Tecnotree Oyj - Company Announcement

Tecnotree Corporation’s Auditor’s Report

Tecnotree Corporation
Stock Exchange Release
18 March 2015 at 8.32 am EET

This is the Auditor's report for the year ended 31 December 2014 to the Annual
General Meeting of Tecnotree Corporation: 

This document is an English translation of the Finnish auditor's report. Only
the Finnish version of the report is legally binding. 

AUDITOR'S REPORT

To the Annual General Meeting of Tecnotree Corporation

We have audited the accounting records, the financial statements, the report of
the Board of Directors, and the administration of Tecnotree Corporation for the
year ended 31 December, 2014. The financial statements comprise the
consolidated balance sheet, consolidated income statement, consolidated
statement of comprehensive income, statement of changes in shareholder's equity
and consolidated cash flow statement 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 President and CEO

The Board of Directors and the President and CEO 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 President and CEO 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 President and CEO 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. 

Basis for a qualified opinion

As presented in Note 18. Trade and other current receivables, the consolidated
balance sheet includes project accounting receivables totaling EUR 22.5 million
related to long-term projects. Thereof EUR 12.7 million relates to a project
for which we have not received sufficient appropriate audit evidence for
measurement purposes. This receivable is also included in the project
accounting receivables in the parent company's balance sheet. 

A qualified 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, except for the possible effects of the matter described in
Basis for a qualified opinion above. 

A qualified opinion on the parent company's financial statements and Board of
Directors' Report 

In our opinion, the financial statements and the report of the Board of
Directors give a true and fair view of 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, except for the possible effects of the matter
described in Basis for a qualified opinion above. The information in the report
of the Board of Directors is consistent with the information in the financial
statements 

Remark

As stated in the Board of Directors' Report and the financial statements, the
parent company's equity was less than one half of share capital on 31 December2014. We would like to remark that the parent company's equity has already
fallen below the limit required under the Limited Liability Companies Act
(Chapter 20, section 23) during the financial year and the Board of Directors
of the parent company has not without delay taken measures required under the
Act. 

Emphasis of matter

Financial position

We draw attention to the Note 24 Financial risk management to the consolidated
financial statements, Accounting principles for the consolidated financial
statements, section Going concern basis and to the Board of Directors' Report,
section Risks and uncertainty factors. As disclosed in these sections, the
financial position of the Group and the parent company is tight and there are
material uncertainties that may cast significant doubt on the Company's ability
to continue as a going concern. The Company had all its credit facilities in
full use and the Company has partly breached financing-related covenants.
During the financial year the parent company has had to rely on very short-term
financing obtained under separate agreements, totaling EUR 2.8 million. The
parent company has continuously had significant amounts of overdue trade
payables to its suppliers during the year. On 5 March 2015 the Company decided
to apply for debt restructuring proceedings as its liquidity position has
further weakened. 

Going concern principle and debt restructuring proceedings

We draw attention to the sections dealing with the debt restructuring
proceedings in the consolidated financial statements and the Board of
Directors' Report, as well as to the sections discussing going concern basis
under the accounting policies for the consolidated financial statements and
under the parent company's accounting principles. 

On 5 March 2015 the Company filed an application for debt restructuring
proceedings with the District Court of Espoo and on 9 March 2015 the District
Court of Espoo decided to commence the corporate debt restructuring
proceedings. The Administrator has to prepare and deliver the draft
restructuring program to the District Court of Espoo on 6 July 2015 at the
latest. 

Tecnotree Corporation has comply with the plan to be authorized by the court.
As explained in the Board of Directors' Report and the accounting policies for
the consolidated financial statements this involves risks. Tecnotree
Corporation has to fully take care of its post-restructuring obligations which
requires sufficient cash flow financing, i.e. payments from clients. As
explained in the Board of Directors' Report and the accounting policies for the
consolidated financial statements, after filing the application for debt
restructuring proceedings the Company is likely to face problems, especially
with those companies from which Tecnotree has previously made purchases. Also
clients may have doubts about risks related to Tecnotree which may impact
future orders to be received. 

There are material uncertainties relating to the going concern basis of the
Company. The financial position described above and debt restructuring
proceedings indicate the existence of a material uncertainty that may cast
significant doubt on the Company's ability to continue as a going concern.
Should the going concern basis prove inappropriate in the foreseeable future,
adjustments to the carrying amounts of Tecnotree Corporation's and the Group's
assets would be necessary. 

Customer receivables

We also draw attention to the section Risks and uncertainty factors in the
Board of Directors' Report and the subsections Carrying out customer projects,
profitability, forecasting, and Risks relating to international operations,
receivables and developing markets. As disclosed in Note 18. Trade and other
current receivables to the consolidated financial statements, customer and
project accounting receivables need significant amount of working capital,
totaling EUR 42.2 million. Part of these items include measurement risk higher
than normally, as explained in the Board of Directors' Report, section Risks
and uncertainty factors. 

Goodwill

Consolidated assets include goodwill amounting to EUR 16.6 million. It is
further stated in the Board of Directors' Report, section Risks and uncertainty
factors, that there are risks relating to goodwill and to management's
financial expectations and assumptions used in the goodwill impairment tests. 

Interim Report for period from 1 January to 30 June 2014

We refer to the Securities Market Act, Chapter 7, section 8, subsection 2 and
state that the matters described above shall be considered when assessing the
compliance of the consolidated interim report with the related rules and
regulations for the period from 1 January to 30 June 2014. 

Helsinki March 17, 2015

KPMG Oy Ab

Toni Aaltonen
Authorized Public Accountant




TECNOTREE CORPORATION

DISTRIBUTION
NASDAQ OMX Helsinki Ltd
Main Media
www.tecnotree.com

About Tecnotree
Tecnotree is a global provider of telecom IT solutions for the management of
products, customers and revenue. Tecnotree helps communications service
providers to transform their business towards a marketplace of digital
services. Tecnotree empowers service providers to monetise on service bundles,
provide personalised user experiences and augment value throughout the customer
lifecycle. With over 1000 telecom experts, Tecnotree serves more than 100
service providers in over 70 countries. Tecnotree is listed on the main list of
NASDAQ OMX Helsinki with the trading code TEM1V. For more information on
Tecnotree, please visit  www.tecnotree.com