QPR Software Plc Annual Report 2011

Transcription

1 QPR Software Plc Annual Report 2011

2 QPR is excellent at displaying information in a variety of ways, which is important to us, as different stakeholders have different needs. Charles McCabe Performance Improvement Officer North Lanarkshire Council United Kingdom Thanks to the QPR ProcessAnalyzer s analysis views, especially the path analysis, we understand that our processes include much more variations than we ever imagined. Process streamlining is now materially easier. Tero Taulavuori Head of Quality and Technical customer care Outokumpu Stainless Finland With QPR as their single point of reference for all relevant figures, our employees have achieved a greater awareness on how they are attaining their targets. Rolf Metzner Director Industrial Engineering, Control, Navigation & Cabin Systems Diehl Aerospace GmbH Germany Based on our experience we have seen that QPR helps Holding Companies to improve efficiency and the quality of strategic planning and reporting. Sergey Tretyak Deputy Director, Strategic Planning Novard Group Russian Federation The time saved thanks to QPR software is really remarkable. We can focus on the essential, which is studying the results and planning the actions. Timo Laapio Development Manager Peab Oy Finland

3 Content Content Page QPR in Brief... 1 CEO s Review... 4 Board of Directors... 5 Executive Management Team... 7 Report of the Board of Directors January 1 December 31, Consolidated Comprehensive Income Statement, IFRS Consolidated Balance Sheet, IFRS Consolidated Cash Flow Statement, IFRS Consolidated Statement of Changes in Equity, IFRS Notes to the Consolidated Financial Statements (IFRS) Parent Company Income Statement, FAS Parent Company Balance Sheet, FAS Parent Company Cash Flow Statement, FAS Accounting principles, FAS Notes to the Parent Company Financial Statements, FAS Date and signatures for the Board of Directors Report and Financial Statements Auditor s Report Information to Shareholders Our customers Contact information... 61

4 QPR in Brief QPR in Brief The business operations of the QPR Group consist of software sales and professional services sales. QPR software is used by over customers around the world from the private as well as the public sector. Our software is localized to more than 20 languages. PRIMARY CUSTOMER BENEFITS The primary customer benefits of our services and products are linked to business process management (BPM) and to performance management (PM) in the following areas: Enterprise Architecture allows successful linkage of business and IT by modeling and planning your organization s processes, information, applications and technology. We offer consulting and a software product developed for EA needs (QPR Enterprise- Architect). GLOBAL REACH THROUGH PARTNER NETWORK QPR Software serves its customers as a comprehensive solution provider directly in Finland and in the Russian Federation and globally as a software vendor through a network of local Value Added Resellers in more than 50 countries. You can find the nearest reseller to you from the Resellers section of the site. QPR IS CERTIFIED QUALITY! The Management System of QPR Software Plc has received ISO9001:2008 quality certification covering the Company s all activities. Scope of the certificate is design, marketing and delivery of software, services and solutions for Process Excellence. Process Analysis helps to understand the organization s true processes. Process Analysis is executed from the event data found in operative systems, like ERP and CRM. We offer a software product for analysis execution (QPR ProcessAnalyzer) and consulting related to the analysis work. Business Process Modeling provides a base for systematic process development and improvement. We offer a software product for modeling and planning processes (QPR ProcessDesigner) as well as professional services for process management and improvement. SAP Business Process Improvement makes business more efficient and swift. We offer professional services to our customers for securing maximum benefits from their SAP investments. Successful Performance Management can be achieved by measuring performance according to set targets. We offer a software product for the measurement and for communication of the results and corrective actions (QPR Metrics) as well as professional services related to these needs. SOURCES OF OUR GROWTH Our constantly renewing software suite and our services are the main sources of our growth. We seek growth especially from Enterprise Architecture, SAP Business Process Improvement, QPR ProcessAnalyzer software and services related to it QPR Quality. Processes. Results.

5 QPR in Brief Net sales (EUR 1,000) Operating profit (EUR 1,000) Share of recurring subscription and maintenance revenue from net sales, % QPR Software business by market. Share of each market of 2011 net sales, % QPR Quality. Processes. Results.

6 QPR in Brief Key figures (EUR 1,000 or %) Net sales 7,539 6,937 6,618 Net sales growth, % Operating profit % of net sales Profit or loss before tax % of net sales Profit for the period % of net sales Return on equity, % Return on investment, % Interest-bearing liabilities ,098 Cash and cash equivalents 1,020 1,703 1,929 Net liabilities Total equity 2,973 2,694 2,575 Gearing, % Equity ratio, % Total balance sheet 7,761 7,250 6,874 Investments in non-current assets 1, ,026 % of net sales Product development expenses 1,312 1,278 1,325 % of net sales Personnel average for period Earnings per share, basic and diluted, Equity per share, QPR Quality. Processes. Results.

7 CEO s review CEO s Review In October 2010 we published our strategy that aims at significant business growth. Profitable growth and doubling our 2009 net sales in five years were set as targets. In practice this means that we are targeting approximately EUR 13 million net sales in In the reporting period we continued the implementation of our strategy through increased investments in our growth areas. We succeeded in accelerating net sales growth, but did not yet achieve the targeted growth level. However, in 2012 we expect our growth to further accelerate compared to the previous year. The sources for growth are our new software products, QPR ProcessAnalyzer and QPR Enterprise- Architect, and our service business expansion. QPR ProcessAnalyzer software discovers the organization's actual as-is business processes automatically based on existing event data stored in IT systems. Process development in organizations can thus be carried out faster and with greater accuracy than when using the traditional methods, creating very significant customer benefits. We aim at strong international software sales growth and a significant market share in this new category. The launch of QPR ProcessAnalyzer software in early 2011 has been successful and we have acquired dozens of customers, mainly large organizations in Finland and abroad. Service business expansion to enterprise architecture consulting made significant progress in the Finnish market, and gained momentum towards the end of the year. Several projects were started in both private and public sector, and in November 2011 The Finnish Ministry of Finance decided to acquire the public sector enterprise architecture and process modeling service from QPR Software. The service utilizes the QPR EnterpriseArchitect software. The contract with the Ministry was made for 3 years and it includes an option to extend the contract to cover 2 additional years. The value of the contract is, including both option years, at minimum over EUR 1 million. Our aim is to become a preferred partner for those large and mid-sized organizations that are seeking competitive advantage through the development of their processes and enterprise architecture. Last year we also strengthened our service business by acquiring Nobultec Ltd, a company specialized in the SAP business process improvement. QPR and Nobultec had already prior to the acquisition intensified their cooperation, especially in SAP business process analysis projects that utilize QPR Process- Analyzer. The acquisition of Nobultec will accelerate QPR s service business and brings new SAP system expertise to QPR. In international channel sales we are focusing on recruiting new business partners mainly among companies specialized in process improvement. In addition to this, we seek growth through developing replicable solutions to our existing channel partners. In Russia, we operate through our subsidiary and focus mainly on performance management solutions for large organizations. Excellent customer references, such as MTS, the largest mobile operator in Russia, the oil company TNK-BP and the City of Moscow, form a solid foundation for this. Jari Jaakkola Chief Executive Officer QPR Quality. Processes. Results.

8 Board of Directors Board of Directors QPR Software Plc s Board of Directors, 31 December 2011: Aino-Maija Gerdt, Vesa-Pekka Leskinen (chairman), Jyrki Kontio and Asko Piekkola. QPR Board of Directors had 13 meetings in 2011 (12). The average attendance percentage in meetings was 94 (93). The Board of Directors made a self-assessment of its operation. The Board has not established any committees. Chairman of the Board received an annual emolument of EUR 25,230 and a member an emolument of EUR 16,820. No separate meeting fees were paid. Vesa-Pekka Leskinen (b.1950) Chairman of the Board since January Member of the Board since July Mr. Vesa-Pekka Leskinen is the Chairman of the Board of Kauppamainos Oy and was the CEO of Kauppamainos from 1979 to September He is the majority owner of Kauppamainos Oy. The main area of business of Kauppamainos has been investor relations and communications, in relation to which Kauppamainos has designed and delivered nearly a hundred annual reports of various companies, participated in the preparation of tens of equity issues, and have been supporting the IPO process of more than ten companies. Mr. Leskinen has personally been involved in carrying out the investor relations and communication of public listed companies. Vesa-Pekka Leskinen is also the founder of Quartal Oy and was the majority owner of the company until Quartal Oy is focusing on developing and delivering computerized delivery solutions and communication services, especially for the stock market and the companies having business therein. In addition, Vesa- Pekka Leskinen is a board member in Mawell Ltd and Vianaturale Oy. By education Mr. Leskinen is an undergraduate and has an MAT degree. Mr. Leskinen held 851,400 shares of QPR Software Plc at December 31, Kauppamainos Oy, whose majority owner Mr. Leskinen is, held 475,170 shares of QPR Software Plc at December 31, Aino-Maija Gerdt (b. 1955) Member of the Board since March Independent member. Mrs. Aino-Maija Gerdt is employed by Innofactor Plc with the responsibility for the global cloud service accounts and partnerships. She is a member of the Innofactor Plc Executive Board. Innofactor is one of the leading developers and providers of Internetbased programming solutions in Finland. The Company provides its own and Microsoft s software. Mrs. Gerdt is also board member in Finnish Software Entrepreneur Association (also earlier in ). Prior to Innofactor Aino-Maija Gerdt worked as CEO of Frends Technology Oy from 2000 to March From 1999 to 2000 she worked in EDS Finland/Nordic as Account Executive for named strategic accounts, first in Finland and later also in Sweden and Belgium. From 1996 to 1998 she worked as Unit Manager in Siemens Nixdorf Oy, responsible for the Industry business unit in Finland. From 1994 to 1996 Gerdt worked as Director for HR solutions in Tietonauha Oy QPR Quality. Processes. Results.

9 Board of Directors Earlier Aino-Maija Gerdt has been a board member in Benefect Oy ( ) and an executive management team member in the Vertical Software Solutions Fund of the Finnish Funding Agency for Technology and Innovation, Tekes ( ). From 2006 to 2008 she was also the chairman for IAMCP Finland and a board member for IAMCP EMEA from 2006 to 2007 (IAMCP, International Association of Microsoft Certified Partners). Aino-Maija Gerdt holds a M.Sc. (BA) degree and has carried out MBA studies in the Aalto University School of Science and Technology. Aino-Maija Gerdt held no shares in QPR Software Plc at December 31, Jyrki Kontio (b.1961) Member of the Board since March Independent member. Mr. Jyrki Kontio is an entrepreneur in his own consulting company R & D-Ware Oy. Previously, he was Professor of Software Product Business at the Helsinki University of Technology in Prior to this assignment, Kontio worked for 15 years at Nokia Corporation, serving in various software and process management leadership and research positions. He has also worked as Senior Researcher at the University of Maryland in the USA. Mr. Kontio has a Ms.Sc. degree in Business Administration and a Doctor degree in Technology. Asko Piekkola (b.1952) Member of the Board since March Independent member. Mr. Asko Piekkola is currently managing director and partner of AG-Partners Corporate Finance Ltd, operating in the area of business of mergers and acquisitions and assignments related to capital markets. He is also a board member in Sievo Oy. Previously he has worked, among others, in the following listed companies: as CFO in Labsystems Oy and Spontel Oy, as a board member in Expaco Oy, Martela Oyj and Kylpyläkasino Oy and as a board member and chairman in Castrum Oyj. Asko Piekkola has also held positions in Arctos Capital Oy and Mawell Oy as a board member and chairman, in Alexander Corporate Finance Oy (former Arctos Corporate Finance Oy) as a board member, and in several other businesses and investment companies as a board member and chairman. He holds a Ms.Sc. degree in Economics. Asko Piekkola is also the chairman of the board in QPR s subsidiary QPR Services Oy. Mr. Piekkola held 316,438 shares of QPR Software Plc at December 31, Mr. Kontio held no shares of QPR Software Plc at December 31, QPR Quality. Processes. Results.

10 Executive Management Team Executive Management Team Jari Jaakkola b Chief Executive Officer as of January Member of the Executive Management Team since August Employed by the Company since August Mr. Jari Jaakkola worked from August 2006 to January 2008 as Senior Vice President, Business Operations in QPR Software Plc. Jari Jaakkola s previous experience covers leadership positions in Sonera Corporation and M-real Corporation. He also has extensive experience from positions in international advertising and PR agencies and the Finnish media. Mr. Jaakkola holds a B.A. degree in journalism from Tampere University and an MBA from Henley Management College. Mr. Jaakkola held 232,000 shares of QPR Software Plc at December 31, His 100%-owned company Value FM Ltd holds 14,550 shares of QPR Software Plc. Maija Erkheikki b Vice President Software Sales International since August Member of the Executive Management Team since January Employed by the Company since October Mrs. Maija Erkheikki is responsible for the sales and delivery of QPR s software and services outside of Finland. Before joining QPR she worked as a consultant and was employed by a QPR reseller partner. At QPR she started as a senior consultant training reseller partners and implementing solutions for Finnish customers. Since August 2006 she was based in California and supported US reseller partners and implemented solutions for the US customers. Starting July 2007 she was in charge of channel sales and developing the distribution channel in the US. Year 2008 she worked as Vice President, Channel Sales Europe and Americas. As of January 2009 Maija Erkheikki worked as Vice President, Services and Solutions. Maija Erkheikki holds a Master s degree in Industrial Engineering and Management. Mrs. Erkheikki held 2,000 shares of QPR Software Plc at December 31, Matti Erkheikki b Vice President, Business Operations Finland since July Member of the Executive Management Team since July Employed by the Company since February Mr. Matti Erkheikki is responsible for Business Operations Finland. Matti Erkheikki has been employed by QPR Software since February Initially he worked as a consultant implementing QPR solutions globally. Since August 2005 he worked as a Business Development Manager and since July 2006 as the Regional Vice President of USA and Canada for QPR's California-based subsidiary QPR Software, Inc. As of July 2007 he was responsible for QPR's software sales in Finland. Matti Erkheikki holds a Master s degree in Industrial Engineering and Management. Mr. Erkheikki held 7,500 shares of QPR Software Plc at December 31, Jyrki Karasvirta b Vice President, Communications and Marketing since February Member of the Executive Management Team since February Employed by the Company since June Mr. Jyrki Karasvirta is responsible for the Group s marketing and communication. From June 2008 to February 2010 he worked as Communications Director in QPR Software. Karasvirta has earlier held management level corporate communication positions in TeliaSonera Finland Oyj, Sonera Corporation and Asset Management Company Arsenal Ltd. He has a strong experience from international corporate communication tasks. From 2006 to 2008 he was the deputy chairman of ProCom the Finnish Association of Communications Professionals. Jyrki Karasvirta holds a Ms.Sc. degree in Corporate Communications and has a Marketing Management Diploma from the Institute of Marketing. Jyrki Karasvirta held 1,000 shares of QPR Software Plc at December 31, QPR Quality. Processes. Results.

11 Executive Management Team Teemu Lehto b Vice President, Business Development since January Member of the Executive Management Team since May Employed by the Company since September Mr. Teemu Lehto is responsible for the development of QPR ProcessAnalyzer software. He has been employed by QPR since September At first, he acted as a Product Manager, Senior Consultant and Sales Manager, and later as a Global Partner Manager. He was the Vice President of Professional Services from 2002 to Teemu Lehto was also responsible for product development from December 2002 to March He was the Vice President of Strategic Accounts and Markets during In he worked as the Vice President of Marketing, Solutions and Business Development. He was responsible for the development of new businesses for QPR and innovation activities during Before joining QPR he was the Managing Director at Planway Oy. Prior to this, he worked at ICL Data Oy as Development Manager at the Data Warehousing Center, at ViSolutions Oy as Product Development Manager, at Nokia Research Center as Application Developer in the department of knowledge management, and at Systeemikonsultit Oy as Application Developer. Teemu Lehto holds a Master s degree in Engineering, with Information Technology as his major subject. Mr. Lehto held 136,468 shares of QPR Software Plc at December 31, Päivi Martti b Chief Financial Officer since November Member of the Executive Management Team since November Employed by the Company since November Ms. Päivi Martti is responsible for the Group's finance, and administration. QPR's insider register is held by the Chief Financial Officer, who also administrates and monitors compliance with Insider Guidelines. Coordination of risk management and internal control and the related reporting is the responsibility of the Chief Financial Officer. Päivi Martti worked as Acting Chief Financial Officer in QPR from May 2008 to August Before joining QPR, she has worked as the CFO in Holiday Club Resorts Oy. In addition, she has held several financial management leadership positions in Sonera Corporation, Sanitec Oyj and Oy Gustav Paulig Ab. Martti is a graduate from Commercial Institute and has a degree from the Institute of Marketing. Ms. Martti held 15,000 shares of QPR Software Plc at December 31, Mikko Mäki-Rahkola b Managing Director of subsidiary Nobultec Ltd since August Member of the Executive Management Team since August Employed by the Company since August Mr. Mikko Mäki-Rahkola is the Managing Director of Nobultec Ltd, a subsidiary of QPR Software Plc. Nobultec is a service company specializing in business process development in SAP system environments. QPR acquired all shares of Nobultec Ltd in August Mikko Mäki-Rahkola is one of the founders of Nobultec Ltd. The company started its operations in He has been Nobultec s Managing Director since He has an extensive experience from participating customer projects as project manager, process architect or lead developer. Between 2002 and 2005 he worked as a consultant in Accenture Oy (Finland) and in as consultant in Fujitsu Invia Oy. During he was a board member in Pesmel Oy and in in Nobultec Ltd. Mikko Mäki-Rahkola holds Masters degrees both in Economics and Computer Sciences. Mr. Mäki-Rahkola held 156,103 shares of QPR Software Plc at December 31, Sami Tähtinen b Vice President Products and Technology since January Member of Executive Management Team since January Employed by the Company since January Mr. Sami Tähtinen is responsible for the Company s software product portfolio, product strategy, product management, product development and internal ICT. Before QPR he worked as Solutions Sales Manager in CCC Corporation. From 2002 to 2009 he worked as Chief Technology Officer, and prior to that first as System Designer and later as Chief Designer in Frends Technology Oy. Tähtinen holds a Master s degree in Engineering. Mr. Tähtinen held 1,500 shares of QPR Software Plc at December 31, QPR Quality. Processes. Results.

12 Report of the Board of Directors January 1 December 31, 2011 Report of the Board of Directors January 1 December 31, 2011 Highlights in 2011: QPR Software Group s net sales in 2011 were EUR 7,539 thousand. Operating profit was EUR 755 thousand. Operating margin was 10.0% of net sales. Profit for the period was EUR 521 thousand. Domestic (Finland) net sales were EUR 3,703 thousand (49.1% of total net sales). Domestic net sales grew mainly due to good demand for QPR s service products and the consolidation of Nobultec Ltd as of August. International net sales were EUR 3,836 thousand (50.9% of total net sales). The launch of the new QPR ProcessAnalyzer software in February was successful and the sales developed positively. New QPR EnterpriseArchitect software product was introduced, when the latest version of our software suite, QPR Suite 2012, was launched in November. In November, The Finnish Ministry of Finance decided to acquire the public sector enterprise architecture and process modeling service from QPR Software. BUSINESS OPERATIONS In the fiscal year 2011, the business operations of the QPR Group consisted entirely of software license and subscription sales, software maintenance sales and professional services. In 2011 the QPR Software Group consisted of the parent Company QPR Software Plc and the following subsidiaries: Nobultec Oy (100%, Finland, acquired in August 2011) QPR Software AB (100%, Sweden), QPR Software Inc. (100%, USA), QPR Services Oy (100%, Finland), StrongDocs Oy (100%, Finland) and QPR CIS Oy (80%, Finland) and its subsidiary, OOO QPR Software (QPR Group 80%, Russia). Nobultec Ltd, acquired in August 2011, is a Finnish service company that specializes in business process development. It concentrates on customers who have organized their business operations into a processbased system and use SAP AG products. Nobultec is a Community level SAP Consultancy Partner. The acquisition of Nobultec accelerates QPR s process development service business and brings new SAP system expertise to QPR. In addition, the deal increases QPR s resources to develop QPR ProcessAnalyzer business, which is strategically important to QPR. QPR Software has two segments; Software Sales International (software license and subscription sales, maintenance and professional services sales outside of Finland) and Business Operations Finland (software license and subscription sales, maintenance and professional services sales in Finland). QPR sales in the Russian Federation and CIS countries are reported in 2011 in the same way as the sales made by QPR international resellers. The Company does not monitor or report intersegment net sales, because it is of minor size. Key figures of the Group from the review period and previous two periods are presented in Note 26, on page 42. Formulas for calculating key indicators of the Group are presented on page 45. NET SALES QPR Software Group s 2011 net sales increased by 8.7% to EUR 7,539 thousand (2010: 6,937; 2009: 6,618). The growth was mainly attributable to good performance in professional service sales in Finland and the consolidation of Nobultec Ltd into QPR Software Group as of August 1, The sales of professional services increased to EUR 1,930 thousand (1,214). The share of professional services of the Group s net sales increased to 25.6 percent (17.5). The share of international operations of the Group s net sales was 50.9 % (58.8). International net sales decreased to EUR 3,836 thousand (4,077) mainly due to lower software license sales than in the previous year. This, in turn, was partly influenced by gradual initiation of subscription based software sales in QPR s international sales channel. QPR software and services were delivered to 69 countries during the reporting period (60) QPR Quality. Processes. Results.

13 Report of the Board of Directors January 1 December 31, 2011 Net sales by product categories (EUR 1,000) 2011 % 2010 % Change, % Software licenses 1, , Maintenance services 3, , Professional services 1, , Total 7, , Net sales by business segments (EUR 1,000) 2011 % 2010 % Change, % Software Sales International 3, , Business Operations Finland 3, , Total 7, , FINANCIAL PERFORMANCE Operating profit in the financial year was EUR 755 thousand (2010: 752; 2009: 705), and the operating margin was 10.0% (2010: 10.8; 2009: 10.6). Operating profit in Business Operations Finland increased due to increased net sales, but the decrease in channel sales had an adverse impact on the profitability in international operations. Despite the growth in net sales, the Company s operating profit was on the same level as last year, which was mainly due to increase in personnel costs and outlays in the development of a new software product, QPR ProcessAnalyzer. Operating profit includes a contribution of EUR 79 thousand (44) from the Finnish Funding Agency for Technology and Innovation for the development of the QPR ProcessAnalyzer software. Depreciation and amortization grew slightly to EUR 572 thousand (532). EUR 221 thousand of this is amortization of acquisition cost of companies or businesses. Net profit after tax for the financial year was EUR 521 thousand (527), which corresponds to 6.9% (7.6%) of net sales. In the consolidated balance sheet as of December 31, 2011 the remaining amount of deferred tax asset was EUR 38 thousand (233) and the amount of deferred tax liabilities was EUR 90 thousand (0). Earnings per share (basic and diluted) were EUR 0.04 (0.04). BUSINESS SEGMENTS The decrease in net sales was due to lower software license sales than in the previous year. This, in turn, was partly influenced by gradual initiation of subscription based software sales in QPR s international sales channel. This has a negative impact on revenue recognition from the new contracts in the short term, but on the other hand will provide a steady increase in net sales in the future. Furthermore, the reflections of the increased uncertainty in general economic situation extended the sales cycles in several markets. International net sales showed a positive development towards the end of the year and quarterly net sales were highest in the fourth quarter. However, net sales in October December decreased by 3.2% compared to the equivalent quarter of the previous year. Business segment s operating profit declined to EUR 472 thousand (777), due to decreased channel sales. The Company delivered software to 69 countries during the period (60). The largest markets outside Finland in the reporting period were Russia, South Africa, Sweden, Belgium, Japan and Great Britain. The Company delivered software, among others, to Abu Dhabi Sewerage Services Company in United Arab Emirates, Anglo Platinum and Real People in South Africa, The Bosch Group in Korea, City of Antwerp and Sibelco in Belgium, City of Malmö in Sweden, City of Moscow, IRKUT, OGUP Pharmacies, and TNK-BP in Russia, The Ministry of Health in Lithuania, The Ministry of Justice in Lithuania, Millard Filters in Spain, Millennium Bank in Romania, United Chemical Company in Kazakhstan, Vattenfall in Sweden and to Aramark in the USA. Software Sales International Net sales for Software Sales International in 2011 decreased by 5.9% to EUR 3,836 thousand (4,077) QPR Quality. Processes. Results.

14 Report of the Board of Directors January 1 December 31, 2011 Operating profit by business segment Change, % Software Sales International Business Operations Finland Not allocated Total Business Operations Finland Net sales in Finland grew by 29.5% in 2011 and were EUR 3,703 thousand (2,860). Organic growth was 16.2%. Net sales growth in Finland was due to good performance in both software sales and professional service business. The growth in professional service business was due to service business expansion to enterprise architecture consulting and process analysis consulting, as well as due to the consolidation of Nobultec Ltd into QPR Software Group. The majority of new software sales in Finland came from subscription sales. The revenue to be recognized in 2012 from software subscription agreements made in 2011 is significant (approximately EUR 0.6 million), which forms a solid foundation for net sales growth in Finland. Operating profit of the business segment increased to EUR 646 thousand (320), due to increased net sales. In Finland, the Company delivered software and professional services in the reporting period, among others, to Carea, Certia, Central Finland Healthcare District, City of Espoo, City of Helsinki, City of Imatra, CRH Finland, DNA Oyj, Elisa Corporation, Helsinki University, Kemira Corporation, Kesko Corporation, Lassila & Tikanoja, Medbit, Metso Paper, The Finnish National Board of Education, Nordic Investment Bank, Onninen Group, Outotec Corporation, Patria Corporation, Rautaruukki Corporation, Realia Group, SATO Corporation, SOK, SRV, Tekla Corporation, Teollisuuden Voima, Tuko, Terveystalo, Vacon, City of Varkaus, Vaisala Corporation, Oy Woikoski Ab, the Ministry of Finance and the Ministry of Education. FINANCE AND INVESTMENTS At the end of 2011, the consolidated balance sheet totaled EUR 7,761 thousand (7,250). The increase is mostly attributable to the acquisition of Nobultec Ltd in August 1, Cash flow from operating activities was EUR 1,261 thousand (864). Strong growth in software subscription sales in the reporting period had a positive effect in cash flow from operating activities. Cash and cash equivalents at the end of reporting period were EUR 1,020 thousand (1,703). A dividend of EUR 362 thousand (244) was paid during the reporting period. The Group s investments in the review period totaled EUR 1,478 thousand (350). The largest investment was the acquisition of Nobultec Ltd, for a total consideration of EUR 904 thousand. Furthermore, investments include payments of EUR 165 thousand for the business operations bought from QPR s Russian resellers in November The Group s interest-bearing liabilities decreased and were EUR 566 thousand (793) at the end of the reporting period. Return on equity was 18.4% (2010: 20.0; 2009: 19.5). The gearing ratio was -15.3% (-33.8). Return on capital employed was 21.5% (21.0). Short-term liabilities include deferred revenue in total of EUR 1,046 thousand (918). At the end of the reporting period, quick ratio was 1.20 (1.87). At the end of the reporting period, the consolidated total equity stood at EUR 2,973 thousand (2,694), and the equity ratio was 44.2% (2010: 42.6; 2009: 42.5). PRODUCT AND SERVICES DEVELOPMENT The amount of product development expenses in the review period totaled EUR 1,313 thousand (2010: 1,278; 2009: 1,325), representing 20.8% of all operating expenses (2010: 20; 2009: 22). During the review period, product development expenses have been capitalized as assets for a total amount of EUR 356 thousand (278). The amortization period of capitalized product development expenses is 4 years. The amortization of product development expense in 2011 was EUR 203 thousand (190). Product development employed 16 people at the end of the review period, corresponding to 21.9% of the total personnel QPR Quality. Processes. Results.

15 Report of the Board of Directors January 1 December 31, 2011 Development expenditure of net sales, % Personnel at the end of the period During the review period, product development activities focused on the development of the new QPR Suite 2012 version of QPR s product family launched in November Both the structure of the suite and the product names were renewed in connection with the launch. Compared to earlier versions, QPR Suite 2012 included new software products QPR EnterpriseArchitect for aligning business with IT and QPR ProcessAnalyzer, which executes automatically visual process analysis from depository data in business applications. Additional resources were allocated into the development of QPR ProcessAnalyzer software, published in February In the review period, QPR developed a new process analysis solution aimed at efficiency increases in SAP systems, especially in order-to-cash processes. Several large enterprises and public organizations are users of this solution. In November 2011, the Company published a cloudbased version of QPR ProcessAnalyzer. The software is based on technologies that utilize Microsoft s cloud services. It has been used for example in streamlining of order-to-cash processes in SAP systems, in improvement of sales processes supported by CRM systems and in analyzing call center activities. Productization, development and marketing of QPR s professional services offering was continued during the review period. Development work was expanded to enterprise architecture and process analysis consulting. Resourcing was strengthened in both services. In early 2011, QPR introduced a solution for public sector enterprise architecture, based on the Finnish public sector JHS 179 recommendation. Several project deliveries based on this solution were made in the review period. The integration of QPR s and Nobultec s service offering and the transition to a process organization in Finland business operations were initiated in December. The new operating model is planned to be operational in the summer. PERSONNEL At the end of review period, the Group employed a total of 73 persons (65). The average number of personnel during the reporting period was 72 (2010: 63; 2009: 57). Out of them 8 were employed by QPR's Russian subsidiary, OOO QPR Software, in Moscow (11), corresponding to 11% of the total personnel (17). Salaries and other emoluments from the period totaled EUR 4,594 thousand (2010: 4,094; 2009: 3,524). SHARE CAPITAL, COMPANY SHARES AND STOCK OPTION PROGRAMS The Company's share capital at the end of the reporting period was EUR 1,359, divided into 12,444,863 shares. QPR Software Plc has one share class. Each share has one vote and an equal right to dividend. The book counter value of the share is EUR The Company's shares are included in the Finnish book-entry securities system managed by Euroclear Finland Oy. At the end of the review period, the Company had a total of 588 shareholders (600). In the reporting period, trading in the Company s shares amounted to EUR 953 thousand (806), i.e. an average of EUR 3,737 per trading day (3,498) QPR Quality. Processes. Results.

16 Report of the Board of Directors January 1 December 31, 2011 Distribution of shareholders by size of shareholding, December 31, 2011 Shares and votes Number of shares Number of shareholders % Amount % , , , ,001 5, , ,001 10, , ,001 50, , , , , ,001 1,600, ,718, Total ,444, Distribution of shareholders by sector, December 31, 2011 Shares and votes Number of shareholders % Amount % Private companies ,992, Financial and insurance institutes , Households ,058, Non-profit organizations Foreign ,300, European Union , Other countries , Total ,444, Out of which nominee-registrated 4 25, Trading in shares totaled 1,122,981 shares (881,585), giving an average of 4,404 shares per trading day (3,485). Turnover in shares corresponds to 9.0% of the total shares (7.1) and the average price was EUR 0.85 per share (0.91). The highest closing price during the review period was EUR 0.94 (1.00) and the lowest EUR 0.74 (0.81). At the end of the reporting period, the total market value of the Company shares was EUR 10,794 thousand (11,032) at the review period s closing price of EUR The Company announced on November 30, 2011 that the holding of Pohjolan Rahoitus Oy, a company controlled by Jouko Antero Pelkonen, in QPR Software Plc has increased above one-tenth (1/10) to % of the share capital and votes. Thus, the total holding of Jouko Antero Pelkonen and his controlled companies, Pohjolan Rahoitus Oy (company ID ) and Electrosale Oy (company ID ), in QPR Software Plc increased to % of the share capital and votes. Own shares The number of repurchased own shares in the public trading of NASDAQ OMX Helsinki Ltd in the reporting period was 106,214. At the end of the reporting period the Company held 179,405 of its own shares with a total nominal value of EUR 19,735 thousand and a total purchase price of EUR 158,271 thousand. Own shares held by the Company (treasury shares) represent 1.4 % of the Company s share capital and votes. The Board of Directors has been granted by the Annual General Meeting of March 18, 2011 a share repurchases authorization, valid until the next Annual General Meeting, to repurchase the Company shares in total of 250,000 shares at maximum. According to the authorization, the Company may repurchase its own shares in order to strengthen the Company's capital structure, to be used as payment in corporate acquisitions or when the Company acquires assets related to its business, or as part of the Company's incentive programs in a manner and to the extent decided by the Board of Directors, or to be transferred for other purposes or to be cancelled. At the end of the reporting period, unused authorization was 170,574 shares. OPTION SCHEMES During the reporting period the Company had no option schemes effective. SHARE-BASED INCENTIVE PLAN QPR Software Plc s Board of Directors approved in March 25, 2011 a new share-based incentive plan for QPR Quality. Processes. Results.

17 Report of the Board of Directors January 1 December 31, 2011 the Group's executive management team (incl. the CEO). The plan aims to align the objectives of shareholders and key employees to increase shareholder value, to commit key employees to the Company and to offer them a competitive reward plan based on ownership of shares in the Company. The plan includes three one-year earning periods, which are the calendar years 2011, 2012 and The Company's Board of Directors will decide on the earnings criteria and the targets to be established for them at the beginning of each earning period. Bonus for the earnings period 2011 was based on QPR Software's consolidated net sales growth and operating profit targets. The earnings criteria were not met in 2011 and thus no bonuses for the year are paid. Any bonuses for the earning period 2012 will be paid in 2013 and for the earning period 2013 in Bonuses will be paid partly in the form of Company shares (50%) and partly in cash (50%). The proportion to be paid in cash is primarily aimed at covering taxes and tax-related costs arising from the bonus. The total bonus payable on the basis of the plan during three years, including Company shares and cash, will not exceed two years' gross salary of the key person concerned. The maximum number of shares to be conveyed on the basis of the plan for all earning periods is approximately 470,000. The Company may use its treasury shares for conveyance. The shares may not be transferred during the lock-up period, which will end on March 31, Should a person's employment or service in a Group company end during the lock-up period, he or she must return, gratuitously, the received bonus to the company. Members of the executive management team must hold shares also after the lock-up period. The shares received on the basis of the plan may not be transferred, if the value of his or her shareholding in the Company is less than 50% of his or her annual salary. This restriction is valid for as long as his or her employment or service in a Group company continues. In addition to this incentive plan, the Company has a separate bonus system that covers the whole personnel. ACQUISITIONS QPR Software Plc acquired 100% of shares in its cooperation partner Nobultec Ltd on August 1, Nobultec is a service company that specializes in business process development in SAP system environments. Through the transaction Nobultec became QPR Software Plc s fully owned subsidiary. The total consideration paid by QPR in 2011 was EUR 904 thousand, of which EUR 631 thousand was paid in cash and EUR 217 thousand in QPR treasury shares. QPR has recorded EUR 56 thousand for an additional purchase price, subject to Nobultec s 2012 net sales, to be paid in During the review period, QPR paid of a total of EUR 165 thousand for the business operations bought from QPR s Russian resellers in November The total purchase price for these operations was set at EUR 272 thousand, including transaction costs. The price was set according to the terms agreed in the purchase agreement and the financial results of the acquired operations between March 1, 2010 and February 28, The price is a consideration for the business operations that were transferred into QPR CIS Oy. As part of the purchase price, the sellers also received a 20% ownership in QPR CIS Oy. For this 20% shareholding, a call option for QPR and a put option for the sellers have been agreed. These options can be exercised in January 2014, the earliest. QPR Software redeemed 40% of share capital and votes in StrongDocs Oy on September 30, QPR owned previously 60% of the company. The redemption price was EUR 4. Businesses acquired in 2011 are described in Note 5, on page 30 During 2010 no business acquisitions took place. GOVERNANCE QPR Software Plc complies with the NASDAQ OMX Helsinki Ltd Guidelines for Insiders issued on October 9, 2009 and the Corporate Governance Code, effective as of October 1, The Company's Corporate Governance Statement is available on the Investor section of the Company's website, Also, available in the investor section is further information, such as administration of the insider register, the public insider register, list of major shareholders, articles of association, charter of the Board, description of how internal control and internal audit are organized, introductions of the members of the Board and Executive Management Team, and the information published by the Company during the financial year. Decisions made by the Annual General Meeting Following decisions were made by the Annual General Meeting (AGM) on March 18, 2011: The AGM confirmed the Company's financial statements and the Group's financial statements for the financial period of January 1 December 31, 2010 and QPR Quality. Processes. Results.

18 Report of the Board of Directors January 1 December 31, 2011 discharged the Board of Directors and the Managing Director from liability. The AGM approved the Board's proposals that a pershare dividend of EUR 0.03, a total of EUR 362,876, be distributed for financial year The payments were made to shareholders who were entered in the Company's shareholder register, maintained by Euroclear Finland Ltd, on the record date of March 23, The date of the payment was April 1, The AGM resolved that the Board of Directors consists of four (4) ordinary members. The AGM elected the following members to the Board of Directors: Aino- Maija Gerdt, Jyrki Kontio, Vesa-Pekka Leskinen and Asko Piekkola. In its first meeting immediately following the AGM, the Board of Directors elected Vesa-Pekka Leskinen as Chairman of the Board. KPMG Oy Ab, Authorized Public Accountants, was elected to continue as QPR Software Plc's Auditors. The AGM decided to keep the Board members emoluments unchanged. The Chairman of the Board receives an annual emolument in total of EUR 25,230 and other members of the Board receive an annual emolument in total of EUR 16,820 each. The decisions made by the AGM are available in the stock exchange release published by the Company on March 18, 2011, which is available on the investors section of the company's web site, MANAGEMENT AND AUDITORS The Executive Management Team of QPR Software Plc consisted of the following persons in January 1, 2011: Chief Executive Officer Jari Jaakkola (chairman); Vice President, Software Sales International Antti Ainasoja; Vice President, Business Operations Finland Matti Erkheikki; Vice President, Communications and Marketing Jyrki Karasvirta, Vice President Business Development Teemu Lehto; Chief Financial Officer Päivi Martti; and Vice President, Products and Technology Tony Virtanen (until January 24, 2011). Sami Tähtinen was appointed as Vice President, Products and Technology and Member of Executive Management Team at QPR Software Plc in January 24, He moved to QPR from CCC Corporation Ltd. Prior to this Mr. Tähtinen worked as Chief Technology Officer in Frends Technology from 2002 to Sami Tähtinen holds Master s degree in Engineering. Maija Erkheikki, M.Sc.(Eng), was appointed as Vice President for Software Sales International as of August 15, Her latest position in QPR was Vice President, Service & Solutions. Mikko Mäki-Rahkola, M.Sc (Econ), M.Sc (tech) was appointed as a Member of the Executive Management Team as of August 15, Mikko Mäki-Rahkola is Nobultec Oy s Managing Director. As of August 15, 2011, QPR Software s Executive Management Teams consists of Chief Executive Officer Jari Jaakkola (chairman); Vice President, Software Sales International Maija Erkheikki; Vice President, Business Operations Finland Matti Erkheikki; Vice President, Communications and Marketing Jyrki Karasvirta; Vice President, Business Development Teemu Lehto; Chief Financial Officer Päivi Martti; Nobultec s Managing Director Mikko Mäki-Rahkola and Vice President, Products and Technology Sami Tähtinen. KPMG Oy Ab, Authorized Public Accountants, acted as QPR Software Plc's auditors, with Authorized Public Accountant Sixten Nyman as the principal auditor. AUTHORIZATIONS OF THE BOARD OF DIRECTORS The Annual General Meeting on March 18, 2011 decided to authorize the Board of Directors to decide on an issue of new shares and conveyance of treasury shares held by the Company (share issue), either on one or several occasions. The share issue can be carried out as a share issue against payment or without consideration on terms to be determined by the Board of Directors. The authorization also includes the right to issue special rights, in the meaning of Chapter 10 Section 1 of the Companies Act, which entitle to the Company's new shares or treasury shares against consideration. In the share issue and/or based on the special rights a maximum of 4,000,000 new shares can be issued and a maximum of 650,000 treasury shares can be conveyed. The authorization is in force until the next Annual General Meeting. The Annual General Meeting decided to authorize the Board of Directors to decide on a repurchase of own shares. Based on the authorization, an aggregate maximum amount of 250,000 shares of the Company s own shares may be repurchased, either on one or several occasions. The authorization is in force until the next Annual General Meeting. The conditions of all authorizations of the Board of Directors decided by the Annual General Meeting are available in their entirety on the stock exchange release published by the Company on March 18, 2011, QPR Quality. Processes. Results.

19 Report of the Board of Directors January 1 December 31, 2011 which is available on the investors section of the company's web site, INTERNAL CONTROL Internal control and risk management in QPR Software Plc aims to ensure that the Company operates efficiently and effectively, distributes reliable information, complies with regulations and operational principles, reaches its strategic goals and ensures continuity of its business. It is the duty of the Board of Directors to monitor the appropriateness, effectiveness and efficiency of risk management and internal control in QPR Software Group. Risk management report covering the risks presented in the Risk Management section is presented to the Board in connection with quarterly financial reporting. The threat caused by the risks to shareholders is used as a criterion when the Board of Directors evaluates these risks. The Board of Directors also monitors that the Company has defined operational principles for internal control and that the Company monitors the effectiveness of internal control. RISK MANAGEMENT Coordination of risk management and internal control and the related reporting is the responsibility of the Chief Financial Officer. Risk management in QPR Software is guided by the requirements of legislation, shareholders expectations regarding business objectives, and expectations among important stakeholders, such as customers and personnel. Risk management in QPR Software aims systematically and comprehensively to identify risks related to the Company s operations and ensures that risks are managed and taken into account in decision-making. The Company does not have a separate risk management organization, and risk management is part of routine responsibilities throughout the organization. Risk management is developed by constantly improving operative processes in the Company. QPR Software identifies the risks by their materiality: if realized, the risks selected for monitoring would have a material impact on the Company's business operations. QPR has identified the following four groups of risks related to its operations: risks related to business operations, risks related to information and products, risks related to financing, and risks related to new businesses. Property, operational and liability risks are covered by insurance. QPR Software Plc s Management System has received ISO9001:2008 quality certification covering the Company s all activities. Scope of the certificate is design, marketing and delivery of software, services and solutions for Process Excellence. The certificate does not cover subsidiaries Nobultec Ltd in Finland or OOO QPR Software in Russia. Risks related to business operations The following risks are related to QPR Software s business operations: Country risk. The instrument used for measuring country risk is the potential loss of country-specific revenue. Risk is managed by constantly gathering market information and by having a geographically spread business. Customer risk. The instrument used for measuring customer risk is the potential loss of annual customer revenue. Risk is managed by taking good care of every customer and reseller. Service delivery risk. The instrument used for measuring the risk is reclamations regarding the length and quality of the delivery. Risk is managed by professional and right-timed recruitment and by internal development of project management. Personnel risk. The instrument used for measuring personnel risk is the adequacy of competencies needed for achieving strategic targets. Risk is managed by professional recruitment, professional supervisory work and by securing possibilities for job rotation as well as for learning and growth. Legal risk. The instrument used for measuring legal risk is the estimated total combined financial value of all legal disputes on the Company in Euros. The risk is managed by in-depth knowhow on contractual jurisprudence and by performing both ethically and according to the Company values. Number of Strategic and Advanced Partners. The instrument used for measuring the risk is number of partners in both categories. Risk is managed by active new recruitment and by QPR Partner Program. Financial risk. The instrument used for measuring financial risk is the forecasted operative cash flow before investments. Risk is managed by following constantly the Company s financial position (cash flow calculation and forecasts). QPR s market and customer risks are mitigated as follows: the Company conducts business in more than 50 countries, both in public and private sectors as well as in several different business verticals. In addition, the customer benefits produced by QPR s prod QPR Quality. Processes. Results.

20 Report of the Board of Directors January 1 December 31, 2011 ucts and solutions are related to optimization and streamlining of operations, strategy implementation as well as risk management and compliance. Reasonable credit risk concerning individual business partners is characteristic to any international business. QPR seeks to limit this credit risk by continuous monitoring of standard payment terms. No significant changes have taken place in risks related to business operations during the financial period. Risks related to Business Operations Russia QPR monitors the following risks in the Russian subsidiary OOO QPR Software: Country risk. The metric used for measuring country risk is the potential loss of country-specific revenue. Risk is managed by constantly gathering information from political and economic development and by having a customer base that is spread geographically and among different industries. Customer risk. The metric used for measuring customer risk is losing a customer. Risk is managed by good customer care and reseller support. Personnel risk. The metric used for measuring personnel risk is adequacy of competencies needed for achieving strategic goals. Risk is managed by professional recruitment, good supervisory work and by securing possibilities for job rotation as well as for learning and growth. Financial risk. The metric used for measuring financial risk is forecasted operative cash flow. Risk is managed by following constantly the subsidiary s financial position (cash flow calculation and forecasts). No significant changes have taken place in risks related to Russian business operations during the financial period. Risks related to information and products QPR Software has identified the following three risks related to information and products: Risk related to own products. The risk is managed by securing the competitiveness of the Company s offering at all times. The company seeks to ensure the security of products by automated virus prevention. Intellectual Property Rights. The Company s Intellectual Property Rights (IPR) are secured by the confidentiality of the source code. Major shareholders December 31, 2011 Name Number of shares % Ulkomarkkinat Oy 1,657, Pelkonen Jouko, total 1,361, Pohjolan Rahoitus Oy 1,331, Electrosale Oy 25, Pelkonen Jouko 5, Leskinen Vesa-Pekka, total 1,326, Leskinen Vesa-Pekka 851, Kauppamainos Oy 475, Alesco S.A. 1,300, Oy Autocarrera Ab 1,245, Junkkonen Kari 512, Fortel Invest Oy 422, Marttila Päivi, total 326, Marttila Päivi 292, Edina Oy 33, Sr Eq Technology 323, Piekkola Asko 316, Jaakkola Jari, total 246, Jaakkola Jari 232, Value FM Oy 14, Pääkkönen Esa 246, Leskinen Veli-Mikko 232, Kanninen Matti 195, QPR Software Plc 179, Virtanen Tony 172, Mäki-Rahkola Mikko 156, Laakso Janne 153, Sonkkila Investment Oy 145, Becker Kai-Erik 140, biggest together 10,660, Other shareholders 1,784, Total 12,444, In addition, the Company aims to secure by up-todate contract management and internal training that third-party IPRs are not used unauthorized in QPR products. The Company has a legal expenses insurance. Data security. Data security risks are related to the good confidentiality of corporate, insider and customer information. Risk is managed by ongoing internal training, keeping instructions up-to-date at all times, and by good technical protection of the Company s data network. No significant changes have taken place in QPR's information and products related risks during the financial period QPR Quality. Processes. Results.

21 Report of the Board of Directors January 1 December 31, 2011 Risks related to financing QPR Software has identified the following two financial risks: Foreign currency risk. The instrument used for measuring foreign currency risk is the realized exchange rate fluctuation and the future outlook for it. The risk is managed by using the Euro as the primary invoicing currency and by currency hedging according to the Company s hedging policy. The company constantly monitors how the open positions of the three biggest invoicing currencies develop. Operative credit risk. The instrument used for measuring operative credit risk is the turnover rate of accounts receivable. Risk is managed by monitoring accounts receivable and by effective collection of dued receivables. Management of financial risks in 2011 is described in more detail in Note 25, on page 41. No significant changes have taken place in QPR's financial risks during the financial period. Risks related to new businesses QPR Software has identified the following two risks related to new businesses: Growth of new business. The instrument used for measuring the risk is share of consolidated net sales. Risk is managed by the correct allocation of resources and investments. Product development outlays to new business. The instrument used for measuring the risk is the amount of development outlays made to the new businesses in relation to the consolidated net sales. SHARES HELD BY THE BOARD AND CEO The members of QPR Software Plc s Board of Directors, the Chief Executive Officer, and persons or institutions closely related to them, held a total of 1,889,558 Company shares on December 31, 2011, representing 15.2% of the total number of the shares and votes (December 31, 2010: 15.2). The amounts include own holdings, holdings of spouses, persons under guardianship, and controlled institutions. The members of QPR Software Plc s Board of Directors or the CEO (including persons and institutions closely related to them) did not hold any QPR stock options on December 31, LEGAL DISPUTES During the period QPR had no material legal disputes. EVENTS AFTER THE REPORTING PERIOD QPR took a EUR 500 thousand overdraft limit from the Nordea Bank Plc in the beginning of January The reference rate of the overdraft limit is 1 week Euribor and the margin is 1.25% of the used limit. The Board of Directors decided on February 16, 2012 to commence preparations for merging StrongDocs Oy, QPR Software Plc s subsidiary, into the parent company. The merger does not have any effect on consolidated results or balance sheet in FUTURE OUTLOOK Market forecasts published in the beginning of 2012 estimate that the value of global software sales will increase approximately 6% and global professional services sales will increase approximately 3% in 2012 compared to QPR Software estimates the consolidated net sales in 2012 to show significantly faster growth than in the previous year (growth in 2011 was 8.7%) and the operating profit in Euro to remain on the same level as in the previous year, or to improve slightly. The Company estimates that net sales especially from software subscription, SAP consulting, process analysis and enterprise architecture service will grow significantly from the previous year. In 2012, QPR aims to place significant outlays in the development of its new software product QPR ProcessAnalyzer and related services. This will, in the short term, have a negative impact on profitability. The Company believes that these outlays are well justified, since the QPR ProcessAnalyzer business, launched in February 2011, has started well and the leading market analysts are forecasting strong demand growth for process analysis products and services. QPR aims at strong international software sales growth and significant market share in this new category. The Company also aims to recruit new channel partners especially for its QPR ProcessAnalyzer and QPR EnterpriseArchitect software products and to develop replicable solutions for its present channel partners. Seasonality of large software deals can affect significantly net sales and profit of one individual quarter QPR Quality. Processes. Results.

22 Report of the Board of Directors January 1 December 31, 2011 THE BOARD OF DIRECTORS PROPOSAL ON DIVIDEND The Board of Directors proposes to the Annual General Meeting on March 22, 2012 that a dividend of EUR 0.03 per share be paid to shareholders for financial year The dividend shall be paid to a shareholder that has been entered into the company s shareholder register on the record date of the dividend payment on March 27, The Board of Directors proposes to the Annual General Meeting that the dividend be paid on April 3, The Board of Directors has in its meeting on February 18, 2011 resolved a dividend policy whereby the Board intends to propose to the Annual General Meeting dividends of approximately 30 50% of annual cash flow from operations. When preparing the dividend proposals, the Board takes into account the Company s financial position, profitability and business prospects. The distributable funds of QPR Software Plc were EUR 1,290 thousand at the end of the review period, out of which the profit for the period was EUR 568 thousand. The Board of Directors proposals to the Annual General Meeting are available in their entirety on the Investors section of the Company's web site, and on the stock exchange release published by the Company on February 16, Ownership of insiders, December 31, 2011 By closely Name and position Own shares By controlled companies related persons*) Own options Vesa-Pekka Leskinen, 851, , Chairman of the Board Aino-Maija Gerdt Member of the Board Jyrki Kontio Member of the Board Asko Piekkola, 316, Member of the Board Sixten Nyman Auditor with primary responsibility Jari Jaakkola 232,000 14, CEO Insiders by definition: Maija Erkheikki, 2, ,500 0 VP, Executive Management Team Matti Erkheikki, 7, ,000 0 VP, Executive Management Team Jyrki Karasvirta, 1, VP, Executive Management Team Teemu Lehto, 136, VP, Executive Management Team Päivi Martti, 15, VP, Executive Management Team Mikko Mäki-Rahkola, 156, VP, Executive Management Team Sami Tähtinen, 1, VP, Executive Management Team *) Shares owned by spouses and persons under guardianship QPR Quality. Processes. Results.

23 Consolidated Financial Statements Consolidated Comprehensive Income Statement, IFRS (EUR 1,000) Note Jan 1 Dec 31, 2011 Jan 1 Dec 31, 2010 Net sales 3 7,539 6,937 Other operating income Materials and services Employee benefit expenses 7 4,594 4,094 Depreciation and amortization Other operating expenses 9 1,448 1,426 6,864 6,279 Operating profit Financial income Financial expenses Profit before tax Income taxes Profit for the period Other comprehensive income statement items: Exchange rate differences from translating foreign operations 4 23 Income tax relating to components of other comprehensive income 0 0 Other comprehensive income, net of tax 4 23 Total comprehensive income Profit for the period attributable to: Shareholders of the parent company Non-controlling interests Total comprehensive income attributable to: Shareholders of the parent company Non-controlling interests Earnings per share, EUR Earnings per share, diluted, EUR QPR Quality. Processes. Results

24 Consolidated Financial Statements Consolidated Balance Sheet, IFRS (EUR 1,000) Note December 31, 2011 December 31, 2010 ASSETS Non-current assets Intangible assets 13 1,760 1,400 Goodwill Tangible assets Other investments 5 5 Other long-term receivables Deferred tax assets Total non-current assets 2,493 1,766 Current assets Trade and other receivables 18 4,219 3,781 Income tax receivables Cash and cash equivalents 19 1,020 1,703 Total current assets 5,268 5,484 TOTAL ASSETS 7,761 7,250 (EUR 1,000) Note December 31, 2011 December 31, 2010 EQUITY AND LIABILITIES Equity 20 Share capital 1,359 1,359 Other funds Treasury shares Translation difference Invested non-restricted equity fund 5 5 Retained earnings 1,820 1,653 Equity attributable to shareholders of the parent company 2,981 2,693 Non-controlling interests -8 1 Total equity 2, Non-current liabilities Deferred tax liabilities Non-interest-bearing liabilities Interest-bearing liabilities Total non-current liabilities Current liabilities Trade and other payables 22 4,076 3,763 Interest-bearing liabilities Total current liabilities 4,302 3,990 Total liabilities 4,788 4,556 TOTAL EQUITY AND LIABILITIES 7,761 7, QPR Quality. Processes. Results

25 Consolidated Financial Statements Consolidated Cash Flow Statement, IFRS (EUR 1,000) Note Jan 1 Dec 31, 2011 Jan 1 Dec 31, 2010 Cash flow from operating activities Profit for the period Adjustments for the profit Depreciation and amortization Non-cash transactions Changes in working capital: Increase (-)/decrease (+) in short-term non-interest bearing receivables ,045 Increase (+)/decrease (-) in short-term non-interest bearing liabilities Interest expense and other financial expenses paid Interest income and other financial income received 27 8 Income taxes paid Net cash from operating activities 1, Cash flows from investing activities Acquired subsidiaries Purchases of tangible assets Purchases of intangible assets Net cash used in investing activities -1, Cash flows from financial activities Repayments of long-term borrowings Repurchase of shares Repayment of invested non-restricted equity fund Dividends paid Net cash used in financing activities Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the period 1,703 1,929 Effect of exchange rate difference 1-4 Cash and cash equivalents at the end of period 1,020 1, QPR Quality. Processes. Results

26 Consolidated Financial Statements Consolidated Statement of Changes in Equity, IFRS Changes in equity January 1 December 31, 2011 (EUR 1,000) Share capital Other funds Translation differences Treasury shares Invested non-restr. equity fund Retained earnings Equity attributable to shareholders of the parent company Noncontrolling interest Total equity Equity January 1, , ,653 2, ,694 Dividends paid Repurchase of shares Disposal of treasury shares Comprehensive income Change in equity Equity December 31, , ,820 2, ,973 Changes in equity January 1 December 31, 2010 (EUR 1,000) Share capital Other funds Translation differences Treasury shares Invested non-restr. equity fund Retained earnings Equity attributable to shareholders of the parent company Noncontrolling interest Total equity Equity January 1, , ,371 2,575 2,575 Dividends paid Repurchase of shares Invested non-restricted equity fund paid Comprehensive income Change in equity Equity December 31, , ,653 2, , QPR Quality. Processes. Results

27 Consolidated Financial Statements Notes to the Consolidated Financial Statements (IFRS) Company information QPR offers services and software for developing business processes and enterprise architecture. QPR Software Plc (Company ID ) is the parent company of the QPR Group. The Company domicile is in Helsinki and its registered address is Huopalahdentie 24, Helsinki, Finland. The shares of the parent company QPR Software Plc have been listed on the Helsinki Stock Exchange since Copies of the Consolidated Financial Statements are available on the Internet at or at the parent company s headquarters, address Huopalahdentie 24, Helsinki, Finland. The Board of Directors of QPR Software Plc has approved on February 15, 2012 the Consolidated Financial Statements for publication. Shareholders have the right to approve or reject the Financial Statements in the Annual General Meeting. The Financial Statements may also be revised in the Annual General Meeting. Accounting principles QPR Software Plc s Consolidated Financial Statements have been prepared according to the International Financial reporting Standards (IRFS), in accordance with the IAS and IFRS standards and SIC and IFRIC interpretations valid on December 31, As of January 1, 2011, the Group has applied the following new and revised standards and interpretations. The following implemented revised standards have not materially influenced the Consolidated Financial Statements: Revised IAS 24 Related Party Disclosures. Amended IAS 32 Financial Instruments: Presentation Classification of Rights Issues. Amended IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. Annual improvements to IFRS standards (Improvements to IFRS standards, May 2010; coming into force July 1, 2010 or financial years beginning after that). Principles of consolidation QPR s Consolidated Financial Statements include the parent company QPR Software Plc and the subsidiaries controlled by it. With regard to subsidiaries, the parent company s control is based on full ownership of the shares capital or a majority holding. The Company does not own shares in joint ventures or associated companies. Subsidiaries acquired during the financial period are consolidated from the date when the Group has acquired control and are no longer consolidated from the date that control ceases. Intra-Group shareholdings are eliminated using the acquisition cost method. Intra-Group business transactions, internal receivables and liabilities, unrealized profits, and the Group s internal profit distribution are eliminated in the Consolidated Financial statements. The profit for the financial year attributable to the non-controlling interests is presented separately in the comprehensive income statement, and the share of the non-controlling interests in equity is presented separately in the consolidated balance sheet. Continuity of operations The Consolidated Financial Statements have been prepared in accordance with the principle of continuity. Transactions in foreign currency The Consolidated Financial Statements have been presented in Euro, which is the operating and presentation currency of the parent company. The operating currency of subsidiaries is the local bookkeeping currency, except for the Russian subsidiary for which the operating currency has been defined to be Euro. Transactions denominated in a foreign currency have been translated into the operating currency using the exchange rate valid on the transaction date. Monetary items have been converted into the operating currency using the exchange rate at the closing date and non-monetary items using the exchange rate on the transactions date. The exchange gains and losses from business operations are included in the corresponding items above operating profit. The exchange gains and losses from financial assets or liabilities denominated in foreign currency are included in financial income and expenses. The income statements of foreign subsidiaries are translated into Euros using the average exchange rates for the year and the balance sheets are translated using the exchange rates on the balance sheet date. Translation differences arising from the elimination of foreign subsidiaries and translation of equity items accumulated after the acquisition are entered in other comprehensive income. Foreign currency gains and losses from monetary items that are part of the net investment in a foreign unit are recognized in other comprehensive income QPR Quality. Processes. Results

28 Consolidated Financial Statements Revenue recognition Net sales include normal sales income from business operations, deducted by sales-related taxes and discounts granted. When net sales are calculated, they are adjusted for exchange rate differences of foreign currency. Revenue recognition of product sales requires that there is a binding agreement of the sale, the product has been delivered, proceeds from the transaction can be reliably specified, the Company will have economic benefit with sufficient probability, and significant benefits and risks related to ownership or rights of the use of the product have been transferred to the buyer. Income from services is recognized when it is probable that economic benefit will arise to the Group and when the income and costs associated with the transactions can be reliably determined. The consolidated net sales consist mainly of software license sales, subscription sales, maintenance and professional services sales. Software license net sales are recognized in connection with the delivery, when significant benefits and risks related to ownership or rights of the use of the product have been transferred to the buyer, and the seller has no de-facto control to the product anymore. Software subscription net sales, meaning the right to use software for the time being, are recognized on an accrual basis during the agreement period. Net sales of temporary rental licenses (12 months or less) are recognized partly in license net sales and partly in maintenance fees. Maintenance fees covering software updates and customer support are recognized on an accrual basis during the agreement period. Net sales of consulting services are recognized when the delivery has been made. Government grants Government grants are presented as other operating income in the comprehensive income statement, except when related to investments in which case they are deducted from the acquisition cost of the asset. Employee Benefits Pension plans The Group s pension arrangements are based on defined contribution plans managed by a pension insurance company. The payments are recognized in the comprehensive income statement in the financial period for which the contribution made. Share-based payments The Group has applied IFRS 2 Share-based Payment for all such option schemes that were granted to key personnel after November 7, 2002 and which were not vested until January 1, Expenses associated with earlier option schemes have not been presented in the comprehensive income statement. Options are valued at fair value at the date of grant and recognized as an expense in the income statement during the vesting period. The expense determined at the date of grant is based on management estimate on the amount of option rights expected to be vested at the end of the vesting period. The fair value is determined on the basis of the Black-Scholes model. The cash received on exercise of option rights based on share subscription is recognized in share capital and invested non-restricted equity fund. The Company has no option schemes in effect. The Group has a share-based incentive plan for the Group s executive management team. Bonuses will be paid partly in the form of Company shares and partly in cash. The benefits granted in the scheme are measured at fair value at the grant date and recognized as an expense evenly during the earnings period. In scheme where the payments are made in cash, the liability recognized and change in its fair value is correspondingly allocated as expenses. The result impact of the scheme is presented under employee benefit expenses. Operating profit IAS 1 Presentation of Financial Statements does not define the concept of operating profit. The Group uses the following definition of operating profit: operating profit is the sum of net sales and other operating income, less the cost of material and services, employee benefits and other operating expenses as well as depreciation and amortization. Exchange rate differences arising from working capital items are included in operating profit, whereas exchange rate differences related to financial assets and liabilities are recognized in financial income and expenses. Impairment On each closing date, management reviews asset items for any indication of impairment. If there are such indications, the amount recoverable from the asset item is assessed. The recoverable amount is the higher of the asset item s fair value less the cost arising from disposal and its value in use. The recovera QPR Quality. Processes. Results

29 Consolidated Financial Statements ble amount of financial assets is either the fair value or the present value of expected future cash flows discounted at the original effective interest rate. An impairment loss is recognized in the comprehensive income statement when the carrying amount is greater than the recoverable amount. Intangible assets with an indefinite useful life are annually assessed for impairment on the closing date, or earlier if there are indications of impairment. Goodwill is not amortized but its recoverable amount is estimated annually or more frequently if circumstances indicate that the value may be impaired. Goodwill is allocated to the cash-generating units. An impairment loss is recognized in the consolidated comprehensive income statement, if the impairment testing shows that the carrying amount of goodwill exceeds its recoverable amount. In this case the goodwill is recorded at its recoverable amount. After the initial recognition, goodwill arising from business combinations is valued at the original acquisition cost, less impairment losses recognized. Impairment losses on goodwill cannot be reversed. Income tax The tax expenses in the comprehensive income statement consist of tax based on taxable income for the financial period and deferred tax. Tax based on the taxable income for the financial period is calculated on the basis of taxable income and the tax rate valid in each country. The tax is adjusted by any taxes associated with previous financial periods. Deferred taxes are calculated at tax rates enacted by the balance sheet date. A deferred tax asset is recognized in the amount that it is likely that taxable income will be generated in the future against which the temporary difference can be utilized. Deferred tax liabilities are recognized in the balance sheet in full. Intangible assets Goodwill represents the excess of the cost of an acquisition over the fair value of the Group s share of net assets of the acquired company. Goodwill is valued at the original acquisition cost less impairments. Product development expenditures during the financial period are recognized as expenses, except for development expenditure leading to new products and significant revisions, which are capitalized and amortized during their useful life. Amortization starts when the product version has been released. Maintenance and minor revisions are directly recorded as expenses. Product development projects started before 2006 have not been capitalized. The useful life of capitalized product development expenditures is 4 years. Other intangible assets with a definite useful life are amortized over their useful life. Useful life of the other intangible assets is 2 5 years. Tangible assets The balance sheet values of tangible assets are based on original acquisition cost less accumulated depreciation and impairment losses. Depreciation is calculated using the straight-line method and is based on the estimated useful life of the asset. Borrowing costs for assets taking a long time period to complete are capitalized. Other borrowing costs are recognized as an expense for the period during which they arise. Immediate transaction costs directly attributable to the acquisition of a particular loan are recognized in the original accrued acquisition cost of the loan and are recorded as interest expense using the effective interest method. Useful lives of tangible assets: Machinery and equipment; 3-7 years ADP machinery and equipment; 2-5 years Lease agreements Lease agreements of tangible assets where the Group has a substantial part of the risks and rewards of ownership are classified as finance leases. Finance lease agreements are recorded in the balance sheet as tangible fixed assets at the start of the lease term at the lower of the fair value of the leased property and the present value of the minimum lease payments. The asset acquired under a finance lease is depreciated over the shorter of the asset s useful life and the lease term. The corresponding rental obligations are included in interest-bearing liabilities. Lease agreements where the lesser retains a significant portion of the risks and rewards of ownership are treated as other leases. Payments made under other leases are charged to the comprehensive income statement on a straight-line basis over the period of the lease. Financial assets and liabilities Financial assets and liabilities are initially recognized at the value of the purchased or sold asset on the trade date. After initial valuation, financial assets are classified into four groups: financial assets at fair value through comprehensive income, held-to-maturity investments, financial assets available for sale, and loans and other QPR Quality. Processes. Results

30 Consolidated Financial Statements receivables. Transaction costs are included in the original carrying amount of the financial liabilities. Financial liabilities are classified into financial liabilities at fair value through comprehensive income, or other financial liabilities. Financial liabilities at fair value through comprehensive income are valued at fair value using the effective interest method. Other financial liabilities are valued at amortized cost. On the reporting date, management assesses whether the value of a financial instrument has been impaired and recognizes such an impairment loss in financial items in the comprehensive income statement. Derecognition of financial assets from the balance sheet takes place when the Group has lost a contractual right to receive the cash flows or when it has transferred substantially the risks and rewards outside the Group. Derivative contracts All derivative contracts are categorized as financial assets available for sale. The Group does not apply hedge accounting under IAS 39. Unrealized and realized gains and losses arising from changes in fair value are recognized in the comprehensive income statement in financial income and expenses. Cash and cash equivalents Cash and cash equivalents include cash, bank deposits, and other short-term very liquid investments with a maturity of no more than three months calculated from the date of acquisition. Accounting principles necessitating management consideration and essential factors of uncertainty related to management estimates When preparing the Consolidated Financial Statements, management is required to make estimates and assumptions regarding the future and to consider the appropriate application of accounting principles, which means that actual results may differ from those estimated. The most significant situations forcing management to use consideration and estimates are related, among others, to the following: estimated useful lives of intangible and tangible assets, impairment testing of goodwill and other assets, from which point onwards development projects qualify for the capitalization of development expenses, probability of future taxable profit against which the tax-deductible temporary differences can be utilized, fair value of trade receivables, amount of provisions, and acquired operations. Adoption of new or revised IFRS standards The Group has not yet adopted following published new or amended standards and interpretations. The Group will adopt them immediately after the standard or interpretation is effective or, when applicable, at the beginning of the next financial year. (* = The standard or interpretation has not yet been approved for adoption by the European Union.) Treasury shares Repurchase of own shares as well as the related direct costs are recorded as deductions in equity. Provisions Provisions are recognized according to IAS 37, when the Group has a present legal or constructive obligation as the result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Restructuring provisions are recognized when a detailed and appropriate plan has been prepared and the Company has begun to implement the plan, or has announced that it will do so. Restructuring provisions are based on actual expenses to be incurred e.g. from employee termination payments. A provision for a loss-making agreement is recognized when unavoidable expenditure required to fulfill the obligations exceeds the benefits obtainable from the agreement. Amendment IFRS 7 Financial Instruments: Disclosures Transfers of Financial Assets * (effective from July 1, 2011 or in the financial year beginning thereafter). The amendment improves the transparency of notes with regard to transfer and derecognition of financial assets. The amendments help users of financial statements to understand the effects of transfer and derecognition of financial assets and identify any risks associated with continuing involvement in derecognized assets. Amendment IAS 12 Income Taxes * (effective from January 1, 2012 or in the financial year beginning thereafter). Deferred tax liabilities and assets associated with investment properties measured at fair value and property, plant and equipment measured with the revaluation model are measured on the basis of the assumption that the carrying amount of the underlying asset will be recovered entirely by sale QPR Quality. Processes. Results

31 Consolidated Financial Statements Amendment IAS 1 Presentation of Financial Statements * (effective from July 1, 2012 or in the financial year beginning thereafter). The main change is the requirement of grouping the comprehensive income items depending on whether they can subsequently be recycled to income subject to certain conditions. IFRS 9 Financial Instruments * (effective from January 1, 2015 or in the financial year beginning thereafter). IFRS 9 is part of a larger project to reform the accounting for financial instruments, the later stages of the project being ready during The first stage of the new standard includes instructions for the classification and valuation of financial instruments. Later stages of the project relate to impairment of financial instruments and hedge accounting. IFRS 10 Consolidated Financial Statements * (effective from January 1, 2013 or in the financial year beginning thereafter). In line with the existing principles, IFRS 10 defines control as the central factor in determining whether an entity is included in the consolidated financial statements. The standard also provides additional guidance on the definition of control in situations when it is difficult to assess. obligations arising from the joint arrangement, rather than its legal form, in the accounting treatment of the joint arrangement. There are two types of joint arrangements; joint operations and joint ventures. Joint ventures shall be accounted for by using the equity method, and the former option to use proportionate consolidation will no longer be allowed. IFRS 12 Disclosure of Interests in Other Entities * (effective from January 1, 2013 or in the financial year beginning thereafter). IFRS 12 collects in one place the disclosure requirements related to various interests in other entities, including subsidiaries, associated companies, joint arrangements, and unconsolidated structured entities. IFRS 13 Fair Value Measurement * (effective from January 1, 2013 or in the financial year beginning thereafter). IFRS 13 combines a framework for measuring fair value together with the required disclosures about fair value measurement. The new standard also includes the definition of fair value. The use of fair value is not extended, but the standard provides guidance in determining fair value when the use is permitted or required by another standard. IFRS 11 Joint Arrangements * (effective from January 1, 2013 or in the financial year beginning thereafter). IFRS 11 emphasizes the rights and QPR Quality. Processes. Results

32 Consolidated Financial Statements 2. Segment information QPR Software Group's operations are mainly managed as two business segments: Software Sales International (software license, maintenance and professional services sales outside of Finland) and Business Operations Finland (software license, maintenance and professional services sales in Finland). Management monitors the segments through performance reporting, including net sales to external customers, operating profit and investments. Management does not allocate any financial items, taxes or administrative expenses related e.g. to the public listing of the Company to the segments. Segment assets are not monitored by management, and accordingly assets are not allocated to the segments. Expenses are generated either directly in the business or through cost allocation. Expenses for product development, marketing, IT and accounting are allocated in relation to net sales, and reviewing the validity of allocation. All non-allocated costs are administrative expenses. The accounting and valuation principles for the segments are the same as in the Consolidated Financial Statements. (EUR 1,000) Jan 1 Dec 31, 2011 Jan 1 Dec 31, 2010 Net Sales Software Sales International 3,836 4,077 Business Operations Finland 3,703 2,860 Total Net Sales 7,539 6,937 Operating profit Software Sales International Business Operations Finland Not allocated Total Operating profit Financial income and expenses Income taxes Profit for the period Other information Depreciation and amortization Software Sales International Business Operations Finland Total Depreciation and amortization QPR Quality. Processes. Results

33 Consolidated Financial Statements 3. Net sales Group net sales are accrued solely from software business, with following breakdown in the financial year: Software licenses 1,822 2,101 Maintenance services 3,787 3,622 Professional services 1,930 1,214 Total 7,539 6,937 The geographical breakdown of net sales was as follows: Domestic (Finland) 3,703 2,860 International 3,836 4,077 Total 7,539 6, Other operating income Governments grants Total Acquired business operations Acquisition of Nobultec Ltd 2011 On August 1, 2011, QPR Software Plc acquired the entire share capital of Nobultec Ltd, a company specialized in SAP business process development. Purchase price was EUR 904 thousand, of which EUR 631 thousand was paid in cash and EUR 217 thousand in QPR Software Plc's treasury shares in The remaining conditional payment of EUR 56 thousand of the recorded purchase price is subject to development of net sales in 2012, and will be payable in Nobultec has been consolidated in the Group starting from August 1, Nobultec s net sales after the acquisition date were EUR 379 thousand and loss was EUR 20 thousand. If the acquisition had been made as of the beginning of the financial period 2011, the impact on Group's net sales would have been EUR 920 thousand and the impact on Group's profit for the period would have been a loss of EUR 123 thousand. There were no major transactions between the Group and the acquired company at the time of the acquisition. Components of the acquisition cost and goodwill EUR 402 thousand was allocated to customer relationships that are amortized in 5 years. EUR 513 thousand was recognized as goodwill. Goodwill is not tax deductible. (EUR 1,000) 2011 Cash 631 Fair value of treasury shares given 217 Contingent consideration (additional purchase price) 56 Total cost of the acquisition 904 Fair value of net assets acquired 391 Goodwill QPR Quality. Processes. Results

34 Consolidated Financial Statements Analysis of net assets acquired (recognized fair values) 2011 Tangible assets 28 Intangible assets 9 Customer relationships (Intangible assets) 402 Trade and other receivables 181 Cash and cash equivalents 66 Accounts payable and other liabilities -190 Deferred tax liabilities -105 Net assets acquired 391 No acquisitions were made in Materials and services Materials and services Total Materials and services include mainly commissions and localization fees charged by the reseller network. 7. Employee benefit expenses Salaries 3,768 3,342 Pension expenses defined contribution plans Other personnel expenses Total 4,594 4,094 Group's personnel average for period Total Salaries, bonuses, fringe benefits, vacation pay and change in bonus accruals for the Executive Management Group Chief Executive Officer Members of the Board Executive Management Team Total The Company does not have any exceptional pension arrangements for the CEO. The period of notice for the CEO is three (3) months. Compensation on termination is equivalent to six (6) month s salary. QPR Software Plc's Annual General meeting held on March 18, 2011 decided that the Chairman of the Board receives an annual emolument of EUR 25 thousand and that other members of the Board receive an annual emolument of EUR 17 thousand each. No separate meeting fees are paid. In 2011 the Executive Management Team's compensations were based on the Group net sales and operating profit. The Executive Management Team does not enjoy benefits related to termination of their contract. The Group's Executive Management Team has a share incentive scheme. The plan includes three one-year earning periods which are the calendar years 2011, 2012 and The company's Board of Directors will decide on the earnings criteria and the targets to be established for them at the beginning of each earning period. In 2011 the criteria were based on the Group's net sales growth and operating profit. In 2011 the performance criteria were not met QPR Quality. Processes. Results

35 Consolidated Financial Statements The potential bonus for the earning period in 2012 will be paid in 2013 and for the earning period 2013 in Bonuses will be paid partly in the form of Company shares (50%) and partly in cash (50%). The proportion to be paid in cash is primarily aimed at covering taxes and tax-related costs arising from the bonus. The total bonus payable on the basis of the plan during three years, including Company shares and cash, will not exceed two years gross salary of the key person concerned. The maximum number of shares to be conveyed on the basis of the plan for all earning periods is approximately 470,000. The company may use its treasury shares for conveyance. On December 31, 2011, the Company held 179,405 treasury shares. The shares may not be transferred during the lock-up period, which will end on March 31, Should a person's employment or service in a Group company end during the lock-up period, he or she must return, gratuitously, the received bonus to the Company. Members of the Executive Management Team must hold shares also after the lock-up period. The shares received on the basis of the plan may not be transferred, if the value of his or her shareholding in the Company is less than 50% of his or her annual salary. This restriction is valid for as long as his or her employment or service in a Group company continues. The Company does not have any stock option schemes in place. The Company does not have any related party loans. 8. Depreciation, amortization and impairment losses Depreciation and amortization by group of assets Intangible assets Other intangible assets Total Tangible assets Machinery and equipment Total Total No impairment losses on assets have been recorded during 2010 and Other operating expenses Non-statutory indirect employee costs Expenses of office premises Travel expenses, marketing and other sales promotion Bad debts and write-downs Other expenses Total 1,448 1,426 Fees paid to the Company s auditor (KPMG) Auditing Tax consultation 1 2 Other services 2 3 Total QPR Quality. Processes. Results

36 Consolidated Financial Statements Product development expenses Development expenses charged to income 1,313 1,278 Capitalized development costs Product development expenses do not include amortization. See Note 13 for Depreciation and amortization. 10. Financial income and expenses Interest income Interest expense Other financial income and expenses Exchange rate differences Total Exchange rate differences included in the comprehensive income statement Exchange rate differences included in net sales 9-68 Exchange rate differences included in purchases and expenses 4-2 Exchange rate gains in financial items Exchange rate losses in financial items Exchange rate differences from translating foreign operations 4 23 Total Income taxes Taxes based on financial year -2 1 Taxes from previous years 0-1 Deferred tax Total tax expense Reconciliation between the tax expense recorded in the comprehensive income statement and the Finnish tax rate, 26 percent: Profit before tax Tax expense calculated at the Finnish tax rate Effect of different tax rates in foreign subsidiaries -1 0 Other items Effect of changes in tax rates 3 0 Non-deductible expenses 7-16 Tax expense in the comprehensive income statement QPR Quality. Processes. Results

37 Consolidated Financial Statements 12. Earnings per share Basic earnings per share are calculated by dividing the profit for the period attributable to shareholders of the parent company by the weighted average number of shares outstanding. When calculating the diluted earnings per share, the dilution effect of share options is taken into account in the weighted average number of shares Profit for the period attributable to shareholders of the parent company (EUR 1,000) Number of shares outstanding, basic and diluted (1,000 pcs) 12,143 12,166 Earnings per share, basic and diluted (EUR/share) Intangible assets (EUR 1,000) Computer software Other intangible assets Capitalized product development costs Total Acquisition cost Jan 1, ,898 1,061 3,608 Increase Acquired subsidiaries Acquisition cost Dec 31, ,319 1,417 4,491 Accumulated amortization Jan 1, , ,208 Amortization for the period Acquired subsidiaries Accumulated amortization Dec 31, , ,731 Book value Jan 1, ,400 Book value Dec 31, ,760 (EUR 1,000) Computer software Other intangible assets Capitalized product development costs Total Acquisition cost Jan 1, , ,494 Increase Decrease Acquisition cost Dec 31, ,898 1,061 3,608 Accumulated amortization Jan 1, , ,774 Amortization for the period Accumulated amortization Dec 31, , ,208 Book value Jan 1, , ,720 Book value Dec 31, , QPR Quality. Processes. Results

38 Consolidated Financial Statements 14. Goodwill Acquisitions (EUR 1,000) 2011 Acquisition cost Jan 1, Additions 513 Acquisition cost Dec 31, Book value Dec 31, Goodwill consists of the following business combinations: Acquisition (EUR 1,000) Goodwill Nobultec Ltd (2011) 513 Goodwill has been allocated to Group s cash-flow generating units as follows: Nobultec Ltd (2011) Goodwill has been tested for impairment in the last quarter of 2011 and the discount rate used in impairment testing was 9.77 % (Nobultec Ltd). The recoverable amount evaluated in the impairment test is based on the 2012 budget and on subsequent development assessed on the basis of the budget. Key variables used in the calculation are the growth rates of net sales, costs and EBITDA. The growth of net sales has been determined by taking into account the company's actual performance, market position and growth potential in the market in question. Based on the zero growth scenario sensitivity analyses, management believes that it is unlikely that a change in used key variables would create a situation where the goodwill included in the balance sheet would exceed the unit's recoverable amount. Nobultec Ltd's net sales growth is broadly planned to be in line with the Company s strategy for the planning period. The recoverable amount is about EUR 1,222 thousand according to the business plan, and about EUR 848 thousand in a zero growth scenario. If the unit's annual growth in the planning period is -2%, sensitivity analyses show that the unit's recoverable amount is about EUR 757 thousand. If Nobultec Ltd's annual net sales growth in the planning period were less than -10% it would constitute a situation in which there is an indication of goodwill impairment. If the fair value of goodwill would be lower than the unit's book value in the impairment test, an impairment loss would be recorded as an expense in the comprehensive income statement and would be allocated primarily to goodwill in the balance sheet. 15. Tangible assets Other (EUR 1,000) Machinery and equipment tangible assets Total Acquisition cost Jan 1, , ,021 Increase Acquired subsidiaries Acquisition cost Dec 31, , ,159 Accumulated depreciation Jan 1, Depreciation for the period Acquired subsidiaries Accumulated depreciation Dec 31, , ,041 Book value Jan 1, Book value Dec 31, QPR Quality. Processes. Results

39 Consolidated Financial Statements Other (EUR 1,000) Machinery and equipment tangible assets Total Acquisition cost Jan 1, Increase Acquisition cost Dec 31, , ,021 Accumulated depreciation Jan 1, Depreciation for the period Accumulated depreciation Dec 31, Book value Jan 1, Book value Dec 31, Other long-term receivables Withholding tax Other long-term receivables 0 22 Total Deferred tax assets and liabilities Specification of deferred tax assets 2011: (EUR 1,000) Jan 1, 2011 Recorded in comprehensive income Acquired subsidiaries Dec 31, 2011 Tax loss carry-forwards Total Specification of deferred tax liabilities 2011: (EUR 1,000) Jan 1, 2011 Recorded in comprehensive income Acquired subsidiaries Dec 31, 2011 Other items Total Specification of deferred tax assets 2010: (EUR 1,000) Jan 1, 2010 Recorded in comprehensive income Dec 31, 2010 Tax loss carry-forwards Total In 2010 the Group had no deferred tax liabilities. The subsidiary in United States, QPR Software Inc., has tax loss carry-forwards after the official tax filings totaling approximately EUR 475 thousand, of which EUR 9 thousand has been recorded as deferred tax asset in 2011 (0). The parent company's tax loss carry-forwards will expire in 2012 and QPR Quality. Processes. Results

40 Consolidated Financial Statements 18. Trade and other receivables Trade receivables 3,488 3,103 Accrued income and prepaid expenses Income tax receivables 29 0 Other receivables Total 4,248 3,781 Geographical breakdown of trade receivables Domestic (Finland) 1,626 1,124 Other European countries Other countries 1,309 1,342 Total 3,488 3,103 Currency breakdown of trade receivables CHF 0 3 EUR 2,587 2,269 GBP 7 61 RUB 73 0 JPY NOK -2 2 USD SEK ZAR Receivables in Euro 3,488 3,103 Share of EUR receivables, % The main part of trade receivables is in EUR and the most significant invoicing currencies after EUR were USD and ZAR during the financial year. If the value of USD and ZAR against EUR were to decrease by 10%, and the share of different currencies were to remain in the same level, the value of trade receivables would decrease by EUR 73 thousand, which corresponds to 1.96% of the total value of trade receivables. Correspondingly, if the value of all other invoicing currencies against EUR were to decrease by 10%, the value of trade receivables would decrease totally by EUR 107 thousand. Age analysis of trade receivables Over 180 days past due days past due days past due Not due 2,839 2,035 Total 3,488 3,103 Fair value of trade receivables The initial book value of trade receivables approximates fair value because the effect of discounting is insignificant due to the short maturity QPR Quality. Processes. Results

41 Consolidated Financial Statements 19. Cash and cash equivalents Bank accounts 1,020 1,703 Total 1,020 1, Equity (EUR 1,000) Number of shares Share capital Other funds Invested non-restr. equity fund Treasury shares Total January 1, ,445 1, ,110 Disposal of treasury shares Repurchase of shares December 31, ,445 1, ,227 January 1, ,445 1, ,176 Repurchase of shares December 31, ,445 1, ,110 The Company has one series of shares and the maximum value of share capital is EUR 1,359 thousand. All the issued shares have been fully paid. Other funds Includes the reserve fund in subsidiary QPR Software AB. Treasury shares Treasury shares include the purchase price of own shares held by the Group. 21. Interest-bearing and non-interest-bearing liabilities Non-current liabilities Deferred tax liabilities 90 0 Other non-interest bearing liabilities 56 0 Pension loans Total Amortization of interest-bearing loans Total Interest-bearing loans are in Euro. According to loan terms, interest rate is fixed, so a sensitivity analysis is not meaningful. The interest rates of loans: Year Pension loan, % QPR Quality. Processes. Results

42 Consolidated Financial Statements Current liabilities Pension loans Total Trade and other payables Trade payables Accrued expenses 2,410 1,920 Prepaid income 1, Other liabilities Total 4,076 3,763 The value of trade payables in foreign currency was low in 2011 and Adjustments to the cash flow from operating activities Non-cash business operations Other items Deferred taxes Total Amortization of current loans EUR 1, Product development loans 0 79 Pension loans Total Commitments and contingent liabilities Business mortgage* 1,337 1,337 Lease liabilities and rental commitments Liabilities maturing during one year Liabilities maturing during 2-5 years Total Total commitments and contingent liabilities 1,645 1,626 *Business mortgages EUR 1,337 thousand are in Nordea as a counter security for a guarantee on the pension loan from Ilmarinen. Rental commitments include office rental agreements: Rental agreement (October 5, 2009) for approximately 3 years. First termination date is February 29, 2012 and the termination period is 3 months. Rental agreement (March 31, 2011) for 1 year. First termination date is November 30, 2011 and the termination period is 6 months. Rental agreement (October 25, 2011) for 2 years. First termination date is November 30, 2013 and the termination period is 6 months. Rental guarantees totaling EUR 60 thousand are included Cash and cash equivalents in the balance sheet QPR Quality. Processes. Results

43 Consolidated Financial Statements Other liabilities The Company acquired on November 2, 2009 the business operations of its reseller Trodos and consulting partner United Project and Services Group (UPSG) in the Russian Federation and the CIS countries. Acquired business operations comprise all QPR Software related customer contracts, solutions, and intellectual property rights in Russia and CIS countries. The operations were transferred to a subsidiary (QPR CIS Oy), which started operations March 2010 and is responsible for all QPR Software businesses in Russia and the CIS countries. QPR owns 80 % and the sellers own 20% of the shares in the subsidiary. The price for acquired business operations was EUR 263 thousand, of which about EUR 165 thousand was paid in May Purchase price is paid in cash (62.5%) and QPR Software Plc's shares (37.5%). QPR and the sellers have also agreed on call and put options for the sellers 20% share. Options can at the earliest be exercised in January QPR and the sellers have agreed that the purchase price will be based on the highest of the following amounts: 20% of the following: QPR CIS Oy's EBITDA in 2013 multiplied by 5.5, less net debt; or 20% of the QPR CIS net assets at the end of 2013 financial year. The contingent purchase price of the put option is not recognized as part of the purchase price, because the option cannot presently be exercised. 25. Financial Risk Management The International business operations of QPR Group are exposed to risks typical in normal international transactions. Financial risk management aims to secure sufficient financing cost-effectively and to monitor, and when necessary, mitigate the materializing risks. Risk management is a centralized responsibility of the Group's financing function and the CEO. The general risk management policies are approved by the QPR Software Plc Board of Directors. The Board is also responsible for supervising the adequacy, appropriateness and effectiveness of the Group s risk management. The terms of the company s interest-bearing loans to not include any covenants. Foreign exchange risk The main sales currency for the Group is Euro and the majority of purchases are managed in Euros. The main part of trade receivables is in EUR and the most significant invoicing currencies after EUR were USD and ZAR during the financial year. If the value of USD and ZAR against EUR were to decrease by 10%, and the share of different currencies were to remain in the same level, the value of trade receivables would decrease by EUR 73 thousand, which corresponds to 1.96% of the total value of trade receivables. Correspondingly, if the value of all other invoicing currencies against EUR were to decrease by 10%, the value of trade receivables would decrease totally by EUR 107 thousand. In accordance with the foreign exchange risk policy approved by the Board of Directors on 19 May, 2010, the Company started foreign currency hedging in June The purpose of the currency hedging is to reduce the added uncertainty of exchange rates and to minimize the adverse impact of the exchange rate changes to the Group's cash flow, financial results and equity. The intention is not to eliminate all the risks but to reduce the significant risks to an acceptable level at an acceptable cost. Management regularly reviews the Company's foreign exchange risks, taking into account the hedging costs. The hedging techniques used by the Company are forward contracts and options. At the end of the reporting period, the Company did not have any forward contracts or options. Interest rate risk At closing, the Company had interest-bearing liabilities totaling EUR 566 thousand. These liabilities bear a fixed interest rate. The effect of interest rate changes on the Group result is insignificant and the Group did not take any hedging measures during the financial period QPR Quality. Processes. Results

44 Consolidated Financial Statements Liquidity risk Liquidity risk is defined as financial distress or extraordinary high financing costs due to a shortage of liquid funds in a situation where business conditions unexpectedly deteriorate and require financing. The objective of liquidity risk management is to maintain sufficient liquidity and to ensure that it is available for business purposes fast enough without endangering the value of investments. QPR maintains sufficient liquidity by efficient cash management, cash deposits, and by investing in liquid interestbearing securities. The Group's interest-bearing loans do not include any covenants. Amounts are not discounted (EUR 1,000) Maturity of liabilities Balance sheet value 0 6 months 6 months 1 year 1 2 years 2 5 years Pension loans Trade and other payables Total 1, Operative credit risk The Group's international business operations are naturally exposed to credit risk related to individual partners. However, the Group has a wide customer base and reseller network spread over several market areas. The Group's trade receivables thereby arise from a large number of resellers and customers in several market areas, and according to management s estimate there are no concentrations of reseller, customer, or geographical risks. In addition, continuous and active monitoring of receivables and credit limits aims at mitigating the Group s credit risks. The Group's maximum credit risk corresponds to the book value of trade receivables QPR Quality. Processes. Results

45 Consolidated Financial Statements 26. Key figures of the group Net sales 7,539 6,937 6,618 Growth of net sales % Operating profit % of net sales Profit before tax % of net sales Profit for the period % of net sales Return on equity, % Return of investment, % Interest-bearing liabilities ,098 Cash and cash equivalents 1,020 1,703 1,929 Net liabilities Total equity 2,973 2,694 2,575 Gearing, % Equity ratio, % Total balance sheet 7,761 7,250 6,874 Investment in non-current assets 1, ,026 % of net sales Product development expenses 1,313 1,278 1,325 % of net sales Personnel average for period Personnel at the beginning of period Personnel at the end of period Company changed the accounting principles of received advance payments in QPR Quality. Processes. Results

46 Consolidated Financial Statements 27. Key figures per share (EUR 1,000) IFRS IFRS IFRS Earnings per share, basic and diluted, EUR Equity per share, EUR Dividend per share, EUR * Dividend per profit, % Effective dividend rate, % Invested non-restricted equity fund paid Price per profit (P/E) Development of share price Average, EUR Lowest, EUR Highest, EUR Price December 31, EUR Market capitalization December 31 (1,000 EUR) 10,794 11,032 11,578 Development of trading volume Number of shares traded, 1,000 pcs 1, % of all shares Number of shares December 31, 1,000 pcs 12,445 12,445 12,445 Weighted average number of shares outstanding, basic 12,143 12,166 12,186 Weighted average number of shares outstanding, diluted 12,143 12,166 12,315 * Year 2011: The Board of Director's proposal to the Annual General Meeting to be held on March 22, Events after review period QPR took a EUR 500 thousand overdraft limit from the Nordea Bank Plc in the beginning of January The reference rate of the overdraft limit is 1-week Euribor and the margin is 1.25% of the used limit. The Board of Directors decided on February 16, 2012 to commence preparations for merging StrongDocs Oy, QPR Software Plc s subsidiary, into the parent company. The merger does not have any effect on consolidated results or balance sheet in Capital management Interest-bearing liabilities Liquid assets 1,020 1,703 Net liabilities Total equity 2,973 2,694 Gearing, % Equity ratio, % Balance sheet total 7,761 7,250 The development of Group capital structure is monitored, in particular, through gearing and equity ratio QPR Quality. Processes. Results

47 Consolidated Financial Statements 30. Group Companies The parent and subsidiary relationships are as follows: The parent company is QPR Software Plc. The Group's subsidiaries Domicile Dec 31, 2011 Group's ownership, % Nobultec Ltd* Helsinki, Finland 100 QPR CIS Oy Helsinki, Finland 80 QPR Service Oy Helsinki, Finland 100 QPR Software AB Stockholm, Sweden 100 QPR Software Inc. San Jose, CA, USA 100 OOO QRP Software Moscow, Russia 80 StrongDocs Oy** Helsinki, Finland 100 *Shares were acquired by QPR Software Plc on August 1, **The Company acquired a 40% stake on September 30, Earlier the Company owned 60% of the share capital QPR Quality. Processes. Results

48 Consolidated Financial Statements Definition of Key Indicators Return on equity (ROE), %: Profit for the period x 100 Total equity (average) Return on investment (ROI), %: Profit before taxes + interest and other financial expenses x 100 Balance sheet total - non-interest bearing liabilities (average) Equity ratio, %: Total equity x 100 Balance sheet total - deferred revenue Gearing, %: Interest bearing liabilities - cash and cash equivalents x 100 Total equity Earnings per share, euro: Profit for the period _ Weighted average number of shares outstanding during the financial year Equity per share, euro: Equity attributable to shareholders of the parent company Basic number of shares outstanding at the end of the financial period Dividend per share, euro: Total dividend paid Basic number of shares outstanding at the end of the financial period Dividend per earnings, %: Dividend per share x 100 Earnings per share Effective dividend yield, %: Dividend per share x 100 Share price at the end of the financial period Price-earnings ratio (P/E): Share price at the end of the financial period Earnings per share Market capitalization: (Total number of shares - treasury shares) x share price at the end of the financial period Turnover of shares, % of all shares: Turnover (number of shares) x 100 Number of shares issued (average) Quick ratio: Current assets inventories Current liabilities deferred revenue QPR Quality. Processes. Results

49 Parent Company Financial Statements Parent Company Income Statement, FAS (EUR 1,000) Note Jan 1 Dec 31, 2011 Jan 1 Dec 31, 2010 Net sales 1 6,568 6,359 Other operating income Materials and services Employee benefit expenses 4 3,896 3,869 Depreciation and amortization Other operating expenses 6 1,256 1,124 5,851 5,733 Operating profit Financial income and expense Profit before taxes Income taxes Profit for the period QPR Quality. Processes. Results

50 Parent Company Financial Statements Parent Company Balance Sheet, FAS (EUR 1,000) Note December 31, 2011 December 31, 2010 ASSETS Non-current assets Intangible assets 9 1,368 1,394 Tangible assets Investments in subsidiaries 11 1, Other investments Total non-current assets 2,564 1,670 Current assets Long-term receivables Short-term receivables 13 4,225 3,807 Cash and cash equivalents ,550 Total current assets 5,150 5,629 Total assets 7,714 7,299 (EUR 1,000) Note December 31, 2011 December 31, 2010 EQUITY AND LIABILITIES Shareholders equity Share capital 15 1,359 1,359 Invested non-restricted equity fund 5 5 Retained earnings Treasury shares Profit for the period Total shareholders equity 2,649 2,328 Liabilities Non-current liabilities Current liabilities 16 4,669 4,405 Total liabilities 5,065 4,971 Total equity and liabilities 7,714 7, QPR Quality. Processes. Results

51 Parent Company Financial Statements Parent Company Cash Flow Statement, FAS (EUR 1,000) Jan 1 Dec 31, 2011 Jan 1 Dec 31, 2010 Cash flow from operating activities Operating profit for the period Adjustments for: Depreciation Financial items 3-93 Income taxes paid 0 0 Net cash flow before changes in working capital 1,325 1,159 Changes in working capital Increase (-) / decrease (+) in short term non-interest bearing receivables ,180 Increase (+) / decrease (-) in non-interest bearing short term liabilities Change in long-term non-interest bearing receivables and payables Change in working capital Net cash flow from operating activities 1, Cash flows from investing activities Purchases of intangible assets Purchases of tangible assets Purchases of subsidiary shares Change in loans receivable from subsidiaries, net Net cash used in investing activities -1, Cash flows from financing activities Repayments of long term borrowings Repurchase of shares Disposal of treasury shares Increase of subsidiary shares 0-6 Repayment of invested non-restricted equity Dividends paid Net cash used in financing activities Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the period 1,550 1,685 Cash and cash equivalents at the end of the period 865 1, QPR Quality. Processes. Results

52 Parent Company Financial Statements Accounting principles, FAS QPR Software Plc s financial statements for 2011 have been prepared according to the Finnish Accounting Standards (FAS), which have certain differences compared to IFRSs applied in the Consolidated Financial Statements. Company information The QPR Group specializes in developing and selling software and services related to business process management, enterprise architecture management and performance management. QPR Software Plc (Company ID ) is the parent company of the QPR Group. The Company domicile is in Helsinki and its registered address is Huopalahdentie 24, Helsinki, Finland. Revenue recognition The net sales of the parent company are generated through the following sales revenue: sale of software licenses, software updates, and sales of maintenance and consulting services. Net sales of software licenses are recognized in connection with the delivery. Maintenance income covering software updates and customer support is recognized on an accrual basis during the agreement period. Consulting services are recognized upon service delivery. Net sales include sales of software licenses and services rendered, deducted by sales-related taxes and discounts granted, and adjusted for exchange rate differences. Transactions in foreign currency Transactions in foreign currencies are recorded in Euro using the exchange rate at the date of the transactions. Exchange rate differences have been entered in the respective items above operating profit. Receivables and liabilities in foreign currencies are recorded in Euro using the exchange rates quoted by the European Central Bank on December 31, Product development expenditures Product development costs are capitalized in the balance sheet when the product is technically and commercially feasible and is expected to yield income. Other product development costs are recorded as expenses during the financial year. Capitalized development costs are amortized in four (4) years. Pension expenses The statutory pension obligations of QPR Software Plc are recognized as an expense in the income statement in the period during which they arise. Intangible assets Intangible assets with a limited economic life are recorded in the balance sheet, and amortized straight-line over their useful lives. The estimated useful life of intangible assets is 2 5 years. Tangible assets Tangible assets are valued at acquisition cost less deprecation according to plan. The assets are depreciated over their estimated useful lives. The estimated useful lives for machinery and equipment are 2 7 years. Leasing In the parent company financial statements, leasing payments are recognized as annual expense in accordance with FAS. Cash and cash equivalents Cash and cash equivalents include liquid cash, bank deposits and marketable securities. Taxes Income taxes are recognized in accordance with the Finnish tax legislation. A deferred tax asset is recognized to the extent it is considered probable that there will be future taxable profit against which the temporary difference can be utilized. Exchange rate differences derived from financial items are recognized in net amount in financial income and expenses. Government grants Government grants are presented as other operating income in the income statement, expect when related to investments, in which case they are deducted from the acquisition cost of the asset QPR Quality. Processes. Results

53 Parent Company Financial Statements Notes to the Parent Company Financial Statements, FAS 1. Net sales The parent company's net sales are accrued solely from software business, with following breakdown in the financial year: Software licenses 1,478 1,647 Maintenance services 3,770 3,648 Professional services 1,320 1,064 Total 6,568 6,359 The geographical breakdown of the net sales was as follows: Domestic (Finland) 3,663 2,861 Sales to Group companies International 2,548 3,105 Total 6,568 6, Other operating income Government grants Total Materials and services Materials and services Total Materials and services include mainly commissions and localization fees charged by the reseller network. 4. Employee benefit expenses Salaries 3,185 3,155 Pension expenses Other personnel expenses Total 3,896 3,869 Salary, fringe benefits, vacation pay and accruals of benefits for the CEO: Jaakkola Jari Total Board fees by member: Leskinen Vesa-Pekka, Chairman of the Board Piekkola Asko Gerdt Aino-Maija Laine Antti, until March 18, Niemi Jarmo, until March 18, Kontio Jyrki Piela Topi, until March 18, Total QPR Quality. Processes. Results

54 Parent Company Financial Statements Average number of personnel Total Depreciation and amortization Depreciation and amortization by group of assets Intangible assets Other intangible assets Total Tangible assets Machinery and equipment Total Total Other operating expenses Non-statutory indirect employee costs Travel expenses Marketing and other sales promotion Bad debts Other operating expenses Total 1,256 1,125 Fees paid to the parent company auditor (KPMG) Auditing Tax consultation 1 2 Other services 2 3 Total Financial income and expenses Interest income Interest expense Exchange rate differences Other financial expenses Total Income taxes Deferred tax Total QPR Quality. Processes. Results

55 Parent Company Financial Statements 9. Intangible assets (EUR 1,000) Computer software Acquisition cost January Increase Acquisition costs December Accumulated amortization January Amortization for the period Accumulated amortization December Book value January Book value December (EUR 1,000) Capitalized product development costs Acquisition cost January 1 1, Increase Acquisition costs December 31 1,417 1,055 Accumulated amortization January Amortization for the period Accumulated amortization December Book value January Book value December (EUR 1,000) Other intangible assets Acquisition cost January ,132 Increase 3 0 Decrease Acquisition cost December Accumulated amortization January Amortization for the period Accumulated amortization December Book value January ,030 Book value December Total intangible assets December 31 1,368 1, Tangible assets (EUR 1,000) Machinery and equipment Acquisition costs January 1 1, Increase Acquisition cost December 31 1,074 1,010 Accumulated depreciation January Depreciation for the period Accumulated depreciation December Book value January Book value December Total tangible assets December QPR Quality. Processes. Results

56 Parent Company Financial Statements 11. Investments Shares in subsidiaries Acquisition cost January Increase Acquisition cost December 31 1, Book value December 31 1, Other shares Acquisition cost January Acquisition cost December Book value December Total investments December 31 1, Subsidiaries QPR Software Inc. (San Jose, CA, USA) 100% 100% QPR CIS Oy (Helsinki, Finland) 80% 80% StrongDocs Oy (Helsinki, Finland) 100% 60% Nobultec Ltd (Helsinki, Finland) * 100% 0% QPR Service Oy (Helsinki, Finland) 100% 100% *Nobultec Ltd became a subsidiary on August 1, Long-term receivables Deferred tax assets Other long-term receivables 0 22 Withholding tax receivables Total The parent company has tax loss carry-forwards, for which a deferred tax asset has been recorded. 13. Short-term receivables Trade receivables 2,831 2,553 Other short-term receivables - Group companies Other short-term receivables Accrued income and prepaid expenses Total 4,225 3,807 Accrued income and prepaid expenses include: Pension insurance receivables Other accrued income 20 3 Other prepaid expenses Total Breakdown of receivables from the Group companies: Other short-term receivables QPR CIS Oy Nobultec Ltd -1 0 StrongDocs Oy 2 0 QPR Services Oy Total QPR Quality. Processes. Results

57 Parent Company Financial Statements 14. Cash and cash equivalents Bank accounts 865 1,550 Total 865 1, Shareholders' equity Shareholders' equity Restricted equity Share capital January 1. 1,359 1,359 Shares issued 0 0 Share capital December 31 1,359 1,359 Total restricted equity December 31 1,359 1,359 Non-restricted equity Invested non-restricted equity fund January Repayment of invested non-restricted equity Invested non-restricted equity fund December Retained earnings January Profit for the period Dividend distribution Own shares Retained earnings December 31. 1, Total non-restricted equity December 31 1, Total shareholders' equity December 31 2,649 2,328 Treasury shares January Decrease (+) / increase (-) Treasury shares December Distributable funds Retained earnings January 1, less dividend distribution Profit for the period Treasury shares Invested non-restricted equity fund 5 5 Total 1, QPR Quality. Processes. Results

58 Parent Company Financial Statements 16. Liabilities, commitments and contingent liabilities Long-term liabilities Loans from financial institutions and other loans Total Short-term liabilities Loans from financial institutions and other loans Trade payables Other short-term liabilities Accrued expenses and prepaid income 2,188 1,743 Advances received Other short-term liabilities - Group companies Total 4,669 4,405 Accrued expenses and prepaid income Holiday pay including social costs Bonuses including social costs Prepaid income 1,539 1,067 Accrued interest expenses 4 6 Other accrued expenses Total 2,188 1,743 Other short-term liabilities - Group companies QPR Software Inc QPR CIS Oy QPR Software AB Total Rental commitments Short-term rental commitments Rental commitments maturing later years Lease commitments Short-term lease commitments Lease commitments maturing later years Total Business mortgage* 1,337 1,337 *Business mortgages EUR 1,337 thousand are in Nordea as a counter security for a guarantee on the pension loan from Ilmarinen. The parent company has no financial derivates QPR Quality. Processes. Results

59 Date and signatures of Board of Directors Report and Financial Statements Date and signatures for the Board of Directors Report and Financial Statements Helsinki, Finland, February 15, 2012 QPR Software Plc Board of Directors Vesa-Pekka Leskinen Chairman of the Board Aino-Maija Gerdt Board member Jyrki Kontio Board member Asko Piekkola Board member Jari Jaakkola Chief Executive Officer Auditor s note An auditor s report concerning the performed audit has been given today. Helsinki, Finland, February 21, 2012 KPMG Oy Ab Autohorized Public Accountants Sixten Nyman Authorized Public Accountant QPR Quality. Processes. Results

60 Auditor s Report Auditor s Report To the Annual General Meeting of QPR Software Plc We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of QPR Software Plc for the year ended December 31, The financial statements comprise the consolidated statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows, and notes to the consolidated financial statements, as well as the parent company s balance sheet, income statement, cash flow statement and notes to the financial statements. Responsibility of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of financial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company s accounts and finances, and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner. Auditor s Responsibility Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the report of the Board of Directors are free from material misstatement, and whether the members of the Board of Directors of the parent company or the Managing Director are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Limited Liability Companies Act or the articles of association of the company. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of financial statements and report of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of the Board of Directors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. Opinion on the company s financial statements and the report of the Board of Directors In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company s financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements. Opinion on discharge from liability and distribution of profit We support the adoption of the financial statements. The proposal by the Board of Directors regarding the treatment of distributable funds is in compliance with the Limited Liability Companies Act. We support that the Board of Directors of the parent company and the Managing Director be discharged from liability for the financial period audited by us. Helsinki February 21, 2012 KPMG OY AB Sixten Nyman Authorized Public Accountant QPR Quality. Processes. Results

61 Information to Shareholders Information to Shareholders The share of QPR Software Plc The share of QPR Software Plc is quoted on the main list of the NASDAQ OMX Helsinki Ltd, in the Information technology sector, Small Cap segment. The trading started on March 8, Trading code: QPR1V ISIN code: FI Annual General Meeting The Annual General Meeting will be held on Thursday 22 March, 2012 starting at 1:00 p.m. at the Company's headquarters Huopalahdentie 24, Helsinki, Finland. A shareholder of the Company that has been entered into the Company's shareholders' register maintained by Euroclear Finland Ltd on March 12, 2012 has the right to participate in the General Meeting. The shareholder willing to participate in the Annual General Meeting shall inform the company of the participation on March 14, 2012, at 4.00 p.m. at the latest, in writing to the address QPR Software Plc, Huopalahdentie 24, Helsinki, by phone to the number , or by to the address ilmoittautumiset@qpr.com. The letter or message of participation shall be at the destination prior to the expiry of the registration period. The possible proxies are asked to be delivered in connection with the registration to the address set forth above. A holder of nominee registered shares has the right to participate in the Annual General Meeting by virtue of such shares, based on which he/she on the record date of the Annual General Meeting, i.e. on 12 March, 2012, and would be entitled to be registered in the shareholders register of the company held by Euroclear Finland Ltd. The right to participate in the Annual General Meeting requires, in addition, that the shareholder on the basis of such shares has been registered into the temporary shareholders register held by Euroclear Finland Ltd at the latest by March 19, 2012 by 10:00 a.m. (Finnish time). As regards nominee registered shares this constitutes due registration for the Annual General Meeting. A holder of nominee registered shares is advised to request without delay all necessary instructions regarding the temporary registration in the shareholders register of the Company, the issuing of proxy documents and registration for the Annual General Meeting from his/her custodian bank. Dividend The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.03 per share be paid to shareholders for financial year The Board of Directors proposes to the Annual General Meeting that dividend be paid on April 3, Financial information in 2012 In 2012, QPR Software Plc will publish its financial information as follows: Interim Report 1-3/2012: 26 April, 2012 Interim Report 1-6/2012: 1 August, 2012 Interim Report 1-9/2012: 25 October, 2012 The interim reports and all stock exchange bulletins of QPR Software Plc are available on the Investor pages of the Company s Internet pages, Changes of addresses If the address of a shareholder changes, we request to contact the custodian bank holding the shareholder s book-entry account QPR Quality. Processes. Results

62 QPR Software customers Our customers QPR software and services are used by over customers around the world from the private as well as the public sector. Customer organizations systematically develop their processes and performance with them. Customers may also use our software and services to comply with requirements set by regulation and standards (e.g. quality or environment) or to manage operational changes related to these. QPR software is localized to more than 20 languages. During 2011 the Company sold software licenses to 69 countries. Some of our international customers: ALPLA Abu Dhabi Sewerage Services Company Advanced Electronics Anglo Platinum Anheuser-Busch InBev Aramark Banco General Belgocontrol BKKBN Badan Koordinasi Bosch Group BSH Ev Aletleri Sanayi Cardiff Bus Company Českomoravská stavební spořitelna City of Antwerp City of Malmö City of Moscow CNOOC SES Commercial Bank of Dubai Commerzbank (Schweiz) AG Company Ltd Danish Defence Die Schweizerische Post Diehl Aerospace GmbH Dubai Aluminium Company Eandis CVBA EDS Electricidad, Ernst & Young - Abu Dhabi GBES Gesundheitsnetz Wallis (GNW) Gold-Pak Höörs Kommun Insel Spital Bern IRKUT Kazzinc Keluarga Berencana Nasional Kommunledningsförvaltningen Landstinget i Östergötland Latvijas valsts meži Dubai Aluminium Limited (DUBAL) Lusitania, Companhia Seguros SA Maeda Road Construction CO., Ltd. Merafong Municipality Millard Filters Millennium Bank Ministry of Health in Lithuania Ministry of Justice in Lithuania MTS OAO Mobilnye Namakwa sands Nampak National Bank Of Abu Dhabi NEC Software Ltd NESTLE Nissha Printing North Lanarkshire Council Novard Group OGUP Pharmacies Oi Telecom ONEOK Pfizer Health AB Real People Rentokil Initial A/S Robert Bosch GmbH Rumiñahui S.A. Seguros, SA Sibelco Sonangol E.P South African Airways SVA Aargau TACA International Airlines, S.A. Grupo TACA Telesystemy The Grass Roots Group The Standard Bank of South Africa Ltd TNK-BP Trenciansky samospravny kraj UK Ltd Umeå Council United Chemical Company United Finance Company, SAOG Urzad Marszalkowski w Lodzi Vattenfall AB ve Ticaret A.S. Veolia Water Japan Vetlanda kommun QPR Quality. Processes. Results

63 QPR Software customers Some of our customers in Finland: Aalto University Alma Media Altia Amiedu School of Applied Sciences Anttila Arla Ingman Atria Barona Carea Cargotec CRH Finland DNA Enfo Espoo City Etelä-Karjala health and social services district Etelä-Pohjanmaa health care district Etelä-Savo health district Evli Bank Finnish Medicine Agency, FIMEA Finnish Communications Regulatory Authority Finnish Government Shared Services Centre for Finance and HR Finland s environmental administration Finnish Defence Forces Finnish Defence University Finnish National Board of Education Finnish State Treasury Finnvera Fira Fortum Hansaprint Heinola City Helsinki and Uusimaa health care district Helsinki City Helsinki School of Economics Helsinki University HKScan Hyriä School of Applied Sciences Häme School of Applied Sciences Ilmarinen Imatra City Ingman Isku Itä-Suomi University Jyväskylä University Järvenpää City Kanta-Häme health care district Kastelli-Talot Kemira Kerava City Keski-Pohjanmaa health care district Keski-Suomi health care district Kesko Kirkkonummi City Kirjavälitys Kokkola city Kotka City Kuopio City Lappi health care district Lassila and Tikanoja Laurea School of Applied Sciences Lindorff Liikennevirasto Lindström Lohja City Lujatalo Mediq Suomi Metropolia School of Applied Sciences Metso Metsä-Botnia Ministry of Employment and Economy Mikkeli School of Applied Sciences Ministry of Education and Culture Ministry of Finance, JulkICT National Audit Office of Finland Neste Oil Oilon Onninen Oriola-KD Oulun City Oulu Region Edcuational Group Oulu University Outokumpu Outotec Patria Peab Peikko Group Pirkanmaa health care district Pohjois-Pohjanmaa health care district Pohjois-Savo health care district Pohjola Bank Posiva Pretax Päijät-Häme Educational Group Päijät-Häme health care and social services district QuattroGemini Raisio Ramboll Rautaruukki Rasila Group Regional State Administrative Agencies Rovaniemi Educational Group Samlink Satakunta School of Applied Sciences Satakunta health care district Sato Savon Voima Sibelius Academy Skanska Sodexo Solteq SRV StoraEnso Suomen Lähikauppa Suunto Tampere School of Applied Sciences Tecwill Tekes Teollisuuden Voima Tekla Terveystalo Tulikivi Turku School of Applied Sciences Turku City Vaasan & Vaasan Vaasa City Vaasa University Vacon Vaisala Valio Varkaus City Visma Software QPR Quality. Processes. Results

64 Contact Information Contact information Finland QPR Software Plc Head Office Huopalahdentie 24, HELSINKI Oulu office Teknologiantie OULU Tel: Fax: Russian Federation Moscow Office OOO QPR Software Novgorodskaya Street, Moscow Tel: Fax: Customer Care Tel: customercare@qpr.com QPR Quality. Processes. Results

65 Contact Information We help people and organizations to take control of their processes and achieve their goals QPR Quality. Processes. Results