percentage of completion once the outcome of the project can be reliably estimated. The percentage of completion is determined as the proportion of costs arising from work performed for the project up to the date of review in the total estimated project costs. If estimates of the project change, the recognised sales and profit/margin are amended in the period during which the change becomes known and can be estimated for the first time. Any loss expected from a project is recognised as an expense immediately after the matter has been noted. Licensing income is recognised in accordance with the factual substance of the agreement. Depending on the nature of the licence, the recognition is based on either the installation date or the degree of completion. Maintenance fees are allocated over the agreement period.

One-off items

Items recorded as one-off items are ones which occur only once or very rarely. These may include business divestments, reorganisations and goodwill write-downs.

Accounting policies requiring consideration by management and crucial factors of uncertainty associated with estimates

Estimates and assumptions regarding the future have to be made during the preparation of the financial statements, and the outcome may differ from the estimates and assumptions. Furthermore, the application of accounting policies requires consideration. These estimates and assumptions are based on historical experience and other justifiable assumptions that are believed to be reasonable under the circumstances and that serve as a foundation for evaluating the items included in the financial statements. The estimates mainly concern the following items:

Impairment testing

The Group carries out annual impairment testing of goodwill and intangible assets with an unlimited useful life and evaluates any indications of impairment as described above in the accounting policies. Recoverable amounts from cash generating units are determined as calculations based on value in use. The preparation of these calculations requires the use of estimates.

Entry as income

As described in the revenue recognition policies, the revenue and costs of a long-term project are recognised as income and expenses, on the basis of percentage of completion once the outcome of the project can be reliably estimated. Recognition associated with the degree of completion is based on estimates of expected income and expenses of the project and reliable measurement and estimation of project progress. If estimates of the project's outcome change, the recognised sales and profit/margin are amended in the period during which the change becomes known and can be estimated for the first time. Any loss expected from a project is immediately recognised as an expense.

Financial risks

Financial risk management consists, for instance, of the planning and monitoring of solvency of liquid assets, the management of investments, receivables and liabilities denominated in a foreign currency, and the management of interest rate risks on non-current interest-bearing liabilities.

In accordance with the company's investment policy, cash and cash equivalents are invested only in low-risk short rate funds and bank deposits. The Group's policy defines creditworthiness requirements for customers in order to minimise the amount of credit losses. A sufficient provision was made for uncertain accounts receivable at the end of the fiscal period.

The company maintained a positive cash flow from operations despite the readjustment actions taken during the year, and thereby its liquidity also remained good. The most significant currency risks relating to accounts receivable or accounts payable are managed by means of forward foreign exchange contracts, when necessary. At the end of the fiscal year, the company did not have any such forward contract in force. Interest rate trends are monitored systematically in different bodies within the company, and possible interest rate risks hedges are made with the appropriate instruments. At the end of the fiscal year, the company had no such hedging instruments in force.

Application of new and amended IFRS standards

The IASB has published the following new or amended standards and interpretations that are not yet effective and thus have not yet been applied by the Group. The Group will introduce each standard and interpretation as of its effective date or, if the effective date is some other date than the first day of the fiscal period, as of the beginning of the fiscal period following the effective date.

Amendment: IFRS 7 Financial Instruments. Disclosures Transfers of Financial Assets. The change is designed to improve the transparency of off-balance sheet transfers of financial asset. The changes will help users of financial statements to understand the relationship between transferred nancial assets that are not derecognised in their entirety and the associated liabilities; and to evaluate the nature of and risks associated with the entity's continuing involvement in derecognised nancial assets. The Group does not expect the changes to have a significant effect on upcoming consolidated financial statements.
Amendment: IFRS 1 First-Time Adoption of International Financial Reporting Standards Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters. The amendment adds a deemed cost exemption that an entity can apply at the date of transition to IFRS, after being subject to severe hyperinflation.
Amendment: IAS 12 Income Taxes: Effect of the earnings model on the calculation of deferred tax on investment properties and intangible assets measured using a revaluation model. Deferred tax on investment properties and intangible assets measured using a fair value or revaluation model is determined based on the assumption that the carrying amount of the underlying asset will be recovered entirely through sale.
The following standards and interpretations are not considered to affect the Group:
Changes to IFRIC 14 IAS 19, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments

1. Segment information

Digia's business segments are Enterprise Solutions and Mobile Solutions.

Net sales

€ 000	2011	2010
Enterprise Solutions	82,659	75,674
Mobile Solutions	39,281	55,152
Group total	121,940	130,825

In the Enterprise Solutions segment, no single customer accounted for more than 10 per cent of the consolidated net sales. The Mobile Solutions segment's major customer is Nokia, which accounted for more than 10 per cent of the consolidated net sales in the fiscal year.

Operating profit before extraordinary items

€ 000	2011	2010
Enterprise Solutions	8,365	11,001
Mobile Solutions	-280	6,164
Group total	8,084	17,164

Digia's consolidated profitability for 2011 was significantly affected by extraordinary non-recurrent items comprising a EUR 25.4 million goodwill writedown and a EUR 4.9 million restructuring provision related to the closure of sites. The goodwill writedown was entirely attributable to the Mobile Solutions segment. EUR 4.4 million of the restructuring provision was attributable to Mobile Solutions and EUR 0.5 million to Enterprise Solutions. Operating profit before extraordinary items is an indicator of the company's operational profitability.

Operating profit (EBIT)

€ 000	2011	2010
Enterprise Solutions	7,895	11,001
Mobile Solutions	-30,063	6,164
Group total	-22,168	17,164
Assets
€ 000	2011	2010

Enterprise Solutions	69,744	63,762
Mobile Solutions	8,422	40,491
Unallocated	9,647	11,185
Group total	87,813	115,438

The assets of the Enterprise Solutions segment include goodwill arising from the acquisition of Digia Sweden AB (formerly Capital C AB), Samstock Ltd and Sentera Plc, as well as the part of the goodwill arising from the acquisition of Yomi Software Ltd that is attributable to the operations of the segment. The assets of the Mobile Solutions segment include goodwill arising from the acquisition of Digia Inc. and Sunrise Resources Ltd, as well as the part of the goodwill arising from the acquisition of Yomi Software Ltd that is attributable to the operations of the segment. A EUR 25.4 million writedown applied to the goodwill of the Mobile Solutions segment during the year. The goodwill items are described in more detail in Note 15.

The most significant unallocated asset item comprises investments and cash and cash equivalents treated from the viewpoint of the Group level.

Liabilities

€ 000	2011	2010
Enterprise Solutions	19,016	12,270
Mobile Solutions	6,401	10,264
Unallocated	22,644	25,493
Group total	48,061	48,027

The most significant item within unallocated liabilities consists of a long-term bank loan.

Depreciation, amortisation, and impairment

€ 000	2011	2010
Enterprise Solutions	2,702	1,671
Mobile Solutions	26,565	2,048
Group total	29,268	3,719

Capital expenditure

€ 000	2011	2010
Enterprise Solutions	2,026	1,023
Mobile Solutions	707	942
Group total	2,733	1,965

Geographical distribution of net sales

€ 000	2011	2010
Finland	120,196	120,196
Other countries	14,697	10,629
Total	121,940	130,825

2. Acquired business operations

Acquired business operations in 2011 and 2010

The purchase price for the business acquired includes fixed and variable components. Fixed components amount to EUR 150,000, which was paid with the company's cash reserves. In addition to fixed components, the seller is entitled to an additional purchase price in the event that the sales targets agreed upon for said business for 2011– 2013 are met. For 2011 the additional purchase price came to EUR 1.0 million, which is EUR 0.8 million higher than the original estimate. The additional price will be paid in cash as agreed. Due to the higher-than-expected sales of 2011, the additional purchase price is now estimated to total EUR 1.5 million.

No business operations were acquired in the 2010 fiscal year.

3. Long-term projects

Consolidated net sales include income recognised on long-term projects totalling EUR 17.1 million in 2011 (EUR 17.7 million in 2010). The consolidated income statement includes income recognised on incomplete long-term projects totalling EUR 11.3 million on 31 December 2011 (EUR 14.3 million on 31 December 2010).The statement of financial position includes advance payments recognised on incomplete long-term projects totalling EUR 0.3 million on 31 December 2011 (EUR 0.8 million on 31 December 2010).

4. One-off expenses

The one-off expenses for the fiscal year 2011 totalled EUR 30.3 million, comprising EUR 25.4 million in a goodwill writedown and EUR 4.9 million in a restructuring provision.

5. Auditors' fees

€ 000	2011	2010
Audit	111	80
Other statutory duties	4	1
Tax counselling	4	10
Other services	11	12
Total	130	103

6. Other operating income

€ 000	2011	2010
Grants	253	249
Other income	107	68
Total	361	317

7. Other operating expenses

The following table presents the five most significant items included in other operating expenses:

€ 000	2011	2010
Costs of premises	6,206	6,144
IT costs	3,985	4,119
Voluntary personnel expenses	3,867	3,384
Travel	2,152	2,367
External services	1,075	1,041
Total	17,284	17,056

8. Product development expenses

€ 000	2011	2010
Product development expenses	4,798	3,003
Total	4,798	3,003

9. Depreciation, amortisation and impairment

€ 000	2011	2010
Depreciation and amortisation by asset category

Intangible assets	1,845	2,162

Property, plant and equipment
Buildings	7	7
Machinery and equipment	2,056	1,550
Total	2,063	1,557

Amortisation
Goodw ill impairment	25,360	0
Depreciation, amortisation and impairment, total	29,268	3,719

10. Personnel expenses

€ 000	2011	2010
Wages and salaries	68,564	65,172
Pension costs, defined-contribution plans	11,915	11,339
Share-based payments	296	720
Other personnel expenses	3,766	3,343
Total	84,541	80,573

Group personnel on average during the period	2011	2010
Enterprise Solutions	607	689
Mobile Solutions	799	768
Group management and administration	47	51
Total	1,453	1,508

Information on employee benefits and loans to the management are presented in Note 28, 'Related party transactions'.

11. Financial income and expenses

Financial income

€ 000	2011	2010
Interest income from cash and cash equivalents	51	23
Interest income from accounts receivable	0	6
Dividend income	10	10
Exchange rate gains	170	87
Other financial income	64	1
Total	295	127

Financial expenses

€ 000	2011	2010
Interest expenses for financing loans valued at accrued acquisition cost	731	727
Interest expenses for accounts payable	1	1
Loan administration fees	239	322
Exchange rate losses	24	290
Other financial expenses	263	225
Total	1,258	1,565

12. Income taxes

€ 000	2011	2010
Current tax	642	4,362
Taxes from previous periods	-2	48
Deferred tax	-1,320	-159
Total	-680	4,251

Reconciliation between the tax expenses in the income statement and taxes calculated at the tax rate valid in the Group's home country (26 per cent):

€ 000	2011	2010
Earnings before tax	-23,131	15,726

Taxes calculated at the domestic corporation tax rate	-6,014	4,089
Deviating tax rates of foreign subsidiaries	80	-1
Income not subject to tax	-162	-21
Non-deductible expenses	5,533	49
Tax effect of dissolution losses	-101	219
Other items	-13	-131
Taxes for the period in the income statement	-2	48
Total	-680	4,251

Taxes for the period in the income statement	-680	4,251

13. Earnings per share

Basic earnings per share are calculated by dividing the earnings before tax for the accounting period attributable to the parent company's shareholders by the weighted average of shares outstanding during the accounting period. Own shares possessed by the company are not included in the calculation of the weighted average of shares outstanding. The calculation of diluted earnings per share includes consideration of the diluting effect of stock options on the weighted average number of shares. Stock options have a diluting effect if their exercise price is lower than the fair value of the share.

	2011	2010
Profit for the period attributable to parent company shareholders (€ 000)	-22,452	11,474

Weighted average number of shares during the period	20,701,877	20,626,817
Diluting effect of stock options	-	5,187
Diluted w eighted average number of shares during the period	20,701,877	20,632,004

Basic earnings per share (EUR/share)	-1.08	0.56
Diluted earnings per share (EUR/share)	-1.08	0.56

14. Property, plant and equipment

€ 000	Land and w ater areas	Buildings and structures	Machinery and equipment	Other tangible assets	Total 2011	Total 2010
Acquisition cost, 1 January	17	162	14,476	84	14,739	12,865
Additions	-	-	2,300	-	2,300	2,018
Acquisition of subsidiary	-	-	-	-	-	-
Disposals	-	-	-7	-	-7	-144
Acquisition cost, 31 December	17	162	16,769	84	17,032	14,739
Accumulated depreciation and amortisation, 31 December	-	-65	-11,665	-83	-11,813	-10,248
Depreciation	-	-7	-2,056	-	-2,063	-1,565
Amortisation	-	-	-	-	-	-
Disposals	-	-	-	-	-	-
Accumulated depreciation and amortisation, 31 December	-	-71	-13,721	-83	-13,876	-11,813

Book value, 1 January	17	97	2,811	1	2,926	2,617
Book value, 31 December	17	91	3,047	1	3,156	2,926

Property, plant and equipment include assets leased under finance lease as follows:

€ 000	Land and w ater areas	Buildings and structures	Machinery and equipment	Other tangible assets	Total 2011	Total 2010
Acquisition cost	-	-	8,067	-	8,067	6,519
Accumulated depreciation	-	-	-6,441	-	-6,441	-5,318
Book value	-	-	1,626	-	1,626	1,202

15. Intangible assets

			Other intangible
€ 000	Goodw ill	Development costs	assets	Total 2011	Total 2010
Acquisition cost, 1 January	89,382	2,487	23,649	115,518	115,419
Capitalised development costs	-	-	-	-	-
Additions	-	-	1,177	1,177	244
Disposals	-	-	-	-	-145
Acquisition of subsidiary	-	-	-	-	-
Acquisition cost, 31 December	89,382	2,487	24,826	116,695	115,518

Accumulated depreciation and amortisation, 31 December	-23,837	-2,487	-14,679	-41,003	-38,841
Depreciation	-	-	-1,845	-1,845	-2,162
Amortisation	-21,002	-	-4,358	-25,360	-
Accumulated depreciation and amortisation, 31 December	-44,839	-2,487	-20,882	-68,208	-41,003

Book value, 1 January	65,545	0	8,970	74,514	76,578
Book value, 31 December	44,543	0	3,944	48,486	74,514

The Group carries out annual impairment tests for goodwill and intangible assets with an indefinite useful life, in accordance with the IAS 36 standard.

The distribution of goodwill and values subject to testing between divisions on the balance sheet date was as follows:

€ 000	Specified intangible assets	Unallocated goodw ill	Other items	Total value subject to testing
Enterprise Solutions	3,419	43,244	6,975	53,638
Mobile Solutions	0	1,299	2,803	4,102
Total	3,419	44,543	9,779	57,740

The goodwill in the Enterprise Solutions segment was mainly associated to the acquisition of Sentera Plc and Digia Sweden Ab and Samstock Ltd. The goodwill in the Mobile Solutions division was mainly associated with the combination of Digia Inc. and SysOpen Plc, as well as the acquisition of Yomi Software Ltd and Sunrise Resources Ltd. Allocated goodwill is presented in the intangible asset group 'Other intangible assets' and amortised over a period of 5-10 years.

The other items include the estimated working capital and fixed assets of the divisions.

Impairment testing

The Group has defined its business segments as cash-generating units (CGU). Goodwill impairment is tested by comparing the CGU fair value to the book value. The use values are based on the continuous use of an asset as well as on the financial plans and estimates of the CGU's future development, approved by the relevant CGU management.

Present values for the Enterprise Solutions segment were calculated for the forecast period, based on the following assumptions: annual growth in net sales 3 per cent; operating profit 10 per cent; discount rate 8.9 per cent. Cash flows after the forecast period are estimated by means of cash-flow extrapolation that applies the assumptions given above.

Present values for the Mobile Solutions segment were calculated for the forecast period, based on the following assumptions: annual growth in net sales 2 per cent; operating profit 10 per cent; discount rate 10.9 per cent. Cash flows after the forecast period are estimated by means of cash-flow extrapolation that applies the assumptions given above.

Net sales growth is deemed the most critical factor in calculating the present values of cash flows. The amount of goodwill for Enterprise Solutions requires average annual growth of 0.9 per cent for business operations and 4.0 per cent profitability. The goodwill for Mobile Solutions requires net sales to remain constant and 3.7 per cent profitability.

In the second quarter of 2011, the company recorded a EUR 25.4 million writedown attributable to the goodwill and customer relations of the Mobile Solutions segment. This writedown was based on the company's revision of the segment's long-term income expectations, as the applicable legislation requires. The revised expectation is due to a sudden and radical transition in the business environment for contract engineering services. In the company's view, this has markedly and permanently reduced demand for Symbian and MeeGo services.

On the balance sheet date, the Enterprise Solutions segment's use value was EUR 137.5 million higher than the segment's book value. The Mobile Solutions segment's use value was EUR 9.1 million higher than the book value.

16. Deferred tax assets and liabilities

Changes in deferred taxes during 2011:

€ 000	1.1.2011	Recognised in income statement	Recognised in equity	Exchange rate differences	Subsidiaries acquired/ divested	31.12.2011
Deferred tax assets:
Provisions	35	178	-	-	-	213
Confirmed losses	690	-258	-	-	-	432
Other items	151	-6	-	-	-	145
Total	876	-86	-	-	-	790

€ 000	1.1.2011	Recognised in income statement	Recognised in equity	Exchange rate differences	Subsidiaries acquired/ divested	31.12.2011
Deferred tax liabilities:
From business combinations	1,989	-1,459	-	-	-	529
Other items	189	54	-	-	-	243
Total	2,178	-1,406	-	-	-	772

Changes in deferred taxes during 2010:

€ 000	1.1.2010	Recognised in income statement	Recognised in equity	Exchange rate differences	Subsidiaries acquired/ divested	31.12.2010
Deferred tax assets:
Provisions	76	-41	-	-	-	35
Confirmed losses	827	-138	-	-	-	690
Other items	309	-157	-	-	-	151
Total	1,212	-336	-	-	-	876

€ 000	1.1.2010	Recognised in income statement	Recognised in equity	Exchange rate differences	Subsidiaries acquired/ divested	31.12.2010
Deferred tax liabilities:
From business combinations	2,438	-449	-	-	-	1,989
Other items	234	-45	-	-	-	189
Total	2,672	-495	-	-	-	2,178

17. Accounts receivable and other receivables

€ 000	2011	2010
Accounts receivable and other receivables
Accounts receivable	18,750	21,919
Security deposit for rental dues	402	374
Receivables from customers on long-term projects	1,518	1,023
Tax assets from the profit for the financial year	2,065	-
Prepayments and accrued income	3,383	2,902
Other receivables	405	581
Accounts receivable and other receivables	26,523	26,799

€ 000	2011	2010
Non-due accounts receivable	16,348	20,470
Accounts receivable due 1–30 days ago	1,579	1,132
Accounts receivable due 31–60 days ago	416	162
Accounts receivable due more than 60 days ago	406	154
Total	18,750	21,919

At the end of the fiscal year 2011, credit loss provisions totalled EUR 0.02 million. At the end of the fiscal year 2010, credit loss provisions totalled EUR 0.1 million. The book value of accounts receivable and security deposits for rental dues is a reasonable estimate of their fair value. Their balance sheet values best correspond with the sum of money that represents the maximum amount of credit risks. Essential items included in prepayments and accrued income are associated with the accrual of statutory insurance premiums and other accrued expenses.

18. Cash and cash equivalents

€ 000	2011	2010
Financing assets recognised at fair value through profit and loss
Mutual funds	303	300
Bank accounts	7,867	9,382
Total	8,170	9,682

19. Notes on share capital

	Number of shares	Share capital (€ 000)
1.1.2010	20,853,645	2,085
Rights issue	11,000	1
31.12.2010	20,864,645	2,086

	Number of shares	Share capital (€ 000)
1.1.2011	20,864,645	2,086
Rights issue	11,000	1
31.12.2011	20,875,645	2,087

The maximum number of shares is 48 million (48 million in 2010). The nominal value of each share is EUR 0.1 and the Group's maximum share capital is EUR 4.8 million (EUR 4.8 million in 2010). All outstanding shares are paid in full. At the end of the fiscal year, the company held 159,576 own shares, or 0.8 per cent of all shares.

The premium fund comprises the amount paid for shares in excess of the nominal value. The 'Other reserves' amount arises from fair valuation of acquired business operations in the consolidated financial statements. The translation differences reserve comprises translation differences arising from the translation of financial statements of non-Finnish units. The unrestricted invested shareholders' equity reserve comprises investments similar to shareholders' equity and the subscription price of shares when a specific decision is made not to enter it in shareholders' equity.

20. Share-based payments

The Group has had stock option schemes in place since 15 September 1999 and has also offered share-based bonuses as part of the key personnel commitment and incentive scheme as of 31 May 2007. Options granted after 2003 have been recognised in the financial statements for 2005 in accordance with the standard IFRS 2 Share-based Payment.

At the end of the financial year, all A options in the 2005 scheme had expired. The Group operated the stock option scheme described below in the 2011 financial year:

Option scheme 2005

There were 900,000 options in the 2005 option scheme, entitling holders to subscribe a maximum of 900,000 shares in Digia Plc. The warrants marked 2005A expired on 30 November 2009, the warrants marked 2005B expired on 30 November 2010, and the warrants marked 2005C expired on 30 November 2011.

The options and related transactions are presented in full below:

	Warrants 2005
2011	2005 A	2005 B	2005 C

Maximum number of options	300,000	300,000	300,000
Shares available for subscription per option	1	1	1
Original subscription price*	€4.33	€3.98	€3.93
Dividend adjustment	Yes	Yes	Yes
Subscription price, 31 December 2008	€4.10	€3.80	€3.83
Subscription price, 31 December 2009	expired	€3.75	€3.78
Subscription price, 31 December 2010	expired	€3.61	€3.64
Subscription price, 31 December 2011	expired	expired	expired
Vesting date	1/11/2007	1/11/2008	1/11/2009
Expiry date	30/11/2009	30/11/2010	30/11/2011
Exercise period, years	expired	expired	expired
Persons at end of financial period	expired	expired	expired

Events in 2011 fiscal year

Amounts 1 January 2011
Options in reserve	-	-	300,000

Changes during the period
Options expired	-	-	300,000

Amounts 31 December 2011
Options in reserve	-	-	-

* At the end of the fiscal year, the subscription price for warrants in force was determined as follows:

2005A: Trading-weighted average share price on the Helsinki Stock Exchange calculated for the 20 days following the publication of Digia's Interim Report Q1/2005.

2005B: Trading-weighted average share price on the Helsinki Stock Exchange calculated for the 20 days following the publication of Digia's Interim Report Q1/2006.

2005C: Trading-weighted average share price on the Helsinki Stock Exchange calculated for the 20 days following the publication of Digia's Interim Report Q1/2007.

On the recorded date for each distribution of dividends, the share subscription price will be deducted by the amount of dividends for which the decision to distribute has been made between the beginning of the price-setting period and the date of subscription.

Determination of fair value

The fair value of the options is determined using the Black-Scholes option pricing model. A fair value is determined for the date of granting the options and charged to personnel expenses over the vesting period. The granting date is the date of the decision by Board of Directors. The company incurred no expenses from share options or from the conversion offer made as a part of the scheme in 2011 or 2010.

Comparison data for 2010

The following table presents the situation on 31 December 2010 as comparative data:

	Option scheme
2010	2005 A	2005 B	2005 C	Total
Amounts, 1 January 2010	-
Options granted	-	148,000	60,000	208,000
Options returned	-	126,000	60,000	186,000
Shares subscribed using options	-	-	-	-
Options outstanding	-	22,000	0	22,000
Options in reserve	-	278,000	300,000	578,000

Changes during the period
Shares subscribed using options	-	11,000	-	11,000

Amounts, 31 December 2010
Options granted	-	148,000	60,000	208,000
Options returned	-	126,000	60,000	186,000
Shares subscribed w ith options (not yet registered)	-	11,000	-	11,000
Options outstanding	-	-	-	-
Options in reserve	-	278,000	300,000	578,000

Share-based bonuses

In addition to stock option schemes, the company offers share-based bonuses as part of its key personnel commitment and incentive scheme. The share-based bonus scheme offers the target group an opportunity to receive shares in Digia Plc shares as a reward for the achievement of specified goals set for an earning period. The Board of Directors decides the earning criteria for the scheme and specifies the targets, as well as the maximum remuneration for the earning period for each person belonging to the target group.

On 30 September 2009, the Board of Directors made the following decisions regarding share-based bonus systems for management and key personnel:

The CEO's share-based incentive scheme covers the earnings periods 2009 and 2010. It entitles the CEO to a maximum bonus equal to the value of 160,000 company shares according to the terms of the scheme, based on the company's EPS. The bonus is payable 50/50 in shares and cash and is made available to the CEO annually after the financial statements are approved.

In a system directed at key personnel, a maximum bonus totalling the value of 200,000 shares will be payable as a 50/50 combination of shares and cash. The earnings periods are 2009, 2010, 2011 and 2012. The bonus will be paid annually, without any disposition restrictions, beginning on 30 January 2010, depending on the fulfilment of certain goals set by the Board and on the condition that the recipient is still employed by the company on the payment date.

On 27 May 2010, the Board of Directors decided on a new share incentive scheme for the CEO and other members of the Group Management Team, as follows:

The scheme comprises four earning periods, which are the calendar years 2010–2013. The earnings principles are the consolidated earnings per share and the growth in consolidated net sales compared to the budget, according to formulae settled separately by the Board.

According to the scheme, rewards totalling a maximum value equivalent to 40,000 shares will be paid for the 2010 earning period, and a maximum value of 200,000 shares will be paid for each of the earning periods from 2011 to 2013. Of the rewards paid, one half will be awarded to the CEO and one half to the other management team members in total. The reward will be paid as a 50/50 combination of shares and cash. The cash portion of the bonus will primarily be used to cover taxes and other comparable costs of the scheme.

The scheme is a continuation of the management share incentive scheme initiated in 2009, which remains effective as planned.

The basic details of the schemes are listed in the table below.

	Management group share-based incentive scheme 2010–2013	CEO's share-based incentive scheme 2009–2010	Key personnel share based incentive scheme 2009–2010

Granting date	27/05/2010	30/09/2009	30/09/2009
Instrument	Shares and cash	Shares and cash	Shares and cash
Target group	Management group	CEO	Key personnel
Maximum number of shares *	640,000	160,000	200,000
Beginning of the earning period	28/05/2010	1/10/2009	1/10/2009
End of the earning period	31/3/2011 / 31/3/2012/ 31/3/2013 /31/3/2014	30/3/2010 / 30/3/2011	30/1/2010 / 30/1/2011/ 30/1/2012 /30/1/2013
Vesting condition	Earnings per share, net sales grow th and employment requirement	Earnings per share, employment requirement	Earnings criterion, employment requirement
Maximum validity, years	3.2	1.5	3.3
Remaining validity, years	2.2	0.0	1.1
Number of persons (31 December 2011)	7	1	22

* In addition to the bonus payment in shares, a cash bonus is paid to cover the cost of taxes and similar expenses.

The items related to share-based incentive schemes in 2011 are given in the table below. Because the cash portion of the bonus payment is also recorded as a share-based expense, the sums below are gross, i.e. the bonuses include the shares and the equivalent cash sum.

Events in 2011 fiscal year	Management group share-based incentive scheme 2010–2013	CEO's share-based incentive scheme 2009–2010	Key personnel share-based incentive scheme 2009–2010	Total
Gross amounts, 1 January 2011 **
Outstanding at beginning of period	640,000	80,000	150,000	870,000

Changes during the period
Forfeited during the year	12,500	26,000	9,248	47,748
Exercised during the year	27,500	54,000	40,752	122,252

Gross amounts, 31 December 2011 **
Outstanding at end of period	600,000	0	100,000	700,000
Available for exercising at end of period	600,000	0	100,000	700,000

** The amounts include the cash portion (in shares) granted according to the terms of the incentive scheme.

Determination of fair value

The fair value of share-based payments is determined on the day on which the scheme is agreed between the company and the recipient group. As the share-based bonus is paid as a combination of shares and cash, the determination of its fair value is divided into two parts in accordance with the IFRS 2 standard: the part settled in shares and the part settled in cash. The part settled in shares is recognised as shareholders' equity and the part settled in cash as a liability. The fair value of the part settled in cash is revalued on each reporting date until the end of earning period, and thus the fair value of the liability changes in accordance with the price of the Digia share.

Expense effect of share-based incentive schemes on 2011 income statement

Effect on earnings and financial position, € 000	Management group share-based incentive scheme 2010–2013	CEO's share-based incentive scheme 2009–2010	Key personnel share-based incentive scheme 2009–2010	Total
Share-based payment expense for the fiscal year	160	48	87	296
Share-based payment expense for the fiscal year, shareholders' equity	122	23	54	199
Liabilities from share-based payments, 31 December 2011	38	25	34	97

Comparison data for 2010

Effect on earnings and financial position, € 000	Management group share-based incentive scheme 2010–2013	CEO's share-based incentive scheme 2009–2010	Key personnel share-based incentive scheme 2009–2010	Total
Share-based payment expense for the fiscal year	156	295	268	720
Share-based payment expense for the fiscal year, shareholders' equity	72	96	100	267
Liabilities from share-based payments, 31 December 2010	84	101	114	299

21. Provisions

Changes in provisions during 2011:

€ 000	Restructuring provision	Unprofitable agreements	Total
1.1.2011	0	133	133
Increase in provisions	4,874	365	5,239
Provisions used	-2,907	-116	-3,023
Reversals of unused provisions	-	-	-
31.12.2011	1,967	382	2,349

Changes in provisions during 2010:

€ 000	Restructuring provision	Unprofitable agreements	Total
1.1.2010	895	157	1,052
Increase in provisions	-	79	79
Provisions used	-895	-103	-998
Reversals of unused provisions	-	-	-
31.12.2010	0	133	133

Restructuring provision

The restructuring provisions are related to personnel negotiations conducted during the financial year.

Unprofitable agreements

A loss provision is created for fixed-price projects if it becomes apparent that the completion of the project will require significantly more work input than has been estimated in connection with selling the project and can be invoiced from the customer on the basis of the agreement.

On the balance sheet date of 31 December 2011, there were six fixed-price projects for which loss provisions had been recorded on the basis of remaining work.

22. Financial liabilities

€ 000	2011 Fair values	2010 Fair values	2011 Balance sheet values	2010 Balance sheet values
Non-current
Bank loan	13,028	14,701	14,500	16,000
Subordinated loan	0	41	0	44
Finance lease liabilities	868	507	942	565
Total	13,896	15,249	15,442	16,609
Current
Bank loan	5,320	5,797	5,500	6,000
Subordinated loan	44	41	44	44
Finance lease liabilities	851	636	886	662
Total	6,215	6,474	6,430	6,706
Total	20,111	21,723	21,872	23,316

The fair value of loans has been calculated by discounting the loan capital on the balance sheet date using a discount rate of 6.71%, which has been determined with regard to the industry's general risk level.

On 31 October 2011, Digia revised its three-year loan arrangements, replacing the company's old loan portfolio totalling EUR 17 million. The loan agreement is financed by Pohjola Bank and Nordea Bank. The total sum of the new loan was EUR 22 million, of which the company withdrew EUR 17 million. As a part of the financing package, the company committed to covenants concerning the maintenance of the company's financial standing and liquidity. The loan covenants comprise the following key figures: operating profit before depreciation and amortisation (EBITDA) in relation to net debt, equity ratio and net gearing. The company can now distribute a maximum of 50 per cent (previously 30%) of the Group's net profit for the year, without separate agreement. The company fulfilled the set loan covenants in 2011.

During the financial year, the company repaid EUR 2.0 million in loans, reducing its interest-bearing liabilities to EUR 20.0 million. The loans have floating interest rates tied to Euribor, plus a margin. The average interest rate of the loans in 2011 was 3.2% (2.8% in 2010). The shares of Digia Finland Ltd and Digia Financial Software Ltd are pledged as collateral for the loans. On 31 December 2011, the book value of pledged shares was EUR 109.4 million.

A subordinated loan has been granted by TEKES for product development. The loan has a fixed interest rate, which was 1.0% until 31 December 2011. The effective interest rate on finance lease liabilities during the fiscal year was 4.51% (4.48%).

Interest-bearing liabilities fall due as follows:

Year, € 000	2011	2010
2011	-	6,706
2012	6,430	14,886
2013	5,689	1,194
2014	9,752	530
Later	-	-
Total	21,872	23,316

The tables below describe agreement-based maturity analysis results for 2011 and the 2010 comparison period. The figures are undiscounted and include interest payments and the repayment of loan capital:

€ 000 31.12.2011	Balance sheet values	Cash flow	Less than 1 year	1–2 years	2–5 years
Bank loans	20,000	21,165	6,055	5,395	9,714
Subordinated loans	44	44	44	0	0
Finance lease liabilities	1,828	1,828	886	689	252
Total	21,872	23,037	6,986	6,084	9,967

€ 000 31.12.2010	Balance sheet values	Cash flow	Less than 1 year	1–2 years	2–5 years
Bank loans	22,000	22,658	6,514	14,616	1,528
Subordinated loans	89	89	45	44	0
Finance lease liabilities	1,227	1,227	662	342	223
Total	23,316	23,975	7,221	15,002	1,751

23. Due dates of finance lease liabilities

€ 000	2011	2010
Finance lease liabilities, total of minimum lease payments
Within one year	942	695
Within more than one but less than five years	965	580
After more than five years	-	-
Finance lease liabilities, present value of minimum lease payments
Within one year	885	662
Within more than one but less than five years	941	565
After more than five years	-	-
Financial expenses to be accrued in the future	80	48
Total amount of finance lease liabilities	1,826	1,227

The finance leases concern IT equipment and have durations of two to three years.

24. Non-interest bearing liabilities

€ 000	2011	2010
Non-current
Deferred tax liabilities	772	2,178
Other long-term liabilities	674	0
Total	1,446	2,178
Current
Accounts payable	1,961	2,353
Total	1,961	2,353
Other non-interest bearing current liabilities
Advance payments received	4,585	769
Accruals and deferred income	11,626	11,569
Provisions	748	133
Income tax liabilities	100	1,369
Other liabilities	5,722	6,340
Total	22,781	20,181
Total non-interest bearing liabilities	26,189	24,712

The book value of non-interest bearing current liabilities represents a reasonable estimate of their fair value. Material items included in accrued expenses arise from the accrual of holiday pay, as well as accrued provisions for salaries and fees.

25. Operating leases

Minimum lease payments on the basis of other non-cancellable leases:

€ 000	2011	2010
Within one year	3,413	3,988
Within more than one but less than five years	2,198	2,412
After more than five years	-	-
Total	5,611	6,400

The Group leases all of its production facilities and office premises. The average duration of the leases is one to three years, and they normally include the option of extension after the original date of expiry. The Group has also leased motor vehicles on maintenance lease agreements. The normal duration of maintenance lease agreements is three years.

26. Contingent liabilities

€ 000	2011	2010
Collateral pledged for ow n commitments
Other	1,125	767
Total	1,125	767

Other contingent liabilities are associated with guarantee deposits or are units in fixed-income mutual funds pledged as collateral for the credit limit. The credit limit is used as security for office leases. Furthermore, the item includes a guarantee deposit pledged as collateral.

27. The group's shares and holdings

Group companies	Domicile	Home country	Share of ow nership	Share of votes
Digia Plc	Helsinki	Finland	Parent company
Digia Estonia Oü *	Tallinn	Estonia	100%	100%
Digia Financial Softw are Oy	Jyväskylä	Finland	100%	100%
Digia Finland Oy	Helsinki	Finland	100%	100%
Digia Hong Kong Ltd *	Hong Kong	China	100%	100%
Digia Service Oy	Jyväskylä	Finland	100%	100%
Digia Softw are (Chengdu) Co. Ltd	Chengdu	China	100%	100%
Digia Sw eden Ab	Stockholm	Sw eden	100%	100%
OOO Digia RUS	St. Petersburg	Russia	100%	100%
Digia Norw ay AS	Oslo	Norw ay	100%	100%
Digia USA, Inc.	San Jose	USA	100%	100%
Digia Partners Oy *	Helsinki	Finland	100%	100%
Microext Oy *	Helsinki	Finland	100%	100%

* The companies are not engaged in business operations.

Other shares and holdings	€ 000
Keimola Golf Club Oy	7
Kiinteistö Oy Rukan Kuukkeli	62
Kytäjä Golf Oy	38
Vierumäki Golf Oy	17
Vierumäki Golf Club Oy	35
Vierumäen Loma-aika Oy	138
Vierumäen Kuntoharju Oy	270
Rikunniemen Huolto Oy	6
Tahko Golf Club Oy	39
Tahkovuorenpeikko Oy	11
Other	1
Total	624

28. Related party transactions

Two parties are considered related if one party can exercise control or significant power in decision-making associated with the other party's finances and business operations. The Group's related parties include the parent company and subsidiaries, in addition to the members of the Board of Directors and the Management Team.

Remuneration paid to the CEO and Group management during the financial period, including fringe benefits, was as follows:

€ 000	2011	2010
Salaries and other short-term employee benefits	1,599	1,893
Share-based bonuses	194	285
Total	1,793	2,178

The salaries and fees paid in 2011 to the CEO and the members of the Board of Directors were as follows:

		€ 000
Kyttälä Pertti	Chairman of the Board of Directors	75
Mehtälä Martti	Vice Chairman of the Board	50
Ingman Robert	Member of the Board	37
Karvinen Kari	Member of the Board	39
Sivonen Pekka	Member of the Board	38
Uhari Tommi	Member of the Board	38
Virtanen Marjatta	Member of the Board	39
Varelius Juha	CEO	596
Total		913

The incentive schemes are described in Note 20 Share-based payments and in the separate report on corporate governance. Transactions related to the sale of services to related parties totalled EUR 9,300 (EUR 14,700 in 2010). Transactions associated with the purchase of goods or services totalled EUR 93,900 (EUR 16,200 in 2010). The Group has no related-party loans.

29. Management of financing risks

Digia Plc's internal and external financing and the management of financing risks is concentrated in the finance function of the Group's parent company. The function is responsible for the Group's liquidity, sufficiency of financing, and the management of interest rate and currency risk. The Group is exposed to several financing risks in its normal course of business. The objective of the Group's risk management is to minimise the adverse effects of changes in the financial markets on the Group's earnings. The primary types of financing risks are interest rate risk, credit risk and funding risk. The general principles of risk management are approved by the Board of Directors, and the Group's finance function together with the business segments is responsible for their practical implementation.

Foreign exchange risks

The Group is not significantly exposed to foreign exchange risk in its operations. The Group's key foreign exchange risks involve the US dollar, Swedish krona, Norwegian krone, Russian rouble and Chinese yuan. The financial statements include foreign currency sales receivables of approx. EUR 2.3 million in Swedish kronas, US dollars, Russian roubles and Chinese yuan. Foreign currency accounts payable totalled approx. EUR 0.8 million, mainly being in Swedish kronas, Norwegian krones, US dollars, Russian roubles and Chinese yuan. The most significant currency risks relating to accounts receivable and accounts payable can be managed by means of forward foreign exchange contracts when necessary. At the end of the fiscal year 2009, the company had no such forward contract in force.

Interest rate risks

The Group's interest rate risk is primarily associated with a long-term bank loan that has an interest rate linked to Euribor rates. Changes in market interest rates have a direct effect on the Group's future interest payments. During the financial period 2011, the interest rate on the long-term bank loan varied between 2.8% and 3.7% (2.3%–2.9% in 2010). The impact of a +/-1% change in the loan's interest rate is EUR 0.2 million per annum. The Group's money market investments are a source of interest rate risk, but the overall impact of these investments is negligible. Interest rate developments are monitored systematically in different bodies within the company, and possible interest rate hedges will be made with the appropriate instruments.

Credit risks

The Group's customers are mostly well-known Finnish and foreign companies with well-established credit, and thus the Group has no significant credit risks. The Group's policy defines creditworthiness requirements for customers, investment transactions and counterparties. Services and products are only sold to companies with a good credit rating. The counterparties in investment transactions are companies with a good credit rating. Credit risks associated with commercial operations are primarily the responsibility of operational units. The parent company's finance function provides customer financing services in a centralised manner and ensures that the principles of the financing policy are observed with regard to terms of payment and collateral required. At the end of the fiscal year 2011, credit loss provisions totalled EUR 0.02 (EUR 0.1) million. The maturity analysis of accounts receivable for 2011 and 2010 is presented in Note 17.

Liquidity risk

The Group aims to continuously estimate and monitor the amount of financing required for business operations in order to maintain sufficient liquid funds for financing operations and repaying loans falling due. The availability and flexibility of financing is ensured by maintaining an unused credit facility and using several banks for financing. The amount of unwithdrawn standby credit on 31 December 2011 was EUR 4.0 million. The Group maintains its immediate liquidity with the help of cash management solutions such as Group accounts and credit facilities at banks. Cash and cash equivalents on 31 December 2011 totalled EUR 8.2 million. An agreement-based maturity analysis on discounted equity and interest payments for the fiscal years 2011 and 2010 is presented in Note 22.

Management of the capital structure

The Group's capital management aims at supporting company business by means of optimal management of the capital structure, ensuring normal operating conditions and increasing shareholder value with a view to achieving the best possible profit. At the end of the period, the Group's interest-bearing net liabilities were EUR 13.7 (13.6) million. When calculating gearing, the interest-bearing net liabilities are divided by shareholders' equity. Gearing includes interest-bearing net liabilities less cash and cash equivalents. Interest-bearing net liabilities have primarily been used for financing the Group's company acquisitions, and at the end of the fiscal year, gearing stood at 34% (20%).

The share of liabilities of total shareholders' equity on 31 December 2011 and 31 December 2010 was as follows:

€ 000	2011	2010
Interest-bearing liabilities	21,872	23,316
Cash and cash equivalents	8,170	9,682
Interest-bearing net liabilities	13,702	13,634
Total shareholders' equity	39,753	67,411
Gearing,%	34%	20%

30. The group's key financial ratios

€ 000	2011	2010	2009	2008	2007

Extent of business
Net sales, € 000	121,940	130,825	120,335	123,203	105,839
- change on previous year, %	-6.8%	9%	-2%	16%	25%
Gross capital expenditure, € 000	2,733	1,965	1,342	2,512	1,979
- % of net sales	2%	2%	1%	2%	2%
Capitalisation for research and development	-	-	-	-	-
- % of net sales	0%	0%	0%	0%	0%
Number of personnel, 31 December	1,175	1,558	1,471	1,337	1,155
Average number of personnel	1,453	1,508	1,387	1,314	1,116
Profitability
Operating profit, € 000	-22,168	17,164	-7,796	13,437	11,080
- % of net sales	18%	13%	-6%	11%	10%
Net profit, € 000	-22,452	17,164	-13,664	7,409	5,871
- % of net sales	-18%	13%	-11%	6%	6%
Return on equity, %	-42%	18%	-21%	11%	9%
Return on investment, %	-29%	19%	-7%	11%	9%
Financing and financial standing
Loans from financial institutions, € 000	21,872	23,316	30,429	56,950	56,413
Cash and cash equivalents, € 000	8,170	9,682	10,469	18,879	11,739
Gearing, %	34%	20%	34%	53%	65%
Equity ratio, %	48%	59%	52%	47%	47%
Cash flow from operations, € 000	8,842	11,066	20,232	15,473	6,157
Dividends (paid), € 000	5,577	2,885	1,025	2,041	1,625
Earnings per share, EUR undiluted	-1.08	0.56	-0.67	0.36	0.29
Earnings per share, EUR diluted	-1.08	0.56	-0.67	0.36	0.29
Equity per share	1.90	3.23	2.79	3.46	3.32
Dividend per share (2012 proposal) *	0.10	0.27	0.14	0.05	0.10
Dividend payout ratio	-	48%	-	14%	35%
Effective dividend yield	4%	5%	4%	3%	3%
Price/earnings ratio (P/E)	-	8.98	-	5.17	10.39
Low est share price	2.30	3.38	1.39	1.73	2.93
Highest share price	5.79	5.89	3.88	3.35	4.26
Average share price	3.88	5.01	2.72	2.83	3.77
Market capitalisation	50,519	104,949	71,528	38,788	61,079
Trading volume, shares	7,135,305	7,260,278	9,123,589	7,321,002	9,583,795
Trading volume, %	34%	35%	45%	36%	47%

* Dividends for 2011 will be paid in 2012 in the form of a repayment of capital.

The weighted average number of shares during the accounting period, adjusted for share issues, was 20,701,877. The diluted weighted average number of shares during the period was 20,701,877. The number of shares outstanding at the end of the accounting period was 20,716,069. At the end of the fiscal year the company held 159,576 own shares. The company has financed the purchase of 300,000 own shares for use in the incentive schemes for key personnel. At the end of the review period, Evli Bank held 29,612 of these shares. The buyback programme was terminated by the Board at its meeting on 3 February 2009.

Calculation of Financial Ratios

Return on investment (ROI), %:

Profit or loss before extraordinary items and taxes + interest and other financing costs x 100

Balance sheet total – non-interest bearing liabilities (average)

Return on equity (ROE), %:

Profit or loss before extraordinary items and taxes – taxes x 100

Shareholders' equity + minority interest (average)

Equity ratio, %:

Shareholders' equity + minority interest × 100

Balance sheet total – advance payments received

Earnings per share:

Earnings before extraordinary items and taxes – taxes +/- minority interest

Average number of shares during the period, adjusted for share-issues

Dividend per share:

Total dividend

Number of shares at the end of the period, adjusted for share issues

Dividend payout ratio, %:

Dividend per share × 100

Earnings per share

Net gearing:

Loans from financial institutions – cash, bank receivables and financial securities × 100 Shareholders' equity

Effective dividend yield, %:

Dividend per share × 100

Last trading price for the period, adjusted for share issues

Price/earnings ratio (P/E):

Last trading price for the period, adjusted for share issues

Earnings per share

Parent Company's Income Statement (FAS)

Note	1/1/–31/12/2011	1/1/–31/12/2010

1	8,010,000.00	7,971,700.00

		36,975.00
3	-4,089,316.81	-4,674,170.53
4	-599,935.72	-236,026.63
5	-2,766,584.92	-2,836,101.90
	-7,418,462.44	-7,646,299.06
		262,375.94

6	-2,000,625.47	-1,666,790.36
	-1,409,087.91	-1,404,414.42

	0.00	5,500,000.00
	-1,409,087.91	4,095,585.58

7	-10.40	-1,149,554.11
		2,946,031.47
	2	37,375.01 591,537.56 -1,409,098.31

Parent Company's Balance Sheet (FAS)

€	Note	31/12/2011	31/12/2010
ASSETS

FIXED ASSETS

Intangible assets	8
Intangible rights		1,376,466.39	273,675.61
		1,376,466.39	273,675.61
Tangible assets	9
Land and w ater areas		16,818.79	16,818.79
Buildings and structures		90,660.07	97,253.53
Machinery and equipment		22,806.50	44,322.44
		131,496.31	158,394.76
Financial assets	10
Shares in Group companies		114,091,160.50	114,078,367.38
Other shares and holdings		606,292.32	606,292.32
		114,697,452.82	114,684,659.70
Total fixed assets		116,205,415.52	115,307,252.68
CURRENT ASSETS
Current receivables	11
Receivables from Group companies		5,135,345.19	6,335,115.00
Other receivables		244,560.61	212,120.54
Prepayments and accrued income		1,407,443.32	272,595.74
		6,787,349.12	6,819,831.28
Cash and cash equivalents		2,895,936.28	8,134,952.75
Total current assets		9,683,285.40	14,954,784.03
Total assets		125,888,700.92	130,071,514.10

€	Note	31/12/2011	31/12/2010

SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY

Equity attributable to parent company shareholders	12
Share capital		2,087,564.50	2,086,464.50
Rights issue		-	39,710.00
Issue premium fund		7,899,485.80	7,899,485.80
Unrestricted invested shareholders' equity reserve		35,525,037.82	35,486,427.82
Retained earnings		1,026,629.00	3,486,757.45
Net profit		-1,409,098.31	2,946,031.47
Total shareholders' equity		45,129,618.81	51,944,877.04
LIABILITIES
Non-current liabilities	13
Loans from financial institutions		13,000,000.00	13,000,000.00
Other non-current debts		674,000.00	0.00
		13,674,000.00	13,000,000.00
Current liabilities	14
Accounts payable		82,237.82	88,141.00
Interest-bearing liabilities		4,000,000.00	4,000,000.00
Liabilities to Group companies		60,458,783.05	59,928,367.18
Other liabilities		1,736,121.89	280,365.50
Accrued liabilities		807,939.35	829,763.38
		67,085,082.11	65,126,637.06
Total liabilities		80,759,082.11	78,126,637.06

Total shareholders' equity and liabilities		125,888,700.92	130,071,514.10

Parent Company's Cash Flow Statement (FAS)

€ 000	1/1/–31/12/2011	1/1/–31/12/2010

Cash flow from operations:
Net profit	-1,409	2,946
Adjustments to net profit	2,607	-2,448
Change in w orking capital	-419	4,711
Interest paid	-728	-621
Interest income	29	11
Taxes paid	-1,265	-1,495
Net cash flow from operations	-1,183	3,104
Cash flow from investments:
Purchase of tangible and intangible assets	-209	-46
Acquisition of subsidiary, net of cash acquired	-	-
Cash flow from investments	-209	-46
Cash flow from financing:
Proceeds from share issue	-	79
Acquisition of ow n shares	-	-
Repayment of current term loans	-17,000	-4,000
Repayments of non-current loans	-	-1,000
Withdraw als of current loans	4,000	-
Withdraw als of non-current loans	13,000	-
Group financing items *	1,730	4,537
Dividends paid and other profit distribution	-5,577	-2,885
Cash flow from financing	-3,847	-3,269
Change in liquid assets	-5,239	-211
Liquid assets at beginning of period	8,135	8,345
Change in liquid assets	-5,239	-211
Liquid assets at end of period	2,896	8,135

* Group financing items comprise changes in loans and receivables between the parent company and its subsidiaries.

Basic Information of the Parent Company and Accounting Policies (FAS)

Basic information on the company

Digia Plc is the parent company of the Digia Group. It is domiciled in Helsinki and its registered office is at Valimotie 21, 00380 Helsinki. Digia Plc's active subsidiaries are Digia Finland Ltd (with the wholly owned subsidiaries Digia Financial Software Oy, Digia Service Oy and OOO Digia RUS Ltd.), Digia Sweden Ab, Digia USA, Inc. and Digia Norway AS. The Digia Plc subsidiary Sunrise Resources Oy (100%) merged into Digia Finland Oy on 31 March 2011.

Accounting policies

The parent company's financial statements have been prepared in accordance with Finnish Accounting Standards (FAS). The financial statement is based on original acquisition costs. Book values based on original costs have been reduced to correspond to fair value as necessary.

Since 1 June 2005, the parent company has operated as the Group's administrative company and charged the Group companies for services rendered.

Pension schemes

The Group's pension schemes are arranged through a pension insurance company. Pension premiums and expenses allocated to the financial period are based on confirmations received from the insurance company. Pension expenses are recognised as expenses for the year in which they arise.

Leasing payments

Leasing payments are recognised as annual expenses.

Extraordinary items

Extraordinary income and expenses include substantial non-recurring income and expenses not associated with actual business operations. In the fiscal year 2010, Group contributions received were recognised as extraordinary items.

Fixed assets, depreciation and amortisation

Fixed assets are recognised in the balance sheet at immediate cost less planned depreciation and amortisation.

The economic lives underlying planned depreciation and amortisation are as follows:

Intangible assets
Intangible rights	5 years
Other long-term expenses	5 years
Tangible assets
Buildings and structures	25 years
Machinery and equipment	3–8 years

Purchases of fixed assets with an economic life of less than three years are recognised as annual expenses.

1. Net sales

Net sales by segment

€ 000	2011	2010
Group administration services	8,010	7,972
Group total	8,010	7,972

2. Other operating income

€ 000	2011	2010
Other	37	37
Total	37	37

3. Information on personnel and governing bodies

€ 000	2011	2010
Board emoluments and remuneration and CEO's compensation	913	764
Other salaries and remunerations	2,466	3,260
Pension insurance premiums	570	532
Other personnel expenses	141	118
Total	4,090	4,674

Number of personnel, 31 December	2011	2010
Management and administration	45	47
Total	45	47

4. Depreciation, amortisation and impairment

€ 000	2011	2010
Planned depreciation and amortisation
Property, plant, and equipment, and intangible assets	600	236
Amortisation	-	-
Total	600	236

5. Auditors' fees

€ 000	2011	2010
Audit	106	80
Other statutory duties	4	1
Tax counselling	4	10
Other services	11	12
Total	125	103

6. Financial income and expenses

Financial income

€ 000	2011	2010
Interest and financial income from Group companies	18	-
Interest and financial income from others	73	11
Total	90	11

Financial expenses

€ 000	2011	2010
Interest expenses to Group companies	1,206	765
Interest expenses to other companies	585	513
Loan administration fees	222	80
Other financial expenses	78	320
Total	2,091	1,678

7. Income taxes

€ 000	2011	2010
Income taxes on operations	-	-280
Income taxes on extraordinary operations	-	1,430
Total	0	1,150

Deferred tax assets arising from accrual differences and from temporary differences between book values and taxation values are unrecorded in the Statement of Financial Position, in accordance with the principle of materiality. Deferred tax assets totalled EUR 436,188.64 at the end of the fiscal year.

8. Intangible assets

€ 000	Intangible rights	Other long-term expenses	Total 2011	Total 2010
Acquisition cost, 1 January	1,844	655	2,499	2,464
Additions	1,681	-	1,681	35
Disposals	-	-	-	-
Acquisition cost, 31 December	3,525	655	4,180	2,499

Accumulated depreciation and amortisation, 1 January	-1,571	-655	-2,226	-2,042
Depreciation	-578	-	-579	-184
Amortisation	-	-	-	-
Accumulated depreciation and amortisation, 31 December	-2,149	-655	-2,804	-2,226
Book value, 1 January	274	0	274	422
Book value, 31 December	1,376	0	1,376	274

9. Property, plant and equipment

€ 000	Land and w ater areas	Buildings and structures	Machinery and equipment	Total for 2011	Total for 2010
Acquisition cost, 1 January	17	162	1,853	2,032	2,022
Additions	-	-	2	2	10
Disposals	-	-	-7	-7	-
Acquisition cost, 31 December	17	162	1,848	2,027	2,032

Accumulated depreciation and amortisation, 1 January	-	-66	-1,808	-1,874	-1,821
Depreciation	-	-7	-15	-22	-53
Amortisation	-	-	-	0	-
Disposals	-	-	-	0	-
Accumulated depreciation and amortisation, 31 December	-	-72	-1,824	-1,896	-1,874

Book value, 1 January	17	97	44	158	201
Book value, 31 December	17	91	24	131	158

10. Financial assets

€ 000	Investments in subsidiary shares	Other shares and holdings	Total for 2011	Total for 2010
Acquisition cost, 1 January	114,078	606	114,685	114,685
Additions	13	-	13	-
Disposals	-	-	-	-
Acquisition cost, 31 December	114,091	606	114,697	114,685

Book value, 1 January	114,078	606	114,685	114,685
Book value, 31 December	114,091	606	114,697	114,685

Itemisation of other shares and holdings

Group companies	Domicile	Home country	Share of ow nership	Share of votes
Digia Hong Kong Ltd	Hong Kong	China	100%	100%
Digia Estonia Oü	Tallinn	Estonia	100%	100%
Digia Sw eden AB	Stockholm	Sw eden	100%	100%
Digia Finland Oy	Helsinki	Finland	100%	100%
Digia Norw ay AS	Oslo	Norw ay	100%	100%
Digia USA, Inc.	San Jose	USA	100%	100%
Digia Partners Oy	Helsinki	Finland	100%	100%

Other shares and holdings	€ 000
Kiinteistö Oy Rukan Kuukkeli	62
Kytäjä Golf Oy	39
Vierumäki Golf Oy	17
Vierumäki Golf Club Oy	35
Vierumäen Loma-aika Oy	138
Vierumäen Kuntoharju Oy	270
Rikunniemen Huolto Oy	6
Tahko Golf Club Oy	39
Total	606

11. Current receivables

€ 000	2011	2010
Receivables from Group companies
Accounts receivable	2,293	-
Prepayments and accrued income	52	5,534
Borrow ings	2,791	801
Other receivables	245	212
Prepayments and accrued income	1,407	273
Total	6,788	6,820

12. Shareholders' equity

€ 000	2011	2010
Share capital, 1 January	2,086	2,085
Rights issue	1	1
Reduction of nominal value	-	-
Share capital, 31 December	2,088	2,086

Premium fund, 1 January	7,899	7,899
Transfer to unrestricted shareholders' equity	-	-
Premium fund, 31 December	7,899	7,899

Rights issue	-	40

Total restricted shareholders' equity	9,987	10,026

Unrestricted shareholders' equity reserve, 1 January	35,486	35,448
Increase in share capital	39	39
Ow n shares	-	-
Unrestricted shareholders' equity reserve, 31 December	35,525	35,486

Accrued earnings, 1 January	6,433	6,106

Dividends	-5,577	-2,885
Ow n shares	-	-
Share-based transactions settled in equity	171	85
Accrued earnings, 31 December	1,027	3,487

Net profit	-1,409	2,946

Total unrestricted shareholders' equity	35,143	41,919

Total shareholders' equity	45,130	51,945

Distributable funds 31 December

€ 000	2011	2010
Unrestricted invested shareholders' equity	35,525	35,486
Retained earnings	1,027	3,487
Net profit	-1,409	2,946
Total	35,143	41,919

13. Non-current liabilities

€ 000	2011	2010
Loans from financial institutions	13,000	13,000
Other long-term liabilities	674	0
Total	13,674	13,000

14. Current liabilities

€ 000	2011	2010
Interest-bearing
Interest-bearing liabilities	4,000	4,000
Liabilities to Group companies
Borrow ings	56,276	59,201
Total interest-bearing current liabilities	60,276	63,201
Interest-free
Liabilities to Group companies
Accounts payable	209	284
Accruals and deferred income	3,974	443
To others
Accounts payable	82	88
Other liabilities	1,736	280
Accruals and deferred income	808	830
Total interest-free current liabilities	6,809	1,925
Total current liabilities	67,085	65,127

Material items included in accrued expenses arise from the accrual of holiday pay, as well as accrued provisions for salaries and fees.

15. Contingent liabilities

Lease liabilities

€ 000	2011	2010
Due during the current financial period	215	150
Due later	242	148
Total	458	298

Other lease liabilities

€ 000	2011	2010
Due during the current financial period	2,063	2,036
Due later	1,418	835
Total	3,482	2,872

Other liabilities

€ 000	2011	2010
Other	500	140
Total	500	140

Signatures to the Board's Report and Financial Statement

Helsinki, 2 February 2012

Pertti Kyttälä Chairman of the Board of Directors Robert Ingman Kari Karvinen

Martti Mehtälä Pekka Sivonen Tommi Uhari

Marjatta Virtanen Juha Varelius

CEO

Auditor's note

A report of the audit has been submitted today.

Helsinki, 2 February 2012

Ernst & Young Oy Authorised Public Accounting Firm

Heikki Ilkka Authorised Public Accountant

Auditor's report

To the Annual General Meeting of Digia Plc

We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of Digia Oyj for the year ended 31 December, 2011. The financial statements comprise the consolidated statement of financial position, income statement, 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.

The 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.

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.

In Helsinki on February 2, 2012

Ernst & Young Oy Heikki Ilkka Authorized Public Accountant Firm Authorized Public Accountant

List of Accounting Books

Accounting books

Journals	Electronic archive e-Office
General ledger	Electronic archive e-Office
Accounts receivable	Computerised partial accounting
Accounts payable	Computerised partial accounting
Payroll	Computerised partial accounting
Balance sheet book	Separately bound
Itemisations of balance sheet	Separately bound

Voucher types and method of storage	Until 31 December 2017

Eurocard vouchers	Paper documents
Accruals	Paper printouts in the journal
Bank receipts	Paper documents
Travel and expense invoices	Paper documents
Sales invoices	Paper documents
Sales payments	Paper documents
Memoranda	Paper documents
Purchasing invoices	Electronic archive e-Office
Payments of purchases	Paper printouts in the journal
Payroll receipts	Paper documents
Tax account receipts	Paper documents

Information for Shareholders

The purpose of Digia's investor relations is to provide capital markets with open and reliable information on the company and its operating environment in order to give market participants a factual overview of Digia as an investment.

Digia Plc shares are quoted on the Main List of the NASDAQ OMX Helsinki Ltd, in the Information Technology sector.

Investor relations

CEO Juha Varelius Valimotie 21, FI-00380 Helsinki Tel. +358 10 313 3000 juha.varelius(at)digia.com

CFO Harri Savolainen Valimotie 21, FI-00380 Helsinki Tel. +358 10 313 3000 harri.j.savolainen(at)digia.com

Financial releases 2012

During the financial year 2012, Digia Plc will publish the following financial releases in Finnish and in English:

Q1/2012 Interim Report: Friday 27 April 2012 at 9:00
Q2/2012 Interim Report: Thursday 9 August 2012 at 9:00
Q3/2012 Interim Report: Friday 26 October 2012 at 9:00

Digia Plc will hold its Annual General Meeting for 2012 on Tuesday, 13 March 2012, starting at 10:00 at the headquarters of the company. Address Valimotie 21, 00380 Helsinki, Finland.

To order Annual Reports and other publications, please contact:

Digia Plc, Corporate Communications Valimotie 21, FI-00380 Helsinki Tel. +358 10 313 3000 invest(at)digia.com

The Annual Report, interim reports, and stock exchange releases are available on our website at www.digia.com.

The Annual Report 2011 has been published in electronic form. You can download the Annual Report as a PDF version here. The Annual Report can also be ordered as a printed PDF version.

Updating Shareholder Information

We kindly ask the shareholders to notify the bank, the brokerage firm or other book-entry register in which they have a book-entry securities account of any change of address. This information cannot be updated through Digia.

Share capital and shares

The nominal share price is EUR 0.10. On 31st of December 2011, the total number of Digia shares was 20,875,645.

According to the Finnish Central Securities Depository Ltd, on 31st of December 2011 Digia had 6,296 shareholders.

The ten major shareholders

Shareholder	Shares and votes
Ingman Group Oy Ab	16.0%
Jyrki Hallikainen	10.2%
Pekka Sivonen	8.8%
Kari Karvinen	6.5%
Matti Savolainen	6.1%
Ilmarinen Mutual Pension Insurance Company	3.8%
Varma Mutual Pension Insurance Company	3.6%
Nordea Bank Finland Plc (nominee-registered)	1.4%
Etola Oy	1.0%
Olli Ahonen	0.9%

Distribution of holdings by number of shares held on 31 December 2011

Number of shares	Percentage of holdings	Percentage of shares and votes
1 – 100	22.2%	0.5%
101 – 1,000	58.9%	8.1%
1,001 – 10,000	17.4%	14.4%
10,001 – 100,000	1.0%	9.9%
100,001 – 1,000,000	0.3%	19.6%
1,000,001 – 3,000,000	0.1%	47.6%

Shareholding by sector on 31 December 2011

	Percentage of holdings	Percentage of shares and votes
Non-financial corporations	4.6%	21.4%
Financial and insurance corporations	0.2%	3.9%
General government	0.0%	7.5%
Not-for-profit institutions serving households	0.3%	0.5%
Households	94.4%	65.6%
Rest of the w orld	0.4%	1.1%

Stock Exchange Releases

Financial reports

04.02.2011 Fourth quarter and 2010 Financial Statement (IFRS): Powerful organic growth with good profitability

29.04.2011 Q1 2011: Growth in consolidated net sales, but changes in operating environment weaken profitability

11.08.2011 Second quarter 2011: Enterprise Solutions developed positively, extraordinary items related to Mobile Solutions' restructuring pushed group's bottom line into red

28.10.2011 Third quarter 2011: Net sales meet targets, Enterprise Solutions' profitability exceeds expectations

Other stock exchange releases

17.01.2011 Shares subscribed with option rights

04.02.2011 Summons to the Annual General Meeting of Digia Plc

04.02.2011 Correction: Summons to the Annual General Meeting of Digia Plc

21.02.2011 Digia's summary of year 2010 releases published

21.02.2011 Digia's Electronic Annual Report 2010 published

02.03.2011 Profit warning: Net sales of Digia's Mobile Solutions segment in 2011 will fall short of previously expected levels; challenges also in profitability

07.03.2011 Digia to acquire Qt commercial software licensing business from Nokia

16.03.2011 The decisions of Digia Plc's Annual General Meeting and the organising meeting

20.04.2011 Digia's cooperation negotiations completed

13.05.2011 Downsizing of Digia's Mobile Solutions segment to continue

28.06.2011 Digia's cooperation negotiations completed

11.08.2011 Digia initiates cooperation negotiations to complete its mobile business adaptation activities

16.08.2011 Announcement under the Securities Market Act, Chapter 2, Section 10

29.09.2011 Digia's cooperation negotiations aimed towards the mobile business adaptation completed. The company will renew its organisation to match the changed operational environment

03.11.2011 Digia's cooperation negotiations completed. The company moves on to report only one segment

24.11.2011 Digia's Financial Reports and Annual General Meeting in 2012

09.12.2011 Change in Digia's Nomination Committee

19.12.2011 Announcement under the Securities Market Act, Chapter 2, Section 10

Digia offices

Digia switchboard number is +358 10 313 3000.

HELSINKI Head office Valimotie 21 FI-00380 Helsinki, Finland Tel. +358 10 313 3000 Fax +358 10 313 3700

JYVÄSKYLÄ Piippukatu 11 FI-40100 Jyväskylä, Finland Tel. +358 10 313 3000 Fax +358 10 313 4700

OULU Sepänkatu 20 FI-90100 Oulu, Finland Tel. +358 10 313 3000 Fax +358 10 313 4022

RAUMA Isokatu 21 FI-26100 Rauma, Finland Tel. +358 10 313 3000 Fax +358 10 313 2110

TAMPERE Hatanpään valtatie 30, P.O. Box 65 FI-33101 Tampere, Finland Tel. +358 10 313 3000 Fax +358 10 313 2120

STOCKHOLM Kungsgatan 8, 4tr SE-11143 Stockholm, Sweden Tel. +46 8 5723 6400 Fax +46 5723 6401

MOSCOW 20 Daev lane Moscow, Russia, 107045 Tel. +7 495 663 7153 Fax +7 812 655 0341

SAINT-PETERSBURG 8 Beloostrovskaya str Saint-Petersburg, Russia, 197342 Tel. +7 812 655 0340 Fax +7 812 655 0341

OSLO Rosenkrantzgate 18 NO-0160 Oslo, Norway Tel. +47 21 08 04 20 Fax +47 21 08 04 39

SANTA CLARA 2350 Mission College Blvd, Suite #1020 Santa Clara, California 95054, USA Fax +1 408 433 9360

BEIJING 2001, East Ocean Center 24A Jianguomenwai Avenue Changyang, Beijing, China Tel. +86 10 6515 5271

CHENGDU 8F, Building D5, Tianfu Software Park Tianfu Avenue Chengdu 610041, China Tel. +86 28 668 56966

Contact

Digia switchboard is +358 10 313 3000

You can reach Digia by email, by selecting an address corresponding your area of interest below. We'll get back to you as soon as we can.

General Information General information: Digia

Products and solutions Questions related to Digia's products and solutions: Sales

Media Media inquiries: Corporate Communications

Recruitment Career opportunities: Human Resources

Investor Relations Financial information: Investor Relations

AI assistant

Digia Oyj — Annual Report 2011

3261_10-k_2012-02-20_86d0875e-47f4-47ab-b2da-d2f2da60291d.pdf

Table of contents

Year 2011 in brief

Digia now and in the future

Governance

Financial Statement

Investor information

Key figures

CEO's review

Eyes firmly on the future

Inspired experts behind the success

Into the new year together

Business segments in 2011

Enterprise Solutions grew moderately, as expected

Broader demand for industry verticals

Companies face growing integration demand

Recognised partner in Portal management solutions

Large market share retained in financial sector and for associations

Mobile Solutions business reduced significantly

Product creation services hit by permanent fall in demand

Usability expertise as part of delivery projects

Major changes in Digia's operating environment in 2011

Use of financial sector services, regardless of time and place

Radical changes in the public sector: serving more people, with fewer resources

Competition for consumer loyalty, and improved customer service, intensified in retail

Radical changes in mobile sector create new opportunities for Digia

Business environment 2011 in other customer segments and internationally

Case Gallery

Digia's customer

Service Level Management improves Elisa's customer deliveries

Systematic service level monitoring

Controlling malfunctions

Better production management for Ojala Group

Challenging offer calculation

Preparing for the future

Automated loan system for Risicum

Automatic invoicing and reminders

Small sums, large quantities

Transparency and cost efficiency for Trafi's Information Management

Framework agreement basis

Shorter solution times

Managed content creation for TUT

Distributed Tutka

Help from automated classification rules

Facilitating shift management at SOK

Efficient shift allocation

Help in everyday management

Banking functions for SAV-Rahoitus

Automation is critical to online banking

Comprehensive solution

Digia in brief

How success is created: Digia's strategy in brief

Fulfillment of Digia's vision for 2014 is based on these strategic cornerstones:

From vision into action: implementing the strategy

Strategic focuses

Customer specific solutions and services

Architectures and technologies lasting long into the future

Services for the whole system development cycle

Digia offers innovative mobile and online solutions for customers

Industry specific, duplicable software solutions

Complete system portfolio based on own and third-party products

Product based system projects are easier to implement

Multichannel solutions improve efficiency and user experience

International product business

Broad client-base for Qt Commercial

Digia Ventures innovate in next-generation software solutions

International product business as a growth driver

New Market Areas

Service operations and duplicable software solutions

Growth based on active customer gain

Creating value by understanding changes in the customer's industry

Digia is a reliable partner during customer's industry changes

Growth partner for telecom operators

Better services for financial industry, at lower costs

Digia as a gateway to public services

Digia optimises all parts of the retail value chain

Competence and teamwork as basis of success

Holistic competence development

Digia Oyj Annual Report 2011