Vertu Operations Limited German BranchLiquidiert

Vertu Operations Limited German Branch

München

Jahresabschluss zum 28. Dezember 2012

Accounts for the 458 day period to 28 December 2012

VERTU OPERATIONS LIMITED, CHURCH CROOKHAM

Company number: 7790912

Index

Directors Report for the 458 day period to 28 December 2012

Independent Auditors Report to the members of the Vertu Operations Limited Financial Statements

Notes to the Financial Statements

Directors Report for the 458 day period ended 28 ^th December 2012

The directors present their annual report and the audited financial statements for the 458 days ended 28 December 2012.

These financial statements cover the results of Vertu Operations Limited. The results are presented in Euros in round thousands (€000's) since the Directors consider that € is the functional currency of the company.

Vertu Operations Limited was incorporated as a private limited company under the laws of England and Wales on 28 September 2011. The registered office and principal place of business of Vertu Operations Limited is Beacon Hill Road, Church Crookham, GU52 8DY.

The immediate parent company is Vertu Corporation Limited, a company incorporated under the laws of England and Wales. The directors regard the ultimate parent undertaking as EQT Partners AB ("EQT group"), a partnership established in Sweden.

1. Principal Activities

Vertu Operations Limited was incorporated, on 28 September 2011. On 4 June 2012 assets and liabilities were acquired from the Nokia group relating to the Vertu business group within Nokia and since that date the principal activities of the company have been the sale of luxury mobile phones. On 12 October 2012 the entire shareholding of the parent company, Vertu Corporation Limited, was sold to Crown BidCo Limited, a company owned by the private equity group, EQT.

The brand and operating business name ("Vertu") was established in the UK in 1998 with the strategic intent to create and lead the luxury mobile communication category. Since 2001 Vertu has successfully developed & produced many different models of luxury mobile phones and is currently the market leader in this field. The first Vertu phone shipped in 2002 and there are currently 5 product families in the marketplace. The outlook for Vertu is positive with sales expected to grow during 2013 with the launch of the new Android based Vertu products.

Vertu Operations Limited uses a mix of both trade and retail channels for sales within Europe. The company operates through branches located in France, Germany and Italy. Vertu Operations Limited also offers a Concierge service to provide access to high end lifestyle services.

The company employed an average of 67 individuals during 2012.

2. Review of Business

The company became fully operational from 4 June 2012 with the purchase of the assets from Nokia. Prior to that date the company had minimal transactions. These financial statements therefore contain revenue and associated costs for 7 months of business from 4 June 2012 to 28 December 2012.

Revenue in the 458 days to 28 December was €14.99m with a reported operating loss of €2.11m.

Historically Vertu has developed phones using the Symbian platform inherent in the Nokia engines. On acquisition away from Nokia the strategy has moved away from the Symbian platform and development will now be focused on the Android platform. As a result of the change in platform, there was no new product launch in the latter half of 2012 as had been the case in previous years. The first model using the Android platform is expected to ship during 2013 with planned future launches scheduled into 2014 and beyond.

Management considers that at the period-end Vertu continues to have a strong position in the market. The change in strategy will support further growth by potentially increasing the size of the market and building on an established operating platform. Based on these assumptions, and supported by management's projection of future sales growth, the accounts have been prepared as a going concern.

Key Performance Indicators

The management of Vertu monitors progress on the overall strategy by reference to 2 key performance indicators; revenue and operating expenses, both of which are demonstrated in the statement of comprehensive income.

Management also review the growth in external revenue on a group wide basis. The results of this performance indicator are presented below from the accounts of Crown Topco Limited.

Principal Risks and Uncertainties

Employees

The company's performance depends largely on its managers and local staff. The resignation of key individuals and the inability to recruit people with the right experience and skills could adversely affect the company's results. To mitigate these issues, the company has the following policies in relation to employees:

Disabled employees

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicants concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the company continues and appropriate training is arranged. It is the policy of the group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

Employee consultation

The company places considerable value on the involvement of its employees and keeps them informed on matters affecting them and on the various factors affecting the performance of the company. Employees are kept informed through internal communications related to business activity and key initiatives. Centrally located management channels are also used as a basis for communication, and functional specific events are run both in the UK and within Europe.

Eligible employees share in and contribute to the company's performance through performance related bonus schemes.

Policy and practice on payment of creditors

It is the company's policy in respect of all suppliers to agree payment terms in advance of the supply of goods or services and to endeavour to adhere to those payment terms. At the period end, trade creditors represented 25 days.

Financial risk management

The operations of the company expose it to a number of financial risks including liquidity, the effects of foreign exchange risk, interest rate risk and credit risk. The company's overall risk management program focuses an the unpredictability of financial markets and seeks to minimise potential adverse effects an the company's financial performance. The company is reliant an it's parent company, Vertu Corporation Limited for it's treasury functions. Vertu Corporation Limited uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by a centralised treasury function under policies approved by the board of directors. Treasury identifies, evaluates and hedges financial risks in close co-operation with the company's operating units.

Treasury Policy and objectives

The treasury function of Vertu Corporation Limited manages the financial risks and conducts treasury activities strictly in accordance to treasury policy as mandated by the Board. The treasury policy is reviewed on an annual basis and sets out key strategies, policies and objectives for the managing of all treasury activities, cash management, liquidity, funding, foreign exchange, interest rate risks and key banking relationships for the company worldwide by treasury.

Liquidity

Cash flow forecasting is performed in the company. Treasury monitors rolling cash flow forecasts of the company's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom an its undrawn committed RCF borrowing facilities at all times so that the company does not breach borrowing limits or covenants (where applicable) an any of its borrowing facilities. Such forecasting takes into consideration the company's debt financing plans, covenant compliance and compliance with internal controls. Surplus cash held by the operating entities over and above balance required for working capital management are transferred to treasury. Treasury invests surplus cash in interest bearing current accounts and time deposits and or pay down an existing loans.

All cash balances and liquidity globally are proactively managed and reported centrally by treasury via online banking systems an a daily basis. Vertu Operations Limited is responsible for making local payments using local excess receipts and, where necessary, funds from treasury. Vertu Corporation Limited acts as an obligor and guarantor for a €24.63M lang-term fully committed revolving credit facility ("RCF") with Barclays Bank which is operated by its immediate parent company and where possible, have set up appropriate cash pooling arrangements with its global relationship banking partners, to ensure adequate liquidity and undrawn facility headroom for the Company worldwide at all times, to meet known or probable cash flow requirements, to fund growth and to minimize interest expense where local regulations and exchange controls permit.

Foreign Exchange Risk

The company operating the treasury function operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the GBP, USD, CNY, HKD, MOP and SGD versus the Euro functional currency. Foreign exchange risk arises from future commercial transactions, recognised assets, liabilities, and net investments in foreign operations.

Foreign exchange risk is managed centrally by treasury in the UK. The main reasons for the risks are the intercompany transactions with overseas subsidiaries and branches and the large number of overseas suppliers used in the sourcing of highly specialized materials and parts for the phones. To minimize foreign exchange gains or losses and maintain currency liquidity, a number of short-term spot deals have been entered into. It is the Intention of the company in the near future is to use the forward foreign exchange market to hedge material longer-term movements in overseas currencies using approved hedging instruments in accordance to the treasury policy. Our relationship banks provide spot forward foreign exchange transaction ("SFET") facilities and online FX systems to treasury to enable future FX cover to be taken where appropriate.

Interest Rate Risk

The Vertu Group currently has a long-term fully secured and committed RCF facility with Barclays Bank to provide working capital requirements for the company worldwide. The fixed rate interest charges incurred under this RCF facility are determined by the terms of the arrangement at market rates plus a margin. The bank provides strict guidelines on the use of the RCF facility, reporting and mandatory financial covenant compliance are strictly adhered by the Vertu Group at all times. The RCF facility is solely utilised by treasury who then, on request, would matched fund all subsidiaries worldwide via intercompany lending and pooling of surplus excess cash to Vertu Corporation Limited in the UK.

Credit Risk

The company has implemented policies that require appropriate credit checks on potential customers before sales are made. Each customer has an appropriate credit limit for their perceived risk. A policy of sales blocking is used if a customer exceeds their credit limit.

3. Future Developments

Vertu will look to continue to developing new products on the Android platform. The current retail channel strategy will continue while exploring new market opportunities.

4. Dividends

The directors do not recommend the payment of a dividend in 2012.

5. Research and Development

The research and development function of the Vertu group is performed by Vertu Corporation Limited.

6. Post Balance Sheet Events

As at the date of signing there have been no post balance sheet events which require disclosure in the financial statements.

7. Directors

The Directors of the company who were in office during the period and up to the date of signing the financial statements

The EQT group has provided an indemnity for its directors, which is a qualifying third party indemnity provision for the purposes of the Companies Act 2006. This was in place as at 28 December 2012 and at the signing date, 11 November 2013.

8. Statement of directors' responsibilities

The directors are responsible for preparing the Directors Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to Show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Statement of disclosure of information to auditors

As required under Companies Act 2006, section 418, the director confirms that, to his knowledge, there is no relevant audit information of which the Company's auditors are unaware.

The director has taken all the steps that ought to have been taken as a director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Independent Auditors

PricewaterhouseCoopers LLP have been appointed as auditors by the Board of directors under section 487(2) of the Companies Act 2006 and have indicated their willingness to continue in office. A resolution concerning their reappointment will be proposed at the Annual General Meeting.

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF VERTU OPERATIONS LIMITED

We have audited the financial statements of Vertu Operations Limited for the 458 day period ended 28 December 2012 which comprise the Statement of Comprehensive Income, the Balance sheet, the Statement of Cash Flows, the Statement of Changes in Equity, the Summary of Significant Accounting Policies and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Respective responsibilities of directors and auditors

As explained more fully in the statement of directors' responsibilities set out on page 7, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the directors' report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

Opinion on other matter prescribed by the Companies Act 2006

In our opinion, the information given in the Directors' Report for the financial period for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

Statement of Comprehensive Income for the 458 day period to 28 December 2012

Company number: 7790912

There are no discontinued operations to disclose for the 458 day period to 28 December 2012.

The notes an pages 15 to 34 are an integral part of these financial statements.

Balance Sheet as at 28 December 2012

The notes on pages 15 to 34 are an integral part of these financial statements.

The financial statements on pages 11 to 34 were authorized for issue by the board of directors on 11 November 2013 and were signed on its behalf.

Statement of changes in equity

The notes an pages 15 to 34 are an integral part of these financial statements.

Statement of cash flows

The notes on pages 15 to 34 are an integral part of these financial statements.

Notes to the Accounts

1 Summary of Significant Accounting Policies

This is the first set of financial statements prepared by the Company. The company was incorporated and domiciled in the United Kingdom.

The statements are prepared under IFRS. In preparing the financial statements the following amendments to standards have been applied early:

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied, unless otherwise stated.

Basis of preparation

The financial statements of Vertu Operations Limited have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), the Companies Act 2006 that applies to companies reporting under IFRS, and IFRIC interpretations. The financial statements have been prepared under the historical cost convention.

Consolidated financial information

The Company is exempt under section 400 of the Companies Act 2006 from the requirements to prepare consolidated financial statements as it and its subsidiary undertakings are included by full consolidation in the publicly available consolidated financial statements of Crown TopCo UK Limited. Prior to acquisition by Crown TopCo Limited on 12 October 2012 the results of the Company and its subsidiary undertakings were consolidated into the consolidated financial statements of Nokia Corporation.

Going concern

The Vertu Group meets its day-to-day working capital requirements through its bank facilities. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, Show that the group should be able to operate within the level of its current facilities. After making enquiries, the directors have a reasonable expectation that the Vertu Group has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its financial statements.

Changes in Accounting policies and disclosures

New and amended standards adopted by the Company

There are no new IFRS or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 28 September 2011, the date of incorporation, that would be expected to have a material impact on the Company.

New standards and interpretations not yet adopted

IFRS 9, 'Financial Instruments', issued in November 2009. IFRS 9 introduces new requirements for classifying and measuring financial instruments and may affect the Company's accounting for its financial instruments.

The standard is not applicable until 1 January 2013 but is available for early adoption, subject to endorsement by the EU. The Company is yet to assess IFRS 9's full impact.

IFRS 7, 'Financial Instruments: Disclosures'. This amendment requires additional disclosures in respect of risk exposures arising from transferred financial assets. The amendment will be effective for annual periods beginning on or after 1 July 2011, with earlier application permitted subject to endorsement by the EU. The Company is yet to assess IFRS 7's full impact.

'Presentation of items of other comprehensive income' (amendments to IAS 1). The main change resulting from the amendments was a requirement for entities to Company items presented in other comprehensive income on the basis of whether they are potentially classifiable to profit or loss subsequently (reclassification adjustments). The amendment will be effective for the financial reporting period commencing on 1 January 2013 subject to endorsement by the EU. The Company is yet to assess IAS 1's full impact.

'Deferred tax - Recovery of underlying assets' (amendment to IAS 12). This introduces an exception to the normal rule in IAS 12 that measurement of deferred tax in respect of an asset depends on the asset's expected manner of recovery (that is through use or sale or a combination of both). The exception applies to investment property measured using the fair value model in IAS 40 and introduces a rebuttable presumption that such investment property is recovered entirely through sale. This presumption is rebutted if the investment property is depreciable and is held within a business model whose objective is to consume the investment property's economic benefits over time, rather than through sale. The amendment also incorporates into IAS 12 guidance previously contained in SIC 21, which is accordingly withdrawn. The effective date for the amendment is annual periods beginning on or after 1 January 2012, with early adoption permitted, subject to EU endorsement. The Company does not expect the amendment to have a significant impact on the Company's results.

IFRS 10, 'Consolidated financial statements'. The standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial information. The standard provides additional guidance to assist in determining control where this is difficult to assess. This new standard might impact the entities that a Company consolidates as its subsidiaries. The standard is effective from 1 January 2013, subject to EU endorsement. The Company does not expect the amendment to have a significant impact on the Company's results.

The Company did not early adopt any standard or interpretation published by the IASB and endorsed by the European Union for which the mandatory application date is on or after 30 November 2012. As a consequence, the Company will apply the following standards and interpretations at their respective application dates as described below.

IAS 27 (Revised 2011), 'Consolidated and separate financial statements', includes the provisions on separate financial information that are left after the control provisions of IAS 27 have been included in the new IFRS 10. The standard is effective from 1 January 2013, subject to EU endorsement. The Company does not expect the amendment to have a significant impact on the Company's results.

IFRS 11, 'Joint arrangements'. The standard provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. The standard is not currently applicable to the Company, as it does not have any joint arrangements. The standard is effective from 1 January 2013, subject to EU endorsement.

IAS 28 (Revised 2011), 'Investments in associates and joint ventures', now includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. The standard is not currently applicable to the Company, as it does not have any joint ventures. The standard is effective from 1 January 2013, subject to EU endorsement.

IFRS 12, 'Disclosure of interests in other entities'. The standard includes disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The standard is not currently applicable to the Company, as it does not have any interests in other entities. The standard becomes effective for annual periods beginning on or after 1 January 2013, subject to EU endorsement.

IFRS 13, 'Fair value measurement'. The standard explains how to measure fair value and aims to enhance fair value disclosures; it does not say when to measure fair value or require additional fair value measurements.

The standard becomes effective for annual periods beginning on or after 1 January 2013, with earlier application permitted, subject to EU endorsement. The Company has yet to assess the standard's full impact.

Improvements to IFRSs 2010 were issued in May 2010. The effective dates vary standard by standard and management is evaluating the impact on the consolidated financial statements.

Improvements to IFRSs 2011 were issued in June 2011. The effective dates vary standard by standard and management is evaluating the impact on the consolidated financial statements.

IAS 19, 'Employee benefits' was amended in June 2011. As the Company does not operate any defined benefit pensions schemes this will have no impact on the consolidated financial statements.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.

Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in euros, which is the group's presentation and functional currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net Investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within 'finance income or costs'. All other foreign exchange gains and losses are presented in the income statement within the relevant income statement area to which they relate.

Property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Assets with an equivalent cost value of less than €2,463 are not capitalised within fixed assets but are taken directly to the income statement during the financial period in which the cost is incurred. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives.

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The useful lives currently in use within the Vertu Corporation Limited are:

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within Other (losses)/gains in the income statement.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in profit and loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in administrative expenses.

As part of the business combination explained in note 28, intangible assets related to key money were acquired during the year. The key money assets are being amortised over the life of the lease being their useful economic life.

Inventories

Inventories are stated at the lower of cost and net realisable value.

The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Trade receivables

Trade receivables are amounts due from customers for merchandise sold in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value less provision for impairment.

Cash and cash equivalents

In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks and bank overdrafts.

Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

Borrowing costs

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Employee benefits

(a) Pension obligations

The Company contributes to various pension schemes. The company only has defined contribution plans. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the Fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

For defined contribution plans, the Company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(b) Termination benefits

Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company recognises termination benefits when it is demonstrably committed to a termination when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

Provisions

Provisions for restructuring costs and legal claims are recognised when:

Restructuring provisions comprise and employee termination payments.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

Revenue recognition

Sales are recognized when the significant risks and rewards of ownership have transferred to the buyer, continuing managerial involvement usually associated with ownership and effective control have ceased, the amount of revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. The Company records reductions to revenue for Value based targeted Sales Incentives, Early settlement and payment in advance discounts, line discounts for in store visibility as well as any Goods in transit. Service revenue is generally recognized on a straight line basis over the service period unless there is evidence that some other method better represents the stage of completion.

The Company defers an element of revenue that relates to the concierge service provided to customers with the sale of its products. The portion of consideration received that is allocated to the concierge service obligation is based on its standalone selling price which is charged to the customer to renew the concierge service after the initial 12-month complementary service period has elapsed. An adjustment is made to the deferred element that takes into account the evidenced history of usage rates experienced by Vertu customers in the past. The costs associated with the provision of the concierge service are recognized as they are incurred.

Any returns are taken as a reduction in the revenue.

Cost of sales

The cost of sales are determined by the transfer prices set by the parent company Vertu Corporation Limited.

The transfer prices charged to Vertu Operations Limited are calculated so as to give the parent company an arm's length compensation for the function performed, value added, risks carried, and assets employed. The transfer prices for intra-group sale of products and spare parts are set based on the resale price method.

Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

In relation to a number of retail leases, an incentive is paid up front by way of key money. Any costs associated with these payments are capitalised and amortised over the length of the lease.

Exceptional items

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Company. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

2 Critical Accounting Estimates

Accounting estimates are used in the areas relating to deferred income on concierge services and provisions on warranty costs, price protection and dilapidations. The calculations in these areas are described in detail within the accounting policies above. Management reviews the assumptions behind these calculations on a regular basis and adjust according to the latest information available. At the year end the values of the deferred income and the provisions recognized in the account is considered to be a reasonable estimate of the values which will be realized.

3 Other expense

4 Exceptional Items

Items that are material either because of their size or their nature, or that are non-recurring are considered as exceptional items and presented separately in the income statement. On 12 October 2012, the Company reviewed the carrying value of Key Money held in intangible assets. As a consequence of this review, the Company has written down the assets to their fair value, less subsequent amortization, by including an impairment charge of €2,610,000 in the income statement.

5 Expenses by nature

6 Auditors Remuneration

The auditors' remuneration is borne by another group company, Vertu Corporation Limited.

7 Employee Benefit Expense

The directors of the Company are not remunerated for their services to the Company

8 Average number of people employed

9 Finance income and costs

10 Investments in subsidiaries

Vertu Operations Limited has investments in the following subsidiaries:

11 Income Tax Expense

The tax an the company's profit before tax differs from the theoretical amount that would arise using the tax rate applicable to profits as follows:

The current tax rate was 24%. The deferred tax rate of 23% differs from the current tax rate due to the decrease in the tax rate which has been substantively enacted in the UK reducing the UK headline tax rate from 24% to 23% from April 2013.

From April 2014 the corporation tax rate in the UK will decrease to 21%. However it is anticipated that the deferred tax an losses included will have been utilized during 2013 and hence the recognition of the UK losses at 23% is considered appropriate.

In April 2012 the UK corporation tax rate decreased from 26% to 24%. As all operations relating to the Company were alter April 2012, 24% has been used for any UK Company profits.

There is no income or deferred tax charged or credited directly to reserves in the period.

12 Property, Plant & Equipment

13 Intangible assets

All amortisation is included within administrative expenses.

Impairment tests for goodwill & other intangibles

When the Vertu business was acquired an 12 October 2012, management valued the key money held by the company. Impairment charges for the Rue Royale, Cannes and Munich store's key money were recognized.

Management considers that there has been no change in the value of the goodwill since the acquisition of the Vertu business. The business is performing in line with expectations and there is no indication of impairment of the goodwill, and as such no formal impairment review has been undertaken. A full impairment review will be carried out in the year ended 28 December 2013 and annually thereafter in line with IAS 36.

14 Financial Instruments by category

Details of the company's risk management policies and objectives are included in the Directors Report.

The cash is held at Bank of America, Deutsche Bank, Societe Generale, Intesa San Paolo S.P.A and Barclays Bank, all of which are well established financial institutions.

Loans and receivables held by the Company are denominated in the following currencies:

As at the balance sheet date the Company held the following financial liabilities:

Liabilities at fair value owed by the Company are denominated in the following currencies:

15 Trade and other receivables

There is no difference between the fair value of trade and other receivables and the amounts shown above.

As of 28 December 2012, trade receivables of €480,000 were past due date but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The aging analysis of these trade debtors is as follows:

As of 28 December 2012, trade receivables of €58,000 were impaired. The provision was 100% of the debt impaired. The aging of these receivables is as follows:

Movements an the provision for impairment of trade receivables are as follows:

The creation and release of provision for impaired receivables have been included in sales and marketing expenses in the income statement.

The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Company does not hold any collateral as security.

16 Inventories

17 Cash and cash equivalents

Cash and cash equivalents include the following for the purposes of the statement of cash flows:

18 Share capital and premium

On incorporation of Vertu Operations Limited an 28 September 2011, € 0.81 of share capital (1 ordinary share with a nominal value of £1 each) was authorized, issued and fully paid up.

19 Retained losses

The retained losses reserve for the Company includes the amounts transferred to reserves from the income statement for the period.

20 Trade and other payables

Amounts due to subsidiaries and related parties are short term, non-interest bearing, and repayable an demand.

21 Borrowings

Due to parent company

The amount due to the parent company of €14,316,000 relates to a revolving short-term intercompany loan issued by Vertu Corporation Limited, granted for the purposes of working capital. Interest is payable at the prevailing UK Base Rate + Margin of 3% p.a. The amount owing at the balance sheet date is unsecured and due for repayment by 15 December 2015.

22 Deferred income tax

The analysis of deferred tax assets and deferred tax liabilities is as follows:

The movement on the deferred income tax account is as follows:

The movement in deferred income tax assets during the year is as follows:

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. All losses are expected to be utilised alter 1 year of the accounting period end and as such all tax losses have been recognized in the accounts to 28 December 2012 as non-current.

23 Provisions for other liabilities and charges

Price Protection

On a case by case basis Vertu will agree to take back obsolete inventory from trade partners and a provision is maintained for this eventuality based on the historic rate of return. This is reviewed on a semi-annual basis. For the period to 28 December 2012 this was provided at 1.5% of trade related revenue.

24 Cash generated from operations

In the statement of cash flows, proceeds from sale of property, plant and equipment comprise:

25 Contingencies

As at 28 December 2012 the Company had no bank guarantees in place.

Nokia Corporation has issued €473,498 bank or parental guarantees on behalf of Vertu Operations Limited

26 Commitments Capital

Commitments

There are no capital expenditure commitments which require disclosure.

Operating lease commitments

The Company leases various retail outlets and offices under non-cancellable operating lease arrangements. The lease terms are between 1 and 15 years and the majority of lease agreements are renewable at the end of the lease period at market rate.

The Company also leases company cars under non-cancellable operating lease agreements.

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

27 Related party transactions

The following transactions were carried out with related parties:

Purchases of goods and services

Recharges from the Nokia group amounting to €26,900 for employee related services, rental expenses and other support services, plus €3,600 for fixed assets, were incurred during the period.

Vertu Operations Limited also purchased finished goods of €5,079,000 and incurred rental expenses of €161,000 from related parties within the group.

In addition to the items disclosed above, the Company acquired the assets of the Vertu business within the period for €16,040,000. See note 28 for further detail of this transaction.

Period end balances with related parties comprise:

28 Business Combination

On 4 June 2012 the company acquired a number of assets and liabilities from the Nokia group. Details of the purchase consideration, the net assets acquired and the goodwill are as follows:

Goodwill has arisen due to additional consideration paid in respect of the Italian business.

29 Events alter the reporting period

There are no post balance sheet events which require disclosure.

30 Parent and Controlling Parties

The immediate parent company for the Company is Vertu Corporation Limited, a company incorporated in England and Wales. The directors regard the ultimate parent company and controlling party as EQT Partners AB an undertaking established in Sweden.

Crown TopCo Limited is the parent undertaking of the smallest and largest Company of undertakings to consolidate these financial statements at 28 December 2012. The financial statements of Crown TopCo Limited are available from: Beacon Hill Road, Church Crookham Fleet, GU52 8DY.

Prior to 12 October 2012 the ultimate parent undertaking was Nokia Corporation and the results of the Company and its subsidiaries were consolidated into the consolidated financial statements of Nokia Corporation before this date. The consolidated financial statements of Nokia Corporation are available from PO Box 226, SF00101, Helsinki, Finland.