Annual Report 2010

Our inventive solutions bring success for people and businesses in everyday life. digia annual report 2010 Digia Plc

Table of contents

Digia Plc Financial Statement Shareholders Digia in brief...... 3 Board of Directors’ Report...... 44 Information for Shareholders...... 92 Key events in 2010...... 4 Consolidated Income Statement...... 50 Stock Exchange Releases...... 92 Key figures...... 6 Consolidated Balance Sheet...... 51 Share Information...... 93 CEO’s review...... 7 Consolidated Cash Flow Statement...... 52 Offices...... 94 Strategy...... 8 Changes in Shareholders’ Equity...... 53 Inventive expertise...... 11 Basic Information of the Group and Accounting Personnel...... 12 Policies...... 55 Key capabilities for successful performance... 14 Notes to the Consolidated Financial Statement...... 59 Business operation Calculation of Financial Ratios...... 78 Enterprise Solutions...... 17 Parent Company’s Income Statement...... 79 Mobile Solutions...... 26 Parent Company’s Balance Sheet...... 80 Product development and technology trends.. 29 Parents Company’s Cash Flow Statement...... 81 Markets and Digia’s business...... 30 Basic Information of the Parent Governance Company and Accounting Policies...... 82 Board of Directors...... 33 Notes to the Parent Company's Financial Group Management Team...... 35 Statement...... 83 Corporate Governance Statement...... 37 Signatures to the Board’s Report and Statement on Financial Statement...... 88 Digia Management Emoluments...... 41 Auditor’s Report...... 89 List of Accounting Books...... 90

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Digia Plc

Digia offers its customers success through inventive solutions.

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Digia in brief

Digia’s driver is the desire to succeed. It offers its customers success, through inventive solutions that enhance operational efficiency, Digia’s mission improve user experiences and increase sales. Digia helps its customers become forerunners. Our inventive solutions bring success for people and With almost 1,600 top experts, Digia enables its businesses in everyday life. customers to benefit from changes in the market, making the future a mutual success. Digia is known for swiftly embracing new technologies, to its customers’ benefit. Digia’s offering includes ERP systems, and mobile and user experience services and solutions. The company’s customers are businesses Digia’s vision and organisations from various industries, with an emphasis on public administration, industry, mobile industry, retail, services, banking and Digia 2014: Successful and most recommended insurance. Digia operates in Finland, Russia, We are the Finnish software solutions and services China and Sweden. The company is listed on the company of choice, growing strongly at home and abroad. NASDAQ OMX Helsinki exchange (DIG1V). Our continuous success is based on inspired experts, skilled leadership and solutions which improve customer experience. Our innovative products are within reach of people around the world.

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Key events in 2010

January devices with different software and hardware a smooth data flow between systems and higher University of Helsinki made a partnership agree- platforms at this year’s Mobile World Congress. operational efficiency. ment with Digia. The Universitarian’s virtual desktop is a user-friendly tool, databank and March April interaction channel intended for all students The AGM decided to elect seven members to Digia fortifies its position as a supplier of insur- and staff at the University of Helsinki. The vir- the Board. Re-elected as Board members were: ance data systems. Digia continues to main- tual desktop will be realized as an agile project Kari Karvinen, Pertti Kyttälä, Martti Mehtälä and tain Arek Ltd’s Pension Earnings System after in partnership with Digia. Digia has solid experi- Pekka Sivonen. In addition, as new Board mem- the termination of the original three-year ser- ence in creating extensive intranet and internet bers were elected Robert Ingman, Tommi Uhari vice contract in August. The new agreement, to portals. and Marjatta Virtanen. At the Organising Meet- remain valid until further notice, entrusts Digia ing held after the General Meeting, Pertti Kyt- with sole responsibility for the future develop- February tälä was elected as Chairman of the Board and ment and maintenance of the Arek platform. Digia Enterprise production management system Martti Mehtälä was elected as Vice Chairman of Digia ranked among top 10 IT-employers by boosts the institutional kitchen operations of the Board. Universum Student Survey. Digia came ninth in Kymijoen Ravintopalvelut. As an industry leader, Lappeenranta University of Technology and a survey charting how university students rate Kymijoen Ravintopalvelut is reshaping its opera- Digia joined forces to train future Android potential employers in IT sector. Climbing 13 tion models, and is about to deploy a new pro- experts. Students learned to develop software places over last year, Digia was named the High- duction management system. With the help of for Android mobile phones during one-week est Climber at the University Awards ceremony Digia’s system, kitchen operations will become course. Lappeenranta University of Technology on Wednesday 28 April. Digia believes that stu- more cost effective and easily manageable. The (LUT) organised a one-week intensive training dents particularly appreciate its stable financial industrialising of institutional kitchens is some- course, titled Code Camp, during which students position and the personal development opportu- thing new in Finland. Digia was selected as the designed and built applications suitable for nities it provides. system provider through a public procurement Android mobile phones by Motorola and HTC. process. Digia to help Holiday Club Resorts boost effi- June Digia shows the way for beautiful user experi- ciency, through system integration. Finland’s MeeGo innovation in Finnish Universities gets ences across multiple platforms with Qt Quick. leading provider of tourism services, Holiday accelerated by Digia’s MeeGo training mate- Digia is using a pre-release version of Qt Quick, Club Resorts Oy, ordered a financial managerial and Intel’s development environments. Digia the new user interface and application crea- ment system from Digia. In addition, Digia is and University of Jyväskylä, supported by Intel, tion tool, to demonstrate how to deliver visu- responsible for integrating the data systems of launch a program to offer MeeGo training mate- ally impressive consumer experiences across Holiday Club’s entire partner network, to ensure rials and state-of-the-art Intel Atom Z600 based

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development environments to Finnish universi- October right time. Faster and more accurate informa- ties to accelerate adoption of MeeGo in educa- Lappeenranta University of Technology and Digia tion retrieval improves efficiency and increases tion and innovation. provided intensive training in Qt expertise. As a the productivity of tasks and work processes for Digia’s ERP system to modernise and boost first for Lappeenranta, students spent a week individuals and organisations alike. operations of Ykkösleipurit. Ykkösleipurit (Katri coding Qt applications for mobile phones. Lap- Digia introduced a product creation solution for Antell Oy, Leipomo Rosten Oy, Linkosuo Oy, Porin peenranta University of Technology (LUT) held a MeeGo product makers. Digia builds on its exten- Leipä Oy and Primula Oy) reached agreement on one-week intensive course, Code Camp, making sive 16+ year’s track record in mobile industry purchase of Digia Enterprise ERP system. students familiar with Qt technology. and introduced a product creation solution for Digia delivered the Digia Enterprise ERP and Digia attended the Qt Developer Days 2010 MeeGo ecosystem. Digia’s offering addresses financial management system to five regional both in Munich and San Francisco and demon- key elements of MeeGo device creation where companies in the Ykkösleipurit chain. This state- strated the latest in mobile user experience and product differentiation is the key to success. of-the-art system will lead to faster processes Qt. Demos showed exciting and inspiring ways of Digia’s MeeGo product creation solution starts and greater efficiency at the five bakeries. In adding new dimensions with 3D and Augmented from MeeGo training and concepting services addition, the joint acquisition will generate cost Reality to the mobile user experience. Digia also and scales to full product software solution savings. showcased how sleek, state-of-the-art mobile delivery and lifecycle management. Digia also experience can be delivered on Nokia touch launches a software solution, Digia Device September devices with Qt Quick - and encouraged visitors Cloud, enabling efficient and environmentally Digia provides an eLearning environment to the to download the cool Flowd -application to their friendly MeeGo RD operations in distributed S Group. Digia provides S Group’s specialised own devices from www.flowd.com. environments. Digia Device Cloud solution ena- vocational institute, Jollas Institute, with an bles remote development teams to access real eLearning environment based on Microsoft November devices without need to physically distribute SharePoint 2010. This solution provides Finn- Digia Tablo Boosts Information Workers’ Effi- prototypes. ish co-operative retail company group S Group ciency – The Digia Tablo digital workdesk builds Digia took part in Invest 2010 Fair at Wanha employees with diverse on-line training oppor- a flow of data and events from various sources. Satama, Helsinki. tunities. All of S Group’s 38,000 employees are Digia has launched a new product with which potential users of the learning environment. organisations can increase the efficiency of Datafisher contributed to the specification and information retrieval and work flows. The pro- implementation of the new eJollas solution. file-based Digia Tablo digital workdesk brings the right information to the right people, at the

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Key figures

Net sales Operating profit Cash flow from operations Earnings per share before MEUR MEUR MEUR extraordinary items EUR

140 20 25 0.6 120 0.5 15 20 100 0.4 80 15 10 0.3 60 10 0.2 40 5 5 20 0.1 0 0 0 0.0 06 07 08 09 10 06 07 08 09 * 10 06 07 08 09 10 06 07 08 09 * 10

*Operating profit before extraordinary items does *Earnings per share before extraordinary items was not include one-off items, which in the 2009 fiscal calculated for the 2009 fiscal year before the effect year comprised a writedown of goodwill totalling of one-off items. The EPS after extraordinary items EUR 23.8 million and an operational restructuring was EUR -0.67 per share. provision of EUR 0.9 million. Operating profit including MEUR one-off items was EUR -7.8MEUR million for the year. MEUR EUR • 2010 130.8 • 2010 17.2 • 2010 11.1 • 2010 0.56 • 2009 120.3 • 2009* 16.9 • 2009 20.2 • 2009* 0.53 • 2008 123.2 • 2008 13.4 • 2008 15.5 • 2008 0.36 • 2007 105.8 • 2007 11.1 • 2007 6.2 • 2007 0.29 • 2006 85.0 • 2006 8.4 • 2006 5.8 • 2006 0.25

* Operating profit before extraordinary items * Earnings per share before extraordinary items does not include one-off items, which in the was calculated for the 2009 fiscal year before 2009 fiscal year comprised a writedown of the effect of one-off items. The EPS after goodwill totalling EUR 23.8 million and an oper- extraordinary items was EUR -0.67 per share. ational restructuring provision of EUR 0.9 million. Operating profit including one-off items was EUR -7.8 million for the year.

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CEO’s review

Digia had a very successful 2010. A year ago, Workdesk, are just two examples of our invest- teamwork becoming more fluent. Of course, Digia found itself in great shape to pursue active ment in productised packages. In 2010, we were through larger competence centres, Digia will growth. We worked hard and fulfilled our prom- also innovators, launching products on the inter- also become even more effective at meeting ise: we succeeded in growing our net sales by national markets. customer needs. 8.7% in 2010. We’ll keep investing in product-based growth. My sincere thanks go to our customers and A year ago, we promised high profitability as As our vision statement says, by the end of the owners for their trust in Digia. A big thank you well as growth. In this too, we were successful - strategy period we want to put several innova- too, to each and every one of Digia’s inventive our profitability figures remain unrivalled in our tive products within easy reach of people around experts. Your everyday efforts are important to sector. the world. our mutual success. Digia is able to deliver organic growth, something We also want to grow in international markets, that makes me particularly happy. At Digia, the with Russia as our main target region. To accel- right things are done, with high quality. We handle erate and maintain our organic growth, we’ve Juha Varelius and develop sales and daily business operations become active in Russia’s fast-growing business- President and CEO efficiently. Our competencies are top-class, and to-business markets. We’ve already won our first we develop them with a close eye on market needs customers, with ERP solutions spearheading our and technological requirements. local expansion. Through our Chinese sites, we Digia has the desire and skill to grow. As one are growing our broad-based offshore compe- Digia, we have worked stronger than ever to tence centres, in line with demand. Our first local develop our core business operations, achieve customers have been won in both mobile and efficiency and pull in the same direction. We enterprise solutions. want to offer customers a strong partner in During the year, Digia recruited many experts. excellent financial shape, run from Finland and As staff numbers have grown, we’ve also tight- easy to do business with. ened up our network of locations. Last winter, we At Digia, we have done more than ensure that combined our Jyväskylä offices. At the turn of our core operations are outstanding and profit- the year, our around 600 of our Helsinki-based able. We have also developed our businesses and experts moved to a single location in Pitäjän- gone for growth through strategic projects. Our mäki, this replaced our former three offices. conceptualised, customer experience develop- It will be fascinating to see how our corporate ment services, and our profile-based Digital culture unifies, as well as our practices and

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Strategy The objective is to improve shareholder value Portfolios • Digia’s strategic objective is to be an international • To strengthen profitability and optimise growth, growth company, whose ability to turn a profit and sound Digia’s business is split into portfolios financial health provide rising shareholder value • The company seeks growth based on developing current operations, expanding the market area and creating new, scalable business Digia’s products, services and business areas are Portfolios to enable risk arranged into portfolios. This is based on growth management, operational • Key factors are expert personnel, high quality expectations, life cycles, operational synergies development and new project management and satisfied customers and business models. business creation The aim is to profitably grow Digia’s current core • Competitive advantage is built on operational efficiency, Digia’s portfolios are: business. At the same time, new, scalable opera- ability to renew, and industry and technology expertise • Productivity and operations management: tions based on internet distribution will comple- Makes customers’ internal processes more ment Digia’s current, successful businesses. efficient; strengthens customers’ cost and The portfolios will guarantee the continuous price competitiveness. development of existing operations. Product and • Product creation services: Helps customers competence life cycles will be optimised, and Digia’s target is to pursue mainly organic growth. growth, Digia is supplementing its successful lead the way in technology; enables the produc- financial and business risk management easier. In The company expands by developing its busi- current business with new solutions suitable for tion of successful mobile software and devices, addition, a portfolio breakdown enables new forms ness operations and product and service portfo- internet distribution. providing good user experiences. of business, creating potential for future growth lio. Digia’s product and service strategy is based In 2010 Digia’s profitability was higher than • Customer experience management: Increases and value generation. on multi-channel solutions, which increase cus- the industry average due to efficient manage- the efficiency of interaction and encounters tomers’ operational efficiency. Other key parts of ment systems and processes. Digia learns faster, between Digia’s customers and their end-cus- Digia’s strategy are product creation services and improves its quality and becomes more efficient tomers. Sales are boosted by improved cus- services covering the entire product life cycle. by focusing on leading technologies and methods. tomer service and greater customer loyalty. Digia is an innovative development partner. As Digia’s price-competitiveness stems from strong • Ventures: Provides solutions for the interna- such, it launches products, services and business industry expertise, technology leadership and a tional consumer and corporate market. These models using new technologies. Digia is also cost-efficient site structure. are based on a scalable business model, and expanding into new market areas. To accelerate can be distributed via the internet.

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Growth • The company seeks growth based on developing which is not based solely on man-hour billing. mobile technology, network services and cloud current operations, expanding the market area The new business has been organised as its own computing. The service is free to use for con- Ventures unit, which will expedite in-house inno- sumer clients. and creating new, scalable business vation activity and aims to bring new solutions to Modern information technology - and Digia’s market quickly. solutions - lean on user-oriented design, mobility and internet technologies, such as cloud comput- Examples of inventive solutions ing. These viewpoints are exploited from two Within current businesses, the target International business and A good example of an innovative solution is the dimensions; on one hand to bring value to Digia’s is to pursue mainly organic growth market expansion new mobile workforce management service Oiko. clients and their customers, on the other to bring Digia seeks growth by developing its current Digia wants to enter growth markets, by provid- fi, based on the SaaS business model. With this value through service implementation and pro- businesses and product and service selection. ing its existing products and services in neigh- network, service companies can send mobile duction. When these perspectives are realised In addition, Digia intends to grow by expanding boring regions and China. The company serves assignments to their workforce, thus increase properly, new service and product development sales into neighboring markets. local customers directly from sites in Russia, the effectiveness of mobile work, save workers is fast, affordable, client oriented and rational- Digia can provide comprehensive deliveries, Sweden and China. Competence centres in China time, optimise routes, save fuel, expedite billing ises the operations of all parties. from conceptualisation to maintenance. and Russia give Digia a sharper competitive and improve customer satisfaction. The Oiko.fi In ERP systems, Digia pursues to grow in edge: they bring off-shore resources to global service can be quickly taken to use, without the selected solution segments. These include Inter- customer relationships. need for system investments and it can be inte- net-based, Customer Experience Management grated easily to be part of other information sys- solutions, and systems that improve customers’ New business with new kinds tems. Digia is marketing the service globally with operational efficiency. of services different language versions, for instance in Ger- Within mobile accounts, Digia looks to expand To accelerate growth, new business based on inter- many the service is called Mobiledispo.de. by developing applications and user experience net distributed consumer and business solutions Increasingly, Digia’s clients want to offer their services. To the same end, Digia intends to cre- will be built alongside Digia’s successful existing consumer clients experimental, modern enter- ate extensive project and solution packages, business. The growth will focus on new, innova- tainment services with latest innovations. Flowd. covering solution life cycles. tive business models, such as SaaS* or transac- com is a mobile and location info based social In search of a better market position, Digia moni- tion based services. New solutions will open the media communication service, executed from a tors market developments and, when necessary, road for new, growing markets, where Digia seeks technology and skills point of view. The service grasps the corporate acquisition opportunities. faster growth compared to other business. gives a good view about the direction where Innovative business models are scalable and modern consumer services are developing into. * SaaS = Software as a Service. Business model allow better profitability in the future. The goal At the same time, it showcases what is possible where IT-solution is offered as an internet based is to create an international area of business, to achieve with Digia’s excellent skills in usability, cloud service invoiced by usage.

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Profitability Competitive advantage • Key factors are expert personnel, high quality • Competitive advantage is built on operational efficiency, project management and satisfied customers ability to renew, and industry and technology expertise

Digia’s profitability has traditionally been based Digia has experience of enterprise systems and on expert personnel, high quality project man- mobile system development. Combined with its agement and satisfied customers. Digia has expertise in new business areas, operating mod- carefully selected technologies, shared meth- els and technologies, this helps Digia to renew its ods and sufficiently large competence centres. entire offering and sharpen its competitive edge. Combined with affordable resources, these fac- Digia’s reputation as a professional, successful tors help maintain a high utilisation rate. They growth company makes it a desirable workplace, also equip Digia to respond to changes in market with satisfied employees. Through business demand and technology trends. portfolios, Digia aims to develop its current busi- Digia’s partners are world-class software and nesses profitably, while at the same time grow- service providers. This means that Digia can ing new, scalable and international businesses. deliver extensive system packages. Digia is efficient because it combines large Global management models and systems, suffi- competence centres, and carefully selected ciently large unit sizes and a focus on technology technologies, with a global management model. – this is where operational synergies are created. Digia’s proven earning power; good customer A technology focus ensures quality, fast learning relations and portfolio management have made and efficient use of resources. it an efficient and profitable growth company.

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Inventive expertise

• Unique blend of expertise in ERP systems, mobile Competence strategies increase efficiency devices, usability planning and web application design Competence development is systematic at Digia. • World-class expert in chosen technology sectors The company has drawn up site-specific competence strategies. These define the areas of • Flexible competence development in line with demand expertise on which each site must focus. In creating these strategies, Digia examined the existing expertise on each site, and what might be obtained locally. Local competence development Digia has a unique blend of expertise in ERP sys- Competence development in core plans were formed on this basis, including close tems, mobile devices, interaction design and web enterprise system technologies cooperation with local universities. Operational application design. This enables Digia to identify In 2010, Digia has invested heavily in developing efficiency will also benefit from each compe- and exploit the opportunities provided by new its enterprise system expertise. tence strategy. On their basis, sufficiently large technological trends (cloud computing, SaaS, Through effective, in-house training organi- teams of experts will be secured, matching each etc.). Examples include building new internet- sation and external courses Digia strongly site’s area of expertise. based ERP systems, accessible also by smart- enhanced its expertise in Microsoft Sharepoint, phones. Dynamix AX and Java technologies. Operational efficiency based on global management model Effective competence development Continually improving Digia’s inventive experts are managed globally, in Digia is skilled at developing its expertise, in line employer image a horizontal organisation. This has enabled Digia with demand and technology trends. In the past A continually improving employer image is also to achieve a high utilisation rate and good opera- year, Digia has successfully trained a large num- boosting Digia’s expertise. In 2010, Digia came tional efficiency. ber of its experts, in the Qt application devel- ninth in a Universum survey, charting how univer- The company’s global site network includes opment tool and the MeeGo environment. Digia sity students rate potential employers. Owing to offices in low-cost locations (Chengdu and Bei- is now one of the world’s leading experts in Qt. a rise by 13 places since 2009, Digia was dubbed jing in China and St. Petersburg in Russia). This Digia’s professional experts are fast in learning the ”IT Sector Rocket”. This means that, as it allows Digia to work with its customers in decid- new technologies. grows, Digia should have no trouble recruiting ing on the most suitable and cost-efficient unit new experts. Digia recruited a large number of for each customer project. first-rate professionals last year.

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Personnel

• Digia’s market recognition continues to grow

Amount of employees

1,600 Personnel in figures Work environment only some salary reviews could be made locally. 1,400 During 2010, the number of employees in Digia The annual work environment survey provided This agreement entailed higher salary levels than 1,200 increased by 87 persons (+ 5,9%). This growth plenty of feedback and good improvement sug- the minimum agreed with the unions. However, it 1,000 was purely organic. At year-end there were 1,558 gestions. This year’s response rate was particu- also took account of differences between sites 800 employees, of whom 12.6% worked outside Fin- larly high, at over 83%. The overall ratings were and of individual cases for raises. Pay rises will 600 land. Staff turnover was 8.5%, which increased similar to those of the previous year. take place between November 2010 and April 400 a bit. The company’s security as an employer, the 2011. 200 The average age was approximately 36.1 years, company’s financial success and future pros- Occupational safety activities are performed 0 a bit higher than in 2009. Women made up 22.1% pects were given noticeably positive ratings. regionally. The company has an occupational 06 07 08 09 10 of personnel, which was a slight increase. Personnel also highly rated communications safety delegate, an occupational safety commit- and leadership at Digia. Processes were further tee and occupational safety representatives in Personnel distribution Recruitment refined in response to feedback. This included various locations. The occupational safety com- by age group Digia significantly increased its recognition and areas such as performance reviews, feedback mittee convened twice during the year. % attractiveness as an employer. The number of and incentive systems. job applications received almost doubled since Training 2009. Around 6,000 applications were received Employer-employee cooperation Digia is skilled in developing its competence in during the year. Digia continued to work closely with staff rep- line with demand and technology trends. In addition to traditional recruitment channels, resentatives, most crucially via the Cooperation Competence in Microsoft SharePoint, Java EE, Digia increasingly focuses on its visibility and Team, to which employees elect representatives. In Oracle, IBM and other technologies was rein- online presence, including in the social media. accordance with the collective labour agreement forced. Digia trained successfully also a signifi-

system, the shop steward and his or her deputy are cant number of Qt and MeeGo experts. This was 20–29 21,0% permanent members of the Cooperation Team. achieved through external and internal training 30–39 51,0% 40–49 20,0% In late 2010, Digia made its first completely sessions, and certification tests. On average, 50–59 7,3% local agreement on salary reviews. Previously, almost weekly training events and best-practice 60– 0,7%

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briefings were arranged on the following: vari- to employees. Culture vouchers were introduced Personnel distribution ous technologies, tools, operating models and in 2010, supporting a balance of both fitness and by employment year certain employee roles. A special emphasis was cultural activities. Through both exercise and % given to specification expertise, through regular cultural pastimes, these versatile vouchers have training sessions. motivated many employees to take care of their The number of Scrum experts grew to over 100, well-being. due to the new Certified Scrum Master (CSM). Digia enhanced its employees’ work-life bal- Digia also extended the skills of its own instruc- ance. This was achieved through flexible working tors and trainers. hours and, for example, childcare services when Managers were trained in the ‘proactive care children fall sick. An average of 3.5% of person- model,’ and the model was made available to all nel were fully absent from work due to longer- <1 20% personnel. This model aims at the earliest possi- term leave. A similar number were employed 1–5 44% ble intervention in difficult workplace situations. part-time or on an hourly basis. 6–10 23% 11–15 11% Solutions are sought together with occupational A similar budget to last year was allocated 16–20 1% health care and other experts. to the OpenClub, which coordinates leisure >20 1% activities for employees. Clubs related to various Employee well-being activities were established in several locations. Personnel distribution Digia organises an annual well-being event. This Examples of OpenClub leisure activities include by Digia offices reminds employees of how easy and important theatre visits, sports clubs and bands around it is to take everyday, functional exercise. Based Finland. One of Digia’s bands, Open Stones, once on a different theme every year, these events are again reached the final of the national Firmarock held in every Digia site. In 2010, the well-being music competition. Digia’s OpenClub bands have event involved occupational health care partners been represented among the top bands for sev- and service providers, as well as clubs and asso- eral years. ciations. Employee benefits were provided to foster well-being. These included luncheon vouchers Helsinki 606 Pori and Rauma 104 Lappeenranta 83 Stockholm 22 and meal tickets for daily meals. Occupational Oulu 111 St. Petersburg 51 health care services were also provided, either Jyväskylä 283 Chengdu and Peking 124 through health insurance or by contract with pri- Tampere 174 vate clinics. Digia also offers dentistry services

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Key capabilities for successful performance • Sustainable performance capabilities are built of Recruitment, Digia as an employer a deep understanding of customer needs, market trends and the latest technological possibilities Employer image improved • At the core of these capabilities are highly skilled people and efficient processes

Skilled people need to be both recruited and Digia significantly increased its recognition and Students are an important trained continuously to answer to Digia’s cus- attractiveness as an employer. The number of target group tomer demands. A good employer reputation job applications received almost doubled since Digia possesses close relationships with the and fast adapting competence development pro- 2009. Around 6,000 applications were received higher education institutions. In recruitment, stu- grams make it possible to grow both in numbers during the year. dents are an important target group. and in technological prowess. Last year Digia recruited both seasoned pro- In spring 2010, Digia and the University of Lap- In addition to skilled people, successful perfor- fessionals and recent graduates for various posi- peenranta joined forces to train Android experts. mance needs motivated people. Digia provides tions in .Net, SharePoint, Java Enterprise, Qt and This was intended to meet growing needs in its people with a whole range of possibilities to MeeGo technologies as well as project manager mobile device product development. In the early increase well-being and job motivation, e.g. various positions. summer, Digia entered a partnership with the club activities that stimulate both mind and body. In addition to traditional recruitment channels, University of Jyväskylä and Intel on MeeGo train- The continuation of successful performance is Digia is increasing its online visibility. This means ing. Partner universities are provided with the also dependent on efficient working practices e.g. presence in social media and relevant discus- same teaching materials as Digia uses in its own and processes. These are developed continu- sion forums. training. MeeGo training commenced in autumn ously and monitored rigorously. The development Digia’s improved employer image was reflected 2010. is done through the Digia Core Process Model by its higher ranking in the Universum survey. Digia actively participated in recruitment (CPM) framework which is the de facto quality This charts shows how university students rate events organised by universities. The company’s management system of the company. The perfor- potential employers. Students ranked Digia own traineeship programme began in spring mance monitoring gives insights to development within the top 10 potential IT sector employers. 2010. Through this, Digia recruited many promis- activities and thus contributes crucially to the Due to its hugely improved ranking, Digia was ing young talents. future performance and success. dubbed the ”IT Sector Rocket.”

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Focus on processes • Understanding changing customer needs is imperative for building high-performing processes • Well-designed processes lead to consistent quality • Continuous improvement is the key to future success

Continuous development The offering portfolio management process Digia is continuously developing its quality manage- has been improved for better transparency ment system – Digia Core Process Model (CPM) – throughout the company and hence giving the based on recent development in the industry and possibility to more people to be involved in the from our learning experiences and customer feed- process. This is important especially in the early back. The certified Core Process Model includes stages of product and service innovation and descriptions of our processes, as well as instruc- cultivation. tions, templates and reference material, steers operations in projects, and guarantees a consistent Systematic monitoring working method of high quality. Digia systematically monitors the implementa- Examples of recent achievements include tion of its quality operations. The suitability and improvements in Digia customer account man- development of the quality management sys- agement process and Digia offering portfolio tem, Core Process Model, is monitored regularly management process. through both internal and external audits. The renewed account management process Recent developments include specific themes gathers more competences from the entire for internal audits. This way Digia is able to organisation to the customer front for bet- gather larger amounts of information from a spe- ter customer service. It also brings even more cific field of interest for closer examination and senior management attention to our customer future improvement. accounts.

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Business operation

A successful customer experience helps firms to stand out and improves customer loyalty.

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CASE Enterprise Solutions New Etra Logistics Centre equipped with Digia Enterprise ERP system • Off-the-shelf software for operational and business • From Etra central warehouse, management as well as consulting and development services products move directly to all customers and Megacenter outlets • Solutions for electronic services and • Quantities can be optimised customer experience management more effectively, giving Etra Megacenters an even broader product selection via logistics centres Digia offers software and services in support of its customers’ daily operations. Its custom- Etra Oy, a subsidiary of Etola Group, is a Finnish ers are enterprises and organisations of all sizes, technical retail specialist, offering a broad selec- from both the private and public sectors. tion of industrial products and services. Etola Digia’s selection includes off-the-shelf soft- Group consists of some 30 specialist companies ware for operational and business management working in close cooperation. With 1,500 employ- as well as consulting and development services. ees, these firms have total revenues of around Solutions for electronic services and customer EUR 400 million. Digia will provide this unit with its Digia Enter- experience management, based on leading tech- The Etola Group has been using the Digia Enter- prise system. The customer was convinced by nology companies’ architecture platforms, build prise ERP system for several years. This enables the system’s logistics features and tools – they an essential part of Digia’s offering. it to manage wholesale operations, production are comprehensive and adaptable enough to suit Digia’s offering covers solution implementa- and maintenance at Etra and approximately 40 the operations of a huge centre. The logistics tion, implementation services and comprehen- of its outlets. The system has around 1,000 users centre will enable smoother delivery of an even sive, continuous life cycle services. within the group. The Etola Group emphasises broader selection of products. These will move continuous collaboration and process devel- directly from the warehouse to all Etra custom- opment, alongside customers and suppliers. ers and Megacenter outlets. Logistics is one of its main focus areas. A range For the Etola Group and its customers, real- of shelf management, service warehouse and time data streams and seamless integration are consignment stock models, using collection ter- major benefits. Product quantities can be opti- minals and RFID solutions – these are already in mised more effectively, giving Etra Megacenters daily use by the Group. an even broader product selection via logistics To further improve its logistical efficiency, Etra centres. Rapid and more-reliable deliveries is building a central logistics unit in Hämeenlinna. result directly to even better customer service.

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Customer Experience Management Digia makes experiences a competitive asset

• Digia helps its clients to provide better customer experiences • Professionally managed development process for improving customer loyalty, competitiveness and process efficiency

It is becoming even more challenging to stand Digia’s services and solutions • Information work, ERP and process manage- Effective management of the customer experi- out on the basis of product or service features. improve the customer experience ment solutions help organisations to fulfil ence, from planning to concrete actions: this is Innovations can be quickly copied, reducing the Digia’s services and solutions help its clients to promises made in customer encounters. what separates Digia from the rest. window of opportunity for exploiting them. In improve their customer experiences. Through • Network management and cooperation solu- Digia offers tools for understanding the end addition, customers no longer compare products business consulting, end customers’ objectives tions help networks to fulfil customer prom- customer’s values and expectations. They help and services in the way they used to. The compe- and expectations are identified. Based on that, ises through cooperation. in planning customer experiences and structur- tition is shifting towards customer interaction Digia creates a development plan for systematic • Integration, service architecture and business ing development measures. Advanced solutions and service experiences when using end prod- improvement of the customer experience. This information solutions enable the gathering, guarantee a trouble-free start-up. These are ucts. A successful customer experience helps plan usually includes measures for improving analysis and use of information from customer much more than IT solutions - they are compre- organisations to differentiate and improve cus- communications, processes, human resourcing encounters. They also support the fulfilment of hensive development projects in which technol- tomer loyalty. and information systems. Aimed at a better cus- customer promises. ogy plays its part. Networking is intense and organisations are tomer experience, these measures are defined outsourcing some of their operations. As a and prioritised based on how well they benefit result, systematising customer experiences the customer. is vitally important. Subcontractor networks, Digia’s IT solutions are tools which help organi- service models and quality need to be well- sations to generate positive customer experi- managed; outsourced service centers and ences. maintenance services are also sources of cus- • Portal solutions and electronic customer ser- tomer experiences. Even if some services are vice solutions support successful customer outsourced, in the minds of customers they still encounters. form an image of the service provider’s brand.

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CASE Digia Tablo Customer encounters at Aalto University Digital workdesk raises efficiency and speeds up info searches

• Through CEM-based workshops, Digia and Aalto’s IT unit concretised the • Digia’s digital workdesk launched in 2010 specification for customer experience • Flexible access to relevant data depending on the

At the beginning of 2010, three Finnish univer- personalised profile and the context sities merged to create Aalto University. Each • Greater organisational efficiency benefits end-customers of the three previously had its own IT organisation, services and operating models. During the second half of 2010, Aalto’s IT unit was seeking a roadmap and destination for its IT services. This was done with the help of Digia, which applied its CEM-method (Customer Experience Manage- ment), a tool for understanding and managing the quality of B-to-C encounters. In their many roles, knowledge workers spend Traditional intranets are built solely for internal The customer experience forms part of every their days gathering and refining information communication. In Digia’s view, this means that customer encounter. Even a good customer to be used by either the worker or the organisa- they cannot provide the availability, scope and relationship can be damaged by a poor experi- tion. Today’s work requires ever more data and speed of information required by today’s organi- ence. Improving customer loyalty and encourag- IT tools. Managing the related information flows, sations. ing viral marketing - these are among the most tools and tasks is taking up more and more time. effective ways of increasing sales and profit- Information needed at work is scattered Digia’s digital workdesk ability. between various data warehouses. Some of provides the solution Through CEM-based workshops, Digia and Aal- ing of how to identify and prioritise areas of these are internal, some shared within a network As a solution to these problems, Digia launched to’s IT unit completed the specifications. The aim improvement. It also showed how a future road- and some are public information sources. In the a digital workdesk in the autumn of 2010. The was to concretise the customer experience and map might be created for the IT organisation. worst case scenario, employees may even have project was established for developing the con- its possible use in creating an IT services road- Aalto University was delighted with the work- to manually piece together information. Addi- cept. This dynamic workdesk collects data and map and destination. The workshops focused shop approach. The university intends to continue tionally, interacting with colleagues and partners event flows from diverse sources, to create a on setting objectives for customer groups and using CEM, in creating roadmaps for other unit. should be easy, regardless of location. single, clear entity. It brings together various customer encounters. This led to an understand- Seeing the big picture and keeping up to date communication tools and communities, as well as is therefore more crucial than ever, but also documents and reports. The workdesk also pro- more difficult. vides access to back-office systems, presents

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CASE Digital Workdesk boosts VVO’s information flow

the related tasks and displays organisation and All sides undeniably benefit • VVO work productivity is being team calendars. This is all done contextually, in The employee, organisation and customer all increased with Digia Tablo, real time. clearly benefit from the digital workdesk. Organ- a digital workdesk concept Digia has developed its digital workdesk into isations obtain productivity gains in knowledge both a concept and a productised solution. Digia work and work processes. In addition, swift • The workdesk and its content are Tablo links an organisation’s information and access to information boosts efficiency. Each based on employee profiles and tools to the context in question. These are pro- user’s work is lightened by easy access to the their task based information needs vided to users by task: information and tools are right content, tasks, people and tools. Time man- made available based on individual user profiles agement is also made easier. In this way, the VVO is a listed company specialising in hous- and situations. Dynamically retrieved from vari- workdesk increases job satisfaction, and finally, ing rental. VVO commissions, markets and man- ous sources, information is provided in line with will benefit the customers, in the form of posi- ages its own residences. The company has nearly users’ actual needs. tive experiences. 39,000 rented dwellings in 50 locations around People want to know what’s happening in Finland. their social networks. Digia Tablo takes this key In late 2010, VVO decided to modernise its insight of the social media, and adapts it to the out-of-date intranet. Using the SharePoint 2010 business world. Workers are kept up to date by a platform, Digia is building a digital workdesk for flow of feeds - Digia’s digital workdesk gathers people at VVO, in line with the Tablo concept. To information from the organisation’s various sys- make VVO’s work more efficient, and improve tems, wiki pages, blogs and feeds. user experiences of IT systems, the best possi- Photo: VVO/Jukka Ahola ble solutions are being chosen. This is based on a digital workdesk, covering areas such as internal communications, group work, document handling and work flows. ease and efficiency of communication and daily The digital workdesk project will be completed tasks. in three phases. Beginning in autumn 2010, the The Digital Workdesk is a productivity tool for first phase will end on May Day 2011. As a result, employees. It offers a user-friendly interface to VVO will have an intranet with a renewed struc- information, colleagues, tasks, events and other ture. This will provide user-friendly, effective tools. The workdesk and its content are based on tools for creating and searching for content. In employee profiles and their task based informa- the second and third phases, further intranet tion needs. This makes for dynamic, up-to-date tools will be provided, aimed at boosting the content and tools, supporting user needs.

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Integration Integration is the spinal column of good customer experiences • Outstanding expertise in integration • Experience from hundreds of integration projects • Smooth integration improves business processes and customer encounters

To provide a good customer experience, a com- help it take its first steps in the right direction. service system is critical, in ensuring a reliable pany needs to deliver information where it is This is how it’s effortless to engage the business service chain. This not only means paying atten- needed. This often means integrating the com- and IT management to walk together towards the tion to the roles and critical nature of systems, pany’s various systems. As business applications next maturity level of integration. but also their special characteristics and sup- become smarter, integration requirements are port/maintenance arrangements. becoming more complex. In integration solutions, Integration is the key to Digia offers high quality services for mapping, the focus needs to shift from traditional, two- service management and systematically developing, integration archi- way message transfers to comprehensive busi- Whether through systematic development, or tecture. These can provide major advantages, ness process management. Business processes piecemeal improvements, integration services for example by unifying integration services are typically long-lasting: they comprise many, have risen into a critical role in many companies. related to customer encounters. Digia has cre- interconnected systems and may include manual This means that even small-scale interruptions ated numerous management models, for both work phases. in integration services can create incidents for integration- and other types of architecture. Its Digia has carried out hundreds of integration a business - not to mention longer disruptions, experience also includes setting up integration projects and understands challenges related to which can cause significant financial losses. centres, as well as the implementation and run- integration. This means that Digia is unmatched In most cases, integration services are not time monitoring of integrations. for integrating information systems to support managed from a single point. Instead, the chain the company’s core business management. includes several technical solutions, such as a Once a company has opted for process-ori- service channel, portal solutions and direct con- ented integration, Digia’s consulting packages nections to legacy systems. Managing the whole

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Productivity and Operations Management Digia improves customers’ operational efficiency

• Digia’s ERP business is growing, with Digia Enterprise and Microsoft Dynamics as the drivers • Digia is the market leader in Finland among providers of systems to trade unions and unemployment funds • Digia has expanded its product selection with a core banking solution intended for small and medium-sized banks

Productivity and Operations A strategic partner In addition to ready-made software, customers Management As a system supplier, Digia often plays a strate- can obtain consulting and development services. Digia’s ERP business grew faster than the market gic role for the customers whose entire opera- These are for the creation of custom-made func- rate in 2010. Profitability remained also high. The tions are often based on systems delivered by tions, in line with the industry-best practices and outstanding success is based on high customer Digia. In many cases, Digia participates in cus- specific customer requirements. satisfaction and the ability to continuously tomers’ business development and change man- Digia’s offering encompasses software imple- launch new, inventive solutions meeting evolving agement. This is achieved by guaranteeing seam- mentation services, as well as comprehensive customer needs. less system support during key development continuous services during the product’s life Digia’s industry-specific, off-the-shelf soft- projects. An ERP system is often like a compa- cycle. Throughout an application’s lifetime, many ware is used for daily operations. These include ny’s heartbeat; without it, the company would customers seek as many application-related ser- managing the order/delivery chain, stock and grind to a halt. vices as possible from a single supplier. asset management, customer and supplier man- Digia’s offering areas include world-class, Digia has strong expertise in the SaaS agement, financial administration and official off-the-shelf software. Such products serve the (Software-as-a-Service) model in all key appli- reporting. needs of retailers, manufacturing, service organ- cation segments. Digia foresees a time when isations, banks, asset management and trade businesses will mainly acquire applications as a unions. Renowned for their flexibility, these sys- service; the company is well prepared to meet tems can be expanded with custom-made exten- these needs. sions or third-party software.

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CASE ERP and financial administration Making an organisation’s knowledge capital visible

SLO Oy is Finland’s leading wholesaler of electrical and telecommunication equipment. It serves electricians, power and telecom companies, net- Digia’s ERP system business includes the compa- ditional, global ERP systems. Digia’s Microsoft work builders, industrial firms and public bodies, ny’s own and third-party, off-the-shelf software. operations are international, delivering solutions through 35 sales offices around Finland. SLO has These are provided to various industries, on a to many countries outside Finland. 410 employees. broad basis. As a leading ERP expert, Digia has A well-productised implementation process, SLO wanted to update its popular intranet, to extensive experience spanning two decades. This professional personnel and ready-made verticals operate on the Microsoft® Office SharePoint 2010 has led to a large, satisfied clientele in Finland in focus industries: these are the keys to Digia’s platform. It also wanted a more logical structure and its neighbouring areas. success as an ERP and financial system supplier. for content offered through the service. In addition, Developed in Finland, and designed specifically Customers often cite security and stability as the intranet was to be made more interactive, by for the Finnish business environment, the Digia Digia’s ace cards. In-depth experience and solid offering SLO units their own sites. On these, they Enterprise package has enjoyed long success. technological expertise mean that the company would be able to post their own news, instructions This is despite intensifying competition. In 2010, can guarantee a safe and carefree project model. and practices. as a provider of ERP systems to Finnish compa- This keeps customers’ projects on schedule, Predictive product search functionality was added Pictured: SLO’s Tuupakka outlet in Vantaa. Sales nies, Digia won considerably more market share. within budget and in sight of the desired out- to SLO’s intranet. When a user types a product name Manager Jari Tuoriniemi checks the order of Digia’s Microsoft Dynamics business also comes and benefits. in the search field, information on electrical and products on the shelves of SLO’s Tuupakka out- grew, at a rate clearly exceeding market growth. telecom goods flows from the product database. let. Attached to the company’s central ware- Among international corporations, Dynamics This database is a separate online system for man- house in Vantaa, the outlet offers a selection of AX has become a competitive alternative to tra- aging products, quantities and sales. around 110,000 electrical and telecom goods. A content management consultant guided the specification and design phase, by offering opin- ions and pre-prepared suggestions based on the customer’s wishes.

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CASE More transparent and efficient jewellery order-supply chain • Digia supplied the most flexible, yet highly standardised, ERP system possible with all the necessary integrations • Production planning is now easier, thanks to up-to-date sales data and forecasts

Kalevala Koru Oy designs and produces gold, sil- ver and bronze jewellery. Together with Lapponia Jewelry Oy, it forms the Koru Group. This is the largest company of its kind in Finland, and one of the largest in northern Europe. Kalevala Koru wanted the most flexible, but highly standardised, ERP system possible. System implementation would have to be smooth, without extensive customisation. With simple system run-in, the system would bring fast realiasable benefits. Inter- national introduction would have to be an option. In addition, customers can be briefed in more detail Digia met all of these objectives, by supplying at various stages of the process. This increases cus- the Microsoft Dynamics AX ERP system, plus the tomer satisfaction and trust between players. necessary integrations. Hardly any customisation ”Our new ERP system is the most imperative was needed; the built-in processes supported well operative system in Koru Group. Practically every- Kalevala Koru’s operating models. They also enabled thing, from financial administration to production the desired changes to its practices. and purchasing, is now based on AX. The system is The result was a more efficient and transparent already used by around 30% of our staff,” states order-supply chain. Stocktaking is now easy via Kalevala Koru IT Manager Tuula Aitta-aho. a mobile device, with data being automatically recorded to the system. Production planning is easier, thanks to up-to-date sales data and forecasts.

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CASE Bank and asset management application PAM has over one million member contacts per year

Digia serves bank and asset management cus- corporate reorganisations and other changes, • By reducing back-office functions, tomers, based on its own product line. This some players have disappeared altogether. Their electronic customer services have cut includes an asset management application pack- places have been taken by new entrants. down manual work at PAM offices age and a basic bank solution for small and Digia has retained its market position. Among medium-sized banks. Within its target segment, other things, this is due to long-term customer • PAM can now focus its time and this product line is a well-known market leader relationships and a skilfully created product line. resources on customer encounters in Finland. In this segment, tumult in the financial markets Service Union United (PAM) is a Finnish trade has created a more challenging scenario. Through union for the private service sector. It has more than 228,000 members. PAM’s members are insured by PAM’s unemployment fund. For over a decade, PAM and Digia have been jointly developing member-service solutions. Digia has provided the union with OpenPoint solutions, which include ERP systems for both the union and fund. Services for associations and unions Digital self-service channels for members are also included. These have mobile application extensions and are system-integrated. Digital channels have improved customer ser- Trade unions and unemployment funds through- In this sector, Digia will continue to focus on vice in many areas of PAM. Joining PAM, signing PAM offices. The union can now focus its time out Finland are significant customers of Digia. excellent customer service. Product develop- up for courses and making membership fee pay- and resources on customer encounters. Due to changes among suppliers in the sector, ment, which takes account of customer needs, ments can all be done online. Members can also PAM’s vision is to be the most modern trade Digia has been able to increase its market share will also be a priority. Through these, Digia view and edit their personal data. union by 2015. To this end, PAM and Digia are and is now the undisputed market leader. In this will ensure that customers can increase their Fund members can carry out all fund-related seeking new ways of improving member services. carefully focused segment, Digia’s strengths are efficiency. Customers will also be able to offer business online. This includes applying, and In early 2011, PAM will adopt VoIP and Contact in-depth knowledge of its customers and the their own clients first-class services and well- submitting the necessary attachments, for fund Center solutions provided by Digia. These will industry. It also keeps a close eye on constantly managed encounters, in union and unemployment payouts. Further applications can be sent by be seamlessly integrated into the OpenPoint changing legislation. Innovative and unflagging insurance matters. mobile phone and based on speech recognition system. development of the Digia OpenPoint product line technology. Through systems provided by Digia, PAM has is another, major strength. By cutting back-office functions, electronic more than one million customer encounters per customer services have reduced manual work at year.

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Mobile Solutions Digia as a mobile solution partner: Product Creation Services an innovator and strong change driver Speed, efficiency and quality user expe- • Time and again, Digia has been chosen as a key rience in Product Creation Services partner of firms facing dramatic change

• Digia has a long, successful history and high World-leading product creation Core competence, on which customer satisfaction in mobile solutions services in the mobile sector customer satisfaction and Digia offers innovative mobile solutions and continuous renewal are built advanced development services to several Inventive design in user experience and archi- Provider of complete solutions tegic products and forecasting future use sce- world-class companies in the mobile sector. tecture, reliability in delivering large entities, Digia creates innovative mobile solutions with narios - Digia has been a powerful partner during Digia’s long and successful history and high cus- efficient operations and uncompromising qual- the world’s leading mobile companies. Digia technological upheaval. tomer satisfaction are based on reliable delivery ity control - these are the keys to developing serves its customers throughout the innovation and high quality. modern products and services. Experience and chain, from designing exciting user experiences, Key to success: the broadest refined operating methods are critical elements to market launches and life cycle management. experience and most inventive • Software platforms and applications for of such skills. Mastery of these core competen- Digia’s business is increasingly based around the expertise on the market mobile devices, tablets and netbooks cies makes it easy to adopt new technologies, independent management and delivery of large Digia has a long, successful history and high cus- • Turnkey deliveries of device-specific software trends and operating models. It also enables software systems. tomer satisfaction in mobile solutions. These and maintenance on multiple platforms their rapid renewal. This is how Digia provides are based on renowned expertise, continuous • Cloud services and desktop applications for excellent customer satisfaction. On the same A strong partner during rapid change renewal, reliable delivery and high quality - all the consumers and business segments basis, customers can be astonished by Digia’s The mobile sector is changing faster than any fruit of broad experience. • Embedded software for devices, machines and inventive solutions and ideas to help them suc- other. Consumer habits, technologies and the To create winning solutions, Digia works close to and industrial systems ceed. business environment are developing at speeds alongside the customer. This closeness is combined • User experience services: innovation, concept unheard of elsewhere. Time and again, Digia has with agile methods, and the efficiency gains available design and usability Ease of purchase based on been chosen as a key partner of firms facing dra- to an international company. • Training services, in the sector’s leading tech- unique service portfolio matic change. Building new-generation software nologies For multiple software platforms, from Android platforms, delivering software solutions for stra- to MeeGo, Symbian, Windows and the iPhone iOS environment, Digia provides inventive, efficient solutions. Digia is unique in offering strong expertise in user experience, visionary

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User Experience Digia User Experience: visionary design architecture design, world-class project manage- for ease of use and added value ment and the efficiencies available from an international operating environment. In addition, agile methods are used alongside the customer, to • User Experience: inspiration and easy-to-use products for the turn its visions into gems. For customers new to end-users – and at the same time, achieving business targets the opportunities of mobile and software solutions, Digia offers training and consulting ser- • Digia’s strength is to understand both users and technology vices to help them get started. • Good results come by asking feedback from the Product creation services bring users and by taking account the business needs digital dimension to new areas To some companies and industries, mobile services and software are still new sources of competitiveness. Digia offers the benefits of product creation services to these too. In such Experiences and ease of use for with Digia’s software teams. For many custom- companies, software may be recognised as an users: achieving business targets ers, strategic decision-making and choice of important part of a product or service portfo- End-users’ demands are growing, and products direction are much easier, when their vision can lio. However, software development for multiple and services need to respond. A product needs rapidly be transformed into functioning soft- platforms, or for a specific device environment, to be attractive, inspiring and provide experi- ware. may not make sense. This is often for reasons ences, as well as being useful and user-friendly. related to competencies or efficiency. As a soft- Users must be captivated not only by the prod- Basis in user-driven design ware partner, Digia can bring a new dimension to uct’s design, but also by its interface. This is a and understanding what a customer’s offering, based on a quick, scalable core precept of Digia’s broad-based, User Expe- technology can offer and efficient method. rience teams. Every year, User Experience works The mobile sector is seeing rapid technological on hundreds of customer projects related to development and tough competition. This leads mobile and business solutions. to a short user experience renewal cycle, and Digia’s User Experience design services stand the need to stand out. Due to its pedigree in user out: in addition to experiences and ease of use, experience design, Digia has a pole position in this they take feasibility and scheduling into account. area. Digia’s leadership is also based on long-term Such elements are crucial to commercial suc- cooperation with leading companies in the sec- cess. This is possible thanks to close cooperation tor, renowned technological expertise and a broad

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CASE Objective: the best user experience in the market

range of usability services. Digia is uniquely able usability testing in various markets. With usabil- • Using the applications and solutions to carry out user-driven design for small, everyday ity testing as part of its solution package, Digia can be made more inspiring with clear purposes, while also creating radical innovations. can ensure quick and seamless utilisation of and visually attractive user interfaces Such innovations harness the potential of new user feedback. This achieves the best possible technologies, to create added value. end result. User satisfaction and, from a busi- • User experience both in mobile ness perspective, a focus on developing the right phones and tablet computers Fine solutions are not created things, are thereby guaranteed. matches reality better and by accident; user experience supports users’ everyday life requires insight and skill • By investing into research and Digia has been refining its processes for years. Digia can now create tailored products quickly, technology, Digia paves the road for turning great ideas into gems. Visual and user new and innovative user experiences interface designers are involved in new prod- to enable these new experiences Digia paves the uct development from a very early stage. Digia The key requirement for any enterprise and mobile road for new and innovative user experiences. is able to fuse creative design seamlessly with solution is a top-class user experience, achieved by the development process. In this way, ideas are smooth interaction and attractive visual look. Digia During 2010 Digia showcased e.g. the following: honed to perfection and viable commercialisa- continuously explores new user experience innova- • 3D desktop – Your new menu for the smart- tion plans are created. Digia’s User Experience tions and emerging technologies. phone of the future. Stunning visual appear- services progress naturally, from user-driven Touch based user experiences have been the high ance and totally new way for navigating in all innovation to concept design, visual design, pro- interest topic for the past couple of years, but there three dimensions. totyping, usability evaluations and user inter- are several new inspiring opportunities around the • Augmented Reality – Add a new dimension to face design. corner for further enriching the user experience. any app. Finding content, services and people Using the applications and solutions can be made from your environment with mobile device act- Getting the end result right: more fun and inspiring with clear and visually attrac- ing as an smart display to your world. collection and iterative tive user interfaces. User experiences both in mobile • Flowd – A circle of artists, places and friends use of user feedback phones and tablet computers can be made to better you love. Create and visit places, post com- Digia’s solutions take usability seriously. Its usa- match reality and users’ experiences in everyday life. ments, send shouts with images and share in bility testing methods apply the sector’s best Digia has used its technical and user experience Facebook and Twitter. Flowd is available as a practices. Testing is based on usability labs with expertise to enable these future mobile UI tech- web service and mobile application for Android, testing equipment, and partner networks for nologies in the mobile phones available today. By iPhone and Nokia touch devices. investing into research and technology needed

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Product development and technology trends Latest technologies serving users and businesses As part of this research and development, the In the Product creation services, it is natural to • By developing its own products and expertise in line with company is also searching for new partners or take advantage of the latest technologies: the changing market needs, Digia stays at the cutting edge of trends will be adopting new products from existing clients’ products usually are from the sharpest partners. This ensures that our clients always end of progress, thus making the demand for • Novel information systems or customer channels enable have access to best solutions and skill that the competence ambitious. Digia has, over the years, new business operations and new business models market can offer. produced operational models that can be used to match the know-how to changing market needs. Taking advantage of new business Technologies change, but with deep industry models in offerings as a whole knowledge and efficient transformation training, Digia has divided its offering and business areas even hundreds of employees have been moved During the last few years, advancements in com- methods to do business. In many areas, the into portfolios. This dividing has been based on towards new technologies. puter science have brought within our reach competitive arenas for companies have changed the growth expectations, life cycle, operative Ventures approaches the market with eas- many new, even trend like things. Cloud comput- radically. synergy and business models. ily scalable cloud solutions, directly from web. ing, location based services, social media, mobile Browser and mobile based products are available applications, Software as a Service (SaaS), just From market promise to The portfolios are: without place or time restrictions. The business to mention a few. As always, some of the new real customer benefit • Productivity and operations management models are also innovative: the client pays the marvels get a little more publicity than they As described above, the change of processes • Product creation services affordable basic fee plus usage. Introduction is deserve. Despite all the hype and media fuss, and business models also requires taking into • Customer experience management free or low cost as well. there’s usually at least a nugget of verity behind account of new kind of information systems or • Ventures Digia’s competitiveness has become even all of them. customer channels. This can also be addressed stronger, due to continuous renewal and devel- Naturally, trends play a part in how consumers reversely: new kinds of information systems or Customer experience management is a service opment. The balanced development of offering use information technology and various terminal customer channels enable new business or a rad- and product concept intended for Digia’s custom- portfolio and expertise are Digia’s key factors devices. It’s clear, that in all organisations the ical change in the business model. Often also sig- ers. It provides tools for understanding the end to renew and further improve its own abilities to end customer connects also electronically to the nificant cost savings or cost scalability in change customers’ values and expectations, planning cus- race the market. Investments made to research services or products of the organisation. Thus, situations can be achieved with new operational tomer experiences and structuring development and development take Digia forward to meet the new technology trends have their effect on model or new information system. measures. Through advanced solutions, it also the future challenges. This way, the company will how end customers are being served and how Digia will strongly stay in the forefront of guarantees a fluent and fast start-up. One part of further maintain its unique combination of skills services are being created. New technologies the trends by developing its own products and our customer experience management concept is in enterprise solutions, mobile devices, usability and operational models have bred whole new knowledge to meet the changing market needs. the Digital Workdesk, launched last year. design and web application design.

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Markets and Digia’s business Digia helps customers face accelerating change in the markets

Public administration services for consumer services, even mobile services, which • Customer experience growing as a competitive factor a growing clientele, at lower cost strengthen customer loyalty. Factors such as • Need for services, anywhere, anytime, is boosting The need for greater efficiency and productiv- timely staff availability and in-store efficiency ity spells major change, both now and in the past, will grow in significance. By improving these, development of multichannel interaction for Finland’s public administration. Public bodies retailers can gain a more competitive edge, • Technological development and changes in consumer are responding by centralising and digitising ser- through a better customer experience. vices, leading to larger, centralised purchases. Digia has developed the Digia Smart Store behaviour create increasing demand for mobile services Many traditional public services are now open to concept. This brings together retail chain man- competition from the private sector: citizens will agement and store solutions, into a package benefit from these changes, due to falling costs covering the key needs of general and specialist Major change is affecting many Digia's customer demand for solutions which directly link online and improved services. Healthcare is a familiar retailers. Digia has a comprehensive range of industries. Good customer experiences have and mobile services to back-office systems. example of this. solutions, from ERP systems, integration ser- joined the traditional change drivers of greater Digia has a strong position in back-office sys- Digia has solid expertise and existing long-term vices and e-commerce solutions, to mobile appli- efficiency and productivity. This is increasing tems for asset managers and in core banking customer relationships in the public sector. It cations for in-store workflow management. demand for digital services. It is also encourag- solutions for small and medium-sized banks. Last also has a strong, private-sector pedigree, in ing companies to improve the usability of ser- year, Digia broadened the functionality of its improving customer experiences and opera- Mobile industry’s focus shifting vices on various devices. Services must be avail- banking system, for example with an online bank- tions. This is an ideal platform for increasing the from devices to services able anytime, anywhere. Companies are planning ing feature. As smartphones proliferate, Digia efficiency and customer-orientation of public Of Digia’s customer segments, the mobile indus- the type of customer experience they provide is also expanding its mobile solutions range for administration systems. try underwent most changes in recent quarters. more carefully, via various channels. the finance industry. Digia’s solutions range from Serious new competitors have appeared among back-office systems to excellent end-customer Consumer behaviour taking device manufacturers. In addition, competitive Finance industry customer usability. No major investments are needed from a front seat in the trade technology platforms have increased in number. experience is created online customers, since these innovative solutions can and services industry Competitive factors are bi-fold. Device Service availability and ease of use have become also be provided as a service. In retail, there is a growing need to manage value manufacturers need a critical mass of their own major competitive factors in the finance indus- chains using real-time data. This is because the devices on the market, but the services available try. Finance companies are developing digi- logistics emphasis is shifting, from a retailer’s for each technical platform and device are also tal services, and services independent of time own central warehouses to managing subcon- critical. In addition to telephones, the range of and place. This enables them to provide a bet- tractors and partners. Traditional competitive mobile devices has grown hugely. A key competi- ter customer experience. It has also led to rising factors are now rivalled by the ability to offer tive edge lies in swift production of new, more

30 digia annual report 2010 Business operation

Digia’s strengths

intuitive devices. Strongly fragmented value In its other customer segments, Digia offers • Ability to understand the industry change chains are also typical of the sector. The decisive solutions in addition to customer experience role is played by consumers, who choose the development and traditional ERP. These include • Inventive expertise kinds of services they prefer. mobile work optimisation and management, for Digia’s strengths are excellent technical example. • Ability to add value to the customer’s business operation expertise and the ability to follow demand by exploring new technologies. Digia can also man- International markets age the entire customer needs cycle, from the Digia has growing competence centres in China In addition to its solid financial position, Digia early planning phases to solution maintenance. and Russia. In 2010, the company began active has systematically maintained its product and It can assume responsibility for large entities - sales to local business customers in these mar- service portfolio, while developing new business whether single applications, or more extensive kets. China’s and Russia’s markets are changing opportunities. Extensive industry-specific and products or services. even faster than Finland’s. In Russia, key areas of technology expertise, plus built-in efficiency, corporate development include the review and mean Digia can change direction quickly to meet Change drivers in other industries renewal of IT strategies, system optimisation, demand. Digia is technology-independent, mak- In Digia’s other customer segments, the increas- efficient infra management and, naturally, cost ing it an even more trusted partner. ing need to manage both a fragmented work- reduction. Across the board, Russian companies Digia’s strength lies in understanding change in force and mobile work is the clearest change are keener to outsource large parts of their IT customer industries. This enables it to provide driver. In addition, the race is on to produce a systems than before. Growth is also expected value-generating, inventive solutions. good, distinctive customer experience: this is a in public healthcare IT projects. This will provide force for change shaking up the entire market. Western companies with good prospects. For example, traditional, large capital goods are Digia has long operated in Sweden. There, it often produced outside Finland. Fierce compe- provides system solutions for the asset man- tition makes after-market services a distinctive agement market, which is undergoing similar competitive edge. These include servicing, main- changes to Finland: demand for electronic and tenance and other services. The same competi- mobile services is growing fast. tive edge is gathering strength in several sectors, for example in elderly care services. Many companies are wondering how to produce efficient services, while staying focused on good customer experiences.

31 digia annual report 2010 governance

Governance

Digia’s employer image is skyrocketing: the number of applications received has doubled in 2010.

32 digia annual report 2010 governance

Board of Directors

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

Pertti Kyttälä, b. 1950, M.Sc. (Econ.) positions at SKOP Bank (1985 –1990) and OKO served as Managing Director of Microsoft Oy for National Information Security Advisory Board Board member since 2005 and Chairman of the Bank (1973 –1985). Moreover, he is Chairman of 12 years. Previously held managerial sales and established by the Ministry of Transport and Board since 2010. Chairman of the Board’s Audit the Board of Directors at ASAN Security Tech- marketing positions at Nokia Data and ICL Data Communications and of the National Board of Committee. Previously Vice Chairman of the nologies Ltd. Oy, as well as serving as Dava Oy’s Managing Economic Defense. Board. Currently Managing Director of Peranit Independent of the company and its significant Director and Country Director of Computervision Independent of the company and its significant Ltd. His previous posts include CEO of Radiolinja shareholders. Inc. Over 25 years’ experience of IT implementa- shareholders. Ltd (1999 –2003), IT Director of Helsinki Tele- tion and of sales and marketing in various indus- phone Company (1997 –1999), Managing Director Martti Mehtälä, b. 1957, M.Sc. (Tech.) tries, and broad experience of working in coop- Robert Ingman, b. 1961, M.Sc. (Eng.), M.Sc. (Econ.) of Samlink Ltd (1994 –1997), and Managing Direc- Board member since 2007 and Vice Chairman of eration with Finland’s most extensive IT partner Member of the Board since 2010. Member of the tor and Deputy Managing Director of Sp-palvelu the Board since 2010. Chairman of the Board’s network and various international partners. Posi- Board’s Nomination Committee. Currently Man- Ltd (1991 –1994). Previously, he has held various Compensation Committee. Until June 2007, tions of trust have included membership of the aging Director of Arla Ingman Oy Ab. Previously

33 digia annual report 2010 governance

he has served as the Managing Director of Ing- Pekka Sivonen, b. 1961, Secondary school gradu- Independent of the company and its significant man Group Oy Ab and Ingman Foods Ab (1997- ate in Political Science shareholders. 2006). In addition, Robert Ingman is the Chair- Member of the Board since 1997. Chairman of man of the Board of Ingman Group Oy Ab and a the Board’s Nomination Committee and mem- Marjatta Virtanen, b. 1950, M.Sc. (Econ.) member of Etteplan Oyj’s and Evli Pankki Oyj’s ber of the Compensation Committee. Previously Member of the Board since 2010. Member of the Boards. full-time Chairman of the Board of Directors of Board’s Audit Committee. Currently Managing Dependent on significant shareholders. Digia Oyj (2005 –2010). Founding shareholder of Director and IR consultant at IRMA Advisors Ltd. Digia Inc., Board member (1997 –2005) and Chair- Previously Virtanen worked as Market Super- Kari Karvinen, b. 1959, MA man (2000 –2005). CEO of Digia Inc (1997 –2000). visor at the Financial Supervisory Authority Member of the Board since 1990. Member of Chair of the National Emergency Supply Agen- (FIN-FSA) (2006 –2009). During her long career the Board’s Audit Committee and the Nomina- cy’s Technology Pool since 2007. Currently also in communications and investor relations Mar- tion Committee. Co-founder of SysOpen Plc. Chairman of the Board at BlueWhite Resorts jatta Virtanen has served as Head of Communi- Chairman of the Board (2002–2005) and Vice Ltd and Comma Group Ltd. Member of the Finn- cations at Hartwall (1988 –1993) and at Tamro Chairman (1999 –2002) of Sysopen. Vice Chair- ish Association of Professional Board Members (2001 –2004). She has also worked as an IR con- man of the Board at Digia Plc (2005 –2007). since 2005. sultant and Managing Director at Viherjuuri Com- Board professional and independent investor. Dependent on the company and significant munications (1994 –2001) and at IRMA Advisors At SysOpen Plc, held the posts of deputy Man- shareholders. Ltd (2004 –2006). Member of the Finnish Associ- aging Director (1990-1999), Director of Plan- ation of Professional Board Members since 2010. ning (1999 –2000) and full-time Chairman of the Tommi Uhari, b. 1971, M.Sc. (Eng.) Independent of the company and its significant Board (2002 –2004). His previous posts include Member of the Board since 2010. Member of the shareholders. Managing Director and Product Manager at Hel Board’s Compensation Committee. Previously singin PC-Konsultit Ltd (1988 –1990), and vari- Uhari has served as a management team mem- ous IT industry posts at Sycon Ltd (1982 –1988). ber of ST Microelectronics (2006 –2010). In addi- Member of the Finnish Association of Profes- tion, he has held various managerial positions at sional Board Members since 2003. ST’s joint ventures in the wireless business ST- Independent of the company and its significant NXP Wireless and ST-Ericsson (2008 –2010), and shareholders. he has also acted as head of ST’s Wireless Busi- ness Unit (2006 –2008). Prior to that, Uhari was in charge of Wireless and SW platforms units at Nokia (1999 –2006).

34 digia annual report 2010 governance

Group Management Team

Juha Varelius, b. 1963, M.B.A. Asko Hakonen, b. 1961, vocational qualification Tommi Laitinen, b. 1968, vocational qualifica- Antti Lastunen, b. 1964, vocational qualification Digia’s President and CEO as from the beginning in business and administration tion in business and administration in business and administration of 2008. Reporting to the Board of Directors, Senior Vice President, software and service Senior Vice President, new products and inter- Senior Vice President, sales and marketing, Man- Varelius is responsible for the company’s opera- products, Management Team member since national product business, Management Team agement Team member since 2008. Responsible tive business. Previously, he has served as the 2008. Responsible for software and service member since 2005. Previously, he has served for sales and marketing operations. Previously, President and CEO of the technology company products as well as their development. Previ- at Digia as SVP of Competence organisation he has been in charge of Business Operations at Everypoint Inc of Boston (2006 –2007). He has ously held managerial positions at the Digia (2009 –2010), SVP of Telecommunication division SAP Nordic (2005 –2008), and Large Enterprise also held managerial positions at Yahoo! and Eve- Industry and Trade division (2007 –2008). Prior (2007–2008) and SVP in charge of the company’s Sales (2003 –2004) and Manufacturing Industry rypoint in London (2002 –2006). Moreover, he has to joining Digia, Hakonen worked as a project and strategy and development (2005 –2007). His pre- Sales (2000 –2002) at SAP Finland. Prior to that, served in various managerial positions at Sonera unit manager at Sentera Plc (1998 –2006), where vious positions at Digia Inc. included Vice Presi- he held positions in international customer man- (1993 –2002), acting in his last years there as he was in charge of internet, mobile and ERP sys- dent, Engineering (2002 –2004); Director, Quality agement at SAP and Computer Associates Fin- Managing Director of Sonera Zed and a member tems. Previously also held the post of project and Processes (2001–2002); and Business Unit land (1995 –1997) and sales at Inter Marketing of the Sonera Management Team. manager at Solagem Oy (1990 –1997). Hakonen Manager (1999 –2000). Prior to that (1991–1999), (1988 –1994), respectively. has worked in the IT sector since 1985. he was in charge of various project and product management duties and software development duties.

35 digia annual report 2010 governance

Harri Paani, b. 1963, M.Sc. Mika Pälsi, born 1970, LL.M. Harri Savolainen, b. 1965, M.Sc. Business Senior Vice President, competences and pro- General Counsel, Management Team mem- Economics jects. Management Team member since 2010. ber since 2009. In charge of legal matters and Chief Financial Officer, Management Team mem- Paani is responsible for the development and stock exchange communications at the company. ber since 2010. Savolainen is in charge of Group management of competences as well as project Trained on the bench, post-graduate LL.M stud- Finance and Administration. Prior to joining Digia resourcing. Previously he has served as Business ies at the Universities of Helsinki and Leices- he worked for Logica Finland Ltd. where he, as Development Director at Logica (2007 –2009) ter (U.K.). Pälsi has over ten years’ experience a Member of Management Team was in charge and was responsible for specific large-scale in international business law, both as an attor- of Logica Finland’s finance, internal IT, HR and sales projects and application outsourcing. Prior ney and in-house counsel. Before joining Digia in administration. Previously in his career, between to that Paani worked at Computer Sciences Cor- 2009, Pälsi worked for Tieto Corporation, where 1997 and 2006 Savolainen worked at Siemens poration in Finland and abroad (1997 –2000). he was in charge of providing legal counsel to one Ltd. as Director for Accounting, Controlling and During that time he spearheaded software devel- of their business units. Before moving into cor- Financing in Finland and the Baltic States, and opment unit located across several countries and porate practice, Pälsi worked as an attorney at between 1992 and 1997 at Mars Incorporated. acted as the CEO of CSC Finland. He was respon- Castrén & Snellman and as a solicitor at Allen & sible for customer relations for a major interna- Gledhill Advocates & Solicitors (Singapore). tional 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.

36 digia annual report 2010 governance

Corporate Governance Statement

General issues Adherence to the Governance Code Board of Directors is no longer available for the chairman’s position in This Statement has been issued separately from Digia adheres to the Governance Code for Listed the new Board to be elected by the AGM, the com- the company’s operating and financial review. Finnish Companies, issued on 15 June 2010 by the Operations and duties pany announced that it will give up the practice to Digia’s corporate governance system is based Finnish Securities Market Association. Elected by the Shareholders’ Meeting, the Board have a full-time chairman of the Board. on the Companies Act, the Securities Markets The Governance Code can be read on the web- of Directors is in charge of company administra- The Board has prepared and approved a written Act, general corporate governance recommenda- site of Finnish Securities Market Association at tion and the appropriate organisation of com- agenda for its work. In addition to Board duties tions, and the company’s Articles of Association www.cgfinland.fi. pany operations. Under the Articles of Associa- prescribed by the Companies Act and other rules and in-company rules and regulations on corpo- tion, the Board of Directors must consist of a and regulations, Digia’s Board of Directors is rate governance. Shareholders’ Meeting minimum of five and a maximum of eight mem- responsible for issues on its agenda, observing Digia’s corporate governance principles are Digia’s highest decision-making body is the bers. The Nomination Committee prepares a pro- the following guidelines: integrity, accountability, fairness and trans Shareholders’ Meeting at which shareholders posal for the Shareholders’ Meeting regarding • Good board practices require that the Board of parency. This means, inter alia, that: exercise their voting rights regarding company the composition of the new Board of Directors to Directors, instead of needlessly interfering in • The company complies with the applicable matters. Each company share entitles the holder be appointed. the details involved in day-to-day operations, laws, rules and regulations. to one vote at the Shareholders’ Meeting. The majority of Board members must be inde- concentrate on elaborating the company’s • The company organises, plans and manages its AGM will be held annually within three months pendent of the company and a minimum of two short- and long-term strategies. operations, and does business abiding by the of the end of the financial year. An Extraordinary of those members must also be independent of • The Board’s general duty is to steer the com- applicable professional requirements approved General Meeting will be held if the Board of the company’s major shareholders. The Manag- pany’s business with a view to maximising by Board members, who demonstrate due care Directors deems it necessary or if requested in ing Director or other company employees under shareholder value in the long term, while taking and responsibility in performing their duties. writing by a company auditor or shareholders the Managing Director’s direction may not be account of expectations set by various stake- • The company demonstrates special prudence holding a minimum of 10 per cent of the com- elected members of the Board. holder groups; and with respect to the management of its capital pany’s shares, for the purpose of discussing a The term of all Board members expires at the • Board members are required to perform on the and assets. specific issue. end of the Annual General Meeting following their basis of sufficient, relevant and updated informa- • The company’s policy is to keep all market The Finnish Limited Liability Companies Act election. A Board member can be re-elected with- tion, in order to serve the company’s interests. participants actively, openly and equitably and Digia’s Articles of Association define the out limitations on the number of successive terms. informed of its business operations. responsibilities and duties of the Shareholders’ The Board of Directors elects its Chairman and In addition, the Board’s agenda: • The company’s management, administration Meeting. Extraordinary General Meetings decide Vice Chairman from amongst its members. If the • defines the Board’s annual action plan and and personnel are subject to the appropriate on the matters for which they have been specifi- Board so decides, the position of Chairman of the provides a preliminary meeting schedule and internal and external audits and supervision. cally convened. Board may be a full-time job. Upon the full-time framework agenda for each meeting; Chairman of the Board of Directors since 2005, • provides guidelines for the Board’s annual self- Pekka Sivonen announcing in the AGM 2010 that he assessment;

37 digia annual report 2010 governance

• provides guidelines for distributing notices Ltd (1991–1994). Previously, he has held various (1997–2006). In addition, Robert Ingman is the cy’s Technology Pool since 2007. Currently also of meetings and advance information to the positions at SKOP Bank (1985–1990) and OKO Chairman of the Board of Ingman Group Oy Ab Chairman of the Board at BlueWhite Resorts Board and procedures for keeping and adopt- Bank (1973–1985). Moreover, he is Chairman of and a member of Etteplan Oyj’s and Evli Pankki Ltd and Comma Group Ltd. Member of the Finn- ing minutes; the Board of Directors at ASAN Security Tech- Oyj’s Boards. ish Association of Professional Board Members • defines job descriptions for the Chairman, nologies Ltd. Kari Karvinen, b. 1959, MA since 2005. members and secretary of the Board of Direc- Martti Mehtälä, b. 1957, M.Sc. (Tech.) Member of the Board since 1990. Member of Tommi Uhari, b. 1971, M.Sc. (Eng.) tors (the secretary is the Company’s General Board member since 2007 and Vice Chairman of the Board’s Audit Committee and the Nomina- Member of the Board since 2010. Member of the Counsel or, if absent, the CEO); and the Board since 2010. Chairman of the Board’s tion Committee. Co-founder of SysOpen Plc. Board’s Compensation Committee. Previously • defines the framework within which the Board Compensation Committee. Until June 2007, Chairman of the Board (2002–2005) and Vice Uhari has served as a management team mem- may set up special committees or working served as Managing Director of Microsoft Oy Chairman (1999–2002) of Sysopen. Vice Chair- ber of ST Microelectronics (2006–2010). In addi- groups. for 12 years. Previously held managerial sales man of the Board at Digia Plc (2005–2007). tion, he has held various managerial positions at During the 2010 financial year, the Board con- and marketing positions at Nokia Data and ICL Board professional and independent investor. At ST’s joint ventures in the wireless business ST- vened 18 times. The meeting attendance rate Data Oy, as well as serving as Dava Oy’s Manag- SysOpen Plc, held the posts of deputy Manag- NXP Wireless and ST-Ericsson (2008–2010), and averaged 98 per cent. ing Director and Country Director of Computer- ing Director (1990–1999), Director of Planning he has also acted as head of ST’s Wireless Busi- The Board evaluates its activities and working vision Inc. Over 25 years’ experience of IT imple- (1999–2000) and full-time Chairman of the Board ness Unit (2006–2008). Prior to that, Uhari was methods annually, employing an external consult- mentation and of sales and marketing in various (2002–2004). His previous posts include Manag- in charge of Wireless and SW platforms units at ant for this evaluation, if necessary. industries, and broad experience of working in ing Director and Product Manager at Helsingin Nokia (1999–2006). cooperation with Finland’s most extensive IT PC-Konsultit Ltd (1988–1990), and various IT Marjatta Virtanen, b. 1950, M.Sc. (Econ.) Board Members partner network and various international part- industry posts at Sycon Ltd (1982–1988). Mem- Member of the Board since 2010. Member of the In 2010, the Digia Plc Board of Directors com- ners. Positions of trust have included member of the Finnish Association of Professional Board’s Audit Committee. Currently CEO and IR con- prised: bership of the National Information Security Board Members since 2003. sultant at IRMA Advisors Oy. Previously Virtanen Pertti Kyttälä, b. 1950, M.Sc. (Econ.) Advisory Board established by the Ministry Pekka Sivonen, b. 1961, Secondary school held the post of Market Supervisor at Financial Board member since 2005 and Chairman of the of Transport and Communications and of the graduate in Political Science Supervisory Authority, formerly Financial Supervi- Board since 2010. Chairman of the Board’s Audit National Board of Economic Defense. Member of the Board since 1997. Chairman of sion, (2006–2009). During her long career in commu- Committee. Previously Vice Chairman of the Robert Ingman, b. 1961, M.Sc. (Eng.), the Board’s Nomination Committee and mem- nications and investor relations Marjatta Virtanen Board. Currently Managing Director of Peranit M.Sc. (Econ.) ber of the Compensation Committee. Previously has served as Head of Communications at Hartwall Ltd. His previous posts include CEO of Radiolinja Member of the Board since 2010. Member of full-time Chairman of the Board of Directors of (1988–1993) and at Tamro (2001–2004). She has also Ltd (1999–2003), IT Director of Helsinki Tele- the Board’s Nomination Committee. Currently Digia Oyj (2005–2010). Founding shareholder of worked as an IR consultant and CEO at Viherjuuri phone Company (1997–1999), Managing Director Managing Director of Arla Ingman Oy Ab. Previ- Digia Inc., Board member (1997–2005) and Chair- Communications (1994–2001) and at IRMA Advisors of Samlink Ltd (1994–1997), and Managing Direc- ously he has served as the Managing Director man (2000–2005). CEO of Digia Inc (1997–2000). Oy (2004–2006). Member of the Finnish Association tor and Deputy Managing Director of Sp-palvelu of Ingman Group Oy Ab and Ingman Foods Ab Chair of the National Emergency Supply Agen- of Professional Board Members since 2010.

38 digia annual report 2010 governance

Heikki Mäkijärvi, b. 1959, M.Sc. (Eng.) committee convened three times, with full CEO tors. The CEO chairs the Group Management Board member since 2009 until 2010. attendance by all members. The company’s Chief Executive Officer is Team’s meetings. Moreover, the CEO is not a Jari Pasanen, b. 1960, Licentiate of Technology Purpose of the Audit Committee is to assist appointed by the Board of Directors. The CEO member of the Board of Directors, but attends Board member since 2009 until 2010. the Board of Directors in ensuring that the is in charge of Digia’s business operations and Board meetings. Of the aforementioned members of the Board, company’s financial reporting, accounting meth- administration in accordance with the instruc- The CEO’s service contract, approved by the Pertti Kyttälä, Martti Mehtälä, Kari Karvinen, ods, financial statements and other reported tions and regulations issued by the Board of Board of Directors, defines the key terms and Tommi Uhari and Marjatta Virtanen are inde- financial information are legitimate, balanced, Directors, and as defined by the Finnish Limited conditions which govern his/her position, in writ- pendent of the company and its major share- transparent and clear, as further specified in the Liability Companies Act. The CEO may take ing. holders. Robert Ingman is independent of the agenda. In 2010 the Audit Committee was com- exceptional and far-reaching measures, in view M.B.A. Juha Varelius (b. 1963) has been the com- company. posed of Pertti Kyttälä (Chairman), Kari Karvinen of the nature and scope of the company’s activi- pany’s CEO since the beginning of 2008. and Marjatta Virtanen. The committee convened ties, only if so authorised by the Board of Direc- Committees of the Board of Directors four times in 2010, with full attendance by all The Digia Board of Directors had three commit- members. tees in 2010: the Compensation Committee, the Nomination Committee’s duty is to prepare a Audit Committee, and the Nomination Committee. proposal for the Annual General Meeting con- Financial Control Environment These committees do not hold powers of cerning the number of members of the Board of decision or execution. They assist the Board Directors, the members of the Board of Direc- Organ Control Function in decision-making concerning their own areas tors, the remuneration of the Chairman, Vice of expertise. The committees report regularly Chairman and members of the Board and the Annual General Meeting on their work to the Board, which governs and remuneration of the chairmen and members Board of Directors

assumes collegiate responsibility for the com- of the committees of the Board of Directors. Internal Control Audit mittees’ work. In 2010, the members of the Nomination Com- Audit Commi ee Purpose of Digia’s Compensation Committee mittee were Pekka Sivonen (Chairman), Kari Group Management is to prepare and follow up compensation and Karvinen and Robert Ingman. The committee con- Business Area Management Controller Function remuneration schemes in order to ensure that vened once, with full attendance by all members. the company’s targets are met, to guarantee the Business Unit Management objectivity of decision-making, and to see to it that the schemes are transparent and systematic. In 2010, the members of the Compensation Committee were Martti Mehtälä (Chairman), Wri en Instructions Pekka Sivonen and Tommi Uhari. In 2010, the

39 digia annual report 2010 governance

Internal control and risk authorised persons are needed to sign on behalf Risk management operating models and best practices, as well management related to of the company. The purpose of the company’s risk management as their integrated development, are managed financial reporting The Group’s business is divided into divisions process is to identify and manage risks in such a according to plan under the supervision of the whose Senior Vice Presidents (SVPs) report to way that the company is able to meet its strate- Group Management Team. With respect to IFRS- Control functions and the CEO. Reporting and supervision are based gic and financial targets. Risk management is a compliant accounting policies, the Group actively control environment on annual budgets that are reviewed monthly, on continuous process, by which the major risks are monitors goodwill and the related impairment The company has a controller function tasked monthly income reporting and on updates of the identified, listed and assessed, the key persons tests, as part of prudent and proactive risk man- with verifying monthly reports. This controller latest forecasts. in charge of risk management are appointed and agement practices within financial management. function reports to the management, the Board The SVPs in charge of the divisions report to risks are prioritised according to an assessment In addition to operational risks, the company is of Directors and the Board’s Audit Committee the Group Management Team on development scale in order to compare the effects and mutual subject to financial risks. Digia Plc’s internal and regarding the financial performance of the com- matters, strategic and annual planning, business significance of risks. external financing and the management of finan- pany and its divisions. and income monitoring, investments, potential The main operational risks handled by Digia’s cial risks are coordinated by the finance function The company uses a reporting system which acquisition targets and internal organisation risk management function are customer risk, of the Group’s parent company. This function is compiles separate subsidiaries’ reports into the matters related to their areas of responsibility. personnel risk, project risk, data security risk responsible for the Group’s liquidity, sufficiency consolidated financial statements. There are Each division has its own management team. and goodwill risk. of financing, and the management of interest written directives for completing the financial Digia’s operational management and supervi- The company manages customer risk by rate and currency risk. The Group is exposed to reports of subsidiaries. Compliance with these sion take place according to the corporate gov- actively developing its customer portfolio struc- several financial risks during the normal course directives is monitored by the controller func- ernance system described above. ture and avoiding any potential risk positions. of its business. The objective of the Group’s risk tion. The company also has the necessary, sepa- The Group’s administration unit is in charge of HR Personnel risks are assessed and managed using management is to minimise the adverse effects rate reporting facilities for monitoring business management and policy, as well as properties and a quarterly goal and development discussion of changes in the financial markets on the operations and asset management. the viability of working conditions in each facility. process for key personnel. To improve personnel Group’s earnings. The primary types of financial The Group finance unit provides instructions The legal affairs unit provides instructions for commitment, the company strives to improve the risks are interest rate risk, credit risk and fund- for drawing up financial statements and interim and monitors contracts made by the company and efficiency of internal communications systemat- ing risk. The general principles of risk manage- financial statements, and compiles the consoli- ensures the legality of the Group’s operations. ically, using personnel events and increasing the ment are approved by the Board of Directors, dated financial statements. The finance unit has visibility of management. Key project audits are and the Group’s finance function is responsible centralised control over the group’s funding and Communications carried out with a view to enhancing project risk for their practical implementation together with asset management, and is in charge of managing The Group’s General Counsel is in charge of the management and securing the success of project the business divisions. interest rate risk. company’s external communications and their cor- deliveries to customers. In addition, the Group’s rectness. External communications include finan- certified quality systems are regularly evaluated Internal risk control cial reports and other stock exchange communica- and the Group has increased the efficiency of its As a general principle, authorisation is distrib- tions. The General Counsel is responsible for the project delivery reporting practices in relation to uted in Digia in such a way that no individual may publication of interim reports and financial state- corporate governance and finance. Data security independently perform measures unbeknown ments, as well as for actions related to convening risk is managed through data security audits to at least one other individual. For example, and holding Shareholders’ Meetings. Most commu- and continuous development of working models, the company’s bookkeeping and asset manage- nications take place through the company’s web- security practices and processes. Risks associ- ment are managed by separate persons, and two site and using stock exchange releases. ated with the integration of businesses, shared

40 digia annual report 2010 governance

Statement on Digia Management Emoluments

This management emolument statement sets Heikki Mäkijärvi EUR 5,600 The scheme decided in Autumn 2009 covers the of shares and cash after the adoption of the forth a summary of the financial benefits, remu- Jari Pasanen EUR 5,600 earning periods of 2009 and 2010, entitling the financial statements following the close of the neration system and thereto related decision- All emoluments were monetary. The company CEO to a maximum bonus equal to the value of respective earning period. The cash payment is making pertaining to Board members and opera- does not grant stock options or share-based 80,000 company shares for each earning period used primarily to cover taxes and other appli- tive management of Digia Plc. remuneration for work on the Board. respectively.The bonus will begin to accrue pro- cable fees and levies incurred from the bonus gressively when the EPS amounts to EUR 0.41, payment. The schemes include no lock-up peri- Board Emoluments Emoluments of the CEO entitling the CEO to a value of 20,000 shares. ods designed to restrict the disposal of shares The Shareholders’ Meeting decides on emoluments and other management The maximum bonus will become payable if the already granted to the CEO. payable to the Board of Directors and grounds EPS amounts to EUR 0.69 for the earning period. for the compensation of expenses. The 2010 AGM Summary of the CEO The scheme decided in Spring 2010 has four earning CEO Financial benefits and decided to pay monthly emoluments of EUR 2,000 remuneration system periods, which are years 2010–2013. Earning criteria main terms of service to Board members, EUR 3,000 to the Vice Chair- The Board of Directors decides on the CEO’s sal- will be the earning per share (EPS) value reached and In 2010 the CEO was paid EUR 515,413 in salary man and EUR 5,000 to the Chairman for their work ary, and other remuneration and benefits. growth in net sales compared to the budgeted net and benefits, of which salary and fringe benefits on the Board. In addition, the AGM approved EUR CEO Juha Varelius’ remuneration package com- sales during the respective earning period as to be account for EUR 305,713 and bonuses for EUR 400 in fees per Board or committee meeting for all prises a monthly salary in accordance with his annually specified by the Board in more detail. The 209,700. Board members. Moreover, the Shareholders’ Meet- director agreement and the bonus possibly payable maximum total bonus payable for the CEO under the The company may terminate the CEO’s service ing decided that standard and reasonable costs pursuant to two share incentive schemes. scheme amounts to the value of 20,000 shares in contract with six months’ notice. Upon such resulting from work on the Board would be reim- CEO’s regular monthly salary is based on a target the earning period 2010 and to the value of 100,000 termination, he will receive remuneration for bursed against invoice. salary model comprising a fixed and variable parts. shares in 2011–2013 respectively. Regarding year 2010 the notice period plus severance pay equalling In the 2010 financial year, a total of EUR According to said model the remuneration finally the minimum bonus (5,000 shares) requires an EPS of 12 months’ salary. The CEO’s retirement age is as 248,800 was paid in emoluments to the members payable to the CEO is linked to the company’s profit- EUR 0.41 and the maximum bonus will become pay- stipulated by law, and he has no supplementary of the Board of Directors for their work on the ability and revenue targets set by the Board for each able if the EPS amounts to EUR 0.69 or a minimum pension agreement with the company. Board, as follows: quarter respectively. In the event the set targets are of EUR 0.615 if the company’s budgeted revenues are Pertti Kyttälä EUR64,400 not met, the agreed target salary will be reduced being exceeded by 15 per cent. Martti Mehtälä EUR41,600 accordingly by a maximum of 15 percent variable Under said schemes the CEO will, based on Robert Ingman EUR24,400 part. On the other hand, exceeding the set targets the results of financial year 2010, be paid with a Kari Karvinen EUR31,200 will lead to remuneration above the target level. total bonus equal to the value of 67,750 company Pekka Sivonen EUR25,200 CEO’s share-based remuneration plans were shares during the financial year 2011. Tommi Uhari EUR24,800 decided by the Board pursuant to authority given All bonuses payable under both of said Marjatta Virtanen EUR26,000 by the AGM in Autumn 2009 and in Spring 2010. schemes will be paid in a 50/50 combination

41 digia annual report 2010 governance

Summary of the remuneration budgeted net sales during the respective earning system of other management period as to be annually specified by the Board Based on a proposal submitted by the CEO, the in more detail. The maximum total bonus payable Board of Directors decides on the salary, other for the GMT members in aggregate under the remuneration and other benefits to be paid to scheme amounts to the value of 20,000 shares members of the Group Management Team (GMT). in the earning period 2010 and to the value of GMT members’ total remuneration package 100,000 shares in 2011–2013 respectively. Regard- comprises a monthly salary and the bonus pos- ing year 2010 the minimum bonus (5,000 shares in sibly payable pursuant to two share incentive aggregate) requires an EPS of EUR 0.41 and the schemes. maximum bonus will become payable if the EPS As with the CEO’s pay, the Management Team amounts to EUR 0.69 or a minimum of EUR 0.615 members’ pay is based on a target salary model, if the company’s budgeted revenues are being where 85 per cent of the salary is fixed and a 15 exceeded by 15 per cent. Under said schemes per cent portion is linked to the company’s prof- the GMT members will, based on the results of itability and revenue targets set by the Board for financial year 2010, be paid with a aggregate each quarter respectively. total bonus equal to the value of 13,750 company In addition to the monthly salary the GMT shares during the financial year 2011. members will receive, in each January of years All bonuses payable under both of said 2010–2013 respectively, a bonus decided by schemes will be paid in a 50/50 combination of the Board in 2009 based on the results of said shares and cash. The cash payment is used pri- accounting period. The bonus amounting to an marily to cover taxes and other applicable fees aggregate total value of 85,000 shares will be and levies incurred from the bonus payment. The paid in four equal slots assuming that the recipi- schemes include no lock-up periods designed to ent is still employed by the company on each restrict the disposal of shares already granted to payment date. the GMT members. Moreover, the GMT members accompany the Each Management Team members’ retirement CEO in the share incentive scheme decided by age is stipulated by law, and no member has a the Board in Spring 2010 and covering the earn- supplementary pension agreement with the ing periods of 2010–2013 where the earning company. criteria will be the earning per share (EPS) value reached and growth in net sales compared to the

42 digia annual report 2010 financial statement

Financial statement

Based on years of experience, Digia can meet Finnish and international ERP needs safely and securely.

43 digia annual report 2010 Financial Statement The Board of Directors’ Report

Markets and Digia’s uct development cycle. The unit’s capacity is uti- by recruiting new experts and developing sector- expertise in the latest technologies with cus- business operations lised both in projects within China and for global specific solutions for increasing customers’ tomer needs. On this basis, Digia draws up con- 2010 began in uncertain terms, but economic customer relationships. The Russian unit oper- operational efficiency and for customer experi- crete objectives and measures. insecurity abated during the year and the IT ates as a near-shore resource for Digia’s Finnish ence management. Digia began offering its Digia Demand for software and user experience market has recovered somewhat from the crash customers and also sells services directly to Enterprise ERP system as a cloud service in development for smartphones was higher in 2010 following the financial crisis. Thanks to an upturn local customers. The company obtained its first response to demand for new service models. than was forecast in conjunction with the good- in overall market demand and a boost to the com- local customers in both countries during 2010. Overall, the Enterprise Solutions segment will writedown in 2009. Growth was particularly pany’s sales, net sales grew significantly faster increased its net sales moderately during the fis- good in Linux-based software development and than the overall market. Digia was also able to Enterprise Solutions cal year, but its operating profit and operational user experience-enhancing software develop- maintain a strong positive cash flow and good The customers of Digia’s Enterprise Solutions profitability fell. ment and consulting. operational profitability. The operating profit segment are companies, organisations and pub- During the year, the company focused on and earnings per share increased slightly from lic bodies. The segment’s product and service Mobile Solutions improving delivery capacity for Linux-based the comparable figures from 2009. There was strategy is based on multi-channel solutions that The customers of Digia’s Mobile Solutions software and reinforcing its service selection to some cost impact towards the end of the year increase the efficiency of customers’ business segment are globally operational smartphone, cover the entire customer needs lifecycle. Digia from recruitment of new experts and invest- operations, and on services that cover the entire machine and equipment manufacturers and also launched the Device Cloud solution, which ments into developing the scalable product product lifecycle. An innovative development telecom operators that utilise Digia’s contract allows development teams that are scattered business, which lowered operational profitability partner for its customers, Digia introduces to the engineering services. Some of the cornerstones around the world to access the devices under slightly from the like-for-like figures for 2009. market products, services and business models of the segment’s operations are competence development via the internet. Cash flow from operations remained positive, that employ new technologies. The segment’s management and continuous competence devel- The Mobile Solutions segment as a whole con- allowing the company to pay off a total of EUR core market consists of the Nordic region and opment. The segment’s core competence areas siderably increased its net sales and operating 7.1 million of its liabilities during the financial Russia, where it seeks to increase its operations are developed in order to match the company’s profit during the year. year. This meant that at the end of the year the mainly through organic growth. company only had EUR 22 million left in loans Demand for ERP systems was good throughout from financial institutions. The company’s cash the year. Meanwhile, demand for e-business and Financial indicators reserves will allow it to continue paying off its customer experience management solutions The group’s operations were profitable, and its financial position and solvency were good. The group’s debts ahead of schedule or invest in expanding grew during the year, reaching a pleasing level in financial indicators are presented in the following table: its operations. the fourth quarter. With regard to international operations in 2010, Demand for software and IT services also grew 2010 2009 2008 2007 2006 Digia improved the offering and expertise of its in 2010 within the retail and service sector. The Net sales 130,825 120,335 123,203 105,839 84,968 units in China and Russia, especially in relation to mood in the financial and insurance sector was Operating profit 17,164 -7,796 13,437 11,080 8,354 serving local customers. Digia’s Chinese unit gen- more cautious, although positive. Demand for Operating margin, % 13% -6% 11% 10% 10% Return on equity, % 18% -21% 11% 9% 8% erates product development and maintenance system work was weak in the public sector. Equity ratio, % 59% 52% 47% 47% 44% services, thanks to which the company is able to During the year, the company focused on creat- serve customers at various points in their prod- ing suitable conditions for growth, for example More detailed key figures for the last five years are provided in the notes to the financial statements (Note 30).

44 digia annual report 2010 Financial Statement

Net sales The Mobile Solutions segment’s operating The Group’s cash flow from business operations The Group’s total investments into fixed assets Digia’s consolidated net sales for the fiscal year profit was EUR 6.2 (-20.0) million, while its oper- for 2010 was positive by EUR 11.1 million (positive were EUR 2.0 (1.3) million. Acquisitions of tangi- were EUR 130.8 (120.3) million, up 8.7 per cent on ating profit before extraordinary items for 2009 by EUR 20.2 million), cash flow from investments ble fixed assets totalled EUR 1.7 (1.1) million. 2009. was EUR 4.6 million. was negative by EUR 2.0 million (negative by Return on investment (ROI) for 2010 was 19.3 The Enterprise Solutions segment posted net The Group’s net financial expenses for 2010 EUR 1.3 million) and cash flow from financing was (-7.1) per cent and return on equity (ROE) was 18.3 sales of EUR 75.7 (70.8) million, up 6.8 per cent. totalled EUR 1.4 (2.3) million. Consolidated earn- negative by EUR 9.9 million (negative by EUR 27.3 (-21.0) per cent. The Mobile Solutions segment had net sales of ings before tax for the year totalled EUR 15.7 million). Cash flow from operations was lower EUR 55.2 (49.5) million, up 11.4 per cent. (-10.1) million, and net profit was EUR 11.5 (-13.7) than in the previous year due to the fact that some Report on the extent of During the reporting period, the product busi- million. receivables were received in advance, before research and development ness accounted for EUR 19.7 (18.5) million or 15.1 Earnings per share for the fiscal year were EUR the end of the previous financial year. Cash flow The Group made research and development (15.4) per cent of consolidated net sales. 0.56 (-0.67). Earnings per share before extraordi- from investments was negatively impacted in the efforts and engaged in product development International operations accounted for EUR nary items for 2009 totalled EUR 0.53. last quarter by furniture purchases for the sum in all of its divisions. In the 2010 fiscal year, the 10.6 (9.7) million or 8.1 (8.1) per cent of consoli- of EUR 0.5 million, made in conjunction with the Group’s R&D costs totalled EUR 3.0 million dated net sales. Financial position and consolidation of the three Helsinki offices. Cash (2009: EUR 2.6 million and 2008: EUR 2.0 mil- capital expenditure flow from financing was negatively affected by a lion), corresponding to 2.3 per cent of net sales Profitability and financial result At the end of the reporting period, the Digia repayment of loans totalling EUR 7.0 million, as (2009: 2.2 per cent and 2008: 1.6 per cent). Digia’s consolidated operating profit (EBIT) for Group’s consolidated balance sheet total stood well as by the payment of dividends with a total the fiscal year was EUR 17.2 (-7.8) million and at EUR 115.4 (112.8) million and the equity ratio effect of EUR 2.9 million. profitability (EBIT%) was 13.1 (-6.5) per cent. In was 58.8 (52.3) per cent. Net gearing was 20.2 2009, the like-for-like operating profit before (34.3) per cent. At the end of the year the Group’s extraordinary items was EUR 16.9 million and liquid assets totalled EUR 9.7 (10.5) million. Personnel, management and administration the profitability before extraordinary items was At the end of the year, the Group had interest- At the end of 2010, the number of Group employees totalled 1,558, showing an increase of 87 employ- (EBIT-%) 14.1 per cent. The extraordinary non- bearing liabilities of EUR 23.3 (30.4) million. ees or 5.9 per cent from the end of the previous year (1,471). The number of employees for the period recurrent items for 2009 comprised a EUR 23.8 Interest-bearing liabilities comprised of EUR averaged 1,508, an increase of 121 employees or 8.7 per cent over the 2009 average (1,387). million goodwill writedown and a EUR 0.9 million 22.0 million in loans from financial institutions, Cumulative employee turnover was 8.5 per cent in 2010 (4.4 per cent). restructuring provision related to the closure EUR 1.2 million in financial leasing liabilities and of sites. Profitability was favourably affected EUR 0.1 million in product development loans. Employee indicators: by the organic growth in consolidated net sales During the reporting period, the company repaid and by the relatively high billing rate. However, EUR 7 million in loans from financial institutions. 2010 2009 2008 investments aimed at recruiting new experts The Group carries out quarterly impairment test- Average number of personnel 1,508 1,387 1,314 and expanding the replicable product business ing on goodwill and intangible assets with an indef- Wages and salaries 65,172 59,907 58,606 caused a decrease in operational profitability as inite useful life. Impairment testing is described compared to the figures before extraordinary in more detail in the notes to the financial state- Employees by segment, year-end 2010: items for 2009. ments, under Note 15 ‘Intangible assets’. The Enterprise Solutions segment’s operat- The company has financing, framework and ing profit was EUR 11.0 (12.2) million, down 9.9 delivery agreements with special terms and con- Enterprise Solutions 47% per cent. Operating profit before extraordinary ditions for any situation in which control of the Mobile Solutions 50% items for 2009 totalled EUR 12.3 million. company changes hands. Administration and management 3%

45 digia annual report 2010 Financial Statement

As of the end of the year, 196 (219) employees were Kyttälä (Chairman), Kari Karvinen and Marjatta Vir- holding 100%); Digia Sweden AB (100%); Digia equity. The Board shall decide on how the shares working outside of Finland. The reduction in person- tanen. The committee convened four times in 2010, Estonia Oü (100%), Digia Hong Kong Ltd (100%) are acquired. Own shares can be bought back in nel since the end of 2009 was due to the closure of with full attendance. and Sunrise Resources Ltd (100%). disproportion to the holdings of the sharehold- the Yaroslaw unit in Russia and to the natural attri- The Nomination Committee will prepare proposals Digia Finland Ltd has the wholly owned active ers. The authorisation also includes the acquisition of personnel in Chengdu, China. for the Annual General Meeting of the shareholders subsidiaries Digia Financial Software Ltd (100%) tion of shares through public trading organised Digia Plc’s Annual General Meeting of 3 March concerning the number of members of the Board of and Digia Service Ltd (100%). Digia Hong Kong Ltd by NASDAQ OMX Helsinki Oy in accordance 2010 re-elected Kari Karvinen, Pertti Kyttälä, Martti Directors, the members of the Board of Directors, has the wholly owned subsidiary Digia Software with the rules and instructions of NASDAQ OMX Mehtälä and Pekka Sivonen as members of the the remuneration for the Chairman, Vice Chairman (Chengdu) Co. Ltd (100%), with a registered branch Helsinki and Euroclear Finland Ltd, or through Board, and elected Robert Ingman, Tommi Uhari and and members of the Board of Directors and the in Beijing. Sunrise Resources Oy has a subsidiary, offers made to shareholders. Shares may be Marjatta Virtanen as new members. At the organisa- remuneration for the Chairman and members of the OOO Digia RUS (100%), operating in Russia. acquired in order to improve the company’s capi- tion meeting of the Board, Pertti Kyttälä was elected committees of the Board of Directors. In 2010, the Digia’s business operations are now divided into tal structure, to fund acquisitions or other busi- as Chairman of the Board and Martti Mehtälä as Vice members of the Nomination Committee were Pekka two main business segments: Enterprise Solu- ness transactions, to offer share-based incentive Chairman. The separate employment contract apply- Sivonen (Chairman), Kari Karvinen and Robert Ing- tions and Mobile Solutions. Enterprise Solutions schemes, to sell on or to be annulled. The shares ing to Pekka Sivonen’s term as full-time Chairman of man. The Nomination Committee convened once with is divided into ERP and Financial Administration, must be acquired at the going price in public the Board ended upon the conclusion of the Annual full attendance. Digital Services and Integration Solutions. The trading. The authorisation replaces the authori- General Meeting. Ernst & Young Oy, authorised public accountants, Mobile Solutions segment is divided into Contract sation granted by the Shareholders’ Meeting on Juha Varelius has been Digia Plc’s President and are the Group’s auditors, with Heikki Ilkka, Author- Engineering Services and User Experience Services. 10 March 2009 and is valid for 18 months from CEO since 1 January 2008. Harri Savolainen started ised Public Accountant, as the chief auditor. the authorisation, i.e. until 3 September 2011. as the new CFO in September 2010. Digia adheres to the Governance Code for Listed Shareholders’ meetings In 2010, Digia’s Board of Directors had three com- Finnish Companies, issued on 15 June 2010 by the Digia Plc’s Annual General Meeting (AGM) was Authorising the Board of Directors to decide on mittees: the Compensation Committee, the Audit Finnish Securities Market Association. Digia’s corpo- held on 3 March 2010. a share issue and granting of special rights Committee, and the Nomination Committee. rate governance system is based on the Companies The AGM adopted the financial statements for Digia’s Compensation Committee’s task is to pre- Act, the Securities Markets Act, general corporate 2009, released the Board members and the CEO The AGM authorised the Board to decide on an pare and follow management remuneration schemes governance recommendations, and the company’s from liability, specified the dividend payment, ordinary or bonus issue of shares and the grant- in order to ensure that the company’s targets are Articles of Association and in-company rules and reg- determined Board emoluments, resolved to raise ing of special rights in one or more instalments, met, that the objectivity of decision-making is ulations on corporate governance. The Governance the number of Board members to seven (7), elected as follows: the issue can total a maximum of maintained, and that the schemes are transparent Code and a separate review of the group’s corporate the company’s Board of Directors for a new term, 4,000,000 shares. The authorisation applies and systematic. The members of the Compensation governance and management system made for this and amended Section 9 of the Articles of Associa- both to new shares and own shares held by the Committee in 2010 were Martti Mehtälä (Chairman), annual report can be seen at www.digia.com. tion, concerning the convocation of the AGM. The company. By virtue of the authorisation, the Pekka Sivonen and Tommi Uhari. In 2010, the commit- AGM granted the following authorisations to the Board has the right to decide on share issues and tee convened three times, with full attendance by all Business acquisitions Board: the granting of special rights, waiving the pre- members. During the 2010 fiscal year, the Digia Group made emptive subscription rights of the shareholders The purpose of the Audit Committee is to assist the no corporate acquisitions. Authorisation of the Board of Directors to (directed issue). The authorisation can be used Board of Directors in ensuring that the company’s decide on the buyback of own shares to fund or complete acquisitions or other busi- financial reporting, accounting methods, financial Group structure and organisation ness transactions, to offer share-based incen- statements and other financial information provided At the end of the year, the Digia Group consisted The AGM authorised the Board to decide on the tive schemes, to develop the company’s capital by the company are balanced, transparent and clear. of parent company Digia Plc and its active buyback of a maximum of 2,000,000 shares in structure, or for other purposes. The Board was In 2010 the Audit Committee was made up of Pertti subsidiaries Digia Finland Ltd (parent company the company using the company’s unrestricted authorised to decide on all terms relating to the

46 digia annual report 2010 Financial Statement share issue or special rights, including the sub- the 2010 earning period, and a maximum value of Distribution of holdings by number of shares held on 31 December 2010 scription price, its payment and its recognition in 200,000 shares will be paid for each of the earn- the company’s balance sheet. The authorisation ing periods from 2011 to 2013. Of the rewards paid, Number of shares Holding (%) Shares and votes replaces the authorisation granted by the Share- one half will be awarded to the CEO and one half 1–100 21.6% 0.4% holders’ Meeting on 10 March 2009 and is valid to the other management team members in total. 101–1,000 59.1% 7.2% for 18 months from the authorisation, i.e. until 3 The reward will be paid as a 50/50 combination of 1,001–10,000 17.5% 12,7% September 2011. shares and cash. The cash portion of the bonus will 10,001–100,000 1.4% 10.8% 100,001–1,000,000 0.3% 19.1% Based on authorisation received from the AGM, primarily be used to cover taxes and other compara- 1,000,001–3,000,000 0.1% 49.8% the Board of Directors decided to establish a new ble costs of the scheme. stock-based incentive scheme for the Chief Execu- The Annual General Meeting will take place on tive Officer and the other members of the Group Wednesday 16 March 2011 from 10 am at the com- Shareholding by sector on 31 December 2010 Management Team. The scheme comprises four pany’s headquarters at Valimotie 21, 00380 Helsinki. earning periods, which are the calendar years 2010- Holding (%) Shares (%) 2013. The earnings principles are the consolidated Companies 5.0% 19.6% earnings per share and the growth in consolidated Financial institutions and insurance companies 0.3% 7.1% net sales compared to the budget, according to Non-corporate public sector 0.1% 3.6% formulae settled separately by the Board. Accord- Non-profit organisations 0.3% 0.6% Households 94.0% 68.0% ing to the scheme, rewards totalling a maximum Foreign holding 0.3% 1.1% value equivalent to 40,000 shares will be paid for

Share capital and shares Stock options granted The nominal share price is EUR 0.10. The number of shares at the end of 2010 totalled 20,864,645. 31 December 2010, according to Finnish Central Securities Depository Ltd, Digia had 5,540 shareholders. Stock options The ten major shareholders were: The Group has had stock option schemes since At the end of the 2010 financial year, all A 15 September 1999. Stock options granted after options in the 2005 scheme had expired. 11,000 B Shareholder Shares and votes 2003 are recognised in the financial statements options were held by previous employees of the Ingman Group Oy Ab 14.4 % in accordance with the standard IFRS 2, Share- company, while all the rest had been returned to Pekka Sivonen 12.6 % Based Payment. the company. All C options had been returned. Jyrki Hallikainen 10.2 % During the reporting period, the company had a stock The returned options will not be exercised for Kari Karvinen 6.5 % option scheme from 2005 as part of its key personnel subscribing shares. Matti Savolainen 6.1 % Varma Mutual Pension Insurance Company 3.6 % incentive scheme. The number of warrants under that The maximum dilution effect of the outstand- Nordea Bank Finland Plc (nominee-registered) 3.1 % scheme totalled 900,000, of which 300,000 were ing options was only 0.1 per cent on 31 December OMXBS/Skandinaviska Enskilda Banken (nominee-registered) 1.7 % marked as 2005A, 300,000 as 2005B and 300,000 as 2010. After the end of the reporting period, the Etola Oy 1.0 % 2005C. The warrants entitle their holders to subscribe remaining 11,000 B options were returned to the Olli Ahonen 0.9 % a maximum total of 900,000 Digia Plc shares. company, and therefore as of the annual report

47 digia annual report 2010 Financial Statement issue date, the company had no outstanding in spring 2010 applied to the company’s other weighted average was EUR 5.01. The Group’s and best practices, as well as their integrated options. management team members, who were entitled market capitalisation was EUR 104,949,164 at development. With respect to IFRS-compliant to share the same share bonus that the CEO the end of the fiscal year. accounting policies, the Group actively monitors Share incentive scheme and received. The company received no flagging notifications goodwill and the related impairment tests as a management ownership In addition, the company has a share incentive during the year. part of prudent and proactive risk management The company has a share bonus system as a part scheme for specific key persons, who, based on practices within financial management. of its key personnel commitment and incentive the financial results for 2009, could receive a total Risks and uncertainties Short-term uncertainties are related to any scheme. The share-based incentive scheme of maximum bonus equivalent to 200,000 shares, The main risks and uncertainties of the com- major changes occurring in the company’s core the President and CEO was specified by the paid out 50/50 in shares and cash in four equal pany’s business have remained unchanged, markets. Certain customer segments are still Board in autumn 2009 and spring 2010 according annual instalments beginning in January 2010. although there is more uncertainty in the devel- recovering from the long global recession, and to authorisation received at the AGM. The payment of bonuses according to the opment of the mobile market. this may still affect the company’s customers’ The system set in autumn 2009 covers the share-based incentive schemes is subject to the The key risks under Digia’s risk management investment decisions and liquidity, and therefore earning periods 2009 and 2010 and entitles the employee in question being employed by the in 2010 were customer, personnel, project, data also Digia’s net sales and profit. Furthermore, the CEO to a maximum bonus for each period equiva- company on the payment date. security, integration and goodwill risks. growth in customer project sizes increases the lent to the value of 80,000 shares. The minimum According to the list of shareholders dated 31 Measures for managing customer risks risks related to projects and their profitability. required result is an EPS of EUR 0.41 (entitling December 2010, Digia’s Board of Directors and included the active development of the customer the CEO to a value of 20,000 shares) for an earn- CEO owned shares in the company as follows: structure and the active prevention of potential Prospects for the future ing period, whereafter the bonus will increase in Pertti Kyttälä 0 risk positions. Personnel risks were assessed The company’s main objective for 2011 is to steps so that the maximum bonus will become Martti Mehtälä 0 and managed using a quarterly goal and appraisal increase its net sales. To do this, it will continue payable when the EPS reaches EUR 0.69 for the Robert Ingman 20,000 discussion process in which key personnel par- to increase its human resources, develop its earning period. Kari Karvinen 1,353,901 ticipate. To develop personnel commitment, sales operations and implement efficiency- The scheme specified in spring 2010 comprises Pekka Sivonen 2,631,613 measures were taken to produce more sys- enhancing measures. In addition to carrying out four earning periods, which are the calendar Tommi Uhari 0 tematic and effective internal communication its core business operations, the company will years 2010–2013. The earnings principles are Marjatta Virtanen 0 through regular personnel events and increased continue to invest into expanding its scalable the consolidated earnings per share and the Juha Varelius 113,750 management visibility. The Group carried out key product business. Digia will also continue to growth in consolidated net sales compared to the project audits with a view to enhancing project develop its international operations, particularly budget, according to formulae settled annually At the end of the year, the shares held by the risk management and securing the success of in China and Russia. by the Board. According to the scheme, rewards Board members and the CEO represented 19.7% project deliveries to customers. In addition, Despite these growth efforts, the cornerstones totalling a maximum value equivalent to 20,000 of the company’s shares and votes. the Group’s certified quality management sys- of the company’s operations will continue to be shares will be paid for the 2010 earning period, tems were re-evaluated and approved, and the maintaining a positive cash flow and a good level and a maximum value of 100,000 shares will be Reported share performance on Group streamlined its project delivery reporting of profitability. paid for each of the earning periods from 2011 to NASDAQ OMX Helsinki in 2010 procedures. In order to manage data security The company predicts continued moderate 2013. For 2010 the requirement for the minimum Digia Plc shares were during the fiscal year listed risks, the Group carries out data security audits growth in the sale of ERP systems in 2011. bonus (5,000 shares) was an EPS of EUR 0.41 and on NASDAQ OMX Helsinki exchange under IT and continuously develops operating models, The increase in popularity of smartphones and the maximum bonus required an EPS of EUR 0.69, Services. The company’s short name is DIG1V. The practices and processes that promote data their related services will create opportunities or at least an EPS of EUR 0.615 plus consolidated lowest reported share quotation was EUR 3.36 security. The management team is tasked with for favourable development of the company’s net sales that exceeded the budget by 15 per cent. and the highest was EUR 5.89. The share closed managing risks associated with the integration sales. The technology revolution, leading to the In addition to the CEO, the scheme that finished at EUR 5.03 on the last trading day. The trade- of business operations, unified operating models arrival of new technologies on the market, and

48 digia annual report 2010 Financial Statement the fact that customers are buying increasingly Board’s dividend proposal large packages of products and services will help At the end of 2010, the distributable sharehold- to uphold demand for Digia’s services. On the ers’ equity of Digia Plc was EUR 41,919,216.74, of other hand, the development of the mobile mar- which EUR 2,946,031.47 was the net profit for ket is somewhat more uncertain than before. the year. The Board of Directors will propose The outsourcing of testing and maintenance at the Annual General Meeting of 16 March 2011 services to low-cost countries continues. Digia that the dividend according to the confirmed is making long-term efforts in improving its statement of financial position for the fiscal year delivery capacity for new technologies. It will ending 31 December 2010 be EUR 0.27 per share. continue to increase its competence in producing Dividends are paid to shareholders listed in the conceptualisation and user experience services, shareholder register maintained by Euroclear and its ability to provide services that cover Finland Oy on the dividend reconciliation date, 21 entire life cycles on various technological plat- March 2011. Dividends will be paid on 28 March forms for global clients. 2011. As a whole, the company predicts the IT mar- The company’s loan covenant terms were modi- ket to continue growing moderately from 2010 fied during the period to stipulate that the com- levels.The company expects its net sales to grow pany is allowed to distribute a maximum of 50 organically, at least at the predicted market per cent of the consolidated net profit for 2010 level,and estimates that it will maintain its good in dividends in 2011. level of operational profitability.

Major events after the balance sheet date There have been no significant events after the end of the financial year.

49 digia annual report 2010 Financial Statement Consolidated Income Statement (IFRS)

€ Note 1 Jan–31 Dec 2010 1 Jan–31 Dec 2009 € Note 1 Jan–31 Dec 2010 1 Jan–31 Dec 2009

Net sales 1.3 130,825,208.92 120,335,203.72 Components of statement of comprehensive income: Exchange differences on translating foreign operations 292,272.49 128,278.79 Other operating income 6 317,471.09 219,677.35 Total comprehensive income 11,766,616.49 -13,535,626.87 Materials and services -10,156,889.49 -7,996,473.53 Depreciation and amortisation 9 -3,719,067.09 -28,051,336.80 Distribution of net profit: Other operating expenses 4,5,7,8,10 -100,102,287.26 -92,303,126.32 Parent company shareholders 11,474,344.00 -13,663,905.66 -113,660,772.75 -128,131,259.30 Minority interest - - 11,474,344.00 -13,663,905.66 Operating profit 17,164,436.16 -7,796,055.58 Distribution of comprehensive income: Parent company shareholders 11,766,616.49 -13,535,626.87 Financial income 11 126,541.87 118,641.56 Minority interest - - Financial expenses 11 -1,565,317.44 -2,441,881.65 11,766,616.49 -13,535,626.87 -1,438,775.57 -2,323,240.09 Basic earnings per share, undiluted 0.56 -0.67 Earnings before tax 15,725,660.59 -10,119,295.67 Diluted earnings per share 0.56 -0.67

Income taxes 12 -4,251,316.59 -3,544,609.99

Net profit 11,474,344.00 -13,663,905.66

50 digia annual report 2010 Financial Statement Consolidated Balance Sheet (IFRS)

€ Note 31 Dec 2010 31 Dec 2009 € Note 31 Dec 2010 31 Dec 2009

ASSETS SHAREHOLDERS’ EQUITY AND LIABILITIES

Non-current assets Equity attributable to parent company shareholders Goodwill 15 65,544,601.75 65,544,601.41 Share capital 19 2,086,464.50 2,085,364.50 Other intangible assets 15 8,969,615.85 11,032,708.45 Rights issue 39,710.00 - Tangible assets 14 2,925,938.19 2,616,735.36 Premium fund 7,899,485.80 7,899,485.80 Available-for-sale investments 27 627,964.34 627,964.34 Other reserves 5,203,821.24 5,203,821.24 Long-term receivables 13,996.95 202,913.87 Unrestricted invested shareholders' equity reserve 35,486,427.82 35,447,817.82 Deferred tax assets 16 875,669.02 1,211,629.53 Translation difference 166,300.95 -125,971.54 78,957,786.10 81,236,552.96 Retained earnings 5,054,438.38 21,337,119.32 Net profit 11,474,344.00 -13,663,905.66 67,410,992.69 58,183,731.48 Current assets Accounts receivable and other receivables 17 26,798,906.70 21,048,287.42 Total shareholders' equity 67,410,992.69 58,183,731.48 Cash and cash equivalents 18 9,681,630.64 10,468,665.55 36,480,537.34 31,516,952.97 Non-current liabilities Deferred tax liabilities 16 2,177,566.16 2,672,317.82 Total assets 115,438,323.44 112,753,505.93 Interest-bearing liabilities 22 16,609,379.77 23,601,334.38 18,786,945.93 26,273,652.20

Current liabilities Accounts payable and other liabilities 24 9,462,612.75 8,767,349.99 Income tax liabilities 1,368,676.49 551,269.24 Provisions 21 133,452.00 1,051,808.00 Accured expences 24 11,569,401.32 11,098,259.86 Interest-bearing liabilities 22 6,706,242.26 6,827,435.16 29,240,384.82 28,296,122.25

Total liabilities 48,027,330.75 54,569,774.45

Total shareholders' equity and liabilities 115,438,323.44 112,753,505.93

51 digia annual report 2010 Financial Statement Consolidated Cash Flow Statement (IFRS)

1 Jan–31 1 Jan–31 € 000 Dec 2010 Dec 2009

Cash flow from operations: Net profit 11,474 -13,664 Adjustments to net profit for the period 9,409 33,919 Change in working capital -5,828 6,817 Interest paid -703 -1,929 Interest income 21 91 Taxes paid -3,306 -5,002 Cash flow from operating activities 11,066 20,232

Cash flow from investments: Purchase of property, plant and equipment and tangible assets -1,965 -1,342 Cash flow from investments -1,965 -1,342

Cash flow from financing: Paid share issue 79 - Purchase of own shares - -33 Repayment of short-term loans -6,082 -58,242 Repayments of long-term loans -1,000 -18,000 Withdrawals of short-term loans - 5,000 Withdrawals of long-term loans - 45,000 Dividends paid and other profit distribution -2,885 -1,024 Cash flow from financing -9,887 -27,300

Change in cash and cash equivalents -786 -8,410

Cash and cash equivalents at beginning of period 10,469 18,879 Change in cash and cash equivalents -786 -8,410 Cash and cash equivalents at end of period 9,682 10,469

52 digia annual report 2010 Financial Statement Changes in Shareholders’ Equity

Shareholders' equity 1 Jan 2009 2,085 0 7,899 34,938 5,204 -254 22,210 72,083 Available-for-sale investments Gains/losses on fair valuation ------Amount recognised through profit or loss ------Taxes associated with items recognised ------or derecognised in shareholders' equity ------Net profit (+) / loss (-) ------13,664 -13,664 Total income and expenses recognised during the period ------13,664 -13,664 Increase of share capital ------Distribution of dividends ------1,024 -1,024 Own share redemption fund - - - 510 - - -169 340 Share-based transactions settled in shareholders' equity ------321 321 Stock options exercised ------Items of comprehensive income - - - - - 128 - 128 510 - 128 -873 -235

Shareholders' equity 31 Dec 2009 2,085 0 7,899 35,448 5,204 -126 7,673 58,184

53 digia annual report 2010 Financial Statement

Proportion belonging to parent company shareholders Unrestricted invested shareholders’ Translation € 000 Share capital Rights Premium fund equity reserve Other reserves difference Retained earnings Total Shareholders' equity 1 Jan 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 with 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 of share capital ------Distribution of dividends ------2,885 -2,885 Share-based transactions settled in shareholders' equity 1 40 - 39 - - 267 346 Stock options exercised ------Items of comprehensive income - - - - - 292 - 292 1 40 - 39 - 292 -2,619 -2,247

Shareholders' equity 31 Dec 2010 2,086 40 7,899 35,486 5,204 166 16,529 67,411

Distributable funds on 31 Dec 2010 2009 € 000 Parent Parent Unrestricted invested shareholders' equity reserve 35,486 35,448 Retained earnings 3,487 2,178 Net profit 2,946 3,928 Total 41,919 41,553

54 digia annual report 2010 Financial Statement Basic Information of the Group and Accounting policies

Basic information of the company Consolidation principles effect on the consolidated financial state- changes were not significant for the consolidated Digia Plc is a modern, agile software company The consolidated financial statements include the ments. financial statements. providing and implementing ICT products, parent company Digia Plc and subsidiaries in which • Updated IFRS 3, Business Combinations. The • The following interpretations have not been sig- services and technologies for its customers to the parent company directly or indirectly controls updated standard has a broader scope than nificant for the group: improve their competitive advantage – solutions more than 50 per cent of the votes associated with before. The update affects the quantity of good- IFRIC 12: Service Concession Arrangements for the needs of a transforming world. shares or over which the parent company otherwise will posted on acquisitions, and the segments’ IFRIC 15: Agreements for the Construction of Real Solutions that are independent of the terminals exercises control. Acquired subsidiaries are con- income from sales. The standard also has an Estate and technologies used provide true freedom and solidated using the cost method, according to which effect on items recognised through profit and IFRIC 16: Hedges of a Net Investment in a Foreign enable the right information to reach the right the assets and liabilities of the acquired entity are loss, both in the acquisition year and in any years Operation people in the right place at the right time. measured at fair value at the time of acquisition, where additional sums are paid on the purchase IFRIC 17: Distributions of Non-cash Assets to As a comprehensive solution provider and sys- and the remaining difference between the acquisi- price or additional acquisitions are made. The Owners tem integrator, Digia provides its customers with tion price and the acquired shareholders’ equity change is expected to have a significant impact on IFRIC 18: Transfers of Assets from Customers an extensive range of IT products and services, constitutes goodwill. In accordance with the exemp- any future business acquisitions. The preparation of financial statements under strong software expertise in mobile environ- tion permitted by IFRS 1, acquisitions prior to the • Amended IAS 27, Consolidated and Separate IFRS means that Group management must nec- ments and extensive industry knowledge. IFRS transition date have not been adjusted to cor- Financial Statements. The amended standard essarily make certain estimates and judgments The company is registered in Finland and it respond to the IFRS principles. Their values remain requires that the effects of any changes in owner- concerning the application of the accounting princi- operates internationally, employing more than unchanged from Finnish Accounting Standards. ship of subsidiaries be posted directly under the ples. Information about such considerations made 1,500 professionals. Digia is listed on NASDAQ Subsidiaries acquired during the fiscal period are consolidated shareholders’ equity if the parent by the management when applying the corporate OMX Helsinki. included in the consolidated financial statements company retains its controlling interest. The accounting principles with the greatest influence on The Group’s parent company is Digia Plc. The as of the date of acquisition, while divested sub- change had no significant effect on the consoli- the figures presented in the financial statements parent company is domiciled in Helsinki and its sidiaries are included until the date of divestment. dated financial statements. are explained under the item ‘Accounting policies registered office is at Hiomotie 19, 00380 Hel- Intra-Group transactions, receivables, liabilities, • Changes to IAS 39, Financial Instruments: Recog- requiring consideration by management and crucial sinki. unrealised margins and internal profit distribution nition and Measurement, Eligible Hedged Items. factors of uncertainty associated with estimates’. are eliminated in the consolidated financial state- The changes apply to hedge accounting. They Accounting policies ments. The profit for the period is divided between specify the instructions given in IAS 39 concerning Segment reporting the parent company shareholders and the minority. the hedging of unilateral risk and risk of inflation Digia’s business operations are now divided into Basis of preparation The minority interest is also presented as a sepa- in items belonging to financial assets or financial two main business segments: Enterprise Solu- The consolidated financial statements have been rate item within shareholders’ equity. liabilities. The change had no significant effect on tions and Mobile Solutions. Enterprise Solutions prepared in compliance with the International From 1 January 2010, the Group has applied the the consolidated financial statements. comprises ERP and Financial Administration, Financial Reporting Standards (IFRS), observing following new or amended standards and interpre- • Improvements to IFRS April 2009. In the Annual Digital Services and Integration Solutions. The the IAS and IFRS standards, as well as SIC and tations: Improvements procedure, all the minor and less Mobile Solutions segment comprises Contract IFRIC interpretations valid on 31 December 2010. • Changes to IFRS 2, Share-based Payment – urgent changes to the standards are gathered Engineering Services and User Experience Group cash-settled share-based payment together and carried out once a year. The changes Services. The divisions have been specified as transactions. The change had no significant made in this procedure apply to 12 standards. The primary reporting segments in accordance with

55 digia annual report 2010 Financial Statement

IFRS 8 Segment Reporting. Geographical areas necessary, adjusted to reflect any changes in case of a phased business combination income statement by straight-line depreciation have been specified as secondary segments. expected economic value. 2. The net sum of the acquisition date assets over their useful life. Amortisation is not booked Capital gains and losses on elimination and the acquired and liabilities assumed. on intangible assets with an unlimited useful life Foreign currency translation transfer of tangible assets are included either in The goodwill for business combinations prior to but they are tested annually for impairment. Items referring to the earnings and financial posi- other operating income or expenses. 2004 corresponds to goodwill in accordance with Long-term expenses are capitalised and tion of the Group’s units are recognised in the cur- previous accounting standards that has been used depreciated over their financial lifetime, which is rency that is the main currency of the unit’s primary Government grants as the deemed cost. A portion of the goodwill of defined as somewhere between 3 and 7 years. operating environment (‘functional currency’). The Grants received as compensation for costs are rec- acquired entities is allocated to customer relation- consolidated financial statements are given in ognised in the income statements at the same time ships or products originating in acquisitions and Leases euros, which is the operating and presentation cur- as the expenses related to the target of the grant recognised in intangible assets. The portions of Leases on property, plant and equipment in which rency of the parent company. are recognised as expenses. Grants of this kind are acquisition cost recognised in intangible assets are the Group bears a significant part of the risks and Receivables and liabilities denominated in for- presented under other operating income. Govern- amortised over their useful life. benefits characteristic of ownership are catego- eign currency have been converted into euro at ment grants attributable to fixed assets are recog- No regular amortisation is booked on goodwill rised as finance leases. A finance lease is recog- the exchange rate in effect on the balance sheet nised as deductions in the value of intangible fixed but it is tested quarterly for impairment. For this nised in the balance sheet at the fair value of the date. Gains and losses arising from foreign cur- assets. The grants are recognised as income over purpose, goodwill is allocated to cash generating leased asset at the start of the lease period or at rency transactions are recognised through profit the life of the asset through reduced amortisation. units. Goodwill is recognised at the original cost a lower current value of minimum lease payments. or loss. Foreign exchange gains and losses from from which the impairment is deducted. Any adjust- Assets acquired on finance leases are depreciated operations are included in the corresponding items Intangible assets ments of acquisition cost are booked no later than over the asset’s useful life or the lease period, above operating profit. 12 months after the date of acquisition. whichever is shorter. Lease obligations are included The income statements of non-Finnish consoli- Goodwill in interest-bearing debt. Leases in which the risks dated companies have been converted into euro at Goodwill corresponds to the proportion of the Research and development costs and benefits characteristic of ownership remain the weighted average exchange rate for the period, acquisition cost of an entity acquired after the Research costs are recognised as expenses in the with the lessor are treated as operating leases. and their balance sheets have been converted at the period between 1 January 2004 and 31 December income statement. Development costs arising from Leases payable on the basis of other leases are exchange rate quoted on the balance sheet date. 2009 that exceeds the Group’s share of the fair the design of new products are capitalised as intan- recognised as expenses in the income statement in Translation differences arising from the application value of the entity’s net assets on the date of gible assets in the statement of financial position equal instalments over the lease period. of the cost method are treated as items adjusting acquisition. The acquisition cost also includes other until the product is ready for commercial utilisation consolidated shareholders’ equity. direct expenses related to the acquisition, such as and future economic benefit is expected from the Financing assets and liabilities professionals’ fees. product. Depreciation begins once the product is Financing assets are divided into receivables and Tangible assets As of the beginning of the 2010 fiscal year, good- ready for commercial utilisation. The useful life of liabilities, either as held-to-maturity, held-for-trading, Property, plant and equipment (PPE) is carried at will has been defined according to IFRS 3, i.e. as the capitalised development expenses is 2 to 5 years, or available-for-sale. Financial instruments are at first cost less accumulated planned depreciation and difference between points 1 and 2 below: during which time the capitalised assets will be rec- measured at fair value, with any fees deducted. Usu- impairment. Assets are depreciated over their esti- 1. Sum of the following items: ognised as expenses by straight-line depreciation. ally, the fair value corresponds with the sum paid or mated useful lives. Depreciation is not booked for 1.1 the fair value of the consideration paid at the received for the instrument. Loans are included under land areas. Estimated useful lives are as follows: time of acquisition Other intangible assets and non-current and current liabilities. Interest expenses Buildings and structures 25 years 1.2 the amount of any non-controlling interest in long-term expenses and fees are stated in the income statement during Machinery and equipment 3–8 years the object of acquisition Patents, trademarks and licences with a limited the loan period, on an accrual basis using the effective The residual value and useful life of assets 1.3 the fair value of any previously held non-con- useful life are booked in the statement of finan- yield method, and they are recognised as a cost on the is reviewed on each balance sheet date and, if trolling interest in the object of acquisition, in the cial position and recognised as expenses in the period during which they are incurred.

56 digia annual report 2010 Financial Statement

Accounts receivable and Employee benefits an option, but they affect the estimate of the final Shares, dividends and other receivables amount of options. shareholders’ equity Accounts receivable and other receivables are Pension liabilities When options are exercised, the payments Dividends proposed by the Board of Directors measured at nominal value. A provision for The Group’s pension schemes are arranged received net of any transaction costs are recog- will not be deducted from distributable share- impairment of accounts receivable is established through a pension insurance company. The nised in shareholders’ equity. Before the entry into holders’ equity before the Board’s approval has when there is evidence based on a case-by-case pension schemes are mainly defined contribu- force of the new Limited Liability Companies Act been received. Immediate costs relating to the risk assessment that the Group will not be able tion plans, and payments are recognised in the on 1 September 2006, payments received from acquisition of Digia Plc’s own shares are recog- to collect all amounts due according to the origi- income statement during the period to which the share subscriptions based on granted options were nised as deductions in shareholders’ equity. nal terms of receivables. payment applies. The Finnish Employees’ Pen- recognised in accordance with the terms and condi- sions Act (TyEL) pension scheme was treated as tions of these arrangements in the share capital and Earnings per share Cash and cash equivalents a defined contribution plan in 2009 and 2010. share premium account. In the option arrangements Earnings per share are calculated by dividing Cash and cash equivalents consist of cash and decided after the entry into force of the new Lim- the period’s earnings after tax belonging to the withdrawable bank deposits and other short- Share-based payments ited Liability Companies Act, proceeds received net parent company’s shareholders by the weighted term investments. Accounts with a credit facility The Group has various incentive schemes where of any eventual transaction costs are recognised in average of shares outstanding during the fiscal are treated as short-term loans under current payments are made either in equity instruments accordance with the terms and conditions of these period, excluding own shares acquired by Digia Plc. liabilities. or in cash. The benefits granted through these arrangements in the unrestricted shareholders’ Diluted earnings per share are calculated assum- arrangements are measured at fair value on the equity reserve. ing that all subscription rights and options have Amortisation date of their being granted and recognised as been exercised by the beginning of the next fiscal On each balance sheet date, the Group estimates expenses in the income statement evenly during the Provisions year. In addition to the weighted average of shares whether there is evidence that the value of an asset vesting period. Correspondingly, in arrangements A provision is recognised when the Group has outstanding, the denominator also includes shares may have been impaired. If there is evidence of where the payment is made in cash, the liability a legal or factual obligation based on previous received from subscription rights and options impairment, the amount recoverable from the asset and the change in its fair value is recognised as a events, the realisation of a payment obligation is assumed to have been exercised. The subscription is estimated. In addition, the recoverable amount is liability on an accrual basis. The impact of these probable and the amount of the obligation can be rights and options assumed to have been exer- estimated annually on the following assets regard- arrangements on the financial results is shown in reliably estimated. cised will not be taken into account in earnings per less of whether there is an indication of impairment the income statements under the cost of employee A restructuring provision is recognised when the share if their actual price exceeds their average or not: goodwill, and intangible assets with an benefits. Group has prepared a detailed restructuring plan price during the fiscal year. unlimited useful life. The need for impairment is The cost determined at the time of granting the and started its implementation and disclosed the reviewed at the level of cash generating units, which options is based on the Group’s estimate of the matter. The provision is based on expected actual Income taxes refers to the lowest level of unit that is mainly inde- amount of options that are expected to become costs, such as agreed compensation for termination Taxes recognised in the income statement include pendent of other units and whose cash flows can vested at the end of the vesting period. The Group of employment. taxes based on taxable income for the financial be separated from other cash flows. If the carrying updates the assumption of the final amount of The Group recognizes a provision for onerous period, adjustments to taxes for previous periods, amount exceeds the recoverable amount, an impair- options on each balance sheet date. Changes in the contracts when the expected benefits to be derived as well as changes in deferred taxes. Tax based on ment loss is recognised in the income statement. An estimates are entered in the income statement. The from a contract are less than the unavoidable costs taxable income for the period is calculated using impairment loss recognised for goodwill will not be fair value of option arrangements is determined of meeting the obligations under the contract. the corporate income tax rate applicable in each revoked under any circumstances. on the basis of the Black-Scholes option pricing A guarantee provision is recognised once a prod- country. Deferred tax assets and liabilities are model. Non-market-based conditions, such as prof- uct or service subject to guarantee terms has been recognised for temporary differences between the itability and certain growth targets, are not taken sold and the amount of potential guarantee costs taxable values and book values of asset and liability into account when determining the fair value of can be estimated with sufficient accuracy. items. The biggest temporary differences arise from

57 digia annual report 2010 Financial Statement depreciation of fixed assets, unused tax losses, and Accounting policies requiring margin are amended in the period during which the by the Group. The Group will introduce each stand- the revaluation of financial and derivative instru- consideration by management change becomes known and can be estimated for ard and interpretation as of its effective date or, if ments at the fair price resulting from the purchase. and crucial factors of uncertainty the first time. Any loss expected from a project is the effective date is some other date than the first Deferred taxes are determined on the basis of the associated with estimates immediately recognised as an expense. day of the fiscal period, as of the beginning of the tax rate enacted by the balance sheet date. Deferred Estimates and assumptions regarding the future fiscal period following the effective date. tax receivables are recognised up to the probable have to be made during the preparation of the Financial risks • Changes to IAS 24, Related Party Disclosures. amount of taxable income in the future, against financial statements, and the outcome may Financial risk management consists, for instance, The purpose of the changes is to clarify and which the temporary difference can be utilised. differ from the estimates and assumptions. of the planning and monitoring of solvency of liquid simplify the definition of related parties, espe- Furthermore, the application of accounting poli- assets, the management of investments, receiva- cially as regards significant influence or shared Revenue recognition cies requires consideration. These estimates bles and liabilities denominated in a foreign cur- control of parties. The Group does not expect Work carried out by people is recognised monthly in and assumptions are based on historical experi- rency, and the management of interest rate risks on the change to have a significant effect on accordance with progress. Long-term projects with ence and other justifiable assumptions that are non-current interest-bearing liabilities. upcoming consolidated financial statements. a fixed price are recognised on the basis of their believed to be reasonable in the circumstances In accordance with the company’s investment • Changes to IAS 32, Financial Instruments: Clas- percentage of completion once the outcome of the that serve as a foundation for evaluating the policy, cash and cash equivalents are invested only sification of Rights Issues. The change applies project can be reliably estimated. The percentage items included in the financial statements. The in low-risk short rate funds and bank deposits. The especially to the handling of share issues in of completion is determined as the proportion of estimates mainly concern the following items: Group’s policy defines creditworthiness require- foreign currencies. In the future, subscription costs arising from work performed for the project ments for customers in order to minimise the rights related to share issues in foreign curren- up to the date of review in the total estimated pro- Impairment testing amount of credit losses. A sufficient provision was cies can, under certain conditions, be classified ject costs. If estimates of the project change, the The Group carries out annual impairment testing made for uncertain accounts receivable at the end as shareholders’ equity rather than derivative recognised sales and profit/margin are amended of goodwill and intangible assets with an unlim- of the fiscal period. The Group’s operative cash flow instruments. The Group does not expect the in the period during which the change becomes ited useful life and evaluates any indications of has developed favourably during the year, and thus change to have a significant effect on upcom- known and can be estimated for the first time. Any impairment as described above in the accounting the Group’s solvency has also remained good. The ing consolidated financial statements. loss expected from a project is recognised as an policies. Recoverable amounts from cash gener- most significant currency risks relating to accounts • IFRS Annual Improvements 2010, changes to expense immediately after the matter has been ating units are determined as calculations based receivable or accounts payable are managed by several standards. The improvements for 2010 noticed. Licensing income is recognised in accord- on value in use. The preparation of these calcula- means of forward foreign exchange contracts. At apply to six standards and one interpretation. ance with the factual substance of the agreement. tions requires the use of estimates. the end of the fiscal year, the company did not have The Group does not expect the change to have Depending on the nature of the licence, the recogni- any such forward contract in force. Interest rate a significant effect on upcoming consolidated tion is based on either the installation date or the Recognition as income and expenses trends are monitored systematically in different financial statements. degree of completion. Maintenance fees are allo- As described in the revenue recognition policies, bodies within the company, and possible interest • The following standards and interpretations cated over the agreement period. the revenue and costs of a long-term project are rate risks hedges are made with the appropriate are not considered to affect the Group: recognised as income and expenses on the basis of instruments. At the end of the fiscal year, the com- Changes to IFRIC 14 IAS 19, The Limit on a One-off items percentage of completion once the outcome of the pany had no such hedging instruments in force. Defined Benefit Asset, Minimum Funding Items recorded as one-off items are ones which project can be reliably estimated. Recognition asso- Requirements and their Interaction. occur only once or very rarely. These may include ciated with the degree of completion is based on Application of new and IFRIC 19, Extinguishing Financial Liabilities business divestments, reorganisations and good- estimates of expected income and expenses of the amended IFRS standards with Equity Instruments. will write-downs. project and reliable measurement and estimation The IASB has published the following new or of project progress. If estimates of the project’s amended standards and interpretations that are outcome change, the recognised sales and profit/ not yet effective and thus have not yet been applied

58 digia annual report 2010 Financial Statement Notes to the Consolidated Financial Statement

1. Segment information Operating profit (EBIT)

Digia’s business segments are Enterprise Solutions and Mobile Solutions. € 000 2010 2009 Enterprise Solutions 11,001 12,211 Net sales Mobile Solutions 6,164 -20,007 Group total 17,164 -7,796 € 000 2010 2009 Enterprise Solutions 75,674 70,841 Mobile Solutions 55,152 49,494 Assets Group total 130,825 120,335 € 000 2010 2009 In the Enterprise Solutions segment, no single customer accounted for more than 10 per cent of the Enterprise Solutions 63,762 61,240 consolidated net sales. The Mobile Solutions segment’s major customer is Nokia, which accounted for Mobile Solutions 40,491 39,205 more than 10 per cent of the consolidated net sales in the fiscal year. Unallocated 11,185 12,308 Group total 115,438 112,753 Operating profit before extraordinary items The assets of the Enterprise Solutions segment include goodwill arising from the acquisition of € 000 2010 2009 Digia Sweden AB (formerly Capital C AB), Samstock Ltd and Sentera Plc, as well as the part of the Enterprise Solutions 11,001 12,301 goodwill arising from the acquisition of Yomi Software Ltd that is attributable to the operations of the Mobile Solutions 6,164 4,634 segment. The assets of the Mobile Solutions segment include goodwill arising from the acquisition of Group total 17,164 16,936 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. The goodwill items are Digia’s consolidated profitability for 2009 was significantly affected by extraordinary non-recurrent described in more detail in Note 15. items comprising a EUR 23.8 goodwill writedown and a EUR 0.9 million restructuring provision related The most significant unallocated asset item comprises investments and cash and cash equivalents to the closure of sites. The goodwill writedown was entirely attributable to the Mobile Solutions seg- treated from the viewpoint of the Group level. ment. EUR 0.8 million of the restructuring provision was attributable to Mobile Solutions and EUR 0.1 million to Enterprise Solutions. The operating profit before extraordinary items is an indicator of the Liabilities company’s operational profitability. € 000 2010 2009 Enterprise Solutions 12,270 11,139 Mobile Solutions 10,264 10,329 Unallocated 25,493 33,101 Group total 48,027 54,570 The most significant item within unallocated liabilities consists of a long-term bank loan. 59 digia annual report 2010 Financial Statement

Depreciation and amortisation 4. One-off expenses € 000 2010 2009 There were no one-off expenses during the fiscal year 2010. The one-off expenses for the fiscal year Enterprise Solutions 1,671 1,945 2009 totalled EUR 24.7 million, comprising EUR 23.8 million in a goodwill writedown and EUR 0.9 mil- Mobile Solutions 2,048 26,106 lion in a restructuring provision. Group total 3,719 28,051 5. Auditors’ fees

Capital expenditure € 000 2010 2009 Audit 80 97 € 000 2010 2009 Other statutory duties 1 1 Enterprise Solutions 1,023 670 Tax counselling 10 7 Mobile Solutions 942 672 Other services 12 19 Group total 1,965 1,342 Total 103 123

Geographical distribution of net sales 6. Other operating income

€ 000 2010 2009 € 000 2010 2009 Finland 120,196 110,624 Grants 249 191 Other countries 10,629 9,711 Other income 68 28 Total 130,825 120,335 Total 317 220

2. Acquired business operations 7. Other operating expenses The following table presents the five most significant items included in other operating expenses: Acquired business operations in 2010 and 2009 No business operations were acquired in the 2009 or 2010 fiscal years. € 000 2010 2009 Costs of premises 6,144 5,996 IT costs 4,119 4,359 Voluntary personnel expenses 3,384 2,675 3. Long-term projects Travel 2,367 2,440 External services 1,041 808 Consolidated net sales include income recognised on long-term projects totalling EUR 17.7 million in Total 17,056 16,278 2010 (EUR 15.9 million in 2009). The consolidated income statement includes income recognised on incomplete long-term projects to the amount of EUR 14.3 million on 31 December 2010 (EUR 10.6 million on 31 December 2009). The statement of financial position includes advance payments recognised on incomplete long-term projects to the amount of EUR 0.8 million on 31 December 2010 (EUR 0.7 million on 31 December 2009).

60 digia annual report 2010 Financial Statement

8. Product development expenses 10. Personnel expenses

€ 000 2010 2009 € 000 2010 2009 Product development expenses 3,003 2,623 Wages and salaries 65,172 59,907 Total 3,003 2,623 Pension costs, defined-contribution plans 11,339 10,242 Stock options granted 720 659 Other personnel expenses 3,343 2,827 9. Depreciation, amortisation and impairment Total 80,573 73,636

€ 000 2010 2009 Group personnel on average during the period 2010 2009 Depreciation and amortisation by asset category Enterprise Solutions 689 627 Mobile Solutions 768 711 Intangible assets Group management and administration 51 49 Capitalised development costs - 84 Total 1,508 1,387 Intangible assets 2,162 2,477 Total 2,162 2,561 Information on employee benefits and loans to the management are presented in Note 28, ‘Related party transactions’. Property, plant and equipment Buildings 7 7 Machinery and equipment 1,550 1,647 Total 1,557 1,654 11. Financial income and expenses

Amortisation Goodwill impairment - 23,837 Financial income Total - 23,837 Depreciation, amortisation and impairment, total 3,719 28,051 € 000 2010 2009 Capital gains on assets recognised at fair value through profit and loss - - Interest income from cash and cash equivalents 23 98 Interest income from accounts receivable 6 4 Dividend income 10 10 Exchange rate gains 87 5 Other financial income 1 2 Total 127 119

61 digia annual report 2010 Financial Statement

Financial expenses 13. Earnings per share € 000 2010 2009 Basic earnings per share are calculated by dividing the earnings before tax for the accounting period Interest expenses for financing loans attributable to the parent company’s shareholders by the weighted average of shares outstanding dur- valued at accrued acquisition cost 727 1,755 ing the accounting period. Own shares possessed by the company are not included in the calculation Interest expenses for accounts payable 1 2 of the weighted average of shares outstanding. The calculation of diluted earnings per share includes Interest expenses for finance lease liabilities - 4 consideration of the diluting effect of stock options on the weighted average number of shares. Stock Loan administration fees 322 394 options have a diluting effect if their exercise price is lower than the fair value of the share. Exchange rate losses 290 73 Other financial expenses 225 214 Total 1,565 2,442 2010 2009 Profit for the period attributable to parent company shareholders (€ 000) 11,474 -13,664 12. Income taxes Weighted average number of shares during the period 20,626,817 20,439,833 Diluting effect of stock options 5,187 - € 000 2010 2009 Diluted weighted average number of shares during the period 20,632,004 20,439,833 Current tax 4,362 3,507 Taxes from previous periods 48 -40 Basic earnings per share (EUR/share) 0.56 -0.67 Deferred tax -159 77 Diluted earnings per share (EUR/share) 0.56 -0.67 Total 4,251 2,997

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 2010 2009 Pre-tax profit 15,726 -10,119

Taxes calculated at the domestic corporation tax rate 4,089 -2,630 Deviating tax rates of foreign subsidiaries -1 -2 Income not subject to tax -21 -35 Non-deductible expenses 49 6,253 Tax effect of dissolution losses 219 103 Other items -131 -104 Taxes from previous years 48 -40 Total 4,251 3,545

Taxes for the period in the income statement 4,251 3,545

62 digia annual report 2010 Financial Statement

14. Property, plant and equipment

Land and Buildings and Machinery and Other € 000 water areas structures equipment tangible assets Total 2010 Total 2009 Acquisition cost 1 January 17 162 12,602 84 12,865 11,719 Additions - - 2 018 - 2,018 1,148 Acquisition of subsidiary ------Disposals - - -144 - -144 -3 Acquisition cost 31 December 17 162 14,476 84 14,739 12,865

Accumulated depreciation and amortisation 1 January - -58 -10,107 -83 -10,248 -8,594 Depreciation - -7 -1,558 - -1,565 -1,654 Amortisation ------Disposals ------Accumulated depreciation and amortisation 31 December - -65 -11,665 -83 -11,813 -10,248

Book value 1 January 17 104 2,495 1 2,617 3,125 Book value 31 December 17 97 2,811 1 2,926 2,617

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

Land and Buildings and Machinery and Other 2010, € 000 water areas structures equipment tangible assets Total Acquisition cost - - 6,519 - 6,519 Accumulated depreciation - - -5,318 - -5,318 Book value - - 1 202 - 1 202

Land and Buildings and Machinery and Other 2009, € 000 water areas structures equipment tangible assets Total Acquisition cost - - 5,676 - 5,676 Accumulated depreciation - - -4,455 - -4,455 Book value - - 1,221 - 1,221

63 digia annual report 2010 Financial Statement

15. Intangible assets

Other € 000 Goodwill Development costs intangible assets Total 2010 Total 2009 Acquisition cost 1 January 89,382 2,487 23,550 115,419 115,488 Capitalised development costs - - - - - Additions - - 244 244 197 Disposals - - -145 -145 - Acquisition of subsidiary - - - - -267 Acquisition cost 31 December 89,382 2,487 23,649 115,518 115,419

Accumulated depreciation and amortisation 1 January -23,837 -2,487 -12,517 -38,841 -12,444 Depreciation - - -2,162 -2,162 -2,560 Amortisation - - - - -23,837 Accumulated depreciation and amortisation 31 December -23,837 -2,487 -14,679 -41,003 -38,841

Book value 1 January 65,545 0 11,033 76,578 103,044 Book value 31 December 65,545 0 8,970 74,514 76,578

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:

Specified Unallocated Total value € 000 intangible assets goodwill Other items subject to testing Enterprise Solutions 3,515 43,244 4,552 51,311 Mobile Solutions 4,941 22,301 4,411 31,654 Total 8,456 65,545 8,963 82,964

The goodwill in the Enterprise Solutions segment was mainly associated to the acquisition of Impairment testing Sentera Plc and Digia Sweden Ab and Samstock Ltd. The goodwill in the Mobile Solutions division was The Group has defined its business segments as cash-generating units (CGU). Goodwill impairment mainly associated with the combination of Digia Inc. and SysOpen Plc, as well as the acquisition of is tested by comparing the CGU fair value to the book value. The use values are based on the continu- Yomi Software Ltd and Sunrise Resources Ltd. Allocated goodwill is presented in the intangible asset ous use of an asset as well as on the financial plans and estimates of the CGU’s future development, group ‘Other intangible assets’ and amortised over a period of 5–10 years. approved by the relevant CGU management. The other items include the estimated working capital and fixed assets of the divisions. Present values for the Enterprise Solutions segment were calculated for the forecast period based on the following assumptions: net sales for 2011 according to the latest forecast, after which annual

64 digia annual report 2010 Financial Statement growth of 3 per cent; operating profit for 2011 in accordance with the latest forecast and after that 10 Net sales growth is reckoned to constitute the most critical factor in calculating the present values per cent, with discount rates of 11.2 per cent. Cash flows following the forecast period are estimated of cash flows. The amount of goodwill for Enterprise Solutions requires average annual growth of two by extrapolating the cash flows, using the assumptions given above. per cent for business operations and five per cent profitability. For Mobile Solutions, the goodwill Present values for the Mobile Solutions segment were calculated for the forecast period based requires business to be maintained at the current level, with seven per cent profitability. on the following assumptions: net sales for 2011 according to the latest forecast, after which annual On the balance sheet date, the Enterprise Solutions segment’s use value was EUR 70.6 million higher growth of 0 per cent; operating profit for 2011 in accordance with the latest forecast and after that 8 than the segment’s book value. The Mobile Solutions segment’s use value was EUR 7.4 million higher per cent, with discount rates of 14.7 per cent. Cash flows following the forecast period are estimated than the book value. by extrapolating the cash flows, using the assumptions given above.

16. Deferred tax assets and liabilities Changes in deferred taxes during 2010:

Recognised in Recognised Exchange rate Subsidiaries € 000 1 Jan 2010 income statement in equity differences acquired/ divested 31 Dec 2010 Deferred tax assets: Provisions 76 -41 - - - 35 Confirmed losses 827 -138 - - - 690 Other items 309 -157 - - - 151 Total 1,212 -336 - - - 876

Recognised in Recognised Exchange rate Subsidiaries € 000 1 Jan 2010 income statement in equity differences acquired/ divested 31 Dec 2010 Deferred tax liabilities: From business combinations 2,438 -449 - - - 1,989 Other items 234 -45 - - - 189 Total 2,672 -495 - - - 2,178

Changes in deferred taxes during 2009: Recognised in Recognised Exchange rate Subsidiaries € 000 1 Jan 2009 income statement in equity differences acquired/ divested 31 Dec 2009 Deferred tax assets: Provisions 112 -36 - - - 76 Confirmed losses 1,183 -356 - - - 827 Internal margin on business transfers 308 -308 - - - 0 Other items 150 159 - - - 309 Total 1,753 -542 - - - 1,212

65 digia annual report 2010 Financial Statement

Recognised in Recognised Exchange rate Subsidiaries € 000 1 Jan 2009 income statement in equity differences acquired/ divested 31 Dec 2009 Deferred tax liabilities: Capitalisation of intangible assets 21 -21 - - - 0 From business combinations 3,027 -589 - - - 2,438 Other items 90 145 - - - 234 Total 3,138 -465 - - - 2,672

17. Accounts receivable and other receivables 18. Cash and cash equivalents

€ 000 2010 2009 € 000 2010 2009 Accounts receivable and other receivables Financing assets recognised at fair value through profit and loss Accounts receivable 21,919 16,782 Mutual funds 300 293 Security deposit for rental dues 374 543 Bank accounts 9,382 10,176 Receivables from customers on long-term projects 1,023 1,143 Total 9,682 10,469 Prepayments and accrued income 2,902 1,360 Other receivables 581 1,220 Accounts receivable and other receivables 26,799 21,048 19. Notes on share capital

Share capital € 000 2010 2009 Number of shares (€ 000) Non-due accounts receivable 20,470 15,943 1 Jan 2009 20,853,645 2,085 Accounts receivable due 1–30 days ago 1,132 660 Increase in share capital - - Accounts receivable due 31–60 days ago 162 125 Exercise of stock options - - Accounts receivable due more than 60 days ago 154 54 31 Dec 2009 20,853,645 2,085 Total 21,919 16,782

At the end of the fiscal year 2010, credit loss provisions totalled EUR 0.1 million. At the end of the fis- Share capital Number of shares (€ 000) cal year 2009, credit loss provisions totalled EUR 0.1 million. The book value of accounts receivable 1 Jan 2010 20,853 645 2,085 and security deposits for rental dues is a reasonable estimate of their fair value. Their balance sheet Increase of share capital 11,000 1 values best correspond with the sum of money that represents the maximum amount of credit risks. Exercise of stock options - - Essential items included in prepayments and accrued income are associated with the accrual of statu- 31 Dec 2010 20,864,645 2,086 tory insurance premiums and other accrued expenses. The maximum number of shares is 48 million (48 million in 2009). 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 2009). All outstanding shares are paid in full. At the end of the fiscal year, the company held 220,703 own shares, or 1.1 per cent of all shares.

66 digia annual report 2010 Financial Statement

The premium fund comprises the amount paid for shares in excess of the nominal value. The ‘Other 2009, for the 2005B warrants between 1 November 2008 and 30 November 2010 and for the 2005C warrants reserves’ amount arises from fair valuation of acquired business operations in the consolidated finan- between 1 November 2009 and 30 November 2011. As a result of share subscriptions using warrants 2005A, cial statements. The translation differences reserve comprises translation differences arising from 2005B and 2005C, the share capital of Digia Plc may increase by a maximum of EUR 90,000, and the number the translation of financial statements of non-Finnish units. The unrestricted invested shareholders’ of shares may increase by a maximum of 900,000 new shares. On 31 December 2010, Digia Plc’s wholly owned equity reserve comprises investments similar to shareholders’ equity and the subscription price of subsidiary Digia Partners Oy held a total of 578,000 warrants under the 2005 option scheme. shares when a specific decision is made not to enter it in shareholders’ equity. Warrants 2005 2010 2005A 2005B 2005C 20. Share-based payments Maximum number of options 300,000 300,000 300,000 The Group has had stock option schemes in place since 15 September 1999 and has also offered share- Shares available for subscription per option 1 1 1 Original subscription price * € 4.33 € 3.98 € 3.93 based bonuses as part of key personnel commitment and incentive scheme as of 31 May 2007. Options Dividend adjustment Yes Yes Yes granted after 2003 have been recognised in the financial statements for 2005 in accordance with the Subscription price on 31 December 2008 € 4.10 € 3.80 € 3.83 standard IFRS 2 Share-based Payment. Stock options expire if they are not exercised during a period Subscription price on 31 December 2009 expired € 3.75 € 3.78 separately defined in the option scheme. Stock options are also lost if the employee resigns from the Subscription price on 31 December 2010 expired € 3.61 € 3.64 company before the right is vested. Vesting date 1 November 2007 1 November 2008 1 November 2009 On 30 September 2009, the Digia Board of Directors decided to offer key personnel an option 30 November 30 November 30 November conversion, such that one Digia share and a cash amount equalling the value of the share would be Expiry date 2009 2010 2011 provided in exchange for twenty (20) A options, for four (4) B options and for two and two-thirds (2 2/3) Exercise period, years expired expired 0.9 C options. The conversion offer was made to the holders of warrants under the 2005 scheme. The Persons at end of financial period expired expired no longer binding conversion offer was approved fully, and a total of 276,000 warrants held by key personnel were converted into 51,900 Digia shares and the equivalent cash amount in order to cover the tax cost of the Events in 2010 fiscal year incentive. The conversion was carried out with existing Digia shares. Amounts 1 January 2010 At the end of the financial year, all A options in the 2005 scheme had expired. 11,000 B options were held Options granted - 148,000 60,000 by previous employees of the company, while all the rest had been returned to the company. All C options Options returned - 126,000 60,000 had been returned. The returned options will not be exercised for subscribing shares. The maximum dilution Options outstanding - 22,000 0 effect of the remaining warrants was 0.001 per cent on 31 December 2010. Options in reserve - 278,000 300,000 The Group had the stock option schemes described below in the financial year. Changes during the period Shares subscribed using options - 11,000 - Option scheme 2005 The number of warrants under the 2005 stock option scheme totals 900,000, 300,000 of which are Amounts on 31 December 2010 marked as 2005A, 300,000 as 2005B and 300,000 as 2005C. The warrants entitle their holders to sub- Options granted - 148,000 60,000 scribe a maximum total of 900,000 Digia Plc shares. Options returned - 126,000 60,000 The share subscription price for 2005B warrants is EUR 3.75 (dividend-adjusted) and for 2005C warrants it is Shares subscribed with optios (not yet registered) - 11,000 - EUR 3.78. The 2005A warrants expired on 30 November 2009. On the record date for each distribution of divi- Options in reserve - 278,000 300,000 dends, the share subscription price based on the stock options 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 * At the end of the fiscal year, the subscription price for warrants in force was determined as follows: date of subscription. However, the minimum subscription price will always be the nominal value of the share. 2005A: Trading-weighted average share price on the Helsinki Stock Exchange calculated for the 20 The share subscription period for the 2005A warrants will be between 1 November 2007 and 30 November days following the publication of Digia’s Interim Report Q1/2005.

67 digia annual report 2010 Financial Statement

2005B: Trading-weighted average share price on the Helsinki Stock Exchange calculated for the 20 days Comparison data for 2009 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 The following table presents the situation on 31 December 2009 for comparison: 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 Option scheme the amount of dividends for which the decision to distribute has been made between the beginning of the Subscription 2009 2005A 2005B 2005C Total price € price-setting period and the date of subscription. Amounts on 1 January 2009 Options granted 326,000 148,000 60,000 534,000 € 3.39 The following table presents a summary of the number of warrants and subscription prices on 31 Options returned 106,000 33,000 - 139,000 € 4.03 December 2010: Shares subscribed using options - - - - - Options outstanding 220,000 115,000 60,000 395,000 € 3.97 Subscription Options in reserve 80,000 185,000 240,000 505,000 € 3.86 2010 Options total prices (weighted) Amounts on 1 January 2010 Changes during the period Options granted 208,000 € 3.94 Options granted - - - - - Options returned 186,000 € 3.92 Options returned 123,000 93,000 60,000 276,000 € 3.89 Shares subscribed using options - - Shares subscribed using options - - - - - Options outstanding 22,000 - Trading-weighted average price Options in reserve 578,000 € 3.77 during subscription period, € * 2.50 2.57 3,32 - - Options expired 300,000 - - 300,000 € 4.05 Changes during the period Options granted - - Amounts on 31 December 2009 Options returned - - Options granted 326,000 148,000 60,000 534,000 € 3.94 Shares subscribed using options 11,000 € 3.61 Options returned 229,000 126,000 60,000 415,000 € 3.92 Options expired 278,000 € 3.63 Shares subscribed using options - - - - - Options outstanding - 22,000 - 22,000 - Amounts on 31 December 2010 Options in reserve - 278,000 300,000 578,000 € 3.77 Options granted 208,000 - Options returned 186,000 - Shares subscribed using options 11,000 - * Trading-weighted average price of Digia Plc’s share from January to November 2009 (2005A) and Shares subscribed with options (not yet registered) 11,000 - from January to December 2009 (2005B and 2005C). Options in reserve 578,000 - Share-based bonuses Determination of fair value In addition to stock option schemes, the company offers share-based bonuses as part of its key per- The fair value of the options is determined using the Black-Scholes option pricing model. A fair value sonnel commitment and incentive scheme. The share-based bonus scheme offers the target group an is determined for the date of granting the options and charged to personnel expenses over the ves- opportunity to receive shared in Digia Plc shares as a reward for the achievement of specified goals ting period. The granting date is the date of the decision by Board of Directors. The company incurred set for an earning period. The Board of Directors decides the earning criteria for the scheme and no expenses from share options or from the conversion offer made as a part of the scheme in 2010 specifies the targets, as well as the maximum remuneration for the earning period for each person (2009: EUR 348,378). belonging to the target group.

68 digia annual report 2010 Financial Statement

On 30 September 2009, the Board of Directors made the following decisions regarding share-based bonus The basic details of the schemes are listed in the table below. systems for management and key personnel: It was decided that the terms of the Chief Executive Officer’s 2008 share-based incentive scheme would be Management group CEO's share-based Key personnel changed so that in October 2009 the CEO received a bonus equivalent to the value of 100,000 shares, paid share-based incentive incentive scheme share-based incentive 31 Dec 2010 scheme 2010–2013 2009–2010 scheme 2009–2010 50/50 in shares and cash. This bonus system entirely replaced the 2008 share-based incentive scheme. Granting date 27 May 2010 30 September 2009 30 September 2009 The CEO’s new share-based incentive scheme covers the period 2009 and 2010. It entitles the CEO to a Instrument Shares and cash Shares and cash Shares and cash maximum bonus equal to the value of 160,000 company shares according to the terms of the scheme, based Target group Management group CEO Key personnel on the company’s EPS. The bonus is payable 50/50 in shares and cash and is made available to the CEO annu- Maximum amount of shares * 640,000 160,000 200,000 ally after the financial statements are approved. Beginning of the earning period 28 May 2010 1 October 2009 1 October 2009 In a system directed at key personnel, a maximum bonus totalling the value of 200,000 shares will be pay- End of the earning period 31 March 2011/ 30 March 2010/ 30 January 2010/ able as a 50/50 combination of shares and cash. The instalments will be paid in 2009, 2010, 2011 and 2012. The 31 March 2012/ 30 March 2011 30 January 2011/ 31 March 2013/ 30 January 2010/ bonus will be paid annually, without any disposition restrictions, beginning on 30 January 2010, depending on 31 March 2014 30 January 2013 the fulfilment of certain goals set by the Board and on the condition that the recipient is still employed by Vesting condition Earnings per share, Earnings per share, Earnings criterion, the company on the payment date. net sales growth employment employment On 27 May 2010, the Board of Directors decided on a new share incentive scheme for the CEO and other and employment requirement requirement members of the Group Management Team, as follows: requirement Maximum validity, years 3.2 1.5 3.3 The scheme comprises four earning periods, which are the calendar years 2010–2013. The earnings prin- Remaining validity, years 0.2 0.2 2.1 ciples are the consolidated earnings per share and the growth in consolidated net sales compared to the Number of persons 7 1 30 budget, according to formulae settled separately by the Board. (31 December 2010) 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 * In addition to the bonus payment in shares, a cash bonus is paid to cover the cost of taxes and similar from 2011 to 2013. Of the rewards paid, one half will be awarded to the CEO and one half to the other manage- expenses. ment 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.

69 digia annual report 2010 Financial Statement

The items related to share-based incentive schemes in 2010 are given in the table below. Because the Expense effect of share-based incentive schemes on 2010 income statement 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. Management group CEO's Key personnel share-based share-based share-based Management € 000 incentive incentive incentive group CEO's Key personnel Effect on earnings and scheme scheme scheme share-based share-based share-based financial position 2010–2013 2009–2010 2009–2010 Total incentive incentive incentive scheme scheme scheme Share-based payment Events in 2010 fiscal year 2010–2013 2009–2010 2009–2010 Total expense for the fiscal year 156 295 268 720 Gross amounts 1 January 2010 ** Share-based payment Outstanding at beginning of period 0 160,000 200,000 360,000 expense for the fiscal year, shareholders' equity 72 96 100 267 Changes during the period Liabilities from share-based Granted during the year 640,000 0 0 640,000 payments 31 December 2010 84 101 114 299 Forfeited during the year 0 35,000 4,498 39,498 Exercised during the year 0 45,000 45,502 90,502 Expired during the year 0 0 0 0 Comparison data for 2009

Gross amounts 31 December 2010 ** Key Outstanding at end of period 640,000 80,000 150,000 870,000 CEO’s personnel Available for exercising CEO’s CEO’s share-based share-based at end of period 640,000 80,000 150,000 870,000 € 000 share-based share-based incentive incentive Effect on earnings and bonus in bonus in scheme scheme financial position 2008 2009 2009–2010 2009–2010 Total ** The amounts include the cash portion (in shares) granted according to the terms of the incentive Share-based payment expense scheme. for the fiscal year, € 58 306 99 113 576 Determination of fair value The fair value of share-based payments is determined on the day on which the scheme is agreed 21. Provisions 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 Changes in provisions during 2010: 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 the earning period, and thus the fair Restructuring Unprofitable value of the liability changes in accordance with the price of the Digia share. € 000 provision agreement Total 1 Jan 2010 895 157 1 052 Increase in provisions - 79 79 Provisions used -895 -103 -998 Reversals of unused provisions - - - 31 Dec 2010 0 133 133

70 digia annual report 2010 Financial Statement

Changes in provisions during 2009: In this way, customers’ needs will be met more effectively. The measures encompassed the closure of the company’s offices in Kuopio, Turku, Lahti and Vaasa, and the reduction of personnel in certain Restructuring Unprofitable departments of the Pori unit. Due to these measures, the company made an operational restructuring € 000 provision agreement Total provision of EUR 0.9 million in its financial statements for 2009. This provision was eliminated accord- 1 Jan 2009 0 432 432 ing to plan in 2010. Increase in provisions 895 157 1,052 Provisions used - -432 -432 Unprofitable agreements Reversals of unused provisions - - - A loss provision is created for fixed-price projects if it becomes apparent that the completion of the 31 Dec 2009 895 157 1,052 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. Restructuring provision On the balance sheet date of 31 December 2010, there were six fixed-price projects for which loss The restructuring provision is associated with restructuring of entities in connection with acquisitions provisions had been recorded on the basis of remaining work. and the reorganisation of unprofitable business operations. To improve its operating conditions, the company launched measures in 2009 for rationalising its site network in line with market requirements, and concentrating its expertise into fewer but larger units.

22. Financial liabilities

2010 2009 2010 2009 Balance sheet Balance sheet € 000 Fair values Fair values values values Non-current Bank loan 14,701 20,081 16,000 23,000 Subordinated loan 41 79 44 89 Finance lease liabilities 507 478 565 513 Total 15,249 20,639 16,609 23,601

Current Bank loan 5,797 5,797 6,000 6,000 Subordinated loan 41 73 44 82 Finance lease liabilities 636 716 662 745 Total 6,474 6,586 6,706 6,827 Total 21,723 27,225 23,316 30,429

71 digia annual report 2010 Financial Statement

The fair value of loans has been calculated by discounting the loan capital on the balance sheet date Interest-bearing liabilities fall due as follows: using a discount rate of 7.86%, which has been determined with regard to the industry’s general risk level. On 3 February 2009, Digia signed a three-year syndicated loan agreement that replaced the company’s Year, € 000 2010 2009 prior loans in their entirety. The loan agreement is financed by Pohjola Bank, Nordea Bank and Varma. In 2010 - 6,827 addition to a three-year bank-financed package of EUR 42 million, the package included EUR 8 million in 2011 6,706 6,447 re-borrowing of pension contributions. There is also a maximum EUR 5 million credit limit. As a part of the 2012 14,886 15,640 financing package, the company committed to covenants concerning the maintenance of the company’s 2013 1,194 1,515 Later 530 0 financial standing and liquidity. The loan covenants comprise the following key figures: operating profit Total 23,316 30,429 before depreciation and amortisation (EBITDA) in relation to net debt, equity ratio and net gearing. The company’s loan covenant terms were modified during the period to stipulate that the company is allowed to distribute a maximum of 50 per cent of the consolidated net profit for 2010 for dividends in 2011. During the financial year, the company repaid EUR 7.0 million in loans, reducing its interest-bearing liabilities to EUR 22.0 million. The loans have floating interest rates tied to Euribor, plus a margin. The average interest rate of the loans in 2010 was 2.8% (3.4% in 2009). The shares of Digia Finland Ltd and Digia Financial Software Ltd are pledged as collateral for the loans. A subordinated loan has been granted by TEKES for product development. The loan has a fixed interest rate, which ranged between 1.0% and 3.0% until 31 December 2010. The effective interest rates on finance lease liabilities during the fiscal year was 4.48% (4.99% in 2009).

The tables below describe agreement-based maturity analysis results for 2010 and the 2009 comparison period. The figures are undiscounted and include interest payments and the repayment of loan capital:

€ 000 31 Dec 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

€ 000 31 Dec 2009 Balance sheet values Cash flow Less than 1 year 1–2 years 2–5 years Bank loans 29,000 30,715 6,872 6,675 17,169 Subordinated loans 170 174 84 45 45 Finance lease liabilities 1,259 1,311 785 410 116 Total 30,429 32,200 7,741 7,130 17,330

72 digia annual report 2010 Financial Statement

The book value of non-interest bearing current liabilities represents a reasonable estimate of their 23. Due dates of finance lease liabilities fair value. Material items included in accrued expenses arise from the accrual of holiday pay, as well as accrued provisions for salaries and fees. € 000 2010 2009 Finance lease liabilities, total of minimum lease payments Within one year 695 785 25. Operating leases Within more than one but less than five years 580 525 Minimum lease payments on the basis of other non-cancellable leases: After more than five years - -

Finance lease liabilities, present value € 000 2010 2009 of minimum lease payments Within one year 3,988 5,053 Within one year 662 705 Within more than one but less than five years 2,412 2,477 Within more than one but less than five years 565 437 After more than five years - - After more than five years - - Total 6,400 7,530

Financial expenses to be accrued in the future 48 51 The Group leases all of its production facilities and office premises. The average duration of the leases is three to five years, and they normally include the option of extension after the original date Total amount of finance lease liabilities 1,227 1,311 of expiry. The Group has also leased motor vehicles on maintenance lease agreements. The normal The finance leases concern IT equipment and have durations of two to three years. duration of maintenance lease agreements is three years. 24. Non-interest bearing liabilities

€ 000 2010 2009 Non-current Deferred tax liabilities 2,178 2,672 Total 2,178 2,672

Current Accounts payable 2,353 1,575 Total 2,353 1,575

Other non-interest bearing current liabilities Advance payments received 769 1,400 Accruals and deferred income 11,569 11,098 Provisions 133 1,052 Income tax liabilities 1,369 551 Other liabilities 6,340 5,793 Total 20,181 19,894 Total non-interest bearing liabilities 24,712 24,141

73 digia annual report 2010 Financial Statement 26. Contingent liabilities

€ 000 2010 2009 Other shares and holdings € 000 Collateral pledged for own commitments Keimola Golf Club Oy 7 Other 767 905 Kiinteistö Oy Rukan Kuukkeli 62 Total 767 905 Kytäjä Golf Oy 39 Vierumäki Golf Oy 17 Other contingent liabilities are associated with guarantee deposits or are units in fixed-income mutual Vierumäki Golf Club Oy 35 funds pledged as collateral for the credit limit. The credit limit is used as security for office leases. Vierumäen Loma-aika Oy 138 Furthermore, the item includes a guarantee deposit pledged as collateral. Vierumäen Kuntoharju Oy 270 Rikunniemen Huolto Oy 6 Tahko Golf Club Oy 39 Tahkovuorenpeikko Oy 11 Other 3 27. The group’s shares and holdings Total 627

Share of Group companies Domicile Home country ownership Share of votes 28. Related party transactions Digia Plc Helsinki Finland Parent company Digia Estonia Oü * Tallinn Estonia 100% 100% Two parties are considered related if one party can exercise control or significant power in decision- Digia Financial Software Oy Jyväskylä Finland 100% 100% making associated with the other party’s finances and business operations. The Group’s related par- Digia Finland Oy Helsinki Finland 100% 100% ties include the parent company and subsidiaries, in addition to the members of the Board of Directors Digia Hong Kong Ltd * Hong Kong China 100% 100% and the Management Team. Digia Service Oy Jyväskylä Finland 100% 100% Digia Software (Chengdu) Co. Ltd Chengdu China 100% 100% Remuneration paid to the CEO and Group management during the financial period, including fringe Digia Sweden Ab Stockholm Sweden 100% 100% benefits, was as follows: OOO Digia RUS St. Petersburg Russia 100% 100% Sunrise Resources Oy Helsinki Finland 100% 100% Digia Partners Oy * Helsinki Finland 100% 100% € 000 2010 2009 Microext Oy * Helsinki Finland 100% 100% Salaries and other short-term employee benefits 1,893 1,505 Share-based bonuses 285 574 Total 2,178 2,079 * The companies are not engaged in business operations.

74 digia annual report 2010 Financial Statement

The salaries and fees paid in 2010 to the CEO and the members of the Board of Directors were as follows: Foreign exchange risks The Group is not significantly exposed to foreign exchange risk in its operations. The Group’s key € 000 foreign exchange risks involve the Swedish krona, Russian rouble and Chinese yuan. The Group has cur- Kyttälä Pertti Chairman of the Board of Directors 64 rency holdings of EUR 1.9 million through its Swedish, Russian and Chinese subsidiaries, which entails Mehtälä Martti Vice Chairman of the Board 42 an exchange risk when the investments are converted into euro. The Group has not hedged these Ingman Robert Member of the Board 24 investments. The financial statements include foreign currency sales receivables of approximately Karvinen Kari Member of the Board 31 EUR 0.3 million in Swedish kronas and Chinese yuan. Foreign currency accounts payable totalled Sivonen Pekka Member of the Board 25 approximately EUR 0.4 million, mainly being in Swedish kronas and Chinese yuan. The most significant Uhari Tommi Member of the Board 25 currency risks relating to accounts receivable and accounts payable can be managed by means of for- Virtanen Marjatta Member of the Board 26 ward foreign exchange contracts when necessary. At the end of the fiscal year 2009, the company had Mäkijärvi Heikki Member of the Board until March 2010 6 no such forward contract in force. Pasanen Jari Member of the Board until March 2010 6 Varelius Juha CEO 515 Total 764 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 The incentive schemes are described in Note 20 Share-based payments and in the separate report interest payments. During the financial period 2010, the interest rate on the long-term bank loan var- on corporate governance. Transactions related to the sale of services to related parties totalled EUR ied between 2.3% and 2.9% (between 2.3% and 4.6% in 2009). The impact of a +/-1% change in the 14,700 (EUR 8,400 in 2009). Transactions associated with the purchase of goods or services totalled loan’s interest rate is EUR 0.2 million per annum. The Group’s money market investments are a source EUR 16,200 (EUR 14,700 in 2009). The Group has no related-party loans. 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. 29. Management of financing risks Credit risks Digia Plc’s internal and external financing and the management of financing risks is concentrated The Group’s customers are mostly well-known Finnish and foreign companies with well-established in the finance function of the Group’s parent company. The function is responsible for the Group’s credit, and thus the Group has no significant credit risks. The Group’s policy defines creditworthiness liquidity, sufficiency of financing, and the management of interest rate and currency risk. The Group requirements for customers, investment transactions and counterparties. Services and products are is exposed to several financing risks in its normal course of business. The objective of the Group’s risk only sold to companies with a good credit rating. The counterparties in investment transactions are management is to minimise the adverse effects of changes in the financial markets on the Group’s companies with a good credit rating. Credit risks associated with commercial operations are primar- earnings. The primary types of financing risks are interest rate risk, credit risk and funding risk. The ily the responsibility of operational units. The parent company’s finance function provides customer general principles of risk management are approved by the Board of Directors, and the Group’s finance financing services in a centralised manner and ensures that the principles of the financing policy function together with the business segments is responsible for their practical implementation. are observed with regard to terms of payment and collateral required. At the end of the fiscal year 2010, credit loss provisions totalled EUR 0.1 million (EUR 0.1 million in 2009). The maturity analysis of accounts receivable for 2010 and 2009 is presented in Note 17.

75 digia annual report 2010 Financial Statement

Liquidity risk The Group aims to continuously estimate and monitor the amount of financing required for business Management of the capital structure operations in order to maintain sufficient liquid funds for financing operations and repaying loans The Group’s capital management aims at supporting company business by means of optimal manage- falling due. The availability and flexibility of financing is ensured by maintaining an unused credit facil- ment of the capital structure, ensuring normal operating conditions and increasing shareholder value ity and using several banks for financing. The amount of unwithdrawn standby credit on 31 December with a view to achieve the best possible profit. The Group’s interest-bearing net liabilities at the end 2010 was EUR 5.0 million. The Group maintains its immediate liquidity with the help of cash manage- of 2010 were EUR 10,634,000 (31 December 2009: EUR 19,960,000). When calculating gearing, the ment solutions such as Group accounts and credit facilities at banks. Cash and cash equivalents on 31 interest-bearing net liabilities are divided by shareholders’ equity. Gearing includes interest-bearing December 2010 totalled EUR 9.7 million. An agreement-based maturity analysis on discounted equity net liabilities less cash and cash equivalents. Interest-bearing net liabilities have primarily been used and interest payments for the reporting periods 2010 and 2009 is presented in Note 22. for financing the Group’s company acquisitions, and at the end of the reporting period, gearing stood at 20% (34% in 2009).

The share of liabilities of total shareholders’ equity on 31 December 2010 and 31 December 2009 was as follows:

€ 000 2010 2009 Interest-bearing liabilities 20,316 30,429 Cash and cash equivalents 9,682 10,469 Interest-bearing net liabilities 10,634 19,960 Total shareholders' equity 67,411 58,184 Net gearing, % 20% 34%

76 digia annual report 2010 Financial Statement

30. The group’s key financial ratios

€ 000 2010 2009 2008 2007 2006 Extent of business Net sales, € 000 130,825 120,335 123,203 105,839 84,968 - change on previous year, % 9 % -2% 16% 25% 40% Gross capital expenditure, € 000 1,965 1,342 2,512 1,979 1,876 - % of net sales 2 % 1% 2% 2% 2% Capitalisation for research and development - - - - 256 - % of net sales 0% 0% 0% 0% 0% Number of personnel, 31 December 1,558 1,471 1,337 1,155 1,087 Average number of personnel 1,508 1,387 1,314 1,116 981

Profitability Operating profit, € 000 17,164 -7,796 13,437 11,080 8,354 - % of net sales 13% -6% 11% 10% 10% Net profit, € 000 17,164 -13,664 7,409 5,871 4,867 - % of net sales 13% -11% 6% 6% 6% Return on equity, % 18% -21% 11% 9% 8% Return on investment, % 19% -7% 11% 9% 9%

Financing and financial standing Loans from financial institutions, € 000 23,316 30,429 56,950 56,413 56,664 Cash and cash equivalents, € 000 9,682 10,469 18,879 11,739 11,506 Gearing, % 20% 34% 53% 65% 72% Equity ratio, % 59% 52% 47% 47% 44% Cash flow from operations, € 000 11,066 20,232 15,473 6,157 5,756 Dividends (paid), € 000 2,885 1,025 2,041 1,625 930 Earnings per share, EUR undiluted 0.56 -0.67 0.36 0.29 0.25 Earnings per share, EUR diluted 0.56 -0.67 0.36 0.29 0.25 Equity per share 3.23 2.79 3.46 3.32 3.10 Dividend per share (proposal for 2010) 0.27 0.14 0.05 0.1 0.08 Dividend payout ratio 48% - 14% 35% 32% Effective dividend yield 5% 4% 3% 3% 2% Price/earnings ratio (P/E) 8.98 - 5.17 10.39 13.70 Lowest share price 3.38 1.39 1.73 2.93 3.00 Highest share price 5.89 3.88 3.35 4.26 4.97 Average share price 5.01 2.72 2.83 3.77 3.75 Market capitalisation 104,949 71,528 38,788 61,079 69,669 Trading volume, shares 7,260,278 9,123,589 7,321,002 9,583,795 13,899,149 Trading volume, % 35% 45% 36% 47% 71%

The weighted average number of shares during the accounting period, adjusted for share issues, was 20,855,020. The diluted weighted average number of shares during the period was 20,860,207. The number of shares outstanding at the end of the accounting period was 20,643,942. At the end of the fiscal year the company held 129,964 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 90,739 of these shares. The buyback program was terminated by the Board at its meeting on 3 February 2009. 77 digia annual report 2010 Financial Statement

Calculation of Financial Ratios

Return on investment (ROI),%: Profit or loss before taxes + interest and other financing costs x 100 Balance sheet total – non-interest bearing liabilities (average)

Return on equity (ROE),%: Profit or loss before taxes – taxes x 100 Shareholders’ equity + minority interest (average)

Equity ratio,%: Shareholders’ equity + minority interest x 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 x 100 Earnings per share

Net gearing Loans from financial institutions – cash, bank receivables and financial securities x 100 Shareholders’ equity

Effective dividend yield,%: Dividend per share x 100 Last trading price for the period, adjusted for share issues

Price/earnings (P/E): Last trading price for the period, adjusted for share issues Earnings per share

78 digia annual report 2010 Financial Statement Parent Company’s Income Statement (FAS)

€ Note 1 Jan–31 Dec 2010 1 Jan–31 Dec 2009 Net sales 1 7,971,700.00 8,277,619.00

Other operating income 2 36,975.00 21,905.00 Personnel expenses 3 -4,674,170.53 -4,537,220.03 Depreciation and amortisation 4 -236,026.63 -853,996.90 Other operating expenses 5 -2,836,101.90 -2,993,412.43 -7,646,299.06 -8,384,629.36

Operating profit 262,375.94 -85,105.36

Financial income and expenses 6 -1,666,790.36 -3,016,448.01

Earnings before extraordinary items and taxes -1,404,414.42 -3,101,553.37

Extraordinary items 5,500,000.00 8,600,000.00

Earnings before tax 4,095,585.58 5,498,446.63

Income taxes 7 -1,149,554.11 -1,570,680.66

Net profit 2,946,031.47 3,927,765.97

79 digia annual report 2010 Financial Statement Parent Company’s Balance Sheet (FAS)

€ Note 31 Dec 2010 31 Dec 2009 € Note 31 Dec 2010 31 Dec 2009 ASSETS SHAREHOLDERS' EQUITY AND LIABILITIES

FIXED ASSETS SHAREHOLDERS' EQUITY

Intangible assets 8 Equity attributable to parent company shareholders Intangible rights 273,675.61 421,224.63 Share capital 2,086,464.50 2,085,364.50 Other long-term expenses 0.00 777.51 Rights issue 39,710.00 0 273,675.61 422,002.14 Issue premium fund 7,899,485.80 7,899,485.80 Tangible assets 9 Unrestricted invested share- Land and water areas 16,818.79 16,818.79 holders' equity reserve 35,486,427.82 35,447,817.82 Buildings and structures 97,253.53 103,846.99 Retained earnings 3,486,757.45 2,177,767.16 Machinery and equipment 44,322.44 79,925.06 Net profit 2,946,031.47 3,927,765.97 158,394.76 200,596.84 Total shareholders' equity 51,944,877.04 51,538,201.25 Investments 10 Shares in Group companies 114,078,367.38 114,078,367.38 Other shares and holdings 606,292.32 606,292.32 LIABILITIES 114,684,659.70 114,684,659.70 Non-current liabilities Total fixed assets 115,116,730.07 115,307,252.68 Loans from financial institutions 13,000,000.00 18,000,000.00

CURRENT ASSETS Current liabilities Current receivables 11 Accounts payable 88,141.00 161,510.01 Receivables from Group companies 6,335,115.00 9,430,272.94 Interest-bearing liabilities 4,000,000.00 4,000,000.00 Other receivables 212,120.54 276,800.10 Liabilities to Group companies 59,928,367.18 58,489,943.46 Prepayments and accrued income 272,595.74 261,815.24 Other liabilities 280,365.50 707,874.37 6,819,831.28 9,968,888.28 Accrued expenses 829,763.38 724,171.71 65,126,637.06 64,083 499.50 Cash and cash equivalents 8,134,952.75 8,345,559.84 Total liabilities 78,126,637.06 82,083,499.55 Total current assets 14,954,784.03 18,314,448.12 Total shareholders' equity and liabilities 130,071,514.10 133,621,700.80 Total assets 130,071,514.10 133,621,700.80

80 digia annual report 2010 Financial Statement Parent Company’s Cash Flow Statement (FAS)

€ 000 1 Jan–31 Dec 2010 1 Jan–31 Dec 2009 Cash flow from operations: Net profit 2,946 3,927 Adjustments to net profit -2,448 -3,159 Change in working capital 4,711 7,627 Interest paid -621 -1,758 Interest received 11 83 Income tax paid -1,495 -2,422 Net cash flow from operating activities 3,104 4,298

Cash flow from investments: Purchase of tangible and intangible assets -46 -16 Acquisition of subsidiary, net of cash acquired - - Cash flow from investments -46 -16

Cash flow from financing: Proceeds from share issue 79 - Acquisition of own shares - -33 Repayment of current term loans -4,000 -57,000 Repayments of non-current loans -1,000 -18,000 Withdrawals of current loans - 4,000 Withdrawals of non-current loans - 38,000 Group financing items * 4,537 37,580 Dividends paid and other profit distribution -2,885 -1,025 Cash flow from financing -3,269 3,522

Change in liquid assets -211 7,805

Liquid assets at beginning of period 8,345 540 Change in liquid assets -211 7,805 Liquid assets at end of period 8,135 8,345

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

81 digia annual report 2010 Financial Statement Basic Information of the Parent Company and Accounting Policies (FAS)

Basic information of the company Fixed assets, depreciation and amortisation Digia Plc is the parent company of the Digia Group. It is domiciled in Helsinki and its registered office Fixed assets are recognised in the balance sheet at immediate cost less planned depreciation and is at Hiomotie 19, 00380 Helsinki. Digia Plc subsidiaries with business operations are Digia Finland amortisation. Ltd (with the wholly owned subsidiaries Digia Financial Software Oy and Digia Service Oy), Sunrise Resources Ltd and Digia Sweden Ab. The economic lives underlying planned depreciation and amortisation are as follows:

Accounting policies Intangible assets The parent company’s financial statements have been prepared in accordance with Finnish Accounting Intangible rights 5 years Standards (FAS). The financial statement is based on original acquisition costs. Book values based on Other long-term expenses 5 years 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 Tangible assets charged the Group companies for services rendered. Buildings and structures 25 years Machinery and equipment 3–8 years Pension schemes The Group’s pension schemes are arranged through a pension insurance company. Pension premiums Purchases of fixed assets with an economic life of less than three years are recognised as annual and expenses allocated to the financial period are based on confirmations received from the insurance expenses. 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 reporting periods 2010 and 2009, Group contributions received have been recognised as extraordinary items.

82 digia annual report 2010 Financial Statement Notes to the Parent Company’s Financial Statement

1. Net sales 4. Depreciation, amortisation and impairment

€ 000 2010 2009 Net sales by segment Planned depreciation and amortisation Property, plant, and equipment, and intangible assets 236 258 € 000 2010 2009 Amortisation - 596 Group administration services 7,972 8,278 Total 236 854 Group total 7,972 8,278

2. Other operating income 5. Auditor’s fees € 000 2010 2009 € 000 2010 2009 Audit 80 91 Other 37 22 Other statutory duties 1 1 Total 37 22 Tax counselling 10 7 Other services 12 19 3. Information on personnel and governing bodies Total 103 118

€ 000 2010 2009 6. Financial income and expenses Board emoluments and remuneration and CEO's compensation 764 1,220 Other salaries and remunerations 3,260 2,520 Pension insurance premiums 532 618 Financial income Other personnel expenses 118 179 Total 4,674 4,537 € 000 2010 2009 Dividend income from Group companies - - Interest and financial income from Group companies - - Number of personnel, 31 December 2010 2009 Interest and financial income from others 11 66 Management and administration 47 46 Total 11 66 Total 47 46

83 digia annual report 2010 Financial Statement

Financial expenses 8. Intangible assets

€ 000 2010 2009 Other Impairment of financial securities - - Intangible long-term Total Total Interest expenses to Group companies 765 660 € 000 rights expenses 2010 2009 Interest expenses to other companies 513 1,494 Acquisition cost 1 January 1,809 655 2,464 2,460 Loan administration fees 80 826 Additions 35 - 35 4 Other financial expenses 320 102 Disposals - - - - Total 1,678 3,082 Acquisition cost 31 December 1,844 655 2,499 2,464

Accumulated depreciation and 7. Income taxes amortisation 1 January -1,388 -654 -2,042 -1,846 Depreciation -183 -1 -184 -196 Amortisation - - - - € 000 2010 2009 Accumulated depreciation and Income taxes on operations -280 -665 amortisation 31 December -1,571 -655 -2,226 -2,042 Income taxes on extraordinary operations 1,430 2,236 Total 1,150 1,571 Book value 1 January 421 1 422 614 Book value 31 December 274 0 274 422 Deferred tax assets arising 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 137,278.70 at the end of the fiscal year.

84 digia annual report 2010 Financial Statement

9. Property, plant and equipment

Land and Buildings and Machinery and Total Total € 000 water areas structures equipment 2010 2009 Acquisition cost 1 January 17 162 1,843 2,022 2,009 Additions - - 10 10 13 Disposals - - - - - Acquisition cost 31 December 17 162 1,853 2,032 2,022

Accumulated depreciation and amortisation 1 January - -59 -1,762 -1,821 -1,759 Depreciation - -7 -46 -53 -62 Amortisation - - - - - Disposals - - - - - Accumulated depreciation and amortisation 31 December - -66 -1,808 -1,874 -1,821

Book value 1 January 17 104 81 201 249 Book value 31 December 17 97 44 158 201

10. Financial assets

Investments in Other shares Total Total € 000 subsidiary shares and holdings 2010 2009 Acquisition cost 1 January 114,078 606 114,685 115,281 Additions - - - - Disposals - - - -596 Acquisition cost 31 December 114,078 606 114,685 114,685

Book value 1 January 114,078 606 114,685 115,281 Book value 31 December 114,078 606 114,685 114,685

85 digia annual report 2010 Financial Statement

Itemisation of other shares and holdings Share of 12. Shareholders’ equity Group companies Domicile Home country ownership Share of votes Digia Hong Kong Ltd Hong Kong China 100% 100% € 000 2010 2009 Digia Estonia Oü Tallinn Estonia 100% 100% Share capital 1 January 2,085 2,085 Digia Sweden AB Stockholm Sweden 100% 100% Rights issue 1 - Digia Finland Oy Helsinki Finland 100% 100% Reduction of nominal value - - Sunrise Resources Oy Helsinki Finland 100% 100% Share capital 31 December 2,086 2,085 Digia Partners Oy Helsinki Finland 100% 100% Premium fund 1 January 7,899 7,899 Transfer to unrestricted shareholders' equity - - Premium fund 31 December 7,899 7,899 Other shares and holdings €000 Kiinteistö Oy Rukan Kuukkeli 62 Rights issue 40 - Kytäjä Golf Oy 39 Vierumäki Golf Oy 17 Total restricted shareholders' equity 10,026 9,985 Vierumäki Golf Club Oy 35 Vierumäen Loma-aika Oy 138 Unrestricted shareholders' equity reserve 1 January 35,448 34,938 Vierumäen Kuntoharju Oy 270 Increase in share capital 39 - Rikunniemen Huolto Oy 6 Own shares - 510 Tahko Golf Club Oy 39 Unrestricted shareholders' equity reserve 31 December 35,486 35,448 Total 606 Accrued earnings 1 January 6,106 2,989

Dividends -2,885 -1,024 11. Current receivables Own shares - -169 Share-based transactions settled in equity 85 383 € 000 2010 2009 Accrued earnings 31 December 3,487 2,178 Receivables from Group companies Accounts receivable - 7 Net profit 2,946 3,928 Prepayments and accrued income 5,534 8,622 Borrowings 801 801 Total unrestricted shareholders' equity 41,919 41,553 Other receivables 212 277 Prepayments and accrued income 273 262 Total shareholders' equity 51,945 51,538 Total 6,820 9,969

86 digia annual report 2010 Financial Statement

Distributable funds 31 December 15. Contingent liabilities € 000 2010 2009 Unrestricted invested shareholders' equity 35,486 35,448 Lease liabilities Accrued earnings 3,487 2,178 Net profit 2,946 3,928 € 000 2010 2009 Total 41,919 41,553 Due during the current financial period 150 158 Due later 148 157 13. Non-current liabilities Total 298 315

€ 000 2010 2009 Loans from financial institutions 13,000 18,000 Other lease liabilities Total 13,000 18,000 € 000 2010 2009 Due during the current financial period 2,036 1,879 14. Current liabilities Due later 835 648 Total 2,872 2 526 € 000 2010 2009 Interest-bearing Interest-bearing liabilities 4,000 4,000 Liabilities to Group companies Other liabilities Borrowings 59,201 57,636 Total interest-bearing current liabilities 63,201 61,636 € 000 2010 2009 Other 140 147 Interest-free Total 140 147 Liabilities to Group companies Accounts payable 284 301 Accruals and deferred income 443 553 To others Accounts payable 88 162 Other liabilities 280 708 Accruals and deferred income 830 724 Total interest-free current liabilities 1,925 2,447 Total current liabilities 65,127 64,083

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

87 digia annual report 2010 Financial Statement Signatures to the Board’s Report and Financial Statement

Helsinki, 3 February 2011

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

Martti Mehtälä Pekka Sivonen Tommi Uhari

Marjatta Virtanen Juha Varelius CEO

Auditor’s note A report of the audit has been submitted today.

Helsinki, 3 February 2011

Ernst & Young Oy Authorised Public Accountants

Heikki Ilkka Authorised Public Accountant

88 digia annual report 2010 Financial Statement Auditor’s report

To the Annual General that its financial affairs have been arranged in a of the Board of Directors that give a true and statements and the report of the Board of Direc- Meeting of Digia Oyj reliable manner. fair view in order to design audit procedures that tors in Finland. The information in the report of We have audited the accounting records, the are appropriate in the circumstances, but not the Board of Directors is consistent with the financial statements, the report of the Board of Auditor’s responsibility for the purpose of expressing an opinion on the information in the financial statements. Directors, and the administration of Digia Oyj for Our responsibility is to express an opinion on the effectiveness of the company’s internal control. the year ended 31 December, 2010. The financial financial statements, on the consolidated finan- An audit also includes evaluating the appro- In Helsinki on February 2, 2011 statements comprise the consolidated state- cial statements and on the report of the Board priateness of accounting policies used and the ment of financial position, income statement, of Directors based on our audit. The Auditing reasonableness of accounting estimates made Ernst & Young Oy statement of comprehensive income, statement Act requires that we comply with the require- by management, as well as evaluating the overall Authorized Public Accountant Firm of changes in equity and statement of cash ments of professional ethics. We conducted our presentation of the financial statements and the flows, and notes to the consolidated financial audit in accordance with good auditing practice report of the Board of Directors. Heikki Ilkka statements, as well as the parent company’s bal- in Finland. Good auditing practice requires We believe that the audit evidence we have Authorized Public Accountant ance sheet, income statement, cash flow state- that we plan and perform the audit to obtain obtained is sufficient and appropriate to provide ment and notes to the financial statements. reasonable assurance about whether the finan- a basis for our audit opinion. cial statements and the report of the Board of The responsibility of the Board of Directors are free from material misstatement, Opinion on the consolidated Directors and the Managing Director and whether the members of the Board of Direc- financial statements The Board of Directors and the Managing Direc- tors of the parent company and the Managing In our opinion, the consolidated financial state- tor are responsible for the preparation of con- Director are guilty of an act or negligence which ments give a true and fair view of the financial solidated financial statements that give a true may result in liability in damages towards the position, financial performance, and cash flows and fair view in accordance with International company or have violated the Limited Liability of the group in accordance with International Financial Reporting Standards (IFRS) as adopted Companies Act or the articles of association of Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of finan- the company. by the EU. cial statements and the report of the Board of An audit involves performing procedures to Directors that give a true and fair view in accord- obtain audit evidence about the amounts and Opinion on the company’s ance with the laws and regulations governing disclosures in the financial statements and the financial statements and the the preparation of the financial statements and report of the Board of Directors. The procedures report of the Board of Directors the report of the Board of Directors in Finland. selected depend on the auditor’s judgment, In our opinion, the financial statements and the The Board of Directors is responsible for the including the assessment of the risks of mate- report of the Board of Directors give a true and appropriate arrangement of the control of the rial misstatement, whether due to fraud or error. fair view of both the consolidated and the parent company’s accounts and finances, and the Man- In making those risk assessments, the auditor company’s financial performance and financial aging Director shall see to it that the accounts of considers internal control relevant to the entity’s position in accordance with the laws and regula- the company are in compliance with the law and preparation of financial statements and report tions governing the preparation of the financial

89 digia annual report 2010 Financial Statement 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 2016

VAT documents Paper documents Automatic entries Paper documents 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

90 digia annual report 2010 shareholders

Shareholders

Latest technologies serving users and businesses

91 digia annual report 2010 shareholders

Information for Shareholders Stock Exchange Releases

The purpose of Digia’s investor relations is to Digia Plc will hold its Annual General Meeting for Financial reports provide capital markets with open and reliable 2011 on Wednesday, 16 March 2011, starting at information on the company and its operating 10.00 a.m. at the headquarters of the company. environment in order to give market participants Address Valimotie 21, 00380 Helsinki, Finland. 04.02.2010 Digia Plc Financial Statement bulletin 2009: Digia achieves its best-ever a factual overview of Digia as an investment. operative result Digia Plc shares are quoted on the Main List of To order Annual Reports and other 10.02.2010 Digia’s Financial Statements 2009 published the NASDAQ OMX Helsinki Ltd, in the Informa- publications, please contact 29.04.2010 Digia Plc First Quarter 2010: Net sales up 6.4 per cent, operating profit tion Technology sector, Small Cap segment. Digia Plc, Corporate Communications 14.2 per cent of net sales Valimotie 21, FI-00380 Helsinki 12.08.2010 Digia Plc Q2 2010: Clear rise in net sales (12.9%), profitability remains Investor relations Tel. +358 10 313 3000 good (13.6%) Chief Financial Officer Harri Savolainen invest(at)digia.com 29.10.2010 Digia Plc Third Quarter 2010: Net sales continued to increase (+6.6%) with Valimotie 21, FI-00380 Helsinki good profitability (EBIT 10.9%) Tel. +358 10 313 3000 The Annual Report, interim reports, and stock harri.j.savolainen(at)digia.com exchange releases are available on our website Other stock exchange releases at www.digia.com. Communications Manager Camilla Lindfors Valimotie 21, FI-00380 Helsinki The Annual Report 2010 has been 05.02.2010 Summons to the Annual General Meeting of Digia Plc Tel. +358 10 313 3000 published in electronic form at 05.02.2010 Changes in Digia’s Board of Directors camilla.lindfors(at)digia.com http://vuosikertomus2010.digia.com/en. The 10.02.2010 Digia’s Annual Summary of releases from 2009 published Annual Report can also be ordered as a printed 11.02.2010 Digia’s Electronic Annual Report published Financial releases 2011 PDF version via email from [email protected]. 03.03.2010 The decisions of Digia Plc’s Annual General Meeting and the organising During the financial year 2011, Digia Plc will pub- meeting of the Company’s Board of Directors lish the following financial releases in Finnish Change of address 31.03.2010 Change in Digia’s Financial Reports schedule regarding Q3/2010 and in English: We kindly ask shareholders to notify their 27.05.2010 New incentive scheme based on share earnings and growth for Digia’s • Q1 Interim Report: respective book-entry securities registers of any Management Friday 29 April 2011 at 9:00 a.m. change of address. 15.11.2010 Digia Plc: Shares subscribed with option rights • Q2 Interim Report: 24.11.2010 Digia’s Financial Reports and Annual General Meeting in 2011 Thursday 11 August 2011 at 9:00 a.m. • Q3 Interim Report: Friday 28 October 2011 at 9:00 a.m.

92 digia annual report 2010 shareholders

Share information Share capital and shares

The nominal share price is EUR 0.10. On 31st of December 2010, the total number of Digia shares was 20,864,645. According to the Finnish Central Securities Depository Ltd, on 31st of December 2010 Digia had 5,540 shareholders.

The ten major shareholders were Distribution of holdings by number of shares held on 31 December 2010

Number of Shares Percentage Percentage of Shareholder shares and votes Number of shares of holdings shares and votes Ingman Group Oy Ab 3,000,000 14.4% 1–100 21.6% 0.4% Sivonen Pekka 2,631,613 12.6% 101–1,000 59.1% 7.2% Hallikainen Jyrki 2,135,463 10.2% 1,001–10,000 17.5% 12.7% Karvinen Kari 1,353,901 6.5% 10,001–100,000 1.4% 10.8% Savolainen Matti 1,270,659 6.1% 100,001–1,000,000 0.3% 19.1% Keskinäinen työeläkevakuutusyhtiö Varma 750,000 3.6% 1,000,001– 3,000,000 0.1% 49.8% Nordea Pankki Suomi Oyj (Nominee-registered) 641,068 3.1% OMXBS/Skandinaviska Enskilda Banken AB (Nominee-registered) 363,005 1.7% Etola Oy 200,000 1.0% Distribution of shareholding by sector on 31 December 2010 Ahonen Olli 183,050 0.9% Percentage Percentage of holdings of shares Business 5.0% 19.6% Finance and insurance 0.3% 7.1% Public corporations 0.1% 3.6% Non-profit organisations 0.3% 0.6% Households 94.0% 68.0% Foreign holdings 0.3% 1.1%

93 digia annual report 2010 offices

Digia offices

Digia switchboard is +358 10 313 3000

HELSINKI JYVÄSKYLÄ LAPPEENRANTA OULU Headquarters Piippukatu 11 Laserkatu 6 Sepänkatu 20 Valimotie 21 FI-40101 Jyväskylä, Finland FI-53850 Lappeenranta, Finland FI-90100 Oulu, Finland FI-00380 Helsinki, Finland Tel. +358 10 313 3000 Tel. +358 10 313 3000 Tel. +358 10 313 3000 Tel. +358 10 313 3000 Fax +358 10 313 4700 Fax +358 10 313 4961 Fax +358 10 313 4022 Fax +358 10 313 3700

PORI RAUMA TAMPERE STOCKHOLM Pohjoisranta 11 F Isokatu 21 Åkerlundinkatu 11 Kungsgatan 8, 4 tr, FI-28100 Pori, Finland FI-26100 Rauma, Finland FI-33100 Tampere, Finland SE-11143, Stockholm, Sweden Tel. +358 10 313 3000 Tel. +358 10 313 3000 Tel. +358 10 313 3000 Tel. +46 8 5723 6400 Fax +358 10 313 4411 Fax +358 10 313 2110 Fax +358 10 313 2120 Fax +46 5723 6401

SAINT-PETERSBURG CHENGDU BEIJING 8 Beloostrovskaya str 8F, Building D5 2001, 20F, East Ocean Centre Saint-Petersburg, Russia,197342 Tianfu Software Park, Tianfu Avenue 24A, Jianguomenwai Avenue, Changyang Tel./Fax +7 812 655 0340/41 Chengdu 610015, China Beijing, China Tel. +86 28 6685 6966 Tel. +86 10 6515 5271 Fax +86 28 6685 6966-115 Fax +86 10 8518 5950