8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 30, 2010

CSG SYSTEMS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-27512	47-0783182
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

9555 Maroon Circle, Englewood, CO	80112
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 200-2000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets.

On November 30, 2010, CSG Systems International, Inc. (“CSG”) filed a Current Report on Form 8-K reporting that it had completed the acquisition of U.K.-based Intec Telecom Systems Limited (formerly Intec Telecom Systems PLC or “Intec”).

This Form 8-K/A amends the Form 8-K we filed on November 30, 2010, to include Intec’s audited consolidated financial statements as of September 30, 2010 and 2009 (Intec’s fiscal year end), and for the three years ended September 30, 2010 required by Item 9.01(a) of Form 8-K, and the unaudited pro forma condensed consolidated financial information related to the Intec acquisition required by Item 9.01(b) of Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The Intec audited consolidated financial statements as of September 30, 2010 and 2009, and for the three years ended September 30, 2010, are attached as Exhibit 99.1 to this Form 8-K/A and incorporated by reference to this Form 8-K/A.

The consent of Deloitte LLP, Intec’s independent auditor, is attached as Exhibit 23.1 to this Form 8-K/A.

(b) Pro forma Financial Information.

The following unaudited pro forma condensed consolidated financial information related to CSG’s acquisition of Intec is attached as Exhibit 99.2 to this Form 8-K/A and incorporated by reference into this Form 8-K/A.

(i) Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 2009;

(ii) Unaudited Pro Forma Condensed Consolidated Statement of Income for the nine months ended September 30, 2010; and

(iii) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2010.

(c) Exhibits.

23.1	Consent of Deloitte LLP
99.1	Intec Audited Consolidated Financial Statements as of September 30, 2010 and 2009, and for the three years ended September 30, 2010
99.2	Unaudited Pro Forma Condensed Consolidated Financial Information

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 7, 2010

CSG SYSTEMS INTERNATIONAL, INC.
By:	/s/ Randy R. Wiese
	Randy R. Wiese,
	Chief Financial Officer and
	Principal Accounting Officer

3

CSG Systems International, Inc.

Form 8-K

Exhibit Index

23.1	Consent of Deloitte LLP
99.1	Intec Audited Consolidated Financial Statements as of September 30, 2010 and 2009, and for the three years ended September 30, 2010
99.2	Unaudited Pro Forma Condensed Consolidated Financial Information

4

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-10315, 333-32951, 333-48451, 333-83715, 333-42202, 333-81656, 333-104206, 333-117928 and 333-125584 of CSG Systems International, Inc. on Form S-8 and Registration Statement No. 333-117427 of CSG Systems International, Inc. on Form S-3/A of our report dated February 3, 2011 related to the consolidated financial statements of Intec Telecom Systems Limited as of September 30, 2010 and 2009 and for the three years ended September 30, 2010, appearing in this Current Report on Form 8-K/A of CSG Systems International, Inc.

/s/ DELOITTE LLP

DELOITTE LLP

London, United Kingdom

February 4, 2011

EX-99.1

EXHIBIT 99.1

Intec Telecom Systems Limited

Consolidated Financial Statements

As of and for the three years ended

30 September 2010

Intec Telecom Systems Limited

Consolidated financial statements as of and for the three years ended 30

September 2010

Contents	Page
Independent auditors’ report		3
Consolidated income statement		4
Consolidated statements of comprehensive income		4
Consolidated statement of changes in equity		5
Consolidated statement of financial position		6
Consolidated statement of cash flows		7
Notes to the consolidated financial statements		8

2

Independent auditors’ report

To the Board of Directors of Intec Telecom Systems Limited

We have audited the accompanying consolidated statements of financial position of Intec Telecom Systems Limited and subsidiaries (the “Group”) as of 30 September 2010 and 2009, and the related consolidated income statements, statements of changes in equity, statements of comprehensive income and statements of cash flow for the three years ended 30 September 2010. These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Intec Telecom Systems Limited and subsidiaries as of 30 September 2010 and 2009, and the results of their operations and their cash flows for each of the three years ended 30 September 2010 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Deloitte LLP

London, United Kingdom

February 3, 2011

3

Intec Telecom Systems Limited

Consolidated income statements

For the years ended 30 September 2010, 2009 and 2008

	Notes		2010 £000			2009 £000			2008 £000
Revenue
Continuing operations		5		141,363			167,891			135,786
Cost of sales				(70,482	)		(77,786	)		(67,238	)
Gross profit				70,881			90,105			68,548
Distribution costs				(22,133	)		(24,138	)		(18,819	)
Development expenditure				(19,294	)		(16,853	)		(14,880	)
Depreciation and amortisation		13, 14		(4,496	)		(5,513	)		(6,237	)
Other administrative expenses				(17,846	)		(20,132	)		(16,643	)
Total administrative expenses				(22,342	)		(25,645	)		(22,880	)
Operating profit		4		7,112			23,469			11,969
Other gains and losses		3		—			596			1,350
Finance income		6		571			710			752
Finance costs		7		(370	)		(82	)		(321	)
Profit before tax				7,313			24,693			13,750
Tax (expense)/ credit		10		(8,686	)		13,675			(3,298	)
(Loss)/profit for the year attributable to equity shareholders				(1,373	)		38,368			10,452

All the results above relate to continuing operations.

Consolidated statements of comprehensive income

For the years ended 30 September 2010, 2009 and 2008

	2010 £000			2009 £000		2008 £000
(Loss)/ profit for the year		(1,373	)		38,368		10,452
Other comprehensive income:
Exchange differences arising on translation of foreign operations		(410	)		10,125		1,833
Other comprehensive (loss)/ income for the year		(410	)		10,125		1,833
Total comprehensive (loss)/ income for the year attributable to equity shareholders		(1,783	)		48,493		12,285

4

Intec Telecom Systems Limited

Consolidated statements of changes in equity

For the years ended 30 September 2010, 2009 and 2008

	Share capital £000		Share premium account £000			Other reserves £000			Own shares £000			Translation reserve £000			Retained earnings £000			Total equity £000
Balance at 1 October 2007		3,057		161,989			249			(95	)		(4,020	)		(22,102	)		139,078
Profit for the year		—		—			—			—			—			10,452			10,452
Other comprehensive income for the year		—		—			—			—			1,833			—			1,833
Total comprehensive income for the year		—		—			—			—			1,833			10,452			12,285
Issue of share capital net of share issue expenses		3		55			—			—			—			—			58
Recognition of share-based payments		—		—			—			—			—			1,458			1,458
Balance at 1 October 2008		3,060		162,044			249			(95	)		(2,187	)		(10,192	)		152,879
Profit for the year		—		—			—			—			—			38,368			38,368
Other comprehensive income for the year		—		—			—			—			10,125			—			10,125
Total comprehensive income for the year		—		—			—			—			10,125			38,368			48,493
Issue of share capital net of share issue expenses		17		129			—			—			—			—			146
Cancellation of share premium account		—		(162,044	)		135,113			—			—			26,931			—
Recognition of share-based payments		—		—			—			—			—			1,336			1,336
Tax on items taken directly to equity		—		—			—			—			—			1,800			1,800
Balance at 1 October 2009		3,077		129			135,362			(95	)		7,938			58,243			204,654
Loss for the year		—		—			—			—			—			(1,373	)		(1,373	)
Other comprehensive loss for the year		—		—			—			—			(410	)		—			(410	)
Total comprehensive loss for the year		—		—			—			—			(410	)		(1,373	)		(1,783	)
Issue of share capital net of share issue expenses		73		273			—			—			—			—			346
Transfer of other reserves to retained earnings		—		—			(135,113	)		—			—			135,113			—
Recognition of share-based payments		—		—			—			—			—			660			660
Tax on items taken directly to equity		—		—			—			—			—			(1,580	)		(1,580	)
Dividends paid		—		—			—			—			—			(4,380	)		(4,380	)
Balance at 30 September 2010		3,150		402			249			(95	)		7,528			186,683			197,917

5

Intec Telecom Systems Limited

Consolidated statements of financial position

30 September 2010 and 2009

	Notes		2010 £000			2009 £000
Non-current assets
Goodwill		12		93,022			93,022
Other intangible assets		13		6,074			5,723
Property, plant and equipment		14		5,202			6,543
Trade and other receivables		15		2,706			2,659
Deferred tax asset		20		15,679			21,767
				122,683			129,714
Current assets
Trade and other receivables		15		54,763			61,205
Cash and cash equivalents		16		71,777			74,832
				126,540			136,037
Total assets				249,223			265,751
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital		22, 23		3,150			3,077
Share premium account				402			129
Other reserves		23		249			135,362
Own shares		23		(95	)		(95	)
Translation reserve		23		7,528			7,938
Retained earnings				186,683			58,243
Total equity				197,917			204,654
Non-current liabilities
Other payables		17		3,262			3,048
Deferred tax liabilities		20		1,154			50
Borrowings		18		99			336
Provisions		19		3,998			2,311
				8,513			5,745
Current liabilities
Trade and other payables		17		37,767			53,050
Current tax liabilities				1,551			996
Borrowings		18		284			220
Provisions		19		3,191			1,086
				42,793			55,352
Total liabilities				51,306			61,097
Total equity and liabilities				249,223			265,751

The financial statements were approved by the Board of directors and authorised for issue on February 3, 2011. They were signed on its behalf by

ROBIN TAYLOR	RANDY WIESE
DIRECTOR	DIRECTOR

6

Intec Telecom Systems Limited

Consolidated statements of cash flows

For the years ended 30 September 2010, 2009 and 2008

	2010 £000			2009 £000			2008 £000
Profit before tax		7,313			24,693			13,750
Adjustments for:
Depreciation of property, plant and equipment		3,102			3,049			3,076
Amortisation of intangible assets		1,343			2,201			2,741
Amortisation of capitalised development expenditure		51			263			420
Amortisation of capitalised project costs		1,079			928			296
Loss on disposal of property, plant and equipment		—			38			28
Share-based payment expense		610			2,043			1,458
Increase in provisions		3,447			92			40
Finance income		(571	)		(710	)		(752	)
Finance costs		370			82			321
Other gains and losses		—			(596	)		(1,350	)
Operating cash flows before movements in working capital		16,744			32,083			20,028
Decrease/(increase) in receivables		8,180			9,994			(11,171	)
(Decrease)/ increase in payables		(16,470	)		4,356			3,511
Cash generated by operations		8,454			46,433			12,368
Income taxes paid (net)		(3,539	)		(2,935	)		(2,462	)
Net cash from operating activities		4,915			43,498			9,906
Investing activities
Interest received		571			710			751
Purchase of property, plant, and equipment		(1,517	)		(3,210	)		(1,783	)
Purchase of intangible assets		(573	)		(139	)		(259	)
Expenditure on capitalised project costs		(1,810	)		(640	)		(2,842	)
Proceeds on disposal of property, plant and equipment		4			21			136
Net proceeds on disposal of business		273			591			538
Net cash used in investing activities		(3,052	)		(2,667	)		(3,459	)
Financing activities
Interest paid		(4	)		(3	)		(34	)
Interest element of finance lease rental payments		(35	)		(27	)		(98	)
Proceeds on issue of shares		346			147			57
Repayments of obligations under finance leases		(201	)		(362	)		(427	)
Dividends paid to shareholders		(4,380	)		—			—
Net cash used in financing activities		(4,274	)		(245	)		(502	)
Net (decrease)/ increase in cash and cash equivalents		(2,411	)		40,586			5,945
Cash and cash equivalents at beginning of year		74,832			28,927			22,580
Effect of foreign exchange rates		(644	)		5,319			402
Cash and cash equivalents at end of year		71,777			74,832			28,927

Cash and cash equivalents (which are presented as a single class of assets on the face of the statement of financial position) comprise cash at bank and other short-term highly-liquid investments with a maturity of three months or less from the date of acquisition.

7

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

1. Accounting policies

General information

The principal activity of the Company and its subsidiaries (together “the Group”) is to develop, market and licence Business Support Systems (“BSS”) software; to provide related professional services such as implementation, consultancy and training; and to provide support and maintenance to those systems on a global basis. The Group also provides certain managed services for some of its customers.

The Company is a private limited company incorporated in Great Britain under the Companies Acts 1985 and 2006 and registered in England and Wales with its registered office at Wells Court, Albert Drive, Woking, Surrey, United Kingdom.

Basis of accounting The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation. The financial statements have also been prepared in accordance with IFRSs as issued by the International Accounting Standards Board (IASB).

The Group’s income statement prepared under IFRS is presented in accordance with IAS 1 “Presentation of Financial Statements”. IAS1 does not provide definitive guidance on the format of the income statement but states key lines that should be disclosed. It also requires additional line items, sub-totals and headings to be presented on the face of the income statement when such presentation is relevant to an understanding of the entity’s financial performance.

Going concern

At 30 September 2010, the Group held cash and cash equivalents of £71.8 million, and its only debt instruments were finance lease payables of £0.4 million. For the year ended 30 September 2010, the Group reported profit before tax of £7.3 million and net cash from operating activities of £4.9 million. Although economic conditions remain challenging, the directors are confident that the Group is well positioned for the year ahead with an established customer base, a solid pipeline of revenue prospects and a reduced fixed cost base compared to 2009. Note 21 includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposures to currency risk, credit risk and liquidity risk.

In determining the appropriate basis of preparation of the financial statements, the Board is required to consider whether the Group can continue in operational existence for the foreseeable future.

The Board believes that the Group is well placed to manage its business risks successfully despite the current market conditions. After making enquiries, the Board has a reasonable expectation that the Group has adequate resources to continue to operate for the foreseeable future, being at least twelve months from the date of approval of the financial statements. Accordingly, the financial statements continue to be prepared on a going concern basis.

8

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

1. Accounting policies (continued)

Changes in accounting standards

International Accounting Standards (IAS/IFRS)

IAS 1 (revised 2007) “Presentation of Financial Statements” has introduced a number of changes in the format and content of the financial statements. The Group now presents a separate Consolidated Statement of Comprehensive Income as a primary statement. The Group previously presented a Consolidated Statement of Changes in Equity as a footnote, together with a Consolidated Statement of Recognised Income and Expense as a primary statement.

The following standards, amendments and interpretations have been adopted by the Group during the year, the adoption of which has not had any material impact on the Group’s results or financial position:

IFRS 3 (revised)	“Business Combinations”
IAS 23 (amendment)	“Borrowing Costs”
IAS 27 (amendment)	“Consolidated and Separate Financial Statements”
IAS 32, IAS 1 (amendment)	“Puttable Financial Instruments and Obligations Arising on Liquidation”
IAS 39 (amendment)	“Financial Instruments: Recognition and Measurement”
IFRS 1, IAS 27 (amendment)	“Cost of an investment in Subsidiary, Jointly Controlled Entity or Associate”
IFRS 2 (amendment)	“Share-based payment”
IFRS 5 (amendment)	“Non-current Assets Held for Sale and Discontinued Operations”
IFRS 7 (amendment)	“Improving Disclosures about Financial Instruments”
IFRIC 12	“Service Concession Arrangements”
IFRIC 14, IAS 19	“The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”
IFRIC 15	“Agreements for the Construction of Real Estate”
IFRIC 17	“Distributions of non-cash assets to owners”
IFRIC 18	“Transfer of assets from customers”
IFRIC 9, IAS 39 (amendment)	“Embedded Derivatives”
Improvements to IFRSs 2008	Various Standards
Improvements to IFRSs 2009	Various Standards

The following standards, amendments and interpretations that are not yet effective have not been early adopted by the Group:

IFRS 9	“Financial Instruments”
IAS 24 (revised)	“Related Party Disclosures”
IAS 32 (amendment)	“Classification of Rights Issues”
IFRS 2 (amendment)	“Company Cash-settled Share-based Payment Transactions”
IFRIC 19	“Extinguishing Financial Liabilities with Equity Instruments”
IFRIC 14 (amendment)	“Prepayments of a Minimum Funding Requirement”
Improvements to IFRSs 2010	Various Standards

The directors are currently evaluating the impact of the adoption of these standards, amendments and interpretations.

9

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

1. Accounting policies (continued)

Basis of preparation The financial statements are prepared under the historical cost convention with the exception of certain items which are measured at fair value as disclosed in the accounting policies below.

Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. The results of entities or businesses acquired during the year are included in the consolidated income statement from the effective date of acquisition being the date on which control passed. Control is achieved where the Company has the power to govern the financial and operating policies of an acquired entity or business so as to obtain benefits from its activities.

Where necessary, adjustments are made to the financial statements of an acquired entity or business to bring their accounting policies into line with those used by the Company.

All intra-company transactions, balances, income and expenses are eliminated on consolidation.

Revenue recognition and contract accounting The Group principally derives its revenue from the sale of software licences, development projects performed for clients and fees for installation, consultancy, training and maintenance. Revenue is recognised on individual contracts based on the fair value of consideration received or receivable under the following principles:

• Revenues from software licence agreements are recognised where there is persuasive evidence of an agreement with a customer, delivery of the software has taken place, collectability is probable and the fee is fixed and determinable. Such revenue, being licence and implementation revenue, is generally recognised on a percentage of completion basis (on the basis of hours incurred against total anticipated hours) over the period of the installation unless the licence fee and any implementation services meet the conditions for separate recognition.

• Revenue from the sale of unbundled software licences is recognised on the completion of contractual milestones or when milestones are unconditional. These contractual milestone obligations normally include grant of licence on signing of the contract, which coincides with delivery, installation of the software and customer acceptance. Thus a portion of revenue is deferred until final customer acceptance.

• Fee income from implementation, consulting, training and maintenance is recognised over the period in which the service is provided. Consulting and training is recognised on the basis of time and materials or for fixed price contracts on hours incurred against total anticipated hours. Maintenance and managed services are recognised on a straight-line basis over the period of the agreement.

• Revenue from hardware sales is recognised on customer acceptance, which normally coincides with delivery.

Accrued income represents revenue recognised in advance of billings to customers. Amounts invoiced in excess of revenue recognised are included in deferred revenue.

Revenue is stated net of any value added tax or sales related tax.

Finance income Finance income is accrued on a time basis, by reference to the principal outstanding and at the effective rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of that financial asset to that asset’s net carrying amount.

Foreign currencies The consolidated financial statements are presented in Sterling which is Intec Telecom Systems Limited’s functional and presentational currency.

In preparing the financial statements of the individual companies, foreign currency transactions are converted to the relevant functional currency at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the relevant functional currency at the rates ruling at the balance sheet date. These translation differences are taken to the income statement. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

10

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

1. Accounting policies (continued)

For the purpose of preparing consolidated financial statements, the results of overseas subsidiaries are translated into Sterling at the average rates for the year. The net assets or liabilities of overseas subsidiaries are translated at year-end exchange rates. The exchange differences arising on translation of the opening net assets or liabilities and results of overseas operations are taken to equity through the Group’s translation reserve. Such cumulative translation differences are recognised in profit and loss in the period in which the operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. The Group has elected to treat goodwill and fair value adjustments arising on acquisitions before the date of transition to IFRS on 1 October 2004 as Sterling-denominated assets and liabilities.

Intangible assets - Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of identifiable assets and liabilities of a subsidiary at the date of acquisition.

Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised, but is instead subject to impairment testing annually or more frequently if there are indications that goodwill might be impaired.

For the purpose of impairment testing, goodwill is allocated to the Group’s cash generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently where there is an indication that goodwill may be impaired. Any impairment is immediately recognised in the income statement and is not subsequently reversed.

Goodwill arising prior to the date of transition to IFRS has been retained at the previous UK GAAP amount, subject to testing for impairment at that date.

Other intangible assets Separately acquired intangible assets, primarily intellectual property rights, development costs and software are initially measured at cost. After initial recognition, the intangible asset is carried at cost less accumulated amortisation less any accumulated impairment losses. Amortisation is charged on a straight-line basis over the estimated useful economic life which ranges from three to ten years.

Expenditure on research activities is recognised in the income statement as an expense in the period in which it is incurred.

Expenditure on development activities is recognised as an internally generated intangible asset only when the following criteria are met:

• an asset is created that can be separately identified;

• the technical feasibility of completing the asset so that it will be available for use has been achieved;

• the Group has the intention to complete the asset and use or sell it;

• the Group has the ability to use or sell the asset;

• it is probable that the asset created will generate future economic benefits;

• adequate technical, financial and other resources are available to complete the development and to use or sell the asset; and

• the development cost of the asset can be measured reliably.

If all the above tests are not met the expenditure is recognised in the income statement as an expense in the period in which it is incurred.

11

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

1. Accounting policies (continued)

The qualifying expenditure capitalised represents costs directly attributable to the development of the asset. This expenditure is capitalised from the point at which the above criteria are met up to the point at which the asset is in use. Asset lives are generally as follows:

Intellectual property rights	5 – 10 years
Development costs	3 – 5 years
Software	3 – 5 years
Other	3 – 5 years

Internally generated intangible assets are amortised on a straight-line basis over their useful lives, which are estimated to be between 3 and 5 years.

Costs relating to the implementation of managed service solutions for specific customers are capitalised and amortised over the minimum term of the data processing period specified in the customer contract. The capitalised costs may include an element of hardware; however, as this element is considered to be an integral part of the managed service solution, it is included as part of the intangible asset.

Property, plant and equipment Property, plant and equipment are stated at cost, less accumulated depreciation and any accumulated impairment losses. Cost comprises the purchase price and directly attributable costs of acquiring the asset. Depreciation is provided on cost on a straight-line basis over the estimated useful life of the assets. Asset lives are generally as follows:

Leasehold improvements	over the lease term
Motor vehicles	3 – 4 years
Computer equipment	3 – 5 years
Furniture and equipment	3 – 5 years

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in income.

Lease and hire purchase contracts Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases and rentals payable and lease incentives are taken to the income statement on a straight-line basis over the term of the relevant lease.

Items of property, plant and equipment acquired under finance leases and hire purchase contracts are recognised as assets at their fair value or, if lower, at the present value of the minimum lease payments, at the date of inception of each lease or contract and depreciated over their estimated useful lives. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the outstanding liability.

Impairment of assets At each balance sheet date, the Group reviews the carrying amounts of all of its tangible and intangible assets to determine whether any of those assets has suffered an impairment loss.

If impairment is indicated, then the recoverable amount is assessed to determine the extent of the impairment. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of the asset’s fair value less disposal costs and its value in use. Value in use calculations are performed using cash flow projections, discounted at a pre-tax rate which reflects the asset-specific risks and the time value of money.

To the extent that the recoverable amount is less than the carrying amount, the shortfall is immediately recognised in the income statement and the carrying amount reduced.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount subject to the new recoverable amount not exceeding the carrying value that would have been in use had the initial impairment not been recognised. The reversal is immediately recognised in the income statement.

12

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

1. Accounting policies (continued)

Financial instruments Financial assets and liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Trade and other receivables Trade and other receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. The allowance recognised is measured as the difference between the asset’s carrying amount and the estimated future recoverable amount.

Cash and cash equivalents Cash and cash equivalents comprise cash in hand and other short-term liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Restricted cash is carried in the balance sheet at cost. Restricted cash comprises collateral required for letter of credit arrangements over certain customer contracts.

Financial assets at fair value through income statement A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Financial assets held in this category are initially recognised and subsequently measured at fair value, with changes in value recognised in the income statement in the line which most appropriately reflects the nature of the item or transaction.

Impairment of financial assets The Group assesses at each balance sheet date whether a financial asset or group of financial assets are impaired. Financial assets are impaired where there is objective evidence that, as a result of one or more events after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. Where there is objective evidence that an impairment loss has arisen on assets carried at amortised cost, the carrying amount is reduced with the loss being recognised in the income statement. The impairment loss is only reversed if it can be related objectively to an event after the impairment was recognised and is reversed to the extent the carrying value of the asset does not exceed its amortised cost at the date of reversal.

The carrying amount of trade receivables in case of impairment is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

Financial liabilities and equity Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

Bank borrowings Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges are accounted for on an accruals basis using the effective interest rate method.

Borrowing costs All borrowing costs are recognised in the income statement using the effective interest method in the period in which they are incurred and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Trade payables Trade payables are not interest bearing and are stated at their nominal value.

Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derivative financial instruments The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.

13

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

1. Accounting policies (continued)

The Group does not use derivative financial instruments for speculative purposes. Derivative financial instruments are initially measured at fair value at the contract date, and are remeasured to fair value at subsequent reporting dates.

Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of a non-financial asset or non-financial liability, then, at the time the asset or liability is recognised, the associated gains or losses or the derivative that had been previously recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of a non-financial asset or a non-financial liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise.

Derecognition of financial assets and financial liabilities Financial assets and financial liabilities are recognised when the Group becomes party to the contractual provisions of the instrument. Financial assets are derecognised when the Group no longer has rights to cash flows, the risks and rewards of ownership or control of the asset. Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled or expires. In particular, for all regular way purchases and sales of financial assets, the Group recognises the financial assets on the settlement date, which is the date on which the asset is delivered to or by the Group.

Retirement benefits Payments to defined contribution retirement benefit schemes are charged as an expense as they become due. Payments made to comparable state managed schemes are treated in the same way.

Taxation The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax, including UK corporation tax and foreign tax, is provided at the amounts expected to be paid or recovered and is calculated using the tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

Deferred tax is the tax expected to be payable or recoverable on the differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax is not provided on the unremitted earnings of subsidiaries where the Group is able to control the reversal of the temporary difference and it is not probable that it will reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.

Deferred tax is charged or credited to the income statement unless it relates to items charged or credited directly to equity in which case it is also charged or credited directly to equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

14

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

1. Accounting policies (continued)

Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the best estimate of the expenditure required to settle that obligation at the balance sheet date and are discounted to present value.

Restructuring provisions comprise unexpired future lease payments on vacant properties, removal costs and employee termination payments. Provisions for restructuring costs are recognised when the Group has a formal, detailed plan for the restructuring and this has been communicated to affected parties.

Onerous lease provisions are established on a property-by-property basis (or separable portions thereof) to meet the estimated liabilities of all surplus properties. The provision includes all ongoing, unavoidable costs net of any sub-letting income. Additionally, provisions for dilapidations are recognised where there is a legal or constructive obligation to make good a property at the end of the lease.

Provisions are not recognised for future operating losses.

Share-based payments The Group has applied the requirements of IFRS 2 to all grants of equity instruments made after 7 November 2002 that were unvested at 1 January 2005 in accordance with the transitional provisions of that Standard.

The Group operates various share-based award schemes, all of which are equity settled. The fair value of awards determined at the date of grant is recognised in the income statement on a straight-line basis over the period that service conditions apply, with a corresponding increase in shareholders’ equity, based on an estimate of the number of share-based awards that are expected to vest and adjusted for the effect of non market-based vesting conditions.

The fair value of the award is calculated using either the Black-Scholes or the Monte Carlo model as described in Note 9. Non-market conditions are included in assumptions around the number of awards that are expected to become exercisable and these assumptions are reviewed at each balance sheet date. Proceeds received on exercise of the awards are credited to equity.

The Group as a lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

15

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

2. Significant accounting judgements and estimates

In preparing the consolidated financial statements, management has to make judgements on how to apply the Group’s accounting policies and make estimates about the future. The critical judgements that have been made in arriving at the amounts recognised in the consolidated financial statements and the key areas of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in the next financial year, are discussed below:

a) Revenue recognition Judgement is sometimes required as to when a contract should be unbundled and its constituent parts accounted for separately. The directors consider the nature of the services and licence sold to determine whether unbundling is appropriate. Key factors to be considered include whether each component of the arrangement, which may include a licence, implementation services and maintenance are essential to the functionality of another component of the arrangement and whether the estimated fair value of each component is determinable. In evaluating the fair value of such elements, the Directors have regard to revenues achieved on other similar transactions. In addition, recognition of revenue on certain contracts is determined, inter alia, by reference to the stage of completion of those contracts. At the balance sheet date, the directors make estimates based upon experience of the remaining costs to complete a contract and hence assess the proportion of the revenue to be recognised on the contract.

b) Impairment testing Impairment testing of goodwill and intangible assets involves comparing the carrying value of an asset with its value in use, based upon a discounted cash flow model. This model involves making assumptions involving future revenues and profits as well as long term growth rates and the appropriate discount rate. Further details are set out in Note 12.

c) Share-based payments The value of share-based payments requires several judgements to be made regarding expected volatility, the expected life of the options granted, risk-free interest rate and dividend yield. The details of these assumptions are disclosed in Note 9.

d) Provisions Using information available at the balance sheet date, the directors make judgements based on experience of the level of provision required to satisfy onerous lease and dilapidation commitments, including assessing whether any sublet income will arise and the length of any void period. The amount of such provision is discussed in Note 19.

e) Provisions for bad debts Provision is made based on management’s estimate of the prospect of recovering the amount due which includes considering the credit status of the customer and its history in meeting its commitments. The amount of such provision is disclosed in Note 15.

f) Deferred taxation The recognition of deferred tax assets requires judgement as to the probability of taxable profits being available in the future and the quantum and location of taxable profits that are forecast to arise. This requires the directors to exercise judgement in forecasting future results, including assumptions and estimates of growth in revenue and changes in operating margins. Changing the assumptions selected by the directors could significantly affect the Group’s forecast and the amount of deferred taxation included in the Group’s results. See Note 20 for further details.

16

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

3. Other gains and losses

			2010 £000		2009 £000		2008 £000
Disposed business	(a	)		—		322		1,182
Other gains	(b	)		—		274		168
				—		596		1,350

a) On 19 November 2007, an asset sale and purchase agreement was announced with Volubill SA to sell certain assets and liabilities of Intec Denmark for an initial consideration of £1m in cash plus additional consideration based on support and maintenance revenues and new licence sales recognised by Volubill for a period of two years from completion. During the year ended 30 September 2008, a gain on disposal of £1,182,000 was recognised. During the year ended 30 September 2009, the estimated additional consideration increased from £451,000 to £916,000, resulting in an additional gain of £322,000. The gain on disposal is presented in the table below:

	£000
Intangible assets		105
Property, plant and equipment		63
Current assets		26
Current liabilities		(612	)
Net liabilities disposed		(418	)
Initial consideration		1,000
Estimated additional consideration		916
Working capital adjustments		(572	)
Net consideration		1,344
Profit on disposal before adjustments		1,762
Costs attributable to the disposal		(217	)
Translation differences		(41	)
Profit on disposal		1,504
Recognised in the year ended 30 September 2008		1,182
Recognised in the year ended 30 September 2009		322
		1,504
Net cash flows in respect of the disposed business are as follows:
Initial consideration		1,000
Additional consideration received		701
Working capital payments		(572	)
Net proceeds on disposal of business		1,129
Net proceeds in the year ended 30 September 2009		591
Net proceeds in the year ended 30 September 2008		538
		1,129

b) Other gains in 2009 and 2008 represent recovery of amounts in relation to an investment in Poland previously written off in 2002.

17

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

4. Operating profit

	2010 £000			2009 £000		2008 £000
Revenue		141,363			167,891		135,786
Other income – sublease of properties		1,412			1,423		1,011
Expenses
Staff costs		89,274			94,769		76,969
Depreciation of property, plant and equipment
- owned assets		2,597			2,924		2,848
- owned assets accelerated depreciation as a result of restructuring(i)		468			—		—
- leased assets		37			125		228
Amortisation
- purchased computer software (ii)		1,185			1,431		1,974
- acquired intangible assets (ii)		158			770		767
- other intangible assets (iii)    (capitalised managed service solutions)		1,079			928		296
- capitalised development expenditure (ii)		51			263		420
Operating lease payments
- land and buildings		5,807			5,531		4,872
- other		2,153			2,099		1,881
Increase/(decrease) in impairment of trade receivables, net		415			677		(864	)
Loss on disposal of property, plant and equipment		—			38		28
(Gain)/ loss on foreign exchange		(312	)		443		(805	)
Restructuring costs (excluding accelerated depreciation shown above) (i)		5,919			2,176		1,098
Merger and acquisition costs		231			—		—
Other costs		26,601			33,671		35,116
		135,663			145,845		124,828
Operating profit		7,112			23,469		11,969

Notes

(i)–	Restructuring costs in 2010 comprise termination pay on staff redundancies and related termination costs across the Group amounting to £2.6m and property related restructuring costs of £3.8m. Property related restructuring costs comprise the establishment of vacant property provisions of £3.2m, accelerated depreciation on leasehold improvements of properties newly vacated of £0.5m and accelerated recognition of depreciation on other property, plant and equipment of £0.1m. The vacant property provisions were established on the Group’s premises located in Woking (£1.2m), Atlanta (£1.2m), Edmonton (£0.7m) and Toronto (£0.1m).
	Restructuring costs in 2009 comprise termination pay on staff redundancies across the Group amounting to £2.1 million and £0.1 million for closure costs of the Dallas facility.
	The restructuring costs in 2008 were attributable to the closure of the Mechanicsburg facility.
(ii)–	Included in administrative expenditure.
(iii)–	Included in cost of sales.

18

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

5. Revenue analysis

Revenue by category

	2010 £000		2009 £000		2008 £000
Licence		20,564		32,009		30,377
Professional services income		62,824		76,472		52,988
Managed services		14,898		16,083		12,299
Support and maintenance fees		41,587		39,857		34,598
Hardware		1,490		3,470		5,524
		141,363		167,891		135,786
Revenue by region
	2010 £000		2009 £000		2008 £000
Americas		63,582		73,338		58,740
EMEA		49,191		64,371		52,712
Asia-Pacific		28,590		30,182		24,334
		141,363		167,891		135,786

Revenue presented in the above table represents revenue by customer location.

6. Finance income

	2010 £000		2009 £000		2008 £000
Cash deposits		565		653		752
Other finance income		6		57		—
		571		710		752

7. Finance costs

	2010 £000		2009 £000		2008 £000
Interest on bank overdrafts and loans		4		6		15
Interest on obligations under finance leases		30		28		97
Unwinding of discount on provisions		336		48		209
		370		82		321

19

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

8. Key management remuneration

Key management personnel, as defined by IAS 24, Related Party Disclosures, have been identified as the Board of directors. Details of the Board of directors’ remuneration, including their beneficial interest in the share capital and share options, are shown below.

	2010 £000		2009 £000		2008 £000
Salaries, fees and flexible benefits		874		963		1,137
Performance bonus		—		598		510
Personal pension plan payments		51		39		29
Termination payments		—		285		—
Other short-term benefits		—		—		100
		925		1,885		1,776
Share-based payment charge		120		588		344
		1,045		2,473		2,120

9. Share-based payment

The Group’s share-based payment arrangements are entirely equity settled and resulted in an expense for the year of £610,000 (2009: £2,043,000; 2008: £1,458,000).

a) Share options

The Group operated the Intec Company Share Option Scheme which is constituted by rules and includes a section which has been approved by the Inland Revenue under the Income and Corporation Taxes Act 1988.

There were no new share option grants in 2010 or 2009. In the year ended 30 September 2008, 896,629 options were granted on 3 January 2008 with an exercise price of 44.0p.

With the exception of awards under long-term incentive plans, all outstanding options have vested at 30 September 2010 and are exercisable at any time subject to individual restrictions during close periods. If the option remains unexercised after 10 years from the date of grant, the option expires. Options are forfeited if the recipient voluntarily leaves the Group before the service conditions are met.

The Group operates a UK Approved and Unapproved Share Option Scheme and a US Stock Option Plan for the benefit of directors and employees. Details of the outstanding share options are disclosed in the table below:

	Weighted average exercise price (£)						Number
	2010		2009		2008		2010			2009			2008
Outstanding at beginning of year		0.65		0.63		0.62		16,189,728			24,521,032			25,854,563
Granted		—		—		0.44		—			—			896,629
Forfeited or lapsed		0.79		0.63		0.56		(5,061,478	)		(6,646,656	)		(1,926,374	)
Exercised		0.50		0.40		0.20		(4,399,774	)		(1,684,648	)		(303,786	)
Outstanding at end of year		0.65		0.65		0.63		6,728,476			16,189,728			24,521,032
Exercisable at end of year		0.65		0.65		0.66		6,728,476			16,189,728			20,858,903

The weighted average share price for options exercised during 2010 at the date of exercise was 105.8p per share with the exercise price of each option ranging from 15.0p to 87.5p.

20

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

9. Share-based payment (continued)

a) Share options (continued)

In 2009, the weighted average share price for options exercised at the date of exercise was 75.0p per share with the exercise price of each option ranging from 15.0p to 70.5p.

In 2008, the weighted average share price for options exercised at the date of exercise was 44.0p per share with the price of each option ranging from 15.0p to 42.0p.

The range of exercise prices and the weighted average remaining contractual life for options outstanding and exercisable at the end of the year is shown below:

	Outstanding and Exercisable
2010	Weighted average remaining life (years)		Number		Weighted average exercise price (£)
Range of exercise prices
£0.15-£0.60		6.2		1,880,650		0.37
£0.61-£1.00		4.5		4,480,858		0.66
£1.01-£3.40		1.4		366,968		2.00
		4.8		6,728,476		0.65
	Outstanding and Exercisable
2009	Weighted average remaining life (years)		Number		Weighted average exercise price (£)
Range of exercise prices
£0.15-£0.60		6.6		6,295,861		0.39
£0.61-£1.00		4.4		8,870,292		0.66
£1.01-£3.40		1.0		1,023,575		2.19
		5.0		16,189,728		0.65

	Outstanding						Exercisable
2008	Weighted average remaining life (years)		Number		Weighted average exercise Price (£)		Number		Weighted average exercise price (£)
Range of exercise prices
£0.15-£0.60		7.5		11,233,957		0.39		7,571,828		0.38
£0.61-£1.00		5.4		11,762,945		0.66		11,762,945		0.66
£1.01-£3.40		2.0		1,524,130		2.12		1,524,130		2.12
		6.1		24,521,032		0.63		20,858,903		0.66

b) Long term incentive plan (“LTIP”)

In May 2007, the Company’s shareholders approved the Long Term Incentive Plan (LTIP). Executive directors may receive an annual award of conditional nominal cost shares (a “Nominal Cost Award”) with a face value at grant of up to 100% of salary, vesting subject to earnings per share growth and the Group’s Total Shareholder Return over a three year period from the start of the financial year in which the awards were granted, and continued employment (“Conditional Awards”). In addition, the LTIP has flexibility to grant awards on a matching basis, pro-rata to the number of shares purchased via annual bonus (“Matching Awards”). Selected individuals, including all directors, may invest a proportion of their annual bonus after tax

21

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

9. Share-based payment (continued)

b) Long term incentive plan (“LTIP”) (continued)

(initially set at 25% of net bonus) in Company shares which will be matched on a one for one basis (to the grossed up value of the bonus invested) after three years subject to performance conditions and continued employment. The maximum value of Conditional Awards and Matching Awards which may be granted to an individual in any year is limited to 125% of basic salary.

2,429,634 awards (2009 - 6,187,170; 2008 - 4,332,327) including 166,253 (2009 - 371,440; 2008 - 227,762) matching awards were made in 2010 to Executive Directors and senior management.

Two performance conditions were applied to the Conditional Awards. Up to 50% of the award would have vested depending on growth of the Group’s absolute earnings per share (“EPS”) growth before exceptional items and impairment, as determined by the Remuneration Committee, measured over a three year period from the start of the financial year in which the awards were granted.

Vesting for EPS growth under each of the annual awards is set out below:

Absolute normalised EPS growth over the Performance Period			Vesting percentage of up to 50% of the shares subject to a Conditional award
2008 grant	2009 grant	2010 grant
Less than 0.75p	Less than 0.177p	Less than 0.339p	0%
0.75p	0.177p	0.339p	30%
Between 0.75p and 2.00p	Between 0.177p and 0.59p	Between 0.339p and 1.13p	Between 30% and 100% pro-rata on a straight-line basis
2.00p and above	0.59p and above	1.13p and above	100% basis

For the 2008 awards, vesting of the remaining 50% of the initial Nominal Cost Award was based on a comparison of the Group’s total shareholder return (“TSR”) over the performance period for each respective grant against a group of UK and US software and computer services companies (Amdocs Limited, Anite Group plc, Comptel Corporation, Comverse Technology Inc., Convergys Corporation, CSG Systems International Inc., Info Vista S.A., Misys plc, Openwave Systems Inc, Fidessa Group plc and Sage Group plc).

For the 2009 and 2010 awards, vesting of 25% of the initial nominal cost award and the matching awards was based on a comparison of the Group’s total shareholder return (“TSR”) against the constituents of the FTSE SmallCap and the remaining 25% was based on comparison against the FTSE All Share Software and Computer Services Index.

Vesting of TSR related awards was as follows:

TSR ranking of Intec compared to the comparator group over the Performance Period	Vesting percentage of up to 50% of the shares subject to an award
Below median ranking	0%
Median ranking	30%
Between median and upper quartile ranking	Between 30% and 100% pro-rata on a straight-line
Upper quartile ranking	100%

22

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

9. Share-based payment (continued)

As a result of the acquisition of the Company on 30 November 2010, the awards that had been granted in 2008, 2009 and 2010 vested as follows:

Grant	TSR Performance Condition		EPS Performance Condition		Total Vesting
	Percentage of Award	Vesting	Percentage of Award	Vesting
2008	50.0%	100.0%	50.0%	55.2%	77.6%
2009	50.0%	95.0%	50.0%	100.0%	97.5%
2010	50.0%	0.0%	50.0%	0.0%	0.0%

The cost of the awards was calculated using the Monte Carlo model as 50% of the awards granted have market-based vesting conditions. The following table shows the fair value calculated and the assumptions made to calculate the fair value of the awards granted in 2010, 2009 and 2008.

	2010			2009			2008
Weighted average fair value		81.6p			21.8p			38.1p
Weighted average share price		110.50p			26.90p			45.75p
Weighted average exercise price		0.0p			0.0p			0.0p
Expected volatility		59.2	%		55.6	%		39.1	%
Expected life of award		3 years			3 years			3 years
Employee attrition rate		10.0	%		10.0	%		10.0	%
Risk free interest rate		2.2	%		2.7	%		4.4	%
Dividend yield		0.9	%		0.0	%		0.0	%

The table below shows the outstanding awards at 30 September under the LTIP.

	Conditional Shares at 1 October 2008		Awards granted during the year		Matching awards granted during the year		Awards forfeited during the year			Conditional Shares at 1 October 2009		Awards granted during the year		Matching awards granted during the year		Awards forfeited during the year			Awards vested during the year			Conditional Shares at 30 September 2010		Market price of award		Vesting date
2007 LTIP		3,083,409		—		—		(267,436	)		2,815,973		—		—		—			(2,815,973	)		—		47.25p		December 2009
2008 LTIP		4,298,185		—		—		(625,428	)		4,273,492		—		—		(368,941	)		—			3,904,551		44.50p		January 2011
2009 LTIP		—		5,815,730		371,440		—			5,586,435		—		—		(722,614	)		—			4,863,821		26.90p		Nov 2011 – Aug 2012
2010 LTIP		—		—		—		—			—		2,263,381		166,253		(231,082	)		—			2,198,552		110.50p		January 2012
Total		7,381,594		5,815,730		371,440		(892,864	)		12,675,900		2,263,381		166,253		(1,322,637	)		(2,815,973	)		10,966,924

23

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

10. Income tax expense

The charge for the year comprises

	2010 £000			2009 £000			2008 £000
Current taxation:
UK Corporation tax at 28 % (2009: 28%; 2008: 29%)		—			1,165			1,479
Utilisation of previously unrecognised UK tax losses		—			(1,165	)		(1,479	)
Foreign tax		5,184			9,379			5,471
Utilisation of previously unrecognised foreign deferred tax assets		(1,796	)		(4,593	)		(3,671	)
		3,388			4,786			1,800
Adjustments in respect of prior years:
UK corporation tax		—			—			(81	)
Foreign tax		(432	)		6			164
		(432	)		6			83
Total current tax expense		2,956			4,792			1,883
Deferred taxation:
Current year charge/ (credit)		2,917			(2,150	)		257
Recognition of previously unrecognised deferred tax assets		(860	)		(16,701	)		—
Derecognition of previously recognised deferred tax assets		3,673			384			1,158
Total deferred taxation		5,730			(18,467	)		1,415
Total income tax expense/ (credit)		8,686			(13,675	)		3,298

UK Corporation tax is calculated at 28% (2009: 28%; 2008: 29%) of the estimated taxable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The deferred tax credit recognised in the year ended 30 September 2009 arose principally due to recognition of deferred tax assets on tax losses in the US, Ireland and the UK. The deferred tax expense recognised in the year ended 30 September 2010 principally arises from the reversal of such assets that no longer qualify for recognition to the extent they had not been utilised in the year, offset by the recognition of deferred tax assets on tax losses relating to Canada.

24

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

10. Income tax expense (continued)

Factors affecting the tax charge for the year:

	2010 £000			2009 £000			2008 £’000
Profit on ordinary activities before tax		7,313			24,693			13,750
Tax on Group profit at standard UK Corporation tax rate of 28 % (2009 – 28%; 2008 – 29%)		2,048			6,914			3,988
Net disallowed expenses and (non-taxable income)		(216	)		(1,540	)		1,451
Tax effect of share based payments		(669	)		(90	)		413
Utilisation of previously unrecognised tax losses		—			(2,451	)		(1,520	)
Derecognition of previously recognised tax losses		—			384			1,158
Utilisation of previously unrecognised other deferred tax assets		(1,796	)		(3,307	)		(3,630	)
Current year tax losses not recognised		5,033			979			122
Withholding taxes		1,535			2,570			2,948
Higher/(lower) rates of foreign tax		19			(439	)		(1,715	)
Effect of change in local tax rates		152			—			—
Adjustments to current tax expense in respect of previous periods		(432	)		6			83
Adjustments to deferred tax expense in respect of previous periods		199			—			—
Recognition of previously unrecognised deferred tax losses		(860	)		(16,701	)		—
Derecognition of previously recognised deferred tax assets		3,673			—			—
Total tax expense/ (credit)		8,686			(13,675	)		3,298

The standard rate of current tax in the UK (being the country of residence of the parent company) for the year is 28% (2009 – 28%; 2008 – 29%). The tax reconciliation is based on this rate due to the difficulty in selecting a weighted average rate given the range of tax rates (0% - 39%) and countries in which the Group operates and the range of profits and losses arising in those countries. The amount of the future tax charge will depend primarily on the level of profits together with the jurisdiction in which they are achieved and the ability to use available tax losses.

In addition to the amount charged to the consolidated income statement, an expense of £1,580,000 (2009: £1,800,000 credit; 2008: nil) has been recognised directly in equity relating to deferred tax on share based payments.

The UK corporation tax rate of 27% was substantially enacted on 21 July 2010 and the impact of this change is shown above. The new rate applies from 1 April 2011. Whilst further reductions in the UK tax rate have been announced they were not substantially enacted by 30 September 2010.

25

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

11. Dividends

Amounts recognised as distributions to equity holders in the year:	2010 £000		2009 £000		2008 £000
Full year dividend for the year ended 30 September 2009 of 1.0p (2008 : nil) per share		3,121		—		—
Interim dividend for the year ended 30 September 2010 of 0.4p (2009 : nil) per share		1,259		—		—
		4,380		—		—
Proposed full year dividend for the year ended 30 September 2010 of nil (2009: 1.0p) per share		—		3,121		—

No final dividend has been proposed for the year ended 30 September 2010.

26

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

12. Goodwill

	Goodwill £000
Cost
At 1 October 2008		93,407
Translation differences		63
At 30 September 2009		93,470
Translation differences		3
At 30 September 2010		93,473
Impairment
At 1 October 2008		385
Translation differences		63
At 30 September 2009		448
Translation differences		3
At 30 September 2010		451
Net book value
At 30 September 2010		93,022
At 30 September 2009		93,022

IFRS requires that goodwill acquired in a business combination is allocated to the cash-generating units (“CGU”) that are expected to benefit from that business combination. Goodwill arising on acquisitions has been allocated to the Development and Corporate segment. The products and technological expertise of the Development and Corporate segment, to which the goodwill relates, supports the revenue activities of the Group’s three geographic regions as a whole.

In assessing whether goodwill has been impaired, the carrying amount of the Group’s assets (including goodwill) is compared with its recoverable amount which is determined by its value in use. The Group estimates value in use using a discounted cash flow model. The future cash flows are adjusted for risks specific to the asset and discounted using a pre-tax discount rate of 13.18% (2009: 9.24%). This discount rate is derived from the Group’s weighted average cost of capital. The Group prepares cash flow forecasts derived from the most recent financial plans approved by management which cover a period of 12 months. The key assumptions used in the impairment testing are revenue and operating margin (and hence profit before interest and taxation), discount rates and rates of growth beyond the twelve month planning period.

The cash flow forecasts reflect management’s expectations of revenue growth and operating margin, based upon signed orders, identified prospects for contract extensions or renewals with existing customers, together with expectations of work to be sold to new clients. The forecasts are most sensitive to changes in projected revenue growth rates in the first year of the forecast period which are based on the 2011 budget. Cash flows beyond this period are extrapolated based on forecast growth rates for the Group of between 0% and 3% (2009: 3%). In all scenarios using these variable forecast growth rates, there was sufficient headroom in the forecast models.

27

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

13. Other intangible assets

	Purchased computer software £000			Acquired intangibles £000		Capitalised managed service solutions £000			Capitalised development costs £000		Total £000
Cost
At 1 October 2008		10,896			10,135		3,824			1,262		26,117
Additions		264			—		—			—		264
Amounts capitalised		—			—		640			—		640
Disposals		(46	)		—		—			—		(46	)
Translation differences		441			884		622			—		1,947
At 1 October 2009		11,555			11,019		5,086			1,262		28,922
Additions		927			—		—			—		927
Amounts capitalised		—			—		1,810			—		1,810
Disposals		(88	)		—		—			—		(88	)
Translation differences		253			45		25			—		323
At 30 September 2010		12,647			11,064		6,921			1,262		31,894
Accumulated amortisation & impairment
At 1 October 2008		8,213			9,205		308			948		18,674
Amortisation		1,431			770		928			263		3,392
Disposals		(45	)		—		—			—		(45	)
Translation differences		288			877		13			—		1,178
At 1 October 2009		9,887			10,852		1,249			1,211		23,199
Amortisation		1,185			158		1,079			51		2,473
Disposals		(88	)		—		—			—		(88	)
Translation differences		198			46		(8	)		—		236
At 30 September 2010		11,182			11,056		2,320			1,262		25,820
Carrying amount
At 30 September 2010		1,465			8		4,601			—		6,074
At 30 September 2009		1,668			167		3,837			51		5,723

Amortisation of intangible assets reported as capitalised managed service solutions is included in cost of sales.

Acquired intangibles include intellectual property rights with a carrying amount of £8,000 (2009: £167,000). Amortisation of acquired intangible assets comprises the amortisation for intellectual property rights.

28

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

14. Property, plant and equipment

	Furniture and equipment £000			Leasehold improvements £000			Computer equipment £000			Motor vehicles £000			Total £000
Cost
At 1 October 2008		3,379			5,376			13,114			35			21,904
Additions		1,809			125			1,615			—			3,549
Disposals		(58	)		(26	)		(2,472	)		(32	)		(2,588	)
Translation differences		536			535			1,750			6			2,827
At 1 October 2009		5,666			6,010			14,007			9			25,692
Additions		100			107			1,292			8			1,507
Disposals		(80	)		(3	)		(430	)		(3	)		(516	)
Translation differences		249			237			705			(5	)		1,186
At 30 September 2010		5,935			6,351			15,574			9			27,869
Accumulated depreciation
At 1 October 2008		2,967			2,882			10,581			19			16,449
Charge for year		335			783			1,923			8			3,049
Disposals		(53	)		(16	)		(2,443	)		(27	)		(2,539	)
Translation differences		454			389			1,344			3			2,190
At 1 October 2009		3,703			4,038			11,405			3			19,149
Charge for year		568			876			1,655			3			3,102
Disposals		(72	)		(2	)		(424	)		(3	)		(501	)
Translation differences		158			197			559			3			917
At 30 September 2010		4,357			5,109			13,195			6			22,667
Carrying amount
At 30 September 2010		1,578			1,242			2,379			3			5,202
At 30 September 2009		1,963			1,972			2,602			6			6,543

The net book value of computer software and equipment includes an amount of £279,000 (2009: £367,000) in respect of assets held under finance leases.

29

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

15. Trade and other receivables

	Non-current				Current
	2010 £000		2009 £000		2010 £000			2009 £000
Trade receivables		—		—		35,376			36,920
Provision for impairment of trade receivables		—		—		(1,035	)		(895	)
Net trade receivables		—		—		34,341			36,025
Overseas tax		—		—		1,356			356
Other receivables		300		386		1,094			1,328
Prepayments		2,406		2,273		4,211			4,458
Accrued income		—		—		13,761			19,038
		2,706		2,659		54,763			61,205

The Directors consider that the carrying amount of trade and other receivables approximate their fair value.

There are no customers in the Group that represents more than 10% of the total trade receivables balance at 30 September 2010 or 30 September 2009. Management do not believe that there is a significant concentration of credit risk in trade receivables. Information on new customers, including country risk, is obtained during the contract negotiation stage and is assessed by management on a case by case basis. The average credit period for trade receivables is 71 days (2009: 57 days) based on invoice date.

Non-current prepayments comprise mainly £1,605,000 (2009: £1,493,000) for deposits on leased properties currently due between two and five years and £388,000 (2009: £550,000) prepaid royalty balance to be expensed to the income statement between two and five years.

The Group has provided for all amounts that are deemed doubtful, estimated by the Group based on all trade receivables that are more than 365 days overdue except in certain circumstances where monies have been received after the reporting date or the revenue relating to the debtor has not been recognised. The Group also provides for all other specifically identified amounts that are less than 365 days overdue based on known impairment indicators including past default experience and known trading difficulties. The table below shows the movements in the provision for impairment of trade receivables:

	2010 £000			2009 £000
Balance at 1 October		895			1,070
Impairment losses recognised		646			699
Amounts written off as irrecoverable		(226	)		(985	)
Amounts recovered during the year		(231	)		(22	)
Translation differences		(49	)		133
Balance at 30 September		1,035			895

Included in accrued income is an amount of approximately £3.0m relating to services performed and provided to a major customer who, during the year, has purported to terminate its contract with the Group. The services performed are for the implementation of an integrated solution. The Group believes that there are no grounds for termination and will rigorously pursue its rights for performance of the contract. Having taken appropriate legal advice, the Group believes that there is no legal justification for the customer’s actions.

30

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

15. Trade and other receivables (continued)

Ageing of trade receivables:

	2010 Gross £000		2010 Impaired £000			2009 Gross £000		2009 Impaired £000
Not past due		21,510		—			21,165		—
Past due 0 – 30 days		4,795		—			5,734		—
Past due 31 – 60 days		2,229		—			4,896		(2	)
Past due 61 – 90 days		1,724		—			1,171		(1	)
Past due 91 – 365 days		4,012		(28	)		3,027		(238	)
More than 365 days past due		1,106		(1,007	)		927		(654	)
		35,376		(1,035	)		36,920		(895	)

Trade receivables disclosed above include amounts which are past due at the reporting date but against which the Group has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable.

16. Cash and cash equivalents

	2010 £000		2009 £000
Cash at bank and in hand		36,725		68,676
Short-term bank deposits		35,052		6,156
		71,777		74,832

The Directors consider that the carrying amount of cash and cash equivalents approximate their fair value.

Cash at bank and in hand was invested on a floating rate basis and is therefore subject to cash flow interest risk.

At 30 September 2010 short-term bank deposits have a weighted average period to maturity of 54 days (2009 – 37 days). These balances attract interest rates of between 0.2% and 7.5% (2009 – 0.6% and 8.7%).

Cash to the value of £2,811,000 at 30 September 2010 (30 September 2009: £2,782,000) denominated predominantly in US Dollars is restricted as it is held as security over certain customer contracts. This cash becomes free from restriction at various dates between December 2010 and September 2013.

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the above amounts. The table below sets out the currency denominations of cash and cash equivalents.

	2010 £000		2009 £000
US Dollar		32,999		33,637
Euro		18,692		14,776
Sterling		14,577		16,616
South African Rand		1,291		3,367
Australian Dollar		718		2,685
Lebanese Pounds		699		301
Brazilian Real		613		1,585
Indian Rupee		604		676
Canadian Dollars		496		530
Other		1,088		659
		71,777		74,832

31

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

17. Trade and other payables

	Non-current				Current
	2010 £000		2009 £000		2010 £000		2009 £000
Trade payables		—		—		3,947		4,231
Other payables		1,718		1,651		1,806		4,082
Accruals		1,544		1,397		9,014		18,939
Deferred revenue		—		—		23,000		25,798
		3,262		3,048		37,767		53,050

Trade and other payables comprise trade purchases and ongoing costs and are predominantly interest free. The directors consider that the carrying amount of trade and other payables approximates to their fair value. Creditors’ days were 35 (2009: 26).

Included in deferred revenue is £10,782,000 (2009 - £9,913,000) of retention payments representing amounts billed in advance of revenue which is recognised over the life of the contract.

18. Borrowings

	Non-current				Current
	2010 £000		2009 £000		2010 £000		2009 £000
Obligations under finance leases (Note 24)		99		336		284		220

As at 30 September 2010, the Group did not have any borrowing facilities. At 30 September 2009, the Group had available £6.75m of undrawn committed borrowing facilities in respect of which all borrowing conditions had been met.

The table below sets out the currency denominations of the Group’s borrowings at 30 September 2010:

	Australian dollar		Sterling		Other		Total
	£000		£000		£000		£000
Obligations under finance leases		212		171		—		383

The table below sets out the currency denominations of the Group’s borrowings at 30 September 2009:

	Australian dollar		US dollar		Other		Total
	£000		£000		£000		£000
Obligations under finance leases		290		243		23		556

32

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

19. Provisions

	Onerous lease commitments £000			Other provisions £000			Total £000
At 1 October 2008		2,162			1,052			3,214
Established during the year		502			—			502
Utilised during the year		(565	)		(108	)		(673	)
Unwinding of discount		44			4			48
Translation differences		256			50			306
At 1 October 2009		2,399			998			3,397
Established during the year		3,968			239			4,207
Utilised during the year		(635	)		(24	)		(659	)
Unwinding of discount		336			—			336
Translation differences		(118	)		26			(92	)
At 30 September 2010		5,950			1,239			7,189
Analysed as: 2010
Current liabilities		2,516			675			3,191
Non-current liabilities		3,434			564			3,998
2009
Current liabilities		606			480			1,086
Non-current liabilities		1,793			518			2,311

Onerous lease commitments disclosed above relate to future estimated losses on sublet or vacant lease commitments on a number of properties within the Group where the lease commitment is expected to be greater than any sublease income (where applicable). Amounts provided brought forward are for the period up to the first option to break in 2011 on a property lease in Denmark and up to September 2012 for part of the office space at the Group’s UK headquarters. During the year, as a result of the general economic outlook and the Group’s overall consolidation and restructuring exercise, additional onerous lease provisions were charged in respect of leasehold interests in the UK (£1.9m), US (£1.2m), Canada (£0.8m), and Denmark (£0.1m). Of the amounts established during the year, all have been treated as restructuring costs except for £0.7m in the UK and £0.1m in Denmark, as these were not directly related to the Group’s restructuring process undertaken in the second half of the year. The provisions in the various locations cover different time periods dependant on local market conditions and the timing of cash flows is dependent upon the remaining term of the associated lease, ranging from 13 months to 5 years.

The other provisions category relate to the estimated restoration costs of properties, primarily within North America and the UK, and are expected to be incurred in 2010 in North America and 2015 in the UK, in line with the end date of such leases.

33

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

20. Deferred tax

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period.

	Accelerated tax depreciation £000			Intangible assets £000			Deferred revenue £000			Tax losses £000			Other temporary differences £000			Total £000
At 1 October 2008		101			(185	)		—			434			840			1,190
Credit to income		1,751			7,102			—			7,201			2,413			18,467
Credit to equity		—			—			—			—			1,800			1,800
Translation differences		31			—			—			—			229			260
At 1 October 2009		1,883			6,917			—			7,635			5,282			21,717
(Charge)/ credit to income		(952	)		6			(1,154	)		(3,005	)		(625	)		(5,730	)
Charge to equity		—			—			—			—			(1,580	)		(1,580	)
Translation differences		7			—			—			(39	)		150			118
At 30 September 2010		938			6,923			(1,154	)		4,591			3,227			14,525

The following is the analysis of the deferred tax balances for financial reporting purposes.

	2010 £000			2009 £000
Deferred tax liabilities		(1,154	)		(50	)
Deferred tax assets		15,679			21,767
		14,525			21,717

Deferred tax assets not recognised

	2010 £000		2009 £000
Tax losses carried forward		22,696		14,891
Capital losses carried forward		395		395
Intangible assets		8,157		11,540
Accelerated tax depreciation		6,296		5,628
Other temporary differences		3,637		3,801
		41,181		36,255

Deferred tax assets of £4,591,000 (2009: £7,635,000) have been recognised in respect of the future use of tax losses carried forward in certain group companies. Management forecasts support the likely future use of the amount recognised.

Deferred tax assets in respect of losses carried forward and other temporary differences in certain group companies have not been recognised because, at present, there is insufficient evidence that there will be sufficient taxable profits in those companies to absorb these reliefs. The unutilised reliefs may be carried forward indefinitely, with the exception of the tax losses in Canada and the US of £54.6m (2009: £47.3m), of which the first will expire, if not previously used, in 2020.

34

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

20. Deferred tax (continued)

Included within other temporary differences are deferred tax assets in respect of share options of £495,000 (2009: £2,852,000), general provisions of £1,221,000 (2009: £1,310,000) and other assets of £357,000 (2009: £1,141,000).

No deferred tax liability is recognised on temporary differences of £8,730,000 (2009: £12,333,000) relating to the unremitted earnings of overseas subsidiaries as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future. The temporary differences at 30 September 2010 represent only the unremitted earnings of those overseas subsidiaries where remittance of those earnings may still result in a tax liability, principally as a result of dividend withholding taxes levied by the overseas tax jurisdictions in which these subsidiaries operate.

21. Financial instruments

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders as well as sustaining the future development of the business. The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in Note 23.

The Group does not have any significant debt outstanding and therefore no gearing ratio is calculated.

The Group is not subject to externally imposed capital requirements.

Categories of financial instruments

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.

	Notes		2010 £000		2009 £000
Financial assets – loans and receivables
Cash and cash equivalents		16		71,777		74,832
Trade receivables		15		34,341		36,025
Other receivables				1,820		1,557
				107,938		112,414
Financial liabilities – amortised cost
Trade payables		17		3,947		4,231
Other liabilities				822		881
Finance lease liabilities		24		383		556
				5,152		5,668

Financial risk management objectives

The main risks arising from the Group’s financial instruments are market risk (primarily foreign currency risks and interest rate risks), liquidity risk and credit risk. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework, which are set out below:

35

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

21. Financial instruments (continued)

Market risk

Market risk is the risk that changes in the market prices, such as foreign exchange rates and interest rates, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The Group’s activities expose it mainly to the financial risks of changes in foreign currency exchange rates. The exposure to interest rate risk is limited to cash and cash equivalents.

Risk is measured in terms of its impact on the assets and liabilities and the effect on the income statement.

Interest rate risk

The Group’s exposures to interest rates on financial assets and financial liabilities are primarily on its cash and cash equivalents as no overdrafts are operated and the Group has no loans. An increase of 1.0% in interest rates will have the effect of an increase in finance income of £706,000, whilst a decrease of 0.5% in interest rates will reduce finance income by £371,000.

Foreign currency risk and sensitivity analysis

Translation:

The Group has foreign operations around the world and is therefore exposed to foreign exchange risk on the translation of the balance sheets and income statements into Sterling. The Group does not hedge the foreign exchange risk relating to the translation of the balance sheet and income statement of overseas operations.

Transaction:

Operations are also subject to foreign exchange risk from committed transactions denominated in currencies other than their functional currency and once recognised, the revaluation of foreign currency denominated assets and liabilities.

The Group’s policy is to settle intercompany balances on which maximum exposure arises due to currency movements. This policy has the effect of protecting the Group’s consolidated balance sheet and the income statement from movements in those currencies.

The carrying amounts of the Group’s monetary assets and monetary liabilities in currencies denominated in a currency other than the functional currency of the Company or its subsidiaries at the reporting date are as follows:

	Monetary Liabilities						Monetary Assets
	2010 £000			2009 £000			2010 £000		2009 £000
Sterling		(39	)		(6	)		893		557
Euro		(29	)		(8	)		3,296		5,067
US Dollar		(37	)		(203	)		16,060		16,497
Saudi Riyal		—			—			977		—
New Zealand Dollar		—			—			345		363
Other		—			(23	)		81		90
		(105	)		(240	)		21,652		22,574

36

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

21. Financial instruments (continued)

Foreign currency sensitivity analysis:

The sensitivity analyses presented below are based on a 10% appreciation/ depreciation of the Euro and US Dollar against Sterling. The impact on the income statement represents the impact of a change in the exchange rates on the net monetary assets or liabilities of the Group that are not denominated in the functional currency of the entity involved. The impact on other equity relates to the translation of the Group’s net assets and that are denominated in Euro and US Dollar at the flexed exchange rates, as well as long term intra-group loans where the denomination of the loan is in a currency other than the currency of the lender or the borrower.

	US$ - denominated						€ - denominated
	2010 £000			2009 £000			2010 £000			2009 £000
Profit before tax – gain/ (loss)
10% appreciation		1,779			1,810			363			562
10% depreciation		(1,455	)		(1,481	)		(297	)		(460	)
Other equity – gain/ (loss)
10% appreciation		4,966			4,822			3,087			3,414
10% depreciation		(4,063	)		(3,946	)		(2,565	)		(2,863	)

Forward foreign exchange contracts

The Group has used forward foreign exchange contracts during the year but all of these have been settled by the year end.

Credit risk management

Credit risk refers to the risk that a customer will default on its contractual obligations resulting in a financial loss to the Group.

The Group’s principal financial assets are cash and cash equivalents and trade receivables which represent the Group’s maximum exposure to credit risk in relation to financial assets and are shown in the table below:

	Notes	2010 £000		2009 £000
Cash and cash equivalents	16		71,777		74,832
Trade receivables	15		34,340		36,025
			106,117		110,857

At 30 September 2010, the Group does not have more than 32% of its cash with any one financial institution. 60% (2009: 87%) of the Group’s cash is held with 3 banks, however, credit risk is considered to be limited due to government support behind these institutions.

The Group’s policy to mitigate its potential credit risks on trade and other receivables is included in Note 15.

37

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

21. Financial instruments (continued)

Liquidity risk management

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Ultimate responsibility for liquidity risk management rests with the Board of directors, though operationally it is managed by the regional finance teams. Since the Group has no borrowings other than finance lease liabilities, the risk is minimal. The Group has creditors and other amounts payable to tax authorities for which it has sufficient cash balances.

Liquidity risk tables

2010	Weighted average effective interest rate %			< 1 year £000		1 – 2 years £000		2 - 5 years £000		> 5 years £000
Non-interest bearing – trade creditors		0	%		3,947		—		—		—
Non-interest bearing – other creditors		0	%		655		167		—		—
Finance lease liability		4.5	%		284		99		—		—
					4,886		266		—		—
2009
Non-interest bearing – trade creditors		0	%		4,231		—		—		—
Non-interest bearing – other creditors		0	%		701		—		180		—
Finance lease liability		6.9	%		220		336		—		—
					5,152		336		180		—

38

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

22. Called up share capital

	2010				2009
	Number		£000		Number		£000
Authorised:
Ordinary shares of 1p each		450,000,000		4,500		450,000,000		4,500
Allotted, called up and fully paid:
Ordinary shares of 1p each		314,966,952		3,150		307,680,975		3,077

The increase in allotted share capital relates to share options exercised during the year.

Substantial shareholdings

As at the date of this report the Company’s sole shareholder is CSG Systems UK Limited.

Share options exercised

During the year, 4,399,774 ordinary shares (2009: 1,684,648) were issued at exercise prices between 15.0p and 87.5p (2009: between 15.0p and 70.5p) under the UK Approved and Unapproved Share Option Scheme and the US Stock Option Plan.

Share options

As at 30 September 2010, there were 6,728,476 (2009: 16,189,728) options outstanding in respect of all schemes. The options were to acquire ordinary shares of 1.0p each up to January 2018 at prices ranging from 15.0p to 340.0p. These have all either been exercised or lapsed upon the acquisition of the Company by CSG Systems International, Inc. Further details are provided in Note 9.

23. Other reserves, own shares and translation reserve

Other reserves

Other reserves include a merger reserve of £249,000 which arose as a result of applying Section 131 of the Companies Act 1985 to the acquisition of the Digiquant Group in 2003.

On 29 April 2009, the High Court of Justice consented to the cancellation of the Company’s share premium account, which was approved by shareholders at a general meeting on 14 April 2009 and subsequently registered by Companies House on 6 May 2009. Cancellation of the £162.0 million in the share premium account has enabled the Company to eliminate the accumulated deficit on its profit and loss account. An amount of £135.1 million of this has been transferred to other reserves.

During the current year, after obtaining appropriate legal advice and given due consideration, the Board approved the re-designation of the Special Reserve related to the cancellation of the share premium account, which had previously been treated as non-distributable, as distributable. This reserve has been reclassified to retained earnings.

Own shares

Own shares are held by the Intec Employee Share Trust. At 30 September 2010 the trust held 270,000 (2009: 270,000) shares in the Company at a cost of 205.0p (2009: 205.0p) each. The written down value of the shareholding was £95,000 (2009: £95,000).

Translation reserve

The translation reserve is used to record exchange differences relating to the translation of the net assets and results of foreign subsidiaries arising after 1 October 2004.

39

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

24. Commitments

a) Operating lease arrangements

The Group as lessee

The Group has entered into non-cancellable operating leases for various leasehold properties, computing and other equipment. Principally the leases relate to the rental of properties, some of which have periodic rent reviews, while certain other leases have renewal rights. There are no purchase options or contingent rentals.

	2010 £000		2009 £000		2008 £000
Minimum lease payments under operating leases recognised as an expense in the year		7,960		7,630		6,753

The future minimum lease payments expected to be made are as follows:

	2010 £000		2009 £000
Within one year		8,183		7,177
In the second to fifth years inclusive		8,911		13,389
After five years		456		1,404
		17,550		21,970

The Group as lessor

Rental income earned from the sub-lease of properties during the year was £1,412,000 (2009 - £1,423,000; 2008 - £1,011,000). At the balance sheet date, the Group had contracted with tenants for the following minimum lease payments:

	2010 £000		2009 £000
Within one year		1,330		1,408
In the second to fifth years inclusive		107		1,558
		1,437		2,966

40

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

24. Commitments (continued)

b) Finance lease commitments

The Group has finance leases for various items of computer and other equipment, some of which have renewal and purchase options. The finance lease obligations are secured by the leased assets purchased as disclosed in Note 13. Future minimum lease payments together with the present value of the net minimum lease payments are as follows:

	Minimum lease payments						Present value of minimum lease payments
	2010 £000			2009 £000			2010 £000			2009 £000
Amounts payable under finance leases
Within one year		303			228			284			195
In the second to fifth years inclusive		102			382			99			361
		405			610			383			556
Less future finance charges		(22	)		(54	)		—			—
Present value of lease obligations		383			556			383			556
Less amount due for settlement within 12 months								(284	)		(220	)
Amounts due for settlement after 12 months								99			336

The average effective borrowing rate was 4.5% (2009: 6.9%). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been made for contingent rental payments. Lease obligations are denominated in Sterling and Australian Dollars. The fair value of the lease obligations approximates their carrying value. The lease obligations under finance leases are secured by the lessors’ charges over the leased assets.

c) Bonds and guarantees

The Group issues letters of credit and guarantees over certain customer contracts in the ordinary course of business. The total amounts outstanding as at 30 September 2010 relating to these obligations was £3.6 million (2009: £5.3 million).

d) Related party transactions

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The Board is not aware of any related party transactions that should be disclosed apart from the details of key management remuneration which are disclosed in Note 8.

41

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

25. Subsidiaries

The Company owns 100% of the issued ordinary share capital and voting rights of Independent Technology Systems Limited (“ITSL”), Inception to Implementation (M) Sdn Bhd, Intec Telecom Systems do Brasil Limitada, Digiquant A/S and the Singl.eView Group of companies (all marked with * as set out below).

The other principal subsidiaries listed below are owned by ITSL either directly, through a holding company or another subsidiary company.

Unlisted subsidiary undertakings	Country of registration/ incorporation	% of ordinary share capital and voting rights			Principal activities
Independent Technology Systems Limited*	Great Britain		100	%	Sales support development and implementation
Intec Telecom Systems do Brasil Limitada*	Brazil		100	%	Sales support and implementation
Intec USA, Incorporated	USA		100	%	Holding Company
Intec Billing, Inc.	USA		100	%	Sales support development and implementation
Intec Telecom Systems Pty Limited	Australia		100	%	Sales support and implementation
Intec Telecom Systems (France) SARL	France		100	%	Sales support and implementation
Intec Systems (Asia) Sdn Bhd	Malaysia		100	%	Sales support and implementation
Intec Telecom Systems South Africa (Pty) Limited	South Africa		100	%	Sales support
Intec Telecom Systems Denmark A/S*	Denmark		100	%	Sales support development and implementation
Intec Billing Ireland	Ireland		100	%	Sales support development and implementation
Intec Billing Canada Limited	Canada		100	%	Sales support development and implementation
Intec Billing Australia Pty Ltd	Australia		100	%	Sales support development and implementation
Independent Technology Systems (India) Pvt. Ltd.	India		100	%	Development and Implementation
Independent Technology Systems Scandinavia AB	Sweden		100	%	Sales support development and implementation
Telmate ApS	Denmark		100	%	Sales support development and implementation

42

Intec Telecom Systems Limited

Notes to the consolidated financial statements

For the year ended 30 September 2010

26. Subsequent events

The Board of directors announced on 3 November 2010 that, at the Court Meeting and General Meeting of eligible Intec Shareholders held on that day, Intec Shareholders approved, by the necessary majorities, the scheme of arrangement under Part 26 of Companies Act 2006 and other associated matters with the acquisition of the Company’s entire issued and to be issued share capital, to be made by CSG Systems UK Limited, registered in England and Wales with company registration number 7382973. CSG Systems UK Limited is a a wholly owned subsidiary undertaking of CSG System International, Inc., a Delaware corporation, listed on the NASDAQ stock exchange under the symbol CSGS. On 30 November 2010, the transaction completed and the Company was delisted from the London Stock Exchange.

From that date CSG Systems UK Limited became the Company’s immediate parent undertaking and CSG System International, Inc., the Company’s ultimate parent undertaking.

Also on 30 November 2010, the Company re-registered as a private limited company.

43

EX-99.2

EXHIBIT 99.2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following tables set forth certain unaudited pro forma condensed consolidated financial information giving effect to CSG Systems International, Inc.’s (“CSG”) acquisition of Intec Telecom Systems Limited (formerly Intec Telecom Systems PLC, or “Intec”).

The unaudited pro forma condensed consolidated statements of income for the year ended December 31, 2009, and for the nine months ended September 30, 2010 (the “Pro Forma Income Statements”), give effect to CSG’s acquisition of Intec, as discussed in Note 3, as if such acquisition had occurred on January 1, 2009, combining the results of CSG for the year ended December 31, 2009 and the results of Intec for the year ended September 30, 2009 (Intec’s fiscal year end), and combining the results of CSG for the nine months ended September 30, 2010 and the results of Intec for the nine months ended June 30, 2010. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2010 (the “Pro Forma Balance Sheet”) gives effect to the Intec acquisition as if it had occurred on September 30, 2010, combining CSG’s September 30, 2010 balance sheet with Intec’s June 30, 2010 balance sheet. The Pro Forma Income Statements and the Pro Forma Balance Sheet are hereafter collectively referred to as the “Pro Forma Financial Information”. The Pro Forma Financial Information is unaudited and does not purport to represent what CSG’s consolidated results of operations would have been if the Intec acquisition had occurred on January 1, 2009, or what those results will be for any future periods, or what CSG’s consolidated balance sheet would have been if the Intec acquisition had occurred on September 30, 2010.

The Pro Forma Financial Information is based upon the historical financial statements of CSG and Intec and certain adjustments which CSG believes are reasonable, to give effect of the Intec acquisition. The pro forma adjustments and Pro Forma Financial Information included herein were prepared using the acquisition method of accounting for the business combination. The pro forma adjustments are based on preliminary estimates and certain assumptions that CSG believes are reasonable under the circumstances. The purchase price allocation is considered preliminary and subject to change once CSG receives certain information it believes is necessary to finalize the acquisition accounting, as noted in Note 3 to the Pro Forma Financial Information.

The Pro Forma Financial Information has been compiled from the following sources with the following unaudited adjustments:

• U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) financial information for CSG has been extracted without adjustment from: (i) CSG’s audited consolidated statement of income for the year ended December 31, 2009, contained in CSG’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2010; and (ii) CSG’s unaudited consolidated statement of income for the nine months ended September 30, 2010, and CSG’s unaudited consolidated balance sheet as of September 30, 2010, both contained in CSG’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2010.

• International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) financial information for Intec has been extracted without material adjustment from: (i) Intec’s audited consolidated statement of income for the year ended September 30, 2009, contained in this Form 8-K/A; and (ii) Intec’s unaudited consolidated statement of income for the nine months ended June 30, 2010, and Intec’s unaudited consolidated balance sheet as of June 30, 2010, both received from Intec management. These financial statements were originally prepared using pounds sterling as the reporting currency, and have been translated into U.S. dollars in the Pro Forma Financial Information using the methodology and the exchange rates noted below.

• Certain adjustments have been made to convert the Intec’s IFRS financial information to U.S. GAAP and to align those policies with CSG’s U.S. GAAP accounting policies. The basis of these adjustments is explained in the notes to the Pro Forma Financial Information.

• Intec translated its historical financial information into pounds sterling based upon the requirements of IFRS. Based upon its review of Intec’s historical financial statements and understanding of the differences between U.S. GAAP and IFRS, CSG is not aware of any further adjustments that it would need to make to Intec’s historical financial statements relating to foreign currency translation. The pro forma adjustments in the Pro Forma Financial Information have been translated from pounds sterling to U.S. dollars using historic exchanges rates. The average exchange rates applicable to Intec during the periods presented for the Pro Forma Income Statements and the period end exchange rate for the Pro Forma Balance Sheet are as follows:

		GBP/USD
Year ended September 30, 2009	Average Spot Rate	$	1.5516
Nine months ended June 30, 2010	Average Spot Rate	$	1.5623
June 30, 2010	Period End Spot Rate	$	1.5071

The Pro Forma Financial Information should be read in conjunction with:

• the accompanying notes to the Pro Forma Financial Information;

• the consolidated financial statements of CSG for the year ended December 31, 2009 and the related notes relating thereto, and the consolidated financial statements of CSG for the nine months ended September 30, 2010 and related notes relating thereto; and

• the consolidated financial statements of Intec for the three years ended September 30, 2010 and the related notes thereto, included in this Form 8-K/A.

2

CSG SYSTEMS INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 2009

(In thousands, except per share amounts)

	Year Ended December 31, 2009			Year Ended September 30, 2009										Pro Forma
	CSG			Intec										CSG
	(in USD)			Intec (in GBP)			Intec (in USD)			Pro Forma Adjustments			Note	(in USD)
Total revenues	$	500,717		£	167,891		$	260,500		$	(600	)	6(d)	$	760,617
Cost of revenues (exclusive of depreciation, shown separately below)		275,679			77,786			120,693			15,674		6(d); 6(e); 6(h)		412,046
Other operating expenses:
Research and development		70,113			16,853			26,149			(237	)	6(h)		96,025
Selling, general and administrative		59,510			44,270			68,689			(326	)	6(d); 6(h)		127,873
Depreciation		20,069			5,513			8,554			(2,628	)	6(h)		25,995
Restructuring Charges		599			—			—			2,950		6(h)		3,549
Total operating expenses		425,970			144,422			224,085			15,433				665,488
Operating income (loss)		74,747			23,469			36,415			(16,033	)			95,129
Other income (expense):
Interest expense		(5,660	)		(82	)		(127	)		(11,462	)	6(c)(ii)		(17,249	)
Amortization of original issue discount		(8,382	)		—			—			—				(8,382	)
Interest and investment income, net		1,194			710			1,102			—				2,296
Gain on repurchase of convertible debt securities		1,468			—			—			—				1,468
Other, net		2			596			925			(925	)	6(h)		2
Total other		(11,378	)		1,224			1,900			(12,387	)			(21,865	)
Income before income taxes		63,369			24,693			38,315			(28,420	)			73,264
Income tax (provision) benefit		(21,507	)		13,675			21,218			7,958		6(g)(iii)		7,669
Income from continuing operations	$	41,862		£	38,368		$	59,533		$	(20,462	)		$	80,933
Pro forma income from continuing operations per common and equivalent share:
Basic	$	1.22												$	2.36
Diluted	$	1.22												$	2.35
Shares used in pro forma per share computation:
Basic		34,325													34,325
Diluted		34,449													34,449

3

CSG SYSTEMS INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 2010

(In thousands, except per share amounts)

	Nine  Months Ended September 30, 2010			Nine Months Ended June 30, 2010										Pro Forma
	CSG			Intec										CSG
	(in USD)			(in GBP)			(in USD)			Pro Forma Adjustments			Note	(in USD)
Total revenues	$	395,300		£	103,609		$	161,870		$	(450	)	6(d)	$	556,720
Cost of revenues (exclusive of depreciation, shown separately below)		215,604			53,086			82,937			12,377		6(d); 6(e); 6(h)		310,918
Other operating expenses:
Research and development		56,615			14,378			22,463			(156	)	6(h)		78,922
Selling, general and administrative		52,608			28,526			44,567			(36	)	6(d); 6(h)		97,139
Depreciation		16,578			3,094			4,834			(1,380	)	6(h)		20,032
Restructuring charges		214			—			—			1,875		6(h)		2,089
Total operating expenses		341,619			99,084			154,801			12,680				509,100
Operating income (loss)		53,681			4,525			7,069			(13,130	)			47,620
Other income (expense):
Interest expense		(4,739	)		(180	)		(281	)		(8,156	)	6(c)(ii)		(13,176	)
Amortization of original issue discount		(5,447	)		—			—			—				(5,447	)
Interest and investment income, net		524			357			558			—				1,082
Loss on repurchase of convertible debt securities		(12,635	)		—			—			—				(12,635	)
Other, net		17			—			—			—				17
Total other		(22,280	)		177			277			(8,156	)			(30,159	)
Income before income taxes		31,401			4,702			7,346			(21,286	)			17,461
Income tax (provision) benefit		(7,181	)		(1,689	)		(2,639	)		5,960		6(g)(iii)		(3,860	)
Income from continuing operations	$	24,220		£	3,013		$	4,707		$	(15,326	)		$	13,601
Pro forma income from continuing operations per common and equivalent share:
Basic	$	0.73												$	0.41
Diluted	$	0.72												$	0.41
Shares used in pro forma per share computation:
Basic		33,152													33,152
Diluted		33,413													33,413

See notes to pro forma condensed consolidated financial information

4

CSG SYSTEMS INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2010

(In thousands)

	September 30, 2010		June 30, 2010									Pro Forma CSG
	CSG		Intec
	(in USD)		(in GBP)		(in USD)		Pro Forma Adjustments			Note		(in USD)
ASSETS
Current Assets:
Total cash, cash equivalents and short-term investments	$	212,332	£	71,746	$	108,128	$	(174,310	)		4; 6(c)(i)	$	146,150
Trade accounts receivable-
Billed, net		113,319		30,397		45,811		—					159,130
Unbilled and other		9,101		19,783		29,815		—					38,916
Deferred income taxes		9,240		—		—		3,848			6(h)		13,088
Income tax receivable		3,890		623		939		5,792			6(b); 6(h)		10,621
Other current assets		19,563		4,289		6,464		—					26,027
Total current assets		367,445		126,838		191,157		(164,670	)				393,932
Property and equipment, net		46,787		6,189		9,327		—					56,114
Software, net		10,650		1,401		2,111		18,537			6(a)(i)		31,298
Goodwill, net		108,507		93,022		140,193		(50,869	)		3; 6(a)(ii)		197,831
Client contracts and related intangibles, net		35,894		5,204		7,843		73,690			6(a)(i); 6(a)(iv)		117,427
Deferred income taxes		—		19,684		29,666		5,163			6(a)(v); 6(g)(i); 6(h)		34,829
Other assets		9,914		2,762		4,163		10,162			6(c)(i)		24,239
Total assets	$	579,197	£	255,100	$	384,460	$	(107,987	)			$	855,670
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt	$	26,172	£	139	$	209	$	9,791			6(c)(i); 6(h)	$	36,172
Customer deposits		30,698		—		—		—					30,698
Trade accounts payable		21,901		3,157		4,758		24,310			6(b)		50,969
Accrued employee compensation		34,384		—		—		15,123			6(b); 6(h)		49,507
Deferred revenue		29,767		26,456		39,872		(5,171	)		6(a)(iv); 6(h)		64,468
Other current liabilities		15,372		13,653		20,576		(11,892	)		6(a)(iii); 6(h)		24,056
Total current liabilities		158,294		43,405		65,415		32,161					255,870
Non-current liabilities:
Long-term debt, net of current maturities		114,067		271		408		189,592			6(c)(i); 6(h)		304,067
Deferred revenue		17,153		—		—		—			6(a)(iv); 6(h)		17,153
Deferred income taxes		47,658		20		30		—					47,688
Other non-current liabilities		7,300		6,824		10,284		(567	)		6(a)(iii); 6(h)		17,017
Total non-current liabilities		186,178		7,115		10,722		189,025					385,925
Total liabilities		344,472		50,520		76,137		221,186					641,795
Total stockholders’ equity		234,725		204,580		308,323		(329,173	)		6(b); 6(f)		213,875
Total liabilities and stockholders’ equity	$	579,197	£	255,100	$	384,460	$	(107,987	)			$	855,670

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CSG SYSTEMS INTERNATIONAL, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED FINANCIAL INFORMATION

1. BASIS OF PRESENTATION

The accompanying Pro Forma Income Statements for the year ended December 31, 2009, and for the nine months ended September 30, 2010, give effect to CSG’s acquisition of Intec as discussed in Note 3, as if such acquisition had occurred on January 1, 2009, combining the results of CSG for the year ended December 31, 2009 and the results of Intec for the year ended September 30, 2009 (Intec’s fiscal year end), and combining the results of CSG for the nine months ended September 30, 2010 and the results of Intec for the nine months ended June 30, 2010. The accompanying Pro Forma Balance Sheet as of September 30, 2010 gives effect to the Intec acquisition as if it had occurred on September 30, 2010, combining the consolidated balance sheet of CSG as of September 30, 2010 and the consolidated balance sheet of Intec as of June 30, 2010. The Pro Forma Financial Information is unaudited and does not purport to represent what CSG’s consolidated results of operations would have been if the Intec acquisition had occurred on January 1, 2009, or what those results will be for any future periods; or what CSG’s consolidated balance sheet would have been if the Intec acquisition had occurred on September 30, 2010.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Pro Forma Financial Information has been compiled in a manner consistent with the accounting policies adopted by CSG. The accounting policies of Intec were not deemed to be materially different to those adopted by CSG. Adjustments were made for presentational differences between IFRS and U.S. GAAP, as set out further in Note 6, together with adjustments arising as part of the acquisition accounting.

The Intec financial information has been translated from pounds sterling to U.S. dollars using the average exchange rates applicable during the periods presented in the Pro Forma Income Statements and the period end spot rate for the Pro Forma Balance Sheet.

3. INTEC ACQUISITION

On September 24, 2010, CSG announced its intention to acquire all of the shares of U.K.-based Intec in an all-cash transaction of 72 pence per Intec share (the “Intec Acquisition”), pursuant to Rule 2.5 of the U.K. City Code on Takeovers and Mergers.

On November 3, 2010, Intec’s Board of Directors announced that, at the court meeting and general meeting of eligible Intec shareholders, Intec shareholders voted to approve, by the necessary majorities, the transaction and other associated matters to implement the acquisition of Intec. On November 29, 2010, the transaction was sanctioned and the capital reduction was confirmed by the court. On November 30, 2010, the documents to finalize the transaction were filed and the transaction closed effective November 30, 2010.

The total purchase price and related preliminary excess total purchase price over fair value of net assets acquired is as follows (in thousands):

Total purchase price	$	364,148
Book value of net assets acquired		(308,322	)
Fair value adjustments		33,498
Residual goodwill	$	89,324

Except as discussed in Note 6 below, the carrying value of assets and liabilities in Intec’s financial statements are considered to be a reasonable estimate of the fair value of those assets and liabilities.

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The total purchase price allocation is considered preliminary and is subject to change once CSG receives certain information it believes is necessary to finalize its determination of the fair value of assets acquired and liabilities assumed. Thus the allocation of total purchase price is subject to refinement, and additional adjustments to record the fair value of all assets acquired and liabilities assumed may be required.

4. DEBT

The Intec Acquisition was funded through the use of approximately $149 million of CSG’s existing cash, with the remainder funded through a new credit facility.

On September 24, 2010 and in conjunction with the Intec Acquisition, CSG entered into a $300 million credit agreement with several financial institutions. On November 24, 2010, CSG entered into an amended and restated $300 million credit agreement (the “Credit Agreement”), which was done as part of the final bank syndication process of the credit agreement.

The Credit Agreement provides for borrowings by CSG in the form of: (i) a $200 million aggregate principal, five-year term loan, and (ii) a $100 million aggregate principal five-year revolving loan facility.

The interest rates under the Credit Agreement are chosen at CSG’s option and are based upon an adjusted LIBOR rate plus an applicable margin, or an alternate base rate plus an applicable margin. The interest rate margin for the term loan is 375 basis points (3.75%) throughout the term of the Credit Agreement, and the interest rate margin for the revolving loan facility is based on CSG’s then-current leverage ratio. A commitment fee will be paid on the average daily unused amount of the revolving loan facility, with the annual commitment fee rate ranging from 50 – 75 basis points, based upon CSG’s then-current leverage ratio.

Mandatory repayments of the term loan (payable quarterly) for the first, second, third, fourth and fifth years are equal to 5%, 10%, 15%, 20%, and 25%, respectively, of the aggregate principal amount, with the remaining 25% of the principal balance due at maturity.

Upon closing of the Intec Acquisition, all of the $200 million aggregate principal of the term loan and approximately $35 million of the $100 million aggregate revolving loan facility were drawn down. In January 2011, CSG repaid the $35 million outstanding balance of the revolving credit facility.

5. DEBT ISSUANCE COSTS AND ACQUISITION-RELATED COSTS

In conjunction with the Credit Agreement discussed in Note 4, CSG incurred debt issuance costs of approximately $10 million. These costs are being amortized to interest expense over the lives of the term loan and revolving credit facility components of the Credit Agreement. The deferred financing costs are reflected in Other Assets in the accompanying Pro Forma Balance Sheet.

In conjunction with the Intec Acquisition, through December 31, 2010, CSG has incurred certain direct and incremental acquisition-related charges, totaling approximately $10 million, related primarily to investment banking, legal, accounting, and other professional services. In addition, through December 31, 2010, CSG has incurred approximately $2 million of restructuring charges related to the Intec Acquisition that CSG has not recognized as an existing liability of Intec at the acquisition date and thus has recorded currently in earnings.

The total purchase price of the Intec Acquisition was payable in pounds sterling. In September 2010, CSG entered into a pound sterling call/U.S. dollar put (the “Currency Option”) at a strike price of 1.62 in conjunction with the Intec Acquisition to limit its exposure to adverse movements in the exchange rate between the two currencies leading up to the expected closing date. Upon the approval of the acquisition by Intec’s shareholders in November 2010, CSG sold the Currency Option, and entered into a forward contract for the delivery of approximately 240 million pounds sterling (which included estimated Intec Acquisition costs at that time) at an exchange rate of approximately 1.61 (the “Currency Forward”). At the November 30, 2010 closing date, which represents the date

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the total purchase price is established under U.S. GAAP, the exchange rate between the pound sterling and the U.S. dollar was approximately 1.56 (which set the U.S.GAAP purchase price at $364.1 million). During December 2010, as part of the payment process for the pound sterling purchase price, CSG closed out its position in the Currency Forward at an average rate of 1.58. Under U.S. GAAP, the costs and proceeds (including gains and losses) from financial instruments that are used to reduce the risks of a change in the value of the acquiree’s net assets or the consideration to be issued by the acquirer before the date of acquisition, are not part of the consideration transferred and should be recorded currently in earnings, and should not be included in the determination of the purchase price. As a result, as of December 31, 2010, CSG recorded net expense of approximately $14 million related to these financial instrument transactions, and the foreign currency translation impact of intercompany notes established to structure the Intec Acquisition.

6. PRO FORMA ADJUSTMENTS

The Pro Forma Financial Information is based upon the historical financial statements of CSG and Intec and certain adjustments which CSG believes are reasonable to give effect to the Intec Acquisition. These adjustments are based upon currently available information and certain assumptions, and therefore the actual adjustments will likely differ from the pro forma adjustments. The Pro Forma Financial Information included herein was prepared using the acquisition method of accounting for the business combination. As discussed above, the purchase price allocation is considered preliminary at this time. However, CSG believes that the preliminary purchase price allocation and other related assumptions utilized in preparing the Pro Forma Financial Information provide a reasonable basis for presenting the pro forma effects of the Intec Acquisition.

Other than those described below, CSG believes there are no adjustments, in all material respects, that need to be made to present the Intec financial information in accordance with U.S. GAAP, and to align Intec’s historical accounting policies with CSG’s U.S. GAAP accounting policies.

The adjustments made in preparing the Pro Forma Financial Information are as follows:

(a) Fair Value Acquisition Accounting Adjustments:

For purposes of the pro forma presentation, the following adjustments were made to reflect our preliminary estimate of the fair value of the net assets acquired:

i. The intangible assets with finite lives of Intec have been increased by approximately $100 million to reflect our preliminary estimate of the fair value of the acquired intangible assets, including trade names, technology assets, and customer relationship assets.

ii. The historical carrying value of Intec’s goodwill as of the acquisition date of approximately $140 million (which relates to prior Intec acquisitions) was eliminated.

iii. The $1.1 million increase in current liabilities and $1.4 million decrease in long-term liabilities relate to the recognition of the fair value of various liabilities.

iv. Capitalized costs of $7.8 million and deferred revenue of $5.2 million related to set-up/implementation efforts on two large, long-term managed services arrangements were eliminated.

v. CSG recorded a net deferred tax liability impact of $17.6 million related to the fair value purchase accounting adjustments discussed above.

Adjustments were also made to the acquired assets and assumed liabilities of Intec to align the Intec IFRS financial information with CSG’s U.S. GAAP accounting policies. See note (f) Income Taxes below for additional adjustments. Goodwill, representing the total excess of the total purchase price over the fair value of the net assets acquired, was approximately $89 million. This allocation is based on preliminary estimates; the final acquisition cost allocation may differ materially from the preliminary assessment outlined above. Any changes to the initial estimates of the fair value of the assets and liabilities will be allocated to goodwill.

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(b) Acquisition-Related Costs

As discussed in Note 5, as of December 31, 2010, CSG incurred approximately $12 million of acquisition-related costs (includes approximately $2 million of restructuring charges), and approximately $14 million of costs related to various foreign currency transactions associated with the acquisition, for a total of approximately $26 million. These costs have been accrued as a current liability, net of a $5 million tax benefit in the accompanying Pro Forma Balance Sheet. No adjustment has been made to the accompanying Pro Forma Income Statements for these items as these costs are considered non-recurring. However, because these types of costs are required to be expensed as incurred, the approximately $21 million net after-tax impact of these costs have been charged directly to retained earnings as of September 30, 2010.

(c) Debt

i. Debt Borrowing

As discussed in Note 4, upon closing of the Intec Acquisition, CSG borrowed $235 million under the Credit Agreement: $200 million related to the term loan and $35 million related to the revolving loan facility. In January 2011, CSG repaid the $35 million outstanding balance of the revolving credit facility. The accompanying Pro Forma Balance Sheet assumes that the total outstanding principal balance related to the term loan was $200 million, and the total outstanding principal balance related to the revolving credit facility was zero. The total debt issuance costs of $10.2 million incurred in conjunction with the Credit Agreement are reflected in Other Assets.

ii. Interest Expense

Adjustments to record pro forma interest expense of $11.5 million (includes $3.4 million of amortized debt issuance costs) and $8.2 million (includes $2.5 million of amortized debt issuance costs) were made for the year ended December 31, 2009 and the nine months ended September 30, 2010, respectively, related to the Credit Agreement. The base interest rate on the debt is variable, dependent upon LIBOR or a base rate, plus the applicable spread. The total amount of the variable interest rate (excludes the amortization of the debt issuance costs) used for calculating interest expense for the periods presented is assumed to be consistent with the December 2010 all-in interest rate of 4.06%. The sensitivity of interest rate fluctuations to interest expense is illustrated as follows: a 0.125% (12.5 basis points) variance in the interest rate in the Pro Forma Income Statements equates to a variance in interest expense of $0.3 million for the year ended December 31, 2009, and $0.2 million for the nine months ended September 30, 2010.

The Pro Forma Income Statements assume: (1) the outstanding principal amount related to the Credit Agreement’s term loan as of January 1, 2009 is $200 million; (2) the outstanding principal amount related to the Credit Agreement’s revolving credit facility as of January 1, 2009 and over the entire pro forma periods is zero; (3) mandatory quarterly prepayments of principal on the term loan of $2.5 million are reflected during 2009 and mandatory quarterly prepayments of principal on the term loan of $5.0 million are reflected during the nine months ended September 30, 2010; and (4) there are no optional prepayments of principal on the term loan. No interest income is assumed from any excess proceeds from the debt.

(d) Capitalized Costs and Deferred Revenue Related to Managed Services Agreements

As the result of the pro forma adjustment described in note 6(a)iv above, adjustments to reduce total revenue were made for the year ended December 31, 2009 and the nine months ended September 30, 2010, of $0.6 million and $0.5 million, respectively. In addition, adjustments to reduce cost of revenue were made for the year ended December 31, 2009 and the nine months ended September 30, 2010, of $1.4 million and $1.1 million, respectively.

(e) Amortization Expense Related to Acquired Intangible Assets

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Acquired finite-lived intangible assets were recorded at their estimated fair value of approximately $100 million. The weighted-average useful life of the acquired intangible assets is estimated at 9.6 years. Adjustments to record estimated amortization expense of $18.5 million and $13.9 million, respectively, were made for the year ended December 31, 2009, and the nine months ended September 30, 2010, and were reflected in the Cost of Revenues line item in the Pro Forma Income Statements.

In addition, adjustments to reverse amortization expense of $1.2 million and $0.2 million, respectively, were made for the year ended and the nine months ended periods related to Intec acquisition-related intangible assets that existed and were eliminated on the acquisition date, and that were reflected in the Selling, General and Administrative Expense line item by Intec.

(f) Elimination of Intec’s Stockholder Equity

An adjustment of $308 million to eliminate Intec’s stockholders’ equity balances was recorded in the Pro Forma Balance Sheet.

(g) Income Taxes

The following pro forma adjustments related to income taxes were made to the Pro Forma Balance Sheet:

i. CSG recorded a net deferred tax liability of $17.6 million related to the fair value acquisition accounting adjustments discussed in 6(a)(v) above.

As a result of the recognition of the additional deferred taxes on the fair value adjustments and the interaction of Intec’s tax position with that of CSG, additional net deferred tax assets of $26.6 million have been recognized.

ii. Under IFRS, Intec classified the deferred tax assets and liabilities as non-current. Under U.S. GAAP, deferred taxes are classified between current and non-current portions, consistent with the classification of the underlying assets or liabilities that give rise to the temporary difference, disclosed separately and presented on a net basis, by tax jurisdiction. Note 6(h) further describes the reclassification to reflect this presentation difference.

The following pro forma adjustments related to income taxes were made to the Pro Forma Income Statements:

iii. Adjustments to income tax (provision) benefit have been recorded for the other pro forma adjustments at the statutory rate in effect during the periods for which the Pro Forma Income Statements are presented. In the Pro Forma Income Statement for the year ended December 31, 2009, Intec is reflecting in its historical financial statements a reduction in total income tax expense of $25.9 million related to the recognition of previously unrecognized deferred tax assets. In the Pro Forma Income Statement for the nine months ended September 30, 2010, Intec is reflecting in its historical financial statements an increase in total income tax expense of $4.3 million related to the de-recognition of previously recognized deferred tax assets.

(h) Reclassifications

Certain balances were reclassified from the Intec financial statements so their presentation would be consistent with CSG.

The following reclassifications were made to the Pro Forma Balance Sheet (in thousands):

	Increase/(Decrease)
Deferred income taxes	$	3,848
Non-current deferred income taxes		(3,848	)

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Current maturities of long-term debt	(209	)
Accrued employee compensation	13,168
Accrued income taxes	(377	)
Other current liabilities	(12,959	)
Long-term debt	(408	)
Other non-current liabilities	785

The following reclassifications were made to the unaudited Pro Forma Income Statement for the year ended December 31, 2009 (in thousands):

	Increase/(Decrease)
Cost of sales	$	(1,379	)
Research and development		(237	)
Selling, general and administrative		869
Depreciation		(2,628	)
Restructuring		2,950
Other income/expense		425

Additionally, $0.5 million of Intec other income was reclassified out of operating income as it related to Intec discontinued operations.

The following reclassifications were made to the Pro Forma Income Statement for the nine months ended September 30, 2010 (in thousands):

	Increase/(Decrease)
Cost of sales	$	(469	)
Research and development		(156	)
Selling, general and administrative		130
Depreciation		(1,380	)
Restructuring		1,875

(i) Earnings per Common Share

Pro forma earnings per common share for the year ended December 31, 2009 and the nine months ended September 30, 2010, have been calculated using the same weighted average number of common shares outstanding used by CSG in its earnings per share calculation.

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