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Form 20-F 2008

Table of contents

  • Page 1
    Form 20-F 2008

  • Page 2
    ... executive offices) ˚ hlberg, Vice President, Assistant General Counsel Kaarina Sta Telephone: +358 (0) 7 1800­8000, Facsimile: +358 (0) 7 1803­8503 Keilalahdentie 4, P.O. Box 226, FI­00045 NOKIA GROUP, Espoo, Finland (Name, Telephone, E­mail and/or Facsimile number and Address of Company...

  • Page 3
    ... Senior Management ...Compensation ...Board Practices ...Employees ...Share Ownership ...MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS ...Major Shareholders ...Related Party Transactions ...Interests of Experts and Counsel ...FINANCIAL INFORMATION ...Consolidated Statements and Other Financial...

  • Page 4
    ... ...CONTROLS AND PROCEDURES ...AUDIT COMMITTEE FINANCIAL EXPERT ...CODE OF ETHICS ...PRINCIPAL ACCOUNTANT FEES AND SERVICES ...EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES ...PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS ...CORPORATE GOVERNANCE ... ... 126 126...

  • Page 5
    ...rates. Our principal executive office is currently located at Keilalahdentie 4, P.O. Box 226, FI­00045 Nokia Group, Espoo, Finland and our telephone number is +358 (0) 7 1800­8000. Nokia Corporation furnishes Citibank, N.A., as Depositary, with consolidated financial statements and a related audit...

  • Page 6
    ... and related financial crisis and their impact on us, our customers and end­users of our products, services and solutions, our suppliers and collaborative partners; the development of the mobile and fixed communications industry, as well as the growth and profitability of the new market segments...

  • Page 7
    ...changes in government policies, trade policies, laws or regulations or political turmoil in countries where we do business; 12. our success in collaboration arrangements with others relating to development of technologies or new products, services and solutions; 13. our ability to manage efficiently...

  • Page 8
    ... financial statements from which the selected consolidated financial data set forth below have been derived were prepared in accordance with IFRS. 2004 (EUR) Year Ended December 31, 2005 2006 2007(1) 2008(1) (EUR) (EUR) (EUR) (EUR) (in millions, except per share data) 2008(1) (USD) Profit and Loss...

  • Page 9
    ...Nokia Siemens Networks, a company jointly owned by Nokia and Siemens, is comprised of our former Networks business group and Siemens' carrier­related operations for fixed and mobile networks. Accordingly, our consolidated financial data for the years ended December 31, 2007 and 2008 is not directly...

  • Page 10
    ... to maintain flexibility, but the Board of Directors has no current plans for repurchases during 2009. Nokia has not repurchased any of its own shares since September 2008. The table below sets forth actual share buy­backs by the Group in respect of each fiscal year indicated. Number of shares EUR...

  • Page 11
    ... shares on NASDAQ OMX Helsinki and, as a result, are likely to affect the market price of the ADSs in the United States. See also Item 3D. "Risk Factors-Our sales, costs and results of operations, as well as the US dollar value of our dividends and market price of our ADSs, are affected by exchange...

  • Page 12
    ..., our customers and end­ users of our products, services and solutions, our suppliers and collaborative partners may have a material adverse effect on our business, results of operations and financial condition. As we are a global company and have sales in most countries of the world, our sales and...

  • Page 13
    ... and Capital Resources" and Note 35 of our consolidated financial statements included in Item 18 of this annual report. Our sales and profitability depend materially on the development of the mobile and fixed communications industry as well as the growth and profitability of the new market segments...

  • Page 14
    ..., multimedia computers, enterprise applications, navigation, music, video, TV, imaging, games, as well as certain other services and solutions. In the consumer Internet services market segment, we currently focus our offering on five areas-music, maps, media, messaging and games-which we regard as...

  • Page 15
    ... those products and services faster and with lower levels of research and development expenditures than Nokia. Additionally, because mobile network operators are increasingly offering mobile devices under their own brand, we face increasing competition from non­branded mobile device manufacturers...

  • Page 16
    ...use, and positively differentiate us from our competition. In Nokia Siemens Networks' business, a competitive portfolio means a high­quality offering of products, services and solutions based on robust technology and designed to meet the requirements of our customers and local markets, supported by...

  • Page 17
    ... our economies of scale, profitability and after­sales service capabilities. In addition, customization could possibly erode the Nokia brand. The competitiveness of our product, services and solutions portfolio is also influenced by our capability to communicate about our mobile devices, including...

  • Page 18
    ... currently expected difficult economic conditions could have a material adverse effect on our financial condition and results of operations. The products, services and solutions we offer are subject to natural price erosion over their life cycle. In addition, the average selling price of our devices...

  • Page 19
    ...or our reputation and brand value. See Item 4B. "Business Overview-Devices & Services-Markets-Demand Supply Network Management " and "Nokia Siemens Networks-Production" for a more detailed discussion of our production activities. Possible consolidation among our suppliers could potentially result in...

  • Page 20
    ... into affordable and usable products, services and solutions that our current and potential customers prefer over those of our competitors. This is true regardless of whether we develop these technologies internally, acquire or invest in other companies with these technologies or collaborate...

  • Page 21
    ... our consolidated financial statements included in Item 18 of this annual report for more detailed information on geographic location of net sales to external customers, segment assets and capital expenditures. Changes in various types of regulation and trade policies in countries around the world...

  • Page 22
    ... the current difficult global economic conditions. See Item 4B. "Business Overview-Government Regulation-Devices & Services, NAVTEQ and Nokia Siemens Networks" for a more discussion about the impact of various regulations. We are developing a number of new products, services and solutions together...

  • Page 23
    ... in the activities we have outsourced, and interruptions in the data communication systems that run our operations. Such failures or interruptions could result in our products, services and solutions not meeting our and our customers' quality, safety, security and other requirements, or being...

  • Page 24
    with which we work in cooperative research and development activities. Similarly, we and our customers may face claims of infringement in connection with our customers' use of our products, services and solutions. In many aspects, the business models for mobile services have not yet been established...

  • Page 25
    ...-Devices & Services-Patents and Licenses", "-NAVTEQ-Patents and Licenses" and "-Nokia Siemens Networks-Patents and Licenses" for a more detailed discussion of our intellectual property activities. Our products, services and solutions include numerous new Nokia, NAVTEQ and Nokia Siemens Networks...

  • Page 26
    ..., or may require Nokia Siemens Networks to sell products, services and solutions in the future that would otherwise be discontinued, thereby diverting resources from developing more profitable or strategically important products. Any non­performance by Nokia Siemens Networks under these contracts...

  • Page 27
    .... The internal review by Nokia Siemens Networks and Nokia is complete. Siemens has informed us that its own investigation is also complete. Although the government investigations of Siemens by German and United States authorities have been concluded and resolved, investigations in other countries...

  • Page 28
    ... adverse effect on our sales, results of operations, share price, reputation and brand value by leading consumers to reduce their use of mobile devices, by increasing difficulty in obtaining sites for base stations, or by leading regulatory bodies to set arbitrary use restrictions and exposure...

  • Page 29
    ... music, maps, media, messaging and games. We also provide comprehensive digital map information through NAVTEQ and equipment, solutions and services for communications networks through Nokia Siemens Networks. For 2008, our net sales totaled EUR 50.7 billion (USD 70.6 billion) and net profit...

  • Page 30
    ... NAVTEQ is a leading provider of comprehensive digital map information and related location­based content and services for automotive navigation systems, mobile navigation devices, Internet­based mapping applications, and government and business solutions. By acquiring NAVTEQ, we aim to ensure the...

  • Page 31
    ... our consolidated financial statements included in Item 18 of this annual report. Other We primarily invest in research and development, marketing and building the Nokia brand. However, over the past few years we have increased our investment in services and software, including acquiring a number of...

  • Page 32
    ... value­added services which are easy to access and use and positively differentiates us from our competition. Nokia mobile devices are developed and produced by our Devices & Services group. We shipped a total of 468 million mobile devices in 2008, representing growth of 7% compared with 2007...

  • Page 33
    ... display. Achieve is focused on advanced mobile devices targeted at business users, with the flagship range being the current Nokia Eseries of devices. They are designed specifically, though not exclusively, for business use, and to address companies' security, manageability, cost and ease­of­use...

  • Page 34
    ... most financially viable: music, maps, media, messaging and games. Nokia estimates that the overall market value of these targeted segments will be approximately EUR 40 billion in 2011. Our strategy in competing in this market is for Nokia's consumer Internet services to support our device average...

  • Page 35
    ... appliance business to Check Point Software Technologies. Services consists of five operational sub­units-Music, Social Location, Media, Messaging and Games-each focused on the development of services in their respective areas. The five sub­units are supported by three horizontal teams: People...

  • Page 36
    ...-accessible online at Ovi.com, on a PC using Nokia Ovi Suite, and through various Nokia mobile device applications-users can easily manage, synchronize and share their personal files or information, as well as access Nokia services in music, maps, media sharing, messaging and games. Our plan...

  • Page 37
    ... Supply Network Management Our Demand Supply Network Management sub­unit is responsible for production and logistics for Nokia mobile devices. It also handles our customer care service. We operated ten manufacturing facilities in nine countries around the world for the production of mobile devices...

  • Page 38
    ... features and applications to be added into our products. Chipset Platforms A chipset platform comprises integrated circuits designed to work as a unit and perform specific functions in a mobile device. A key component of the chipset is the modem, responsible for converting the digital language of...

  • Page 39
    ... to develop Symbian OS, the market­leading operating system for mobile devices, into an open and unified mobile software platform, which will be licensed royalty­free and eventually move towards 'open source'. In December 2008, Nokia acquired full ownership of Symbian Limited, the company that...

  • Page 40
    ... a system to provide real­time traffic information based on speed and location data from GPS­enabled mobile devices carried by motorists. Building from the Nokia Maps service, this provides a glimpse into the future with the mobile device as a personal travel assistant. Nokia Research Center also...

  • Page 41
    ...GSM mobile devices. As the number of entrants in the market grows, as the Nokia product range becomes more diversified, as our products and solutions are increasingly used together with hardware, software or service components that have been developed by third parties, as Nokia enters new businesses...

  • Page 42
    ..., a leading provider of comprehensive digital map information and related location­based content and services for automotive navigation systems, mobile navigation devices, Internet­based mapping applications, and government and business solutions. By acquiring NAVTEQ, we aim to ensure the...

  • Page 43
    ... traffic information to radio and television stations, in­vehicle and mobile navigation systems, Internet sites and mobile device users. In January 2009, NAVTEQ expanded its traffic offering in Europe with the completion of its acquisition of T­Traffic, a leading provider of traffic services in...

  • Page 44
    ..., direct sales mailings and advertisements, electronic mailings, Internet­based marketing and co­marketing with customers. Technology, Research and Development NAVTEQ's global technology team focuses on developments and innovations in data gathering, processing, delivery and deployment of its map...

  • Page 45
    ... Services business unit is based in New Delhi, India. The Board of Directors of Nokia Siemens Networks is comprised of seven directors, four appointed by Nokia and three by Siemens, and Nokia appoints the CEO. Nokia Siemens Networks provides wireless and fixed network infrastructure, communications...

  • Page 46
    ... Units Nokia Siemens Networks has five business units: Radio Access; Converged Core; Broadband Connectivity Solutions; Operations and Business Software; and Services. These are supported by Operations; Research, Technology & Platforms; and Customer and Market Operations. Radio Access develops...

  • Page 47
    ...dedicated account team. In addition, customer executive teams led by Nokia Group Executive Board members focus on both Nokia's Devices & Services and Nokia Siemens Networks for the largest operator groups. Solution Sales Management supports the sales process by managing bids and pricing for products...

  • Page 48
    ... in close collaboration with the company's sales force, solution sales managers, business units as well as strategy, human resources and corporate communication teams. Nokia Siemens Networks has also strengthened its solutions­driven approach that seeks a deeper partnership with its customers by...

  • Page 49
    ...for mobile and fixed networks infrastructure and related services with the emergence of the merged Alcatel­Lucent and the formation of Nokia Siemens Networks. As a result, together with Ericsson and Huawei, there are now four major global players leading the network infrastructure market that offer...

  • Page 50
    ... US foreign policy and the US government has designated these countries as "state sponsors of terrorism." Government Regulation-Devices & Services, NAVTEQ and Nokia Siemens Networks Our business is subject to direct and indirect regulation in each of the countries in which we, the companies with...

  • Page 51
    ... supportive services to the mobile devices that complement the Nokia offering addressing sensorial and physical challenges in mobile communications. Employees-Corporate Responsibility Values We have a set of values developed by our employees around the world that reflects and supports our business...

  • Page 52
    ...also communicated our Code of Conduct to all NAVTEQ employees to make them aware of our values, ethics and responsibilities both as a business and as individual employees. Information on the Nokia Code of Conduct is available in 34 languages, and a web training tool and online test for employees are...

  • Page 53
    ...data is not directly comparable. Voluntary Attrition at Nokia During 2008, the rate of voluntary attrition was 9.3% at Nokia and 6.2% at Nokia Siemens Networks. Suppliers-Corporate Responsibility Nokia During 2008, we continued to promote environmental and social responsibility in the supply chain...

  • Page 54
    ... Networks suppliers must meet Nokia Siemens Networks' global supplier requirements, which set standards for the management of ethical, environmental and social issues. This commitment is part of the contractual agreements with the suppliers. To monitor our suppliers, Nokia Siemens Networks conducts...

  • Page 55
    ... in Indonesia and India. In Germany, Nokia Siemens Networks worked with a special needs center to build a communications network to help promote communication amongst its residents. Nokia Siemens Network continues developing solutions supporting sustainable development in emerging markets. For...

  • Page 56
    ... environment in everyday life. A variety of eco services are freely downloadable in Nokia devices. In December 2008, we introduced the beta­version of Green Explorer, a free service designed to promote sustainable travel. The service is a combination of travel guide information and tips about...

  • Page 57
    ... certificate in place for all manufacturing sites. Nokia Devices & Services supply chain­related environmental issues are discussed in the 'Suppliers' section above. Nokia Siemens Networks Nokia Siemens Networks environmental strategy is to achieve a net positive impact on environment. It intends...

  • Page 58
    ... key officers and the majority of the members of its Board of Directors and, accordingly, Nokia consolidates Nokia Siemens Networks. 4D. Property, Plants and Equipment At December 31, 2008, Nokia operated ten manufacturing facilities in nine countries for the production of mobile devices, and Nokia...

  • Page 59
    ..., our three mobile device business groups, Mobile Phones, Multimedia and Enterprise Solutions, and the supporting horizontal groups were replaced by an integrated business segment, Devices & Services. Results for Nokia and its reportable segments for the years ended December 31, 2007 and 2006 have...

  • Page 60
    ... the mobile device user experience are evolving. We are increasing our offering of consumer Internet services, specifically in music, maps (including navigation and points of interest), media (including the Ovi Store for applications), messaging and games, and working to deliver those services in...

  • Page 61
    ... the replacement market will be driven by purchases of devices with color screens, cameras, music players, and general design and aesthetic improvements. In addition, we believe the combination of consumer Internet services, including maps, music, media, messaging and games, and the user interface...

  • Page 62
    ...we are investing to extend our leadership position in mobile devices and integrated services. Our market share is also impacted by our regional and product mix. In 2008, for example, our global device market share benefited from our strong market share in India, Middle & East Africa, South East Asia...

  • Page 63
    ... the licensing of NAVTEQ's digital map data and related location­based content and services for use in mobile devices, in­vehicle navigation systems, Internet applications, geographical information system applications and other location­based products and services. NAVTEQ's success depends upon...

  • Page 64
    ... markets, the principal factors influencing the operator investments are the growth in network coverage and the growth in the number of subscribers. Nokia Siemens Networks' net sales are also impacted by pricing developments. The products and solutions offered by Nokia Siemens Networks business...

  • Page 65
    ... and/or the reduced purchasing power of customers in the emerging market. The appreciation of an emerging market currency generally has a positive impact on our operating profit. Significant changes in exchange rates may also impact our competitive position and related price pressures through their...

  • Page 66
    ... typically see strong fourth quarter seasonality due to holiday sales. As the relative share of licensing of NAVTEQ's digital map data and related location­based content and services for use in mobile devices compared to in­vehicle navigation systems has increased during the last few years, NAVTEQ...

  • Page 67
    ...agreed customer inventories at the date of the price adjustment. An immaterial part of the revenue from products sold through distribution channels is recognized when the reseller or distributor sells the product to the end­user. Devices & Services and certain Nokia Siemens Networks service revenue...

  • Page 68
    ... become likely and estimable. Nokia Siemens Networks' current sales and profit estimates for projects may change due to the early stage of a long­term project, new technology, changes in the project scope, changes in costs, changes in timing, changes in customers' plans, realization of penalties...

  • Page 69
    ... new technologies is between two to five years. During the development stage, management must estimate the commercial and technical feasibility of these projects as well as their expected useful lives. Should a product fail to substantiate its estimated feasibility or life cycle, we may be required...

  • Page 70
    ... activity's current business model and industry comparisons. Terminal values are based on the expected life of products and forecasted life cycle and forecasted cash flows over that period. Although we believe that the assumptions applied in the determination are reasonable based on information...

  • Page 71
    ... to our consolidated financial statements included in Item 18 of this annual report and include, among others, the discount rate, expected long­term rate of return on plan assets and annual rate of increase in future compensation levels. A portion of our plan assets is invested in equity securities...

  • Page 72
    ... 2008 compared with 2007 As of January 1, 2008, our three mobile device business groups, Mobile Phones, Multimedia and Enterprise Solutions, and the supporting horizontal groups were replaced by an integrated business segment, Devices & Services. Results for Nokia and its reportable segments...

  • Page 73
    ... in Devices & Services which were partially offset by decreased R&D expenses in Nokia Siemens Networks. In 2008, Nokia R&D expenses included EUR 153 million representing the contribution of the assets to the Symbian Foundation, restructuring charges of EUR 46 million and purchase price accounting...

  • Page 74
    ... net sales both in 2008 and 2007. Selling and marketing expenses decreased in Devices & Services and increased in Nokia Siemens Networks. In 2008, selling and marketing expenses included a EUR 14 million reversal of restructuring charges and EUR 343 million of purchase price accounting related items...

  • Page 75
    ... Our device market share decreased in Middle East & Africa, North America, Greater China and Europe. In Latin America, our 2008 market share was up significantly driven by strong share gains in markets such as Colombia, Mexico and Brazil as Nokia continued to benefit from its brand and broad product...

  • Page 76
    ... the Devices & Services group for the fiscal years 2008 and 2007. Year Ended December 31, 2008 Year Ended December 31, Percentage of Percentage of 2007 Net Sales Net Sales (EUR millions, except percentage data) Percentage Increase/ (Decrease) Net sales ...Cost of sales ...Gross profit ...Research...

  • Page 77
    ...and related location­based content. The following table sets forth NAVTEQ net sales by geographic area for the period from July 10, 2008 to December 31, 2008. From July 10 to December 31, 2008 (EUR millions) Europe ...Middle East & Africa ...China ...Asia­Pacific ...North America ...Latin America...

  • Page 78
    ... region. Slowed growth in developed markets was due to decreasing investments in mature 2G networks which were not fully offset by the capacity expansions of 3G networks. The mobile infrastructure market still grew in emerging markets such as Middle East & Africa, Latin America and China due to the...

  • Page 79
    ... of the product portfolio and related replacement of discontinued products at customer sites of EUR 309 million and purchase price accounting related items of EUR 182 million. In Nokia Siemens Networks, R&D expenses decreased to EUR 2 500 million in 2008 compared with EUR 2 746 million in 2007. In...

  • Page 80
    ... 99 million in 2008 compared with minority shareholders' interest in our subsidiaries' losses of EUR 459 million in 2007. The change was primarily due to the decrease in the net losses of Nokia Siemens Networks. Net Profit and Earnings per Share Net profit in 2008 totaled EUR 3 988 million compared...

  • Page 81
    ...Nokia Group. Research and development expenses for the device business represented 6.6% of its net sales in 2007, down from 7.1% in 2006, reflecting continued efforts to gain efficiencies in our investments. R&D expenses increased in Mobile Phones, Multimedia and Nokia Siemens Networks and decreased...

  • Page 82
    ...operating profit of Mobile Phones, Multimedia, Enterprise Solution and Corporate Common Functions in 2007 more than offset Nokia Siemens Networks operating loss. Our operating margin was 15.6% in 2007 compared with 13.3% in 2006. Results by Segments Devices & Services The following table sets forth...

  • Page 83
    ... sales and marketing spend to support launches of new products, increased costs related to further development of the distribution network and the growth of our business. In 2007, selling and marketing expenses represented 7.9% of Devices & Services net sales, compared with 8.2% of its net sales...

  • Page 84
    ... and other items and a gain on sale of real estate of EUR 53 million. The operating loss in 2007 also included EUR 570 million of intangible asset amortization and other purchase price accounting related items. In 2006, Nokia Siemens Networks operating profit included the negative impact of EUR 39...

  • Page 85
    ... compared with minority shareholders' interest in our subsidiaries' profits of EUR 60 million in 2006. The change was primarily due to the formation of Nokia Siemens Networks and Siemens' share of the losses of Nokia Siemens Networks. Net Profit and Earnings per Share Net profit in 2007 totaled EUR...

  • Page 86
    ... production lines, test equipment and computer hardware used primarily in research and development, office and manufacturing facilities as well as services and software related intangible assets. Proceeds from maturities and sale of current available­for­sale investments, liquid assets, decreased...

  • Page 87
    ...to support our business and to engage in hedging transactions on commercially acceptable terms. We primarily invest in research and development, marketing and building the Nokia brand. However, over the past few years Nokia has increased its investment in services and software by acquiring companies...

  • Page 88
    ... in 2007. See Note 35 (b) to our consolidated financial statements included in Item 18 of this annual report for further information relating to our committed and outstanding customer financing. As a strategic market requirement, we plan to continue to provide customer financing and extended payment...

  • Page 89
    ...consolidated financial statements included in Item 18 of this annual report for further information regarding commitments and contingencies. 5C. Research and Development, Patents and Licenses Success in the mobile communications industry requires continuous introduction of new products and solutions...

  • Page 90
    ... Companies Act and our Articles of Association, the control and management of Nokia is divided among the shareholders at a general meeting, the Board of Directors (or the "Board"), the President and the Group Executive Board chaired by the Chief Executive Officer. Board of Directors The current...

  • Page 91
    ... of the Group Executive Board of Nokia Corporation 1999­2006, President and CEO, Chairman of the Group Executive Board of Nokia Corporation 1992­1999, President of Nokia Mobile Phones 1990­1992, Senior Vice President, Finance of Nokia 1986­1989. Holder of various managerial positions at Citibank...

  • Page 92
    ... of the Boards of Directors of The Research Institute of the Finnish Economy ETLA and Finnish Business and Policy Forum EVA. Member of Aalto University Foundation Board. Prof. Dr. Henning Kagermann, b. 1947 Co­CEO and Chairman of the Executive Board of SAP AG. Board member since 2007. Member of...

  • Page 93
    ... CEO of Nokia Corporation. Board member since 2007. LL.M. (University of Helsinki). President and COO of Nokia Corporation 2005­2006, Executive Vice President and General Manager of Nokia Mobile Phones 2004­2005, Executive Vice President, CFO of Nokia 1999­2003, Executive Vice President of Nokia...

  • Page 94
    ... Meeting in 2009 until the close of the Annual General Meeting in 2010. Isabel Marey­Semper is Chief Financial Officer, EVP responsible for Strategy at PSA Peugeot Citroën. Subject to the requirements of Finnish law, the independent directors of the new Board will elect a Chairman and a Vice...

  • Page 95
    ..., Helsinki). Executive Vice President of Customer and Market Operations 2005­2007, Senior Vice President of Customer and Market Operations, Europe, Middle East and Africa 2004­2005, Senior Vice President of Nokia Mobile Phones in Asia­Pacific 2001­2004, Vice President of Sales for Nokia Mobile...

  • Page 96
    ...of Science (Finance) (Helsinki School of Economics). Executive Vice President, Sales and Portfolio Management, Mobile Phones, 2007. Senior Vice President, CDMA Business Unit, Mobile Phones 2004­2007, Vice President, Finance, Corporate Treasurer of Nokia Corporation 2000­2004, Director of Corporate...

  • Page 97
    ..., Nokia Mobile Software, Strategy, Marketing & Sales 2001­2002, Vice President and General Manager of Nokia Networks, Mobile Internet Applications 2000­2001, Vice President of Nokia Networks, Systems Marketing 1997­1998. Holder of executive and managerial positions at Hewlett­Packard Company...

  • Page 98
    ...Executive Vice President, Markets. Group Executive Board member since 1998. Joined Nokia 1991. Master of Science (Econ.) (Helsinki School of Economics and Business Administration). Executive Vice President and General Manager of Multimedia 2004­2007. Executive Vice President of Nokia Mobile Phones...

  • Page 99
    ... is paid in the form of Nokia shares, and in alignment therewith, approximately 40% of the annual remuneration payable to the members of Board of Directors has been paid in Nokia shares purchased from the market. The President and CEO receives variable compensation for his executive duties...

  • Page 100
    information with respect to the Nokia shares and equity awards held by the members of the Board of Directors, please see Item 6E. "Share Ownership". Change in Pension Value Fees and Nonqualified Non­Equity Earned or Deferred Incentive Paid in Compensation Plan Stock All Other Cash Earnings Awards ...

  • Page 101
    ...services companies, and companies from other industries that are headquartered in Europe and the United States. The Personnel Committee retains and uses an external consultant from Mercer Human Resources to obtain benchmark data and information on current market trends. The consultant works directly...

  • Page 102
    ... the Group Executive Board (excluding that of the President and CEO of Nokia and Simon Beresford­Wylie, Chief Executive Officer of Nokia Siemens Networks) and other direct reports to the President and CEO, including long­term equity incentives and goals and objectives relevant to compensation. The...

  • Page 103
    ...Group Executive Board ...0% 0% 25% 150% 75% 37.5% 300% 168.75% (a) Financial Objectives (includes targets for net sales, operating profit and operating cash flow) (c) Total Shareholder Return(1) (comparison made with key competitors in the high technology, telecommunications and Internet services...

  • Page 104
    ...case of the President and CEO, the annual incentive award is also partly based on his performance compared against (d) strategic leadership objectives, including entry into new markets and services, and executive development. Instead of Nokia's short­term cash incentive plan, Simon Beresford­Wylie...

  • Page 105
    ... Board under our equity plans in 2008. Gains realized upon exercise of stock options and share­based incentive grants vested for the members of the Group Executive Board during 2008 are included in Item 6.E. "Share Ownership." Aggregate Cash Compensation to the Group Executive Board for 2008 Number...

  • Page 106
    ... 652 Name and Principal Position(1) Olli­Pekka Kallasvuo President and CEO ...Richard Simonson EVP and Chief Financial Officer ...Simon Beresford­Wylie CEO Nokia Siemens Networks ...Anssi Vanjoki EVP, Head of Markets ...Mary McDowell EVP, Chief Development Officer ... Stock Option Year(**) Salary...

  • Page 107
    ... Price Fair Value(2) Threshold (Number) (Number) (EUR) (Number) (EUR) (EUR) Name and Principal Position Year Olli­Pekka Kallasvuo President and CEO...2008 May 9 115 000 19.16 Richard Simonson EVP and Chief Financial Officer ...2008 May 9 Simon Beresford­Wylie(4) CEO, Nokia Siemens Networks...

  • Page 108
    ...cash incentive plan sponsored by Nokia Siemens Networks. His target incentive covering 2008­2010 is EUR 1.5 million. For information with respect to the Nokia shares and equity awards held by the members of the Group Executive Board, please see Item 6E. "Share Ownership". Pension Arrangements for...

  • Page 109
    ... employees of Nokia Siemens Networks have not participated in any new Nokia equity­based incentive plans since the formation of Nokia Siemens Networks on April 1, 2007. For a more detailed description of all of our equity­based incentive plans, see Note 22 to our consolidated financial statements...

  • Page 110
    ... directors of the Board subject to the requirements of Finnish law. Approvals for restricted share grants to the other Group Executive Board members and other direct reports of the CEO are made by the Personnel Committee. Other Equity Plans for Employees In addition to our global equity plans...

  • Page 111
    ... stock units upon closing of the acquisition is approximately 3 million. We do not intend to make further awards under the NAVTEQ Plan. We have also an Employee Share Purchase Plan in the United States, which permits all full­time Nokia employees located in the United States to acquire Nokia...

  • Page 112
    ...members of the Group Executive Board. The Chief Executive Officer also acts as President, and his rights and responsibilities include those allotted to the President under Finnish law. Subject to the requirements of Finnish law, the independent directors of the Board confirm the compensation and the...

  • Page 113
    ... directors", as defined in the New York Stock Exchange's Listed Company Manual. In addition to the Chairman of the ¨ m was determined not to be independent under the Board and the President and CEO, Bengt Holmstro NYSE standards due to a family relationship with an executive officer of a Nokia...

  • Page 114
    ... have a Code of Conduct which is equally applicable to all of our employees, directors and management and is accessible on our website, www.nokia.com. In addition, we have a Code of Ethics for the Principal Executive Officers and the Senior Financial Officers. For more information about our Code of...

  • Page 115
    ... Compensation." The Corporate Governance and Nomination Committee consists of three to five members of the Board who meet all applicable independence requirements of Finnish law and the rules of the stock exchanges where Nokia shares are listed, including NASDAQ OMX Helsinki and the New York Stock...

  • Page 116
    ... the Company policy, approximately 40% of the remuneration paid to the Board of Directors has been paid in Nokia shares purchased from the market. Non­executive members of the Board of Directors do not receive stock options, performance shares, restricted shares or other variable compensation. For...

  • Page 117
    ...SEC rules), which represented 0.03% of our outstanding share capital and total voting rights excluding shares held by Nokia Group at that date. The following table sets forth the number of shares and ADSs held by members of the Board of Directors as at December 31, 2008. Shares(1) ADSs Jorma Ollila...

  • Page 118
    ... (5) The following table sets forth the number of shares and ADSs in Nokia (not including stock options or other equity awards that are deemed as being beneficially owned under the applicable SEC rules) held by members of the Group Executive Board as at December 31, 2008. Shares ADSs Olli­Pekka...

  • Page 119
    ...of the Group Executive Board as at December 31, 2008. These stock options were issued pursuant to Nokia Stock Option Plans 2003, 2005 and 2007. For a description of our stock option plans, see Note 22 to our consolidated financial statements in Item 18 of this annual report. Exercise Price per Share...

  • Page 120
    ... value of the stock options is based on the difference between the exercise price of the options and the closing market price of Nokia shares on NASDAQ OMX Helsinki as at December 31, 2008 of EUR 11.10. For gains realized upon exercise of stock options for the members of the Group Executive Board...

  • Page 121
    ... the performance period. Under the performance share plan 2006 the maximum number of Nokia shares deliverable equals 1.98 times the number of performance shares at threshold. The intrinsic value is based on the closing market price of a Nokia share on NASDAQ OMX Helsinki as at December 31, 2008 of...

  • Page 122
    ... of Nokia shares vested from the 2005 restricted share grant to all members of the Group Executive Board. Value is based on the market price of the Nokia share on NASDAQ OMX Helsinki on October 22, 2008 of EUR 12.42. (2) (3) Stock Ownership Guidelines for Executive Management One of the goals of...

  • Page 123
    ... United States hold our shares, in whole or in part, beneficially for United States persons. Based on information known to us as of February 17, 2009, as at December 31, 2008, Capital World Investors, a division of Capital Research and Management Company, beneficially owned 280 009 790 Nokia shares...

  • Page 124
    ..., our sale of 3G products was fully released through the date of the settlement agreements. Nokia and IDT currently have pending legal disputes in the United States regarding IDT's alleged 3G patents. In August 2007, IDT filed a complaint against us in the US International Trade Commission ("ITC...

  • Page 125
    ... against certain members of Nokia's Group Executive Board in their personal capacities (but not any company in the Nokia Group) asserting one of the patents in suit in Mannheim. No trial date has yet been set. Qualcomm Our payment obligations under the subscriber unit cross­license agreements...

  • Page 126
    ... Business and Professions Code, and that NAVTEQ intentionally interfered with Tele Atlas' contractual relations and prospective economic advantage with third parties, by allegedly excluding Tele Atlas from the market for digital map data for use in navigation system applications in the United States...

  • Page 127
    ... business and results of operations. ITEM 9. THE OFFER AND LISTING 9A. Offer and Listing Details Our capital consists of shares traded on NASDAQ OMX Helsinki under the symbol "NOK1V." American Depositary Shares, or ADSs, each representing one of our shares, are traded on the New York Stock Exchange...

  • Page 128
    ... The principal trading markets for the shares are the New York Stock Exchange, in the form of ADSs, and NASDAQ OMX Helsinki, in the form of shares. In addition, the shares are listed on the Frankfurt Stock Exchange. 9D. Selling Shareholders Not applicable. 9E. Dilution Not applicable. 9F. Expenses...

  • Page 129
    ... marketing of telecommunications systems and equipment, mobile phones, consumer electronics and industrial electronic products. We also may engage in other industrial and commercial operations, as well as securities trading and other investment activities. Director's Voting Powers Under Finnish law...

  • Page 130
    ...any subscription rights, stock options or convertible bonds issued by the company if so requested by the holder. The purchase price of the shares under our Articles of Association is the higher of (a) the weighted average trading price of the shares on NASDAQ OMX Helsinki during the 10 business days...

  • Page 131
    ... outstanding share of the common stock of NAVTEQ was converted into the right to receive cash, and NAVTEQ survived the merger as a wholly­owned subsidiary of Nokia Inc. The aggregate purchase price was approximately EUR 5.3 billion. 10D. Exchange Controls There are currently no Finnish laws which...

  • Page 132
    ... estate investment trusts, persons that are dealers in securities, persons who own (directly, indirectly or by attribution) 10% or more of the share capital or voting stock of Nokia, persons who acquired their ADSs pursuant to the exercise of employee stock options or otherwise as compensation, or...

  • Page 133
    ...prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a passive foreign investment company. Nokia currently believes that dividends paid with respect to its shares and ADSs will constitute qualified dividend income for US federal income tax purposes...

  • Page 134
    ... the conduct of a trade or business in the United States or (b) in the case of an individual, that individual is present in the United States for 183 days or more in the taxable year of the disposition and other conditions are met. US Information Reporting and Backup Withholding Dividend payments...

  • Page 135
    ...RISK See Note 35 to our consolidated financial statements included in Item 18 of this annual report for information on market risk. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not applicable. PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES None. ITEM 14. MATERIAL...

  • Page 136
    ....02 of the New York Stock Exchange's Listed Company Manual. ITEM 16B. CODE OF ETHICS We have adopted a code of ethics that applies to our Chief Executive Officer, President, Chief Financial Officer and Corporate Controller. This code of ethics is posted on our website, www.nokia.com/board, under the...

  • Page 137
    ... with customers and occasional training or reference materials and services. Audit Committee Pre­approval Policies and Procedures The Audit Committee of our Board of Directors is responsible, among other matters, for the oversight of the external auditor subject to the requirements of Finnish law...

  • Page 138
    ... 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table sets out certain information concerning purchases of Nokia shares and ADRs by Nokia Corporation and its affiliates during 2008. (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or...

  • Page 139
    ...that Nokia follows the requirements of Finnish law with respect to the approval of equity compensation plans. Under Finnish law, stock option plans require shareholder approval at the time of their launch. All other plans that include the delivery of company stock in the form of newly­issued shares...

  • Page 140
    ...15.(a) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes­Oxley Act of 2002. Consent of Independent Registered Public Accounting Firm. * Incorporated by reference to our annual report on Form 20­F for the fiscal year ended December 31, 2007. 139

  • Page 141
    ... of switching centers, radio base stations and transmission equipment. Converged device: A generic category of mobile device that can run computer­like applications such as email, web browsing and enterprise software, and can also have built­in music players, video recorders, mobile TV and other...

  • Page 142
    ... IP (Internet Protocol): A network layer protocol that offers a connectionless Internet work service and forms part of the TCP/IP protocol. IP Centrex: Voice over IP service that provides centrex services for customers who transmit voice calls to the network as packet streams across broadband access...

  • Page 143
    .... Open source: Refers to a program in which the source code is available to the general public for use and modification from its original design free of charge. OS: Operating System. Packet: Part of a message transmitted over a packet switched network. PBX (Private Branch Exchange): A local exchange...

  • Page 144
    ...points. Unix: An open standard operating system. VAR (Value Added Reseller): A reseller that adds something to a product, thus creating a complete customer solution which it then sells under its own name. VDSL (very high bit rate digital subscriber line): A form of digital subscriber line similar to...

  • Page 145
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was...

  • Page 146
    ... on Internal Control Over Financial Reporting" appearing under Item 15(b), management has excluded the activities of Symbian Limited from its assessment of internal control over financial reporting as of December 31, 2008 because it was acquired by the Company in a purchase business combination...

  • Page 147
    Nokia Corporation and Subsidiaries Consolidated Profit and Loss Accounts Notes Financial Year Ended December 31 2008 2007 2006 EURm EURm EURm Net sales ...Cost of sales ...Gross profit ...Research and development expenses ...Selling and marketing expenses ...Administrative and general expenses ......

  • Page 148
    Nokia Corporation and Subsidiaries Consolidated Balance Sheets Notes December 31 2008 2007 EURm EURm ASSETS Non­current assets Capitalized development costs ...Goodwill...Other intangible assets ...Property, plant and equipment ...Investments in associated companies Available­for­sale ...

  • Page 149
    ...Other financial income and expenses, net received ...Income taxes paid, net received ...Net cash from operating activities ...Cash flow from investing activities Acquisition of Group companies, net of acquired cash ...Purchase of current available­for­sale investments, liquid assets ...Purchase of...

  • Page 150
    ... of: Bank and cash ...Current available­for­sale investments, cash equivalents ...15,35 1 706 3 842 5 548 2 125 4 725 6 850 1 479 2 046 3 525 The figures in the consolidated cash flow statement cannot be directly traced from the balance sheet without additional information as a result of...

  • Page 151
    Nokia Corporation and Subsidiaries Consolidated Statements of Changes in Shareholders' Equity Fair value Reserve for Share and Before invested issue Treasury Translation other non­restrict. Retained minority Minority Number of Share shares (000's) capital premium shares differences reserves equity ...

  • Page 152
    ... compensation is shown net of deferred compensation recorded related to social security costs on share­based payments. Dividends declared per share were EUR 0.40 for 2008 (EUR 0.53 for 2007 and EUR 0.43 for 2006), subject to shareholders' approval. See Notes to Consolidated Financial Statements...

  • Page 153
    ... to form Nokia Siemens Networks on April 1, 2007. The NAVTEQ and the Nokia Siemens Networks business combinations have had a material impact on the consolidated financial statements and associated notes. Adoption of pronouncements under IFRS In the current year, the Group has adopted all of the new...

  • Page 154
    ... eliminated in proportion to share ownership. Such profits are deducted from the Group's equity and fixed assets and released in the Group accounts over the same period as depreciation is charged. The companies acquired during the financial periods presented have been consolidated from the date on...

  • Page 155
    ... the average rate and assets and liabilities at the closing rate are treated as an adjustment affecting consolidated shareholders' equity. On the disposal of all or part of a foreign Group company by sale, liquidation, repayment of share capital or abandonment, the cumulative amount or proportionate...

  • Page 156
    Notes to the Consolidated Financial Statements (Continued) 1. Accounting principles (Continued) estimated reliably, it is probable that the economic benefits associated with the contract will flow to the Group and the stage of contract completion can be measured reliably. When the Group is not able ...

  • Page 157
    ... the Consolidated Financial Statements (Continued) 1. Accounting principles (Continued) For defined benefit plans, pension costs are assessed using the projected unit credit method: The pension cost is recognized in the profit and loss account so as to spread the service cost over the service lives...

  • Page 158
    ...­for­sale investments are recognized in fair value and other reserves as part of shareholders' equity, with the exception of interest calculated using effective interest method and foreign exchange gains and losses on monetary assets, which are recognized directly in profit and loss. Dividends on...

  • Page 159
    ... under hedge accounting or not. Derivatives not designated in hedge accounting relationships carried at fair value through profit and loss Fair values of forward rate agreements, interest rate options, futures contracts and exchange traded options are calculated based on quoted market rates at...

  • Page 160
    .... For qualifying foreign exchange options, or option strategies, the change in intrinsic value is deferred in shareholders' equity to the extent that the hedge is effective. In all cases the ineffective portion is recognized immediately in the profit and loss account as financial income and expenses...

  • Page 161
    ... in the profit and loss account within financial income and expenses. For qualifying foreign exchange options the change in intrinsic value is deferred in shareholders' equity. Changes in the time value are at all times recognized directly in the profit and loss account as financial income and...

  • Page 162
    Notes to the Consolidated Financial Statements (Continued) 1. Accounting principles (Continued) Income taxes Current taxes are based on the results of the Group companies and are calculated according to local tax rules. Deferred tax assets and liabilities are determined, using the liability method, ...

  • Page 163
    ...contract and the expected cost of terminating the contract. Share­based compensation The Group offers three types of equity settled share­based compensation schemes for employees: stock options, performance shares and restricted shares. Employee services received, and the corresponding increase in...

  • Page 164
    ... basis in exchange for an upfront cash payment. Allowances for doubtful accounts The Group maintains allowances for doubtful accounts for estimated losses resulting from the subsequent inability of customers to make required payments. If the financial conditions of customers were to deteriorate...

  • Page 165
    ... commercial and technological feasibility, have been met. Should a product fail to substantiate its estimated feasibility or life cycle, material development costs may be required to be written­off in future periods. Business combinations The Group applies the purchase method of accounting...

  • Page 166
    ... the pension obligation and future expense. Share­based compensation The Group operates various types of equity settled share­based compensation schemes for employees. Fair value of stock options is based on certain assumptions, including, among others, expected volatility and expected life of...

  • Page 167
    ...responsible for developing and managing the Group's portfolio of mobile devices and consumer Internet services, as well as the management of our supply chains, sales channels, brand and marketing activities. NAVTEQ is a leading provider of comprehensive digital map information for automotive systems...

  • Page 168
    Notes to the Consolidated Financial Statements (Continued) 2. Segment information (Continued) mobile navigation devices, Internet­based mapping applications, and government and business solutions. Nokia Siemens Networks provides mobile and fixed network solutions and services to operators and ...

  • Page 169
    ... Consolidated Financial Statements (Continued) 2. Segment information (Continued) Corporate Common Functions and Corporate unallocated EURm 2006 Devices & Services EURm NAVTEQ EURm Networks EURm Total reportable segments EURm Eliminations EURm Group EURm Profit and Loss Information Net sales...

  • Page 170
    Notes to the Consolidated Financial Statements (Continued) 2. Segment information (Continued) Net sales to external customers by geographic area by location of customer 2008 EURm 2007 EURm 2006 EURm Finland ...China ...India...Great Britain ...Germany...Russia...Indonesia ...USA ...Other ... ...5 ...

  • Page 171
    ......Nokia Siemens Networks ...Corporate Common Functions ... ... 57 443 3 969 59 965 346 49 887 - 50 336 311 100 534 44 716 - 20 277 331 65 324 Nokia Group ...121 723 5. Pensions The Finnish plan comprises of the Finnish state Employees' Pension Act ("TyEL") system with benefits directly linked...

  • Page 172
    Notes to the Consolidated Financial Statements (Continued) 5. Pensions (Continued) Pension Trust. In Germany, individual benefits are generally dependent on eligible compensation levels, ranking within the Group and years of service. The majority of active employees in Nokia UK participate in a ...

  • Page 173
    Notes to the Consolidated Financial Statements (Continued) 5. Pensions (Continued) obligations, EUR 416 million of partly funded obligations (EUR 333 million in 2007) and EUR 82 million (EUR 134 million in 2007) of unfunded obligations. The amounts recognized in the profit and loss account are as ...

  • Page 174
    ... expenses include EUR 152 million net loss on transfer of Finnish pension liabilities, of which a gain of EUR 65 million is included in Nokia Siemens Networks' operating profit and a loss of EUR 217 million in Corporate Common expenses. Devices & Services recorded EUR 259 million of restructuring...

  • Page 175
    ... with co­ development partners, Nokia intended to selectively participate in key CDMA markets, with special focus on North America, China and India. Accordingly, Nokia ramped down its CDMA research, development and production which ceased by April 2007. In 2006, Devices & Services recorded a charge...

  • Page 176
    ... will not be included in future product portfolios. This impairment amount is included within research and development expenses in the consolidated profit and loss statement. Other intangible assets In connection with the restructuring of its CDMA business, the Group recorded an impairment charge of...

  • Page 177
    ...the Group completed its acquisition of all of the outstanding common stock of NAVTEQ. Based in Chicago, NAVTEQ is a leading provider of comprehensive digital map information for automotive systems, mobile navigation devices, Internet­based mapping applications, and government and business solutions...

  • Page 178
    ...Map database ...Customer relationships ...Developed technology ...License to use trade name and trademark ...Capitalized development costs ...Other intangible assets ...Property, plant & equipment ...Deferred tax assets ...Available­for­sale investments ...Other non­current assets ...Non­current...

  • Page 179
    ... has increased from 47.9% to 100% of the outstanding common stock of Symbian. A UK­based software licensing company, Symbian developed and licensed Symbian OS, the market­leading open operating system for mobile phones. The acquisition of Symbian is a fundamental step in the establishment of the...

  • Page 180
    ...Nokia share of changes in Symbian's equity after each stage of the acquisition ...Cost of the business combination ... The goodwill of EUR 470 million has been allocated to the Devices & Services segment. The goodwill is attributable to assembled workforce and the significant benefits that the Group...

  • Page 181
    ... in Trolltech ASA on June 6, 2008. • Oz Communications Inc., headquartered in Monteal, Canada, is a leading consumer mobile messaging solution provider delivering access to popular instant messaging and email services on consumer mobile devices. The Group acquired a 100% ownership interest in Oz...

  • Page 182
    ... Consolidated Financial Statements (Continued) 8. Acquisitions (Continued) The table below presents the reported results of Nokia Networks prior to the formation of Nokia Siemens Networks and the reported results of Nokia Siemens Networks since inception. Net sales, EUR million January ­ March 2007...

  • Page 183
    ... ...Current liabilities ...Total liabilities assumed ...Minority interest ...Net assets acquired ...Cost of Acquisition ...Goodwill ...Less non­controlling interest in goodwill ...Plus costs directly attributable to the acquisition ...Goodwill arising on formation of Nokia Siemens Networks...

  • Page 184
    ... services that allow anyone to use their mobile devices to securely access, use and share personal computer files. The Group acquired 100% ownership interest in Avvenu Inc. on December 5, 2007. • Twango, provides a comprehensive media sharing solution for organising and sharing photos, videos...

  • Page 185
    ... of digital music platforms and digital media distribution services. The Group acquired a 100% ownership interest in Loudeye Corporation on October 16, 2006. • gate5 AG, based in Berlin, Germany, a leading supplier of mapping, routing and navigation software and services. The Group acquired a 100...

  • Page 186
    Notes to the Consolidated Financial Statements (Continued) 9. Depreciation and amortization 2008 EURm 2007 EURm 2006 EURm Depreciation and amortization by function Cost of sales ...Research and development(1) ...Selling and marketing(2) ...Administrative and general ...Other operating expenses ... ...

  • Page 187
    ... rate ...Items without tax benefit/expense...Non­taxable gain on formation of Nokia Siemens Networks(1) ...Taxes for prior years ...Taxes on foreign subsidiaries' profits in excess of (lower than) income taxes at statutory rates...Operating losses with no current tax benefit ...Net increase in tax...

  • Page 188
    Notes to the Consolidated Financial Statements (Continued) 12. Intangible assets 2008 EURm 2007 EURm Capitalized development costs Acquisition cost January 1 ...Additions during the period ...Acquisitions ...Impairment losses ...Retirements ...Disposals during the period ...Accumulated acquisition ...

  • Page 189
    ...the Consolidated Financial Statements (Continued) 12. Intangible assets (Continued) 2008 EURm 2007 EURm Goodwill Acquisition cost January 1 ...Translation differences...Acquisitions ...Disposals during the period ...Other changes ...Accumulated acquisition cost December 31 ...Net book value January...

  • Page 190
    Notes to the Consolidated Financial Statements (Continued) 13. Property, plant and equipment 2008 EURm 2007 EURm Land and water areas Acquisition cost January 1 ...Translation differences...Additions during the period ...Acquisitions ...Impairments during the period...Disposals during the period ...

  • Page 191
    Notes to the Consolidated Financial Statements (Continued) 13. Property, plant and equipment (Continued) 2008 EURm 2007 EURm Other tangible assets Acquisition cost January 1 ...Translation differences...Additions during the period ...Disposals during the period ... ... 20 2 8 - 30 (9) - - (6) (15) ...

  • Page 192
    Notes to the Consolidated Financial Statements (Continued) 14. Investments in associated companies 2008 EURm 2007 EURm Net carrying amount January 1 ...Translation differences ...Additions ...Acquisitions ...Deductions(1) ...Impairment ...Share of results ...Dividends ...Other movements ...Net ...

  • Page 193
    ...24 10 10 The long­term loans receivable mainly consist of loans made to suppliers and to customers principally to support their financing of network infrastructure and services or working capital. Fair value is estimated based on the current market values of similar instruments. See Note 35 for...

  • Page 194
    Notes to the Consolidated Financial Statements (Continued) 19. Valuation and qualifying accounts Allowances on assets to which ...doubtful accounts ...Excess and obsolete inventory ...2007 Allowance for doubtful accounts ...Excess and obsolete inventory ...2006 Allowance for doubtful accounts ...Excess...

  • Page 195
    ... to profit and loss account as adjustment to Cost of Sales . . Available­for­sale Investments: Net fair value gains/(losses) ...Transfer to profit and loss account on impairment ...Transfer of net fair value (gains)/losses to profit and loss account on disposal ...Balance at December 31, 2007...

  • Page 196
    ... sales or purchases are transferred from the Hedging Reserve to the profit and loss account when the forecasted foreign currency cash flows occur, at various dates up to approximately 1 year from the balance sheet date. 21. The shares of the Parent Company Nokia shares and shareholders Shares...

  • Page 197
    ...on May 3, 2007, Nokia shareholders authorized the Board of Directors to issue a maximum of 800 000 000 new shares through one or more issues of shares or special rights entitling to shares, including stock options. The Board of Directors may issue either new shares or shares held by the Company. The...

  • Page 198
    ... any short term fluctuations in Nokia's share price. The determination of exercise price is defined in the terms and conditions of the stock option plan, which are approved by the shareholders at the respective Annual General Meeting. The Board of Directors does not have right to amend the above...

  • Page 199
    Notes to the Consolidated Financial Statements (Continued) 22. Share­based payment (Continued) The table below sets forth certain information relating to the stock options outstanding at December 31, 2008. Plan (year of launch) Stock options Number of outstanding participants Option (sub) 2008 (...

  • Page 200
    ... information see "Other equity plans for employees" below. The weighted average exercise price and the weighted average share price do not incorporate the effect of transferable stock option exercises by option holders not employed by the Group. (2) The weighted average grant date fair value...

  • Page 201
    .... Until the Nokia shares are delivered, the participants will not have any shareholder rights, such as voting or dividend rights associated with the performance shares. The following table summarizes our global performance share plans. Plan Performance shares outstanding at threshold(1)(2) Number of...

  • Page 202
    ... under other than global equity plans. For further information see "Other equity plans for employees" below. The fair value of performance shares is estimated based on the grant date market price of the Company's share less the present value of dividends expected to be paid during the vesting period...

  • Page 203
    ... for key management positions and other critical resources. The outstanding global restricted share plans, including their terms and conditions, have been approved by the Board of Directors. A valid authorization from the Annual General Meeting is required, when the plans are settled by using Nokia...

  • Page 204
    ...for Nokia acquired businesses or employees in the United States or Canada which do not result in an increase in the share capital of Nokia. These plans are settled by using Nokia shares or ADSs acquired from the market. When treasury shares are issued on exercise of stock options any gain or loss is...

  • Page 205
    ... reserves, fair value gains/losses and excess tax benefit on share­based compensation ...(1) (106) 133 In 2008, other temporary differences included a deferred tax liability of EUR 1 140 million arising from purchase price allocation related to Nokia Siemens Networks and NAVTEQ. In 2007, other...

  • Page 206
    ...Derivatives not designated in hedge accounting relationships carried at fair value through profit and loss: Forward foreign exchange contracts ...Currency options bought ...Currency options sold ...Interest rate futures ...Interest rate swaps...Cash settled equity options bought(3) ...Cash settled...

  • Page 207
    ...Derivatives not designated in hedge accounting relationships carried at fair value through profit and loss: Forward foreign exchange contracts ...Currency options bought ...Currency options sold ...Interest rate futures ...Interest rate swaps...Cash settled equity options bought(3) ...Cash settled...

  • Page 208
    ... related to restructuring activities in Devices & Services and Nokia Siemens Networks segments. The majority of outflows related to the restructuring is expected to occur during 2009. In conjunction with the Group's decision to discontinue the production of mobile devices in Germany, a restructuring...

  • Page 209
    Notes to the Consolidated Financial Statements (Continued) 27. Provisions (Continued) included EUR 402 million (EUR 318 million in 2007) impacting gross profit, EUR 46 million (EUR 439 million in 2007) research and development expenses, EUR 14 million of reversal of provision (EUR 149 million ...

  • Page 210
    ... pledged for the Group's own commitments include available­for­sale investments of EUR 10 million in 2008 (EUR 10 million in 2007). Other guarantees include guarantees of EUR 2 682 million in 2008 (EUR 2 429 million in 2007) provided to certain Nokia Siemens Networks' customers in the form of bank...

  • Page 211
    ...'s patents for use in Nokia's mobile devices and Nokia Siemens Networks infrastructure equipment, and Nokia has agreed not to use any of its patents directly against Qualcomm. The financial terms included a one­ time lump­sum cash payment of EUR 1.7 billion made by Nokia to Qualcomm in the fourth...

  • Page 212
    ... sets forth the salary and cash incentive information awarded and paid or payable by the company to the Chief Executive Officer and President of Nokia Corporation for fiscal years 2006­2008 as well as the share­based compensation expense relating to equity­based awards, expensed by the company...

  • Page 213
    ...% of the gross annual fee is paid in cash and the remaining 40% in Nokia shares purchased from the market and included in the table under "Shares Received." This table includes fees paid for Mr. Ollila, Chairman, for his services as Chairman of the Board, only. The 2008 and 2007 fees of Ms. Scardino...

  • Page 214
    ...of the Audit Committee. (10) Pension arrangements of certain Group Executive Board Members Olli­Pekka Kallasvuo can, as part of his service contract, retire at the age of 60 with full retirement benefit should he be employed by Nokia at the time. The full retirement benefit is calculated as if Mr...

  • Page 215
    ...in inventories ...321 (Decrease) Increase in interest­free short­term liabilities ...(2 333) Change in net working capital ...(2 546) The Group did not engage in any material non­cash investing activities in 2008 and 2006. In 2007 the formation of Nokia Siemens Networks was completed through the...

  • Page 216
    ... of Nokia and Siemens and consolidated by Nokia. Nokia effectively controls Nokia Siemens Networks as it has the ability to appoint key officers and the majority of the members of its Board of Directors, and accordingly, Nokia consolidated Nokia Siemens Networks. 35. Risk Management General risk...

  • Page 217
    ... Consolidated Financial Statements (Continued) 35. Risk Management (Continued) on creating shareholder value. Treasury activities support this aim by: i) minimizing the adverse effects caused by fluctuations in the financial markets on the profitability of the underlying businesses; and ii) managing...

  • Page 218
    Notes to the Consolidated Financial Statements (Continued) 35. Risk Management (Continued) (1) The FX derivatives are used to hedge the foreign exchange risk from forecasted highly probably cashflows related to sales, purchases and business acquisition activities. In some of the currencies, ...

  • Page 219
    ... to the Consolidated Financial Statements (Continued) 35. Risk Management (Continued) Nokia is exposed to equity price risk on social security costs relating to its equity compensation plans. Nokia mitigates this risk by entering into cash settled equity option contracts. Value­at­Risk Nokia uses...

  • Page 220
    ... parties. The Group Credit Policy, approved by the Group Executive Board, lays out the framework for the management of the business related credit risks in all Nokia group companies. Credit exposure is measured as the total of accounts receivable and loans outstanding due from customers and other...

  • Page 221
    ... this investment policy approach and active management of outstanding investments exposures, Nokia has not been subject to any material credit losses in its financial investments. The table below presents the breakdown of the outstanding available­for­sale fixed income and money market investments...

  • Page 222
    ...a situation where business conditions unexpectedly deteriorate and require financing. Transactional liquidity risk is defined as the risk of executing a financial transaction below fair market value, or not being able to execute the transaction at all, within a specific period of time. The objective...

  • Page 223
    ...Shelf registration statement for an indeterminate amount of debt securities on file with the US Securities and Exchange Commission • Local commercial paper program in Finland, totaling EUR 750 million • Euro Commercial Paper (ECP) program, totaling USD 4 000 million • US Commercial Paper (USCP...

  • Page 224
    Notes to the Consolidated Financial Statements (Continued) 35. Risk Management (Continued) loan commitments according to their remaining contractual maturity. Line­by­line reconciliation with the balance sheet is not possible. Due within 3 months EURm Due between 3 and 12 months EURm Due between 1...

  • Page 225
    Notes to the Consolidated Financial Statements (Continued) 35. Risk Management (Continued) Due between 3 and 12 months EURm Due between 3 and 5 years EURm At December 31, 2007 Due within 3 months EURm Due between 1 and 3 years EURm Due beyond 5 years EURm Non­current financial assets Long­...

  • Page 226
    ... Consolidated Financial Statements (Continued) 35. Risk Management (Continued) Hazard risk Nokia strives to ensure that all financial, reputation and other losses to the Group and our customers are minimized through preventive risk management measures or purchase of insurance. Insurance is purchased...

  • Page 227
    ... it meets all of the requirements for filing on Form 20­F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. NOKIA CORPORATION By: /s/ ANJA KORHONEN Name: Anja Korhonen Title: Senior Vice President, Corporate Controller ˚ HLBERG By: /s/ KAARINA...