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Form 20-F 2009
Nokia Form 20-F 2009
Copyright © 2010. Nokia Corporation. All rights reserved.
Nokia and Nokia Connecting People are registered trademarks of Nokia Corporation.
FORM_20-F_2009.indd 1 11.3.2010 12.25

Table of contents

  • Page 1
    Form 20-F 2009 Nokia Form 20-F 2009

  • Page 2

  • Page 3
    ...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 Contact...

  • Page 4
    ...Directors and 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...

  • Page 5
    ... INFORMATION ...Share Capital ...Memorandum and Articles of Association ...Material Contracts ...Exchange Controls...Taxation ...Dividends and Paying Agents ...Statement by Experts ...Documents on Display ...Subsidiary Information ...QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...

  • Page 6
    ... 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 opinion...

  • Page 7
    ... and commercialize new technologies, products and services and their combinations; • expectations regarding market developments and structural changes; • expectations and targets regarding our and the industry volumes, market share, prices, net sales and margins of products and services and...

  • Page 8
    ... intellectual property rights of these technologies; 16. the impact of changes in government policies, trade policies, laws or regulations and economic or political turmoil in countries where our assets are located and we do business; 17. any disruption to information technology systems and networks...

  • Page 9
    ... IFRS. 2005(1) (EUR) Year Ended December 31, 2006(1) 2007(1) 2008(1) 2009(1) (EUR) (EUR) (EUR) (EUR) (in millions, except per share data) 2009(1) (USD) Profit and Loss Account Data Net sales ...34 191 Operating profit ...4 639 Profit before tax ...4 971 Profit attributable to equity holders of the...

  • Page 10
    ...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, 2005 and 2006 is not directly...

  • Page 11
    ... made to all shareholders on equal terms, or through public trading from the stock market. The authorization would be effective until June 30, 2011 and terminate the current authorization granted by the Annual General Meeting on April 23, 2009. The table below sets forth actual share buy­backs by...

  • Page 12
    ... of the euro price of the 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 net sales, costs and results of operations, as well as the US dollar value of our dividends and market price of our...

  • Page 13
    ...business, sales, results of operations, financial condition and share price from time to time. We need to have a competitive portfolio of high quality products and services and their combinations that are preferred, purchased and used by our current and potential customers and consumers. If we fail...

  • Page 14
    ... appealing products and services and their combinations, as well as related business models, and to create new or address yet unidentified needs among our current and potential customers and consumers. If we fail to analyze correctly or respond timely and appropriately to key market trends, customer...

  • Page 15
    ... structure, world­class sourcing, manufacturing, logistics and distribution network, supported by one of the strongest intellectual property portfolios and the Nokia brand, provide us with a competitive advantage in the development, production, marketing and sale of traditional mobile devices. Such...

  • Page 16
    ...on the traditional mobile device market. If that occurs, and if the current trends in that market continue, this could have a material adverse effect on our business, results of operations, particularly our profitability, and financial condition. Our converged mobile device business has required and...

  • Page 17
    ... of services, user experience, software, quality, compatibility, technical performance and price; operational and manufacturing efficiency; supply chain efficiency, including sourcing, logistics and distribution; marketing; customer support; and brand. However, mobile device markets are increasingly...

  • Page 18
    ...map data and related location­based content from our competitors' similar offerings or if we fail in finding competitive business models for our business customers, our business and results of operations, particularly our profitability, may be materially adversely affected. Mobile and Fixed Network...

  • Page 19
    ... and resources of Nokia Siemens Networks management and result in its customers being more intensively targeted by competitors during the plan implementation period. If we cannot respond successfully to the competitive requirements in the fixed network infrastructure and related services market, our...

  • Page 20
    ..., made available to us or stored in or through our products and services or that they are being used by third parties to access personal or consumer data could impair our sales or our reputation and brand value. We are a global company and have sales in most countries of the world and, consequently...

  • Page 21
    ... for value­added services, including content and applications, or if mobile network operators and service providers invest in the related infrastructure less than anticipated, our business and results of operations could be materially adversely affected. As we are a global company with sales in...

  • Page 22
    ...If we fail to maintain or improve our market position and scale compared to our competitors across the range of our products and services, as well as leverage our scale to the fullest extent, or if we are unable to develop or otherwise acquire software, applications and content cost competitively in...

  • Page 23
    ... profitability. If Nokia Siemens Networks is unable to execute its plan effectively and timely or if the plan fails to achieve the desired results, that may have a material adverse effect on our business, results of operations and financial condition. Our net sales, costs and results of operations...

  • Page 24
    ... means of messaging, media, music, entertainment, navigation, location­based and other services. Nokia Siemens Networks' components and sub­assemblies sourced and manufactured by third­party suppliers include Nokia Siemens Networks­specific integrated circuits and radio frequency components...

  • Page 25
    ...' intellectual property rights in a way that we cannot foresee or prevent; the technologies, products or services supplied by the parties we work with do not meet the required quality, safety, security and other standards or customer needs; our own quality controls fail; or the financial condition...

  • Page 26
    ... or timing of content­related services offered by us, mobile network operators or third­party service providers, and may also indirectly affect the sales of our mobile devices. Since all technology standards, including those used and relied on by us, include some intellectual property rights, we...

  • Page 27
    ...the invalidity of the intellectual property rights of these technologies. This may have a material adverse effect on our business and results of operations. Our products and services and their combination include numerous Nokia, NAVTEQ and Nokia Siemens Networks patented, standardized or proprietary...

  • Page 28
    ... work and our customers do business. As a result, changes in various types of regulations, their application and trade policies applicable to current or new technologies, products and services including applications and content may adversely affect our business and results of operations. For example...

  • Page 29
    ... related to regulation and trade policies could affect our business and results of operations adversely even though the specific regulations do not always directly apply to us or our products and services, including applications and content. In addition to changes in regulation and trade policies...

  • Page 30
    ... who allege that radio emissions from mobile phones caused or contributed to each plaintiff's brain tumor. Although Nokia products and services and their combinations are designed to meet all relevant safety standards and recommendations globally, even a perceived risk of adverse health effects of...

  • Page 31
    ... If Nokia Siemens Networks fails to achieve such support from its shareholders, our business, results of operations and financial condition could be materially adversely affected. The networks infrastructure and related services business relies on a limited number of customers and large multi­year...

  • Page 32
    ... and related services business and may have a material adverse effect on our business, results of operations and financial condition. Customers in some markets sometimes require their suppliers, including Nokia Siemens Networks, to arrange, facilitate or provide financing in order to obtain sales or...

  • Page 33
    ... on Nokia Siemens Networks and our reputation, business, results of operations and financial condition. In addition, detecting, investigating and resolving such situations have been, and might continue to be, expensive and consume significant time, attention and resources of Nokia Siemens Networks...

  • Page 34
    ... in advancing mobile technology to enrich people's lives and helping to drive sustainability. Today, Nokia is integrating its devices with innovative services through Ovi, our Internet services brand, including music, navigation, media and messaging. Nokia's NAVTEQ is a leader in comprehensive...

  • Page 35
    ... step by Nokia and industry partners to develop Symbian operating system into an open and unified mobile software platform. Symbian Foundation, a non­profit organization, now manages the platform which has been fully open source and available royalty­free since February 2010. • As part of our...

  • Page 36
    ... 1, 2010, Nokia Siemens Networks has three business units: Business Solutions; Global Services; and Network Systems. For a breakdown of our net sales and other operating results by category of activity and geographical location, see Item 5 and Note 2 to our consolidated financial statements included...

  • Page 37
    ... will access the Internet and send an email for the first time using a mobile device rather than a PC, and it is Nokia's aim to bring consumers around the world the tools they need to do that. We currently address the needs of our customers in three categories-mobile phones, smartphones and mobile...

  • Page 38
    ...able to use their mobile device to manage their personal finances, pay for products or services, as well as add credit to their mobile account. In February 2010, Nokia commenced a commercial pilot in Pune, one of the largest metropolitan areas in India, in partnership with YES BANK. Smartphones Our...

  • Page 39
    ... with operators around the world to offer mobile billing, enabling users to add purchases made in the store directly to their mobile phone bill. For developers, Ovi Store represents an increasingly important channel through which they can make their applications and content available to Nokia users...

  • Page 40
    ... Windows Live Hotmail-directly to the user's device. By March 2010, Nokia Messaging was available in more than 100 countries, with agreements in place with more than 70 operators. • We continued to expand Comes With Music, where following the purchase of a Comes With Music­edition mobile device...

  • Page 41
    ...to our competitors, we have a substantially larger distribution and care network, particularly in China, India and the Middle East and Africa. Nokia derives its Devices & Services net sales primarily from sales to mobile network operators, distributors, independent retailers, corporate customers and...

  • Page 42
    ... actual requirements. Design and user experience At Devices & Services, we endeavor to take a human approach to designing mobile devices, services and software. Using the customer feedback, information on consumer usage patterns and other consumer data collected by us, we are focusing on creating...

  • Page 43
    ... Sourcing and Partnering In line with industry practice, Devices & Services sources components for our mobile devices from a global network of suppliers. Those components include electronic components, such as chipsets, integrated circuits, microprocessors, standard components, printed wiring boards...

  • Page 44
    ... and content from a global network of third­party companies, application developers, content providers and industry­leading technology providers. For instance, we obtain content from commercial partners in the music industry to offer an extensive catalog of digital music through Nokia Music Store...

  • Page 45
    ... user experience with their devices. Nokia believes it has a number of competitive strengths, notably in its brand as well its scale, R&D and software platforms, intellectual property and supply chain, including sourcing, production, logistics and distribution. Building on these strengths, our aim...

  • Page 46
    ... map data, location­ based services and technology platform. In December 2009, NAVTEQ's service offerings were extended by combining the Nokia Interactive Advertising business, which is focused on providing technology and services for planning, creating, executing, measuring and optimizing mobile...

  • Page 47
    ...of Nokia GPS data for availability in NAVTEQ traffic products in North America and Europe. NAVTEQ's map database enables its customers to offer dynamic navigation, route planning, location­ based services and other geographic information­based products and services to consumer and commercial users...

  • Page 48
    ...systems, Internet sites and mobile device users. In 2009, NAVTEQ also began receiving GPS data records from Nokia devices for use in NAVTEQ's traffic data products. NAVTEQ's map database is a highly accurate and detailed digital representation of road transportation networks in Europe, North America...

  • Page 49
    ..., communications and networks service platforms, as well as professional services and business solutions to operators and service providers. Nokia Siemens Networks has a broad product and services portfolio designed to address the converging mobile and fixed infrastructure markets and a global base...

  • Page 50
    ... operating expenses and production overheads of EUR 500 million by the end of 2011, compared to the end of 2009, excluding special items and purchase price accounting­related items. Nokia Siemens Networks also announced in November 2009 that as part of that effort the company is conducting a global...

  • Page 51
    ... also develops new technologies such as I­HSPA and LTE to support the uptake of mobile data services and introduce flat architecture for wireless and mobile broadband applications. The main products are base stations and base station controllers. For fixed line networks, Network Systems focuses on...

  • Page 52
    ... the company's sales force, solution sales managers, business units as well as strategy and human resources. Production Operations handles the supply chain management of all Nokia Siemens Networks' hardware, software and original equipment manufacturer (OEM) products. This includes supply planning...

  • Page 53
    ...investments in technology through adequate intellectual property rights, including patents, patent applications, design patents, trade secrets, trademark registrations and copyrights. Nokia Siemens Networks owns a significant portfolio comprising IPR that was transferred from its parent companies at...

  • Page 54
    ... benefited some of our main competitors in 2009. Nokia Siemens Networks competes with companies that have larger scale and higher margins affording them more flexibility on pricing, while some of the competitors may receive certain governmental support allowing them to offer products and services...

  • Page 55
    ...& 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 which we work and our customers do business. As a result, changes in or uncertainties related to various types of regulations applicable to...

  • Page 56
    ... track record of taking sustainability into account in all of our operations and products, and we continue to work to ensure that sustainability is reflected in the way we do business every day. Customers-Corporate Responsibility Accessibility of Nokia Devices Accessibility is about making Nokia...

  • Page 57
    ... customer, Communicate Openly, Innovate, Inspire and Win together. Every employee of Nokia Siemens Networks is responsible for adopting these principles and using them to guide their actions. The values serve as the cultural cornerstones of the company. Code of Conduct Nokia's Group Executive Board...

  • Page 58
    ... management system to help companies collect, manage, and analyze social and environmental responsibility (SER) data from their supply chain. Nokia also uses this self­assessment tool for its suppliers. At December 31, 2009, Nokia Siemens Networks had 1 822 employees working directly in production...

  • Page 59
    ...support regulatory compliance within the supply chain. One expectation for suppliers is that they have a company­level Code of Conduct in place. Codes of conduct set out requirements in several areas, such as corruption, general business routines, health and safety, human rights, working conditions...

  • Page 60
    ... data collection process in this area will continue in 2010. Nokia Siemens Networks held two workshops in 2009 for 15 suppliers in India to communicate supplier requirements, raise awareness and competence in corporate responsibility and drive improved standards further down the supply chain. Nokia...

  • Page 61
    ... effective. Nokia's mobile data­gathering technology has, for example, been used for the institution of civil registration systems essential for good governance in post­ conflict countries, as well as deployed to support humanitarian work and aid those working in the agriculture and health sectors...

  • Page 62
    .... In 2009, the four main areas continued to be: • Nokia products and services • Nokia operations • Nokia facilities • Leveraging mobile and virtual tools in the way of working and management practices There is also evidence that information and communications technology (ICT) can help reduce...

  • Page 63
    ... many new take­back programs in the Middle East and Africa and now offer a take­back service in seven additional countries in these two regions. Our take­back project in India started in four major cities and was expanded to 20 more cities and to business customers during the year. In 2009, Nokia...

  • Page 64
    ... a number of different projects in recent years. In 2009, Nokia created 35 500 MWh and Nokia Siemens Networks 3 100 MWh of new energy savings in technical building systems and both are on course to achieving the cumulative 6% energy savings target by 2012, compared to the baseline year 2006 (Nokia...

  • Page 65
    ... technology and renewable energy. Nokia Siemens Networks has deployed more than 390 sites running on renewable energy in 25 countries in Asia­Pacific, China, Europe, Middle East, Africa and Latin America. Renewable energy will be the first choice for remote base stations by 2011. Nokia Siemens...

  • Page 66
    ... of the members of its Board of Directors and, accordingly, Nokia consolidates Nokia Siemens Networks. 4D. Property, Plants and Equipment At December 31, 2009, Nokia operated ten manufacturing facilities in nine countries for the production of mobile devices, and Nokia Siemens Networks had eight...

  • Page 67
    ... years. Nokia has three operating and reportable segments: Devices & Services; NAVTEQ; and Nokia Siemens Networks. 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...

  • Page 68
    ...devices improved during the latter part of 2009 as the global economy started to show initial signs of recovery. According to our estimates, in 2009 the industry mobile device volumes, based on the definition of the industry mobile device market we used in 2009, decreased by 6% to 1.14 billion units...

  • Page 69
    ... our global market position in the high volume mobile phone business. With the product mode of operation we seek to satisfy consumers with affordable devices that embed selected services. • Our focus in the solutions mode of operation is on the complete user experience and the seamless integration...

  • Page 70
    ...to profit by promoting services adoption with us. • Distribution: Nokia has the industry's largest distribution network with over 650 000 points of sale globally. Compared to our competitors, we have a substantially larger distribution and care network, particularly in China, India and Middle East...

  • Page 71
    ... our competitors have entered the mobile device market with a high­end, vertically integrated offering supported by a large number of applications that are distributed through their proprietary application store. By focusing on this lucrative high­end, high margin segment, creating an applications...

  • Page 72
    ... employees from leading Internet services companies. We currently have over 3 000 employees in the United States working on our services offerings. Mobile Phones: Our Series 40 software platform supports Internet connectivity and is open to third­ party developers to build applications and content...

  • Page 73
    ...color screens, music players, materials and general design and aesthetic improvements continue to drive the majority of customer purchase decisions. Additional functionalities such as Internet connectivity, services and applications are also becoming important at mid­range price points. Thus, Nokia...

  • Page 74
    ... to support localized services offerings; for example, local content and local operator billing integration. Combined with our distribution capabilities, we believe this is a significant competitive differentiator in a number of markets globally. Ovi Store had over one million downloads a day...

  • Page 75
    ... to accept profit margins that are lower than those targeted by us. In the mobile phone category, we believe our competitive advantages - including our scale, brand, manufacturing and logistics, strategic sourcing and partnering, distribution, R&D and software platforms and intellectual property...

  • Page 76
    ... services, without requiring the use of GPRS or Internet connectivity. During 2009, we launched Nokia Life Tools in India and Indonesia, and we plan to introduce the service to additional emerging markets during 2010. Nokia is continuing to invest in Series 40, and we plan to bring a touch...

  • Page 77
    ... Navigable Map Data Increasing NAVTEQ net sales are also impacted by the highly competitive pricing environment. Google recently announced its decision to make turn­by­turn navigation available to its business customers and consumers on certain mobile handsets at no charge. In January 2010, Nokia...

  • Page 78
    ... and content aware service delivery, flexible service creation and management and customer and service specific communications experience. Nokia Siemens Networks' net sales depend on various developments in the mobile and fixed infrastructure market, such as network operator investments, the pricing...

  • Page 79
    ... investment. Nokia Siemens Networks has intensified and focused its investment in research and development in its network systems business and in the radio access area, particularly in 2008 and 2009, in order to offer the products and software that respond to the growing requirement of operators for...

  • Page 80
    ... its customers. The model is based on the delivery of services from three global network operations centers in Lisbon, Portugal and Chennai and Noida in India, the latter of which was opened in 2009. Increasingly, Nokia Siemens Networks is addressing opportunities in multi­vendor network management...

  • Page 81
    ... operating expenses and production overheads of EUR 500 million by the end of 2011, compared to the end of 2009, excluding special items and purchase price accounting related items. Nokia Siemens Networks also announced in November 2009 that as part of that effort, the company is conducting a global...

  • Page 82
    ... countries, including Finland and Germany. Nokia Siemens Networks plans to pursue acquisitions when assets are available and the associated purchase price of those assets provides the appropriate value. In particular, assets that enhance the scale of existing product and service business lines...

  • Page 83
    ... 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's sales have been increasingly affected by the same seasonality as mobile device sales. Nokia Siemens Networks also...

  • Page 84
    ... Policies Our accounting policies affecting our financial condition and results of operations are more fully described in Note 1 to our consolidated financial statements included in Item 18 of this annual report. Certain of our accounting policies require the application of judgment by management...

  • Page 85
    ... 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 86
    ... decreased to EUR 971 million primarily due to lower sales volumes in Devices & Services in 2009 (EUR 1 375 million in 2008). The financial impact of the assumptions regarding this provision mainly affects the cost of sales of Devices & Services segment. Provision for Intellectual Property Rights...

  • Page 87
    ... 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 88
    ... to the Nokia Siemens Networks CGU. The recoverable amounts for the Devices & Services CGU and NAVTEQ CGU are determined based on a value in use calculation. The cash flow projections employed in the value in use calculation are based on financial plans approved by management. These projections are...

  • Page 89
    ... and projected financial performance of the Nokia Siemens Networks CGU taking into consideration the challenging competitive factors and market conditions in the infrastructure and related service business. As a result of this evaluation, the Group lowered its net sales and gross margin projections...

  • Page 90
    ... consideration of public market comparable companies in similar industry sectors. Changes in these assumptions may cause the Group to recognize impairments or losses in the future periods. The financial impact of these assumptions mainly affects Devices & Services segment. Income Taxes The Group...

  • Page 91
    ... volatility. These variables make estimation of fair value of stock options difficult. Non­market vesting conditions attached to the performance shares are included in assumptions about the number of shares that the employee will ultimately receive relating to projections of sales and earnings per...

  • Page 92
    ... credit availability and currency market volatility. The following table sets forth the distribution by geographical area of our net sales for the fiscal years 2009 and 2008. Year Ended December 31, 2009 2008 Europe ...Middle East & Africa ...Greater China ...Asia­Pacific ...North America ...Latin...

  • Page 93
    ...in Devices & Services and Nokia Siemens Networks which was partially offset by a decrease in sales and marketing expenses in Devices & Services. In 2009, selling and marketing expenses included restructuring charges of EUR 12 million and EUR 401 million of purchase price accounting related items. In...

  • Page 94
    ...our definition of the industry mobile device market used in 2009 and 2008. Year Ended Year Ended December 31, December 31, Change (1) 2009 2008 to 2009 2008 (Units in millions, except percentage data) Europe ...Middle East & Africa ...Greater China ...Asia­Pacific ...North America ...Latin America...

  • Page 95
    ... competition. During 2009, based on the industry mobile device market definition we used in 2009, we estimate that Nokia gained mobile device market share in Europe and Middle East & Africa. Our device market share decreased in Asia­Pacific, Latin America and North America. Our device market share...

  • Page 96
    ... 10.7% of Devices & Services net sales compared with 8.9% in 2008. The decrease Devices & Services R&D expenses in 2009 was due to the measures taken to adjust our business operations and cost base to prevailing market conditions. In 2009, Devices & Services R&D expenses included EUR 8 million...

  • Page 97
    ... of NAVTEQ's geographic database and related location­based content. NAVTEQ's sales were negatively affected by the economic downturn primarily as a result of a decrease in overall vehicle sales in Europe and North America and consumer trend towards the purchase of lower­end car classes. The...

  • Page 98
    ... (17)% (445)% Nokia Siemens Networks' net sales in 2009 decreased 18% to EUR 12 574 million compared with EUR 15 309 million in 2008. The decrease in net sales reflected extremely challenging market conditions with significant investment restraint by our customers in line with the general economic...

  • Page 99
    ... Siemens Networks net sales by geographic area for the fiscal years 2009 and 2008. Nokia Siemens Networks Net Sales by Geographic Area Year Ended Year Ended December 31, December 31, 2009 2008 (EUR millions) Europe ...Middle East & Africa...Greater China ...Asia­Pacific...North America ...Latin...

  • Page 100
    ... price accounting related items of EUR 477 million. Nokia Siemens Networks' operating margin for 2009 was negative 13.0% compared with negative 2.0% in 2008. The increased operating loss resulted primarily from a non­tax deductible impairment of goodwill of EUR 908 million and lower net sales...

  • Page 101
    ... decreased net sales in Devices & Services. The following table sets forth the distribution by geographical area of our net sales for the fiscal years 2008 and 2007. Year Ended December 31, 2008 2007 Europe ...Middle East & Africa ...Greater China ...Asia­Pacific ...North America ...Latin America...

  • Page 102
    ... 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 103
    ... of Nokia's volume market share in the following discussion are based on our definition of the industry mobile device market used in 2008 and 2007. Year Ended Year Ended December 31, Change (%) December 31, 2008 2007 to 2008 2007 (Units in millions, except percentage data) Europe ...Middle East...

  • Page 104
    ... share decreased in Middle East & Africa, North America, Greater China and Europe. In Latin America, we estimated that 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 105
    ... in ASP. Net sales grew in Latin America. Net sales decreased in North America, Europe, Middle East & Africa, Asia­Pacific and Greater China. In 2008, services and software net sales contributed EUR 476 million of our total Device & Services net sales. Devices & Services gross profit in 2008 was...

  • Page 106
    ...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 107
    ... 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 108
    ... intangible asset amortization and other purchase price accounting related items. Nokia Siemens Networks' operating margin for 2008 was negative 2.0% compared with negative 9.8% in 2007. The decreased operating loss resulted primarily from higher net sales and lower operating expenses and the impact...

  • Page 109
    ...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 with EUR 7 205 million in 2007, representing a year­on­year decrease in net profit of 44.6% in 2008. Earnings per share in 2008 decreased to EUR...

  • Page 110
    ... 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 111
    ... used to finance the investments in research and development to Radio Access Network technology for mobile communication systems. The loan from European Investment Bank includes similar financial covenants to the EUR 2 000 million revolving credit facility. As of December 31, 2009, all financial...

  • Page 112
    .... Network operators in some markets sometimes require their suppliers, including us, to arrange, facilitate or provide long­ term financing as a condition to obtaining or bidding on infrastructure projects. In response to the tightening of the credit markets in 2009, requests for customer financing...

  • Page 113
    ... & Services and Nokia Siemens Networks. R&D expenses in 2007 were EUR 5 636 million. These expenses represented 14.4%, 11.8% and 11.0% of Nokia net sales in 2009, 2008 and 2007, respectively. In 2009, Devices & Services R&D expenses included EUR 8 million of purchase price accounting related items...

  • Page 114
    ...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 members of the Board of...

  • Page 115
    ... 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 within corporate banking 1978­1985. Vice Chairman of the Board of Directors of Otava...

  • Page 116
    ...of ICICI Ltd 1994­1996. Various leadership positions in Corporate and Retail Banking, Strategy and Resources, and International Banking in ICICI Ltd since 1971. Member of the Boards of Directors of ICICI Venture Funds Management Co Ltd (non­executive Chairman), Bharat Forge Ltd, Kirloskar Brothers...

  • Page 117
    ...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 Americas...

  • Page 118
    ...in 2010 until the close of the Annual General Meeting in 2011. The Board's Corporate Governance and Nomination Committee will propose to the Annual General Meeting that the number of Board members be ten, and that the following current Nokia Board members be re­elected as members of the Nokia Board...

  • Page 119
    ... Simonson, Chief Financial Officer until October 31, 2009, was appointed Head of Mobile Phones within Devices. Both Mr. Ihamuotila and Mr. Simonson continued as members of the Group Executive Board. ¨ kra ¨ s has been appointed Executive Vice President of Human Resources as of April 1, 2010. At...

  • Page 120
    ..., Chief Financial Officer. Group Executive Board member since 2007. With Nokia 1993­1996, rejoined 1999. Master of Science (Economics) (Helsinki School of Economics), Licentiate of Science (Finance) (Helsinki School of Economics). Executive Vice President, Sales, Markets 2008­2009, Executive Vice...

  • Page 121
    ... 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 1987­1997. Member of the Board of Directors of NAVTEQ Corporation and Nokia Siemens Networks...

  • Page 122
    ... Executive Vice President and Chief Financial Officer of Nokia Corporation 2003­2009, Vice President & Head of Customer Finance of Nokia Corporation 2001­2003, Managing Director of Telecom & Media Group of Barclays 2001, Head of Global Project Finance and other various positions at Bank of America...

  • Page 123
    Executive Vice President and General Manager of Mobile Phones 2005­2007. Senior Vice President, Business Line Management, Mobile Phones 2004­2005, Senior Vice President, Mobile Phones Business Unit, Nokia Mobile Phones 2002­2003, Vice President, TDMA/GSM 1900 Product Line, Nokia Mobile Phones ...

  • Page 124
    ... remuneration is paid in cash and the remaining 40% in Nokia shares purchased from the market. Not applicable to any non­executive member of the Board of Directors. The 2009 fee of Mr. Ollila was paid for his services as Chairman of the Board. The 2009 fee of Dame Marjorie Scardino was paid for her...

  • Page 125
    ... compete in an extremely complex and rapidly evolving mobile communications industry. We are a leading company in our industry and conduct business globally. Our executive compensation programs have been designed to attract, retain and motivate talented executive officers globally that drive Nokia...

  • Page 126
    ...to such factors as changes in the business environment or industry. 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 for the Chairman of the Personnel Committee...

  • Page 127
    ... of Nokia's success in driving increased shareholder value. Financial objectives are established that are based on a number of factors and are intended to be stretch targets that, if achieved, we believe, will result in performance that would exceed that of our key competitors in the high technology...

  • Page 128
    ....75% (a) Financial and Business Objectives (includes targets for net sales, operating profit and operating cash flow management and key business goals) (c) Total Shareholder Return(1) (comparison made with key competitors in the high technology, telecommunications and Internet services industries...

  • Page 129
    ..., tied to Nokia's financial performance, is achieved by the end of the performance period and the value is dependent on Nokia's share price. Stock options are granted to fewer employees that are in more senior and executive positions. Stock options create value for the executive officer, once vested...

  • Page 130
    ... the employment relationship terminates with Nokia prior to vesting. The settlement is conditional upon performance and/or service conditions, as determined in the relevant plan rules. For a description of our equity plans, see Note 23 to our consolidated financial statements included in Item 18 of...

  • Page 131
    ... are the current positions of the named executives. Until October 30, 2009, Mr. Ihamuotila served as Executive Vice President and Global Head of Sales. Mr. Simonson served as Executive Vice President and Chief Financial Officer until October 30, 2009. Bonus payments are part of Nokia's short­term...

  • Page 132
    ...and for mobile phone. All other compensation for Ms. McDowell in 2009 includes: EUR 12 345 for car allowance, EUR 10 996 for Financial counseling, EUR 10 280 company contributions to the 401(k) plan and EUR 105 as service award under Nokia's policy. (8) (9) (10) (11) (12) (*) None of the named...

  • Page 133
    ... Executive Board The members of the Group Executive Board participate in the local retirement programs applicable to employees in the country where they reside. Executives in Finland participate in the Finnish TyEL pension system, which provides for a retirement benefit based on years of service...

  • Page 134
    ... 31, 2009, we sponsored three global stock option plans, five global performance share plans and four global restricted share plans. Both executives and employees participate in these plans. Performance shares are the main element of the company's broad­based equity compensation program to further...

  • Page 135
    ... share grants to the other Group Executive Board members and other direct reports of the CEO are approved by the Personnel Committee. Stock Options Nokia's global stock option plans in effect for 2009, including their terms and conditions, were approved by the Annual General Meetings in the year...

  • Page 136
    ... other Group Executive Board members and other direct reports of the CEO are approved by the Personnel Committee. Other Equity Plans for Employees In addition to our global equity plans described above, we have equity plans for Nokia­acquired businesses or employees in the United States and Canada...

  • Page 137
    ... or dividend rights associated with these performance shares. Stock Options The stock options to be granted in 2010 are out of the Stock Option Plan 2007 approved by the Annual General Meeting in 2007. For more information on Stock Option Plan 2007 see "Equity­Based Compensation Programs-Stock...

  • Page 138
    ... under Nokia equity plans in case of a financial restatement caused by an act of fraud or intentional misconduct. This policy will apply to equity grants made to Group Executive Board members after January 1, 2010. 6C. Board Practices The Board of Directors The operations of the company are managed...

  • Page 139
    ... rules of the New York Stock Exchange due to a family relationship with an executive officer of a Nokia supplier of whose consolidated gross revenue from Nokia accounts for an amount that exceeds the limit provided in the New York Stock Exchange rules, but that is less than 8%. The executive member...

  • Page 140
    ... of three members of the Board who meet all applicable independence, financial literacy and other 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 Exchange. Since April 23, 2009, the Audit Committee...

  • Page 141
    ... of a minimum of three 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 Exchange. Since April 23, 2009, the Personnel Committee consists of...

  • Page 142
    ... 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 Exchange. Since April 23, 2009, the Corporate Governance and...

  • Page 143
    ... 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, the average number of personnel for 2007 is not directly comparable with the following years. Management...

  • Page 144
    ... applicable SEC rules), which represented 0.04% of our outstanding shares 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, 2009. Name Shares(1) ADSs...

  • Page 145
    ... 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, 2009. Name Shares ADSs Olli­Pekka...

  • Page 146
    ... relating to stock options held by members of the Group Executive Board as of December 31, 2009. These stock options were issued pursuant to Nokia Stock Option Plans 2003, 2005 and 2007. For a description of our stock option plans, please see Note 23 to our consolidated financial statements...

  • Page 147
    ... 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 30, 2009 of EUR 8.92. For gains realized upon exercise of stock options for the members of the Group Executive Board...

  • Page 148
    ...for the 2007 plan is 2007­2009, 2008 plan 2008­2010 and 2009 plan 2009­2011, respectively. The threshold number will vest as Nokia shares should the pre­determined threshold performance levels be met. No Nokia shares were delivered under the Performance Share Plan 2007 as Nokia's performance did...

  • Page 149
    ... the 2007 plan, on January 1, 2011; and for the 2008 plan, on January 1, 2012 and for the 2009 plan, on January 1, 2013. The intrinsic value is based on the closing market price of a Nokia share on NASDAQ OMX Helsinki as at December 30, 2009 of EUR 8.92. Mr. Andersson, left the Group Executive Board...

  • Page 150
    ... closing market price of the Nokia share on NASDAQ OMX Helsinki as at February 26, 2009 of EUR 7.72. Delivery of Nokia shares vested from the 2006 restricted share grant to all members of the Group Executive Board. Value is based on the closing market price of the Nokia share on NASDAQ OMX Helsinki...

  • Page 151
    ... for Executive Management One of the goals of our long­term equity­based incentive program is to focus executives on promoting the long­term value sustainability of the company and on building value for shareholders on a long­ term basis. In addition to granting stock options, performance shares...

  • Page 152
    ... Registered Public Accounting Firm." 8A4. Not applicable. 8A5. Not applicable. 8A6. See Note 2 to our audited consolidated financial statements included in Item 18 of this annual report for the amount of our export sales. 8A7. Litigation Intellectual Property Rights Litigation InterDigital...

  • Page 153
    ... ongoing. In January 2009, IPCom brought an infringement a claim in Dusseldorf, Germany against certain members of Nokia's Group Executive Board in their personal capacities, but not any company in the Nokia Group. The trial is set for April 27, 2010. In October 2008, Nokia filed a complaint with...

  • Page 154
    ... Related Litigation Nokia and several other mobile device manufacturers, distributors and network operators were named as defendants in a series of class action suits filed in various US jurisdictions. The actions were brought on behalf of a purported class of persons in the United States as a whole...

  • Page 155
    ...failed to disclose alleged material adverse facts about the company's true financial condition and business prospects, including specifically that: (i) the positive statements made about Nokia's new product launches were without reasonable basis given the component supply shortages and manufacturing...

  • Page 156
    ... the information currently available, our management does not believe that liabilities related to these proceedings, in the aggregate, are likely to be material to our financial condition or results of operations. 8A8. Dividend Policy See Item 3A. "Selected Financial Data-Distribution of Earnings...

  • Page 157
    ...59 12.56 12.14 12.52 12.73 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...

  • Page 158
    .... ADDITIONAL INFORMATION 10A. Share Capital Not applicable. 10B. Memorandum and Articles of Association Registration Nokia is organized under the laws of the Republic of Finland and registered under the business identity code 0112 038­9. Under our current Articles of Association, Nokia's corporate...

  • Page 159
    ... which case the unclaimed dividend will be retained by Nokia. Under Finnish law, the rights of shareholders related to shares are as stated by law and in our Articles of Association. Amendment of the Articles of Association requires a decision of the general meeting, supported by two­thirds of the...

  • Page 160
    ... the prices paid for the security in public trading during the preceding three months weighted by the volume of trade. Under the Finnish Companies Act of 2006, as amended, a shareholder whose holding exceeds nine­ tenths of the total number of shares or voting rights in Nokia has both the right and...

  • Page 161
    ... situations involving financial institutions, banks, tax­exempt entities, pension funds, US expatriates, real 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...

  • Page 162
    ... of US federal income tax at a maximum rate of 15% in respect of "qualified dividend income" received in taxable years beginning before January 1, 2011, provided that certain holding period and other requirements are met. Dividends that Nokia pays with respect to its shares and ADSs generally will...

  • Page 163
    ...birth or business ID (if applicable) and address in the country of residence. US and Finnish Tax on Sale or Other Disposition A US Holder generally will recognize taxable capital gain or loss on the sale or other disposition of ADSs in an amount equal to the difference between the US dollar value of...

  • Page 164
    ... Securities and Exchange Commission's public reference facilities at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. 10I. Subsidiary Information Not applicable. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See Note 33 to our consolidated financial statements included in...

  • Page 165
    ...In addition, for the year ended December 31, 2009, our Depositary has agreed to reimburse us USD 7 296 966 mainly for contributions towards our investor relations activities (including investor meetings and conferences and fees of investor relations service vendors) and other miscellaneous expenses...

  • Page 166
    ... our consolidated financial statements for the year ended December 31, 2009, has issued an attestation report on the effectiveness of the company's internal control over financial reporting under Auditing Standard No. 5 of the Public Company Accounting Oversight Board (United States of America...

  • Page 167
    ...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 heading "Company codes-Code of Ethics." ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES Auditor Fees and Services PricewaterhouseCoopers...

  • Page 168
    ... under the Policy, namely, audit, audit­related, tax and other services. Requests or applications to provide services that require specific approval by the Audit Committee are submitted to the Audit Committee by both the independent auditor and the Corporate Controller. At each regular meeting of...

  • Page 169
    ... require that the equity compensation plans be approved by a company's shareholders. Our corporate governance practices comply with the Finnish Corporate Governance Code approved by the boards of the Finnish Securities Market Association and NASDAQ OMX Helsinki effective as of January 1, 2009...

  • Page 170
    ... co­operate on the production of globally applicable technical specifications for a third generation mobile system. Access network: A telecommunications network between a local exchange and the subscriber station. ADSL (asymmetric digital subscriber line): A technology that enables high­speed data...

  • Page 171
    ... homes or any business environment. GPRS (General Packet Radio Services): A service that provides packet switched data, primarily for second generation GSM networks. GPS (Global Positioning System): Satellite­based positioning system that is used for reading geographical position and as a source...

  • Page 172
    ...are used for mobile communications over a cellular network. Mobile phone: A generic term for mobile devices that are based on non­programmable software platforms. Mobile phones can run applications such as email and web browsing, and can also have built­in music players, video recorders, mobile TV...

  • Page 173
    ... Access): A technology of wireless networks that operates according to the 802.16 standard of the Institute of Electrical and Electronics Engineers (IEEE). WLAN (wireless local area network): A local area network using wireless connections, such as radio, microwave or infrared links, in place...

  • Page 174
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  • Page 175
    ... on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform...

  • Page 176
    ...14,30 10 11 Operating profit ...Share of results of associated companies ...Financial income and expenses ...Profit before tax ...Tax ...Profit ...Profit attributable to equity holders of the parent ...Loss attributable to minority interests ... Earnings per share ...(for profit attributable to the...

  • Page 177
    ... Income Notes Financial Year Ended December 31 2009 2008 2007 EURm EURm EURm Profit ...Other comprehensive income Translation differences...Net investment hedge gains (losses) ...Cash flow hedges ...Available­for­sale investments ...Other increase (decrease), net ...Income tax related to...

  • Page 178
    ...Consolidated Statements of Financial Position Notes December 31 2009 2008 EURm EURm ASSETS Non­current assets Capitalized development costs ...Goodwill...Other intangible assets ...Property, plant and equipment ...Investments in associated companies Available­for­sale investments ...Deferred tax...

  • Page 179
    ... investments at fair value through profit and loss, liquid assets ...Purchase of non­current available­for­sale investments ...Purchase of shares in associated companies ...Additions to capitalized development costs ...Long­term loans made to customers ...Proceeds from repayment and sale of long...

  • Page 180
    ... comprise of: Bank and cash ...Current available­for­sale investments, cash equivalents ...15,33 1 142 4 784 5 926 1 706 3 842 5 548 2 125 4 725 6 850 The figures in the consolidated cash flow statement cannot be directly traced from the balance sheet without additional information as a result...

  • Page 181
    ..., net of tax ...Available­for­sale investments, net of tax ...Other decrease, net ...Profit ...Total comprehensive income ...Stock options exercised ...Stock options exercised related to acquisitions...Share­based compensation ...Excess tax benefit on share­based compensation ...Settlement of...

  • Page 182
    ..., net of tax ...Available­for­sale investments, net of tax ...Other decrease, net ...Profit ...Total comprehensive income ...Stock options exercised ...Stock options exercised related to acquisitions...Share­based compensation ...Excess tax benefit on share­based compensation ...Settlement of...

  • Page 183
    ... policies below. The notes to the consolidated financial statements also conform to Finnish Accounting legislation. On March 11, 2010, Nokia's Board of Directors authorized the financial statements for 2009 for issuance and filing. The Group completed the acquisition of all of the outstanding equity...

  • Page 184
    Notes to the Consolidated Financial Statements (Continued) 1. Accounting principles (Continued) • IFRIC 13, Customer Loyalty Programs addresses the accounting surrounding customer loyalty programs and whether some consideration should be allocated to free goods or services provided by a company. ...

  • Page 185
    ... of the transaction is often used. At the end of the accounting period, the unsettled balances on foreign currency assets and liabilities are valued at the rates of exchange prevailing at the year­end. Foreign exchange gains and losses arising from statement of financial position items, as well as...

  • Page 186
    ... 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 187
    ... amortized on a straight­line basis over the vesting period. The liability (or asset) recognized in the statement of financial position is pension obligation at the closing date less the fair value of plan assets, the share of unrecognized actuarial gains and losses, and past service costs. Any net...

  • Page 188
    ... in the profit and loss account on a straight­line basis over the lease terms unless another systematic approach is more representative of the pattern of the user's benefit. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard cost...

  • Page 189
    ... are fair valued by using quoted market rates, discounted cash flow analyses and other appropriate valuation models at the balance sheet date. Investments in publicly quoted equity shares are measured at fair value using exchange quoted bid prices. Other available­for­sale investments carried...

  • Page 190
    ... 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 each balance sheet date. Discounted cash flow analyses are used to value...

  • Page 191
    ... pricing models and discounted cash flow analysis using assumptions that are based on market conditions existing at each balance sheet date. The fair value changes are recognized in the income statement. Hedge accounting Cash flow hedges: Hedging of anticipated foreign currency denominated sales...

  • Page 192
    ... 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 expenses. In all cases the ineffective portion is recognized immediately in the income statement...

  • Page 193
    ...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 expenses. If a foreign currency denominated loan is used as a hedge, all foreign exchange gains and losses arising from...

  • Page 194
    ... offers three types of global equity settled share­based compensation schemes for employees: stock options, performance shares and restricted shares. Employee services received, and the corresponding increase in equity, are measured by reference to the fair value of the equity instruments as of the...

  • Page 195
    ... to the Consolidated Financial Statements (Continued) 1. Accounting principles (Continued) Dividends Dividends proposed by the Board of Directors are not recorded in the financial statements until they have been approved by the shareholders at the Annual General Meeting. Earnings per share The Group...

  • Page 196
    Notes to the Consolidated Financial Statements (Continued) 1. Accounting principles (Continued) 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, and other corresponding factors. ...

  • Page 197
    ... market volatility. Changes in assumptions and actuarial conditions may materially affect the pension obligation and future expense. See also Note 5. Share­based compensation The Group operates various types of equity settled share­based compensation schemes for employees. Fair value of stock...

  • Page 198
    ...Statements (Continued) 1. Accounting principles (Continued) volatility and expected life of the options. Non­market vesting conditions attached to performance shares are included in assumptions about the number of shares that the employee will ultimately receive relating to projections of net sales...

  • Page 199
    ... navigation devices, Internet­ based mapping applications, and government and business solutions. Nokia Siemens Networks provides mobile and fixed network solutions and related services to operators and service providers. Corporate Common Functions consists of company wide functions. The accounting...

  • Page 200
    ...) Nokia Siemens Networks EURm 12 564 10 860 919 (1 639) 32 278 11 015 2009 Profit and Loss Information Net sales to external customers Net sales to other segments ...Depreciation and amortization . Impairment ...Operating profit / (loss)(1) ...Share of results of associated companies ...Balance...

  • Page 201
    ... Consolidated Financial Statements (Continued) 2. Segment information (Continued) (1) Nokia Siemens Networks operating loss in 2009 includes a goodwill impairment loss of EUR 908 million. Corporate Common Functions operating profit in 2007 includes a non­taxable gain of EUR 1 879 million related...

  • Page 202
    ... expenses as per profit and loss account ...6 747 Share­based compensation expense includes pension and other social costs of EUR ­3 million in 2009 (EUR ­7 million in 2008 and EUR 8 million in 2007) based upon the related employee benefit charge recognized during the year. Pension expenses...

  • Page 203
    ..., was accounted for as a defined benefit plan. As of March 1, 2008 the Finnish statutory pension liability and plan related assets of Nokia and Nokia Siemens Networks were transferred to two pension insurance companies. The transfer did not affect the number of employees covered by the plan nor did...

  • Page 204
    ...are recognized in the Group's consolidated statement of financial position at December 31: 2009 EURm 2008 EURm Present value of defined benefit obligations at beginning of year ...(1 205) Foreign exchange...5 Current service cost ...(55) Interest cost ...(69) Plan participants' contributions ...(12...

  • Page 205
    ... recognized in the statement of financial position are as follows: 2009 EURm 2008 EURm Prepaid (accrued) pension costs at beginning of year ...Net income (expense) recognized in the profit and loss account ...Contributions paid ...Benefits paid ...Acquisitions ...Foreign exchange...Prepaid (accrued...

  • Page 206
    ... on sale of security appliance business of EUR 68 million impacting Devices & Services operating profit and a gain on sale of real estate in Oulu, Finland, of EUR 22 million impacting Nokia Siemens Networks operating loss. In 2009, other operating expenses includes EUR 178 million of charges related...

  • Page 207
    ... related to restructuring of a subsidiary company. In all three years presented, "Other operating income and expenses" include the costs of hedging highly probable forecasted sales and purchases (forward points of cash flow hedges). As from 2009, on the same line are included also the fair value...

  • Page 208
    ... and projected financial performance of the Nokia Siemens Networks CGU taking into consideration the challenging competitive factors and market conditions in the infrastructure and related services business. As a result of this evaluation, the Group lowered its net sales and gross margin projections...

  • Page 209
    ... 55. The impairment loss related to the closure and sale of production facilities at Bochum, Germany and is included in the Devices & Services segment. In 2008, Nokia Siemens Networks recognised an impairment loss amounting to EUR 35 million relating to the sale of its manufacturing site in Durach...

  • Page 210
    ... digital map information for automotive systems, mobile navigation devices, Internet­based mapping applications, and government and business solutions. The Group will use NAVTEQ's industry leading maps data to add context-time, place, people-to web services optimized for mobility. The total...

  • Page 211
    ...: 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 ...Non...

  • Page 212
    ... the Consolidated Financial Statements (Continued) 8. Acquisitions (Continued) 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...

  • Page 213
    ... technology ...Customer relationships ...License to use trade name and trademark ... ... - 5 - - 5 33 7 45 20 43 147 210 255 - - 5 48 53 202 470 41 11 3 55 31 19 105 20 43 147 210 785 17 20 5 53 95 690 22 27 641 Property, plant & equipment ...Deferred tax assets ...Non­current assets ...Accounts...

  • Page 214
    ... officers and the majority of the members of the Board of Directors. Accordingly, for accounting purposes, Nokia is deemed to have control and thus consolidates the results of Nokia Siemens Networks in its financial statements. The transfer of Nokia's networks business was treated as a partial sale...

  • Page 215
    Notes to the Consolidated Financial Statements (Continued) 8. Acquisitions (Continued) Operating profit, EUR million January ­ March 2007 April ­ December Total January ­ March 2006 April ­ December Total Nokia Networks ...Nokia Siemens Networks ...Total ... 78 * 78 * (1 386) (1 386) 78 (1 ...

  • Page 216
    ... Fair Value EURm Useful lives Intangible assets subject to amortization: Customer relationships ...Developed technology ...License to use trade name and trademark ...Capitalized development costs ...Other intangible assets ...Property, plant & equipment ...Deferred tax assets ...Other non­current...

  • Page 217
    ...ongoing integration of the acquired Siemens' carrier­related operations and Nokia's networks business, and management's focus on the operations and results of the combined entity, Nokia Siemens Networks. During 2007, the Group completed the acquisition of the following three companies. The purchase...

  • Page 218
    ... exchange market. During 2009, interest income has decreased significantly due to lower interest rates and interest expense has increased given higher long­term funding with higher cost. 11. Income taxes 2009 EURm 2008 EURm 2007 EURm Income tax Current tax ...Deferred tax ...Total ...Finland...

  • Page 219
    ... In 2009 this item primarily relates to Nokia Siemens Networks' losses and temporary differences for which no deferred tax was recognized. see Note 26 (4) (5) In 2008 and 2007 the change in deferred tax liability on undistributed earnings mainly related to changes to tax rates applicable to profit...

  • Page 220
    Notes to the Consolidated Financial Statements (Continued) 12. Intangible assets 2009 EURm 2008 EURm ...Disposals during the period ...Amortization for the period ...Accumulated amortization December 31 ...Net book value January 1 ...Net book value December 31 ... 1 811 27 - (8) 1 830 (1 567) - 8 (128...

  • Page 221
    Notes to the Consolidated Financial Statements (Continued) 12. Intangible assets (Continued) 2009 EURm 2008 EURm Goodwill ...5 498 (860) (32) - - 48 (741) (1 585) 2 358 3 913 Accumulated amortization December 31 ...( 2 525) Net book value January 1 ...Net book value December 31 ...3 913 2 762 F­47

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    Notes to the Consolidated Financial Statements (Continued) 13. Property, plant and equipment 2009 EURm 2008 EURm Land and water areas Acquisition cost ...acquisition cost December 31 ...Net book value January 1 ...Net book value December 31 ...Buildings and constructions Acquisition cost January 1...

  • Page 223
    Notes to the Consolidated Financial Statements (Continued) 13. Property, plant and equipment (Continued) 2009 EURm 2008 EURm Other tangible assets Acquisition cost January 1 ...Translation differences...Additions during the period ...Accumulated acquisition cost December 31 ...Accumulated ...

  • Page 224
    ... profit or sale financial cost loss assets EURm EURm EURm At December 31, 2009 Current available­for­ sale financial assets EURm Financial liabilities measured at amortised cost EURm Total carrying amounts EURm Fair value EURm Available­for­sale investments in publicly quoted equity shares...

  • Page 225
    ... profit or sale financial cost loss assets EURm EURm EURm At December 31, 2008 Current available­for­ sale financial assets EURm Financial liabilities measured at amortised cost EURm Total carrying amounts EURm Fair value EURm Available­for­sale investments in publicly quoted equity shares...

  • Page 226
    ... using non­ observable data (Level 3) EURm At December 31, 2009 Total EURm Fixed income and money­market investments carried at fair value ...Investments at fair value through profit and loss ...Available­for­sale investments in publicly quoted equity shares ...Other available­for­sale...

  • Page 227
    ... statement ...Total gains/(losses) recorded in other comprehensive income ...Purchases ...Sales ...Transfer from level 1 and 2 ...At December 31, 2009 ... 214 (30) 15 45 (2) - 242 The gains and losses from Level 3 financial instruments are included in the line other operating expenses of the profit...

  • Page 228
    ... 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 equity options sold...

  • Page 229
    Notes to the Consolidated Financial Statements (Continued) 18. Prepaid expenses and accrued income (Continued) the use in Nokia mobile devices and Nokia Siemens Networks infrastructure equipment. The financial structure of the agreement included an up­front payment of EUR 1.7 billion, which is ...

  • Page 230
    ... to the Consolidated Financial Statements (Continued) 20. Fair value and other reserves Hedging reserve, EURm Gross Tax Net Balance at December 31, 2006 ...Cash flow hedges: Net fair value gains/(losses) ...Transfer of (gains)/losses to profit and loss account as adjustment to Net Sales ...Transfer...

  • Page 231
    ... net fair value gains or losses recorded in the fair value and other reserve at December 31, 2009 on open forward foreign exchange contracts which hedge anticipated future foreign currency sales or purchases are transferred from the Hedging Reserve to the profit and loss account when the forecasted...

  • Page 232
    Notes to the Consolidated Financial Statements (Continued) 21. Translation differences Translation Net investment differences, EURm hedging, EURm Gross Tax Net Gross Tax Net Total, EURm Gross Tax Net Balance at December 31, 2006 ... (37) - (37) 41 (38) - - - - 3 4 (38) (34) Translation ...

  • Page 233
    ... rights. Under the Articles of Association of Nokia, Nokia Corporation does not have minimum or maximum share capital or a par value of a share. Authorizations Authorization to increase the share capital At the Annual General Meeting held on May 3, 2007, Nokia shareholders authorized the Board...

  • Page 234
    ...plans. Both executives and employees participate in these programs. The equity­based incentive grants are generally conditional upon continued employment as well as fulfillment of such performance, service and other conditions, as determined in the relevant plan rules. The share­based compensation...

  • Page 235
    Notes to the Consolidated Financial Statements (Continued) 23. Share­based payment (Continued) The stock option exercises are settled with newly issued Nokia shares which entitle the holder to a dividend for the financial year in which the subscription occurs. Other shareholder rights commence on ...

  • Page 236
    Notes to the Consolidated Financial Statements (Continued) 23. Share­based payment (Continued) Total stock options outstanding as at December 31, 2009(1) Number of shares Weighted average exercise price EUR(2) Weighted average share price EUR(2) Shares under option at January 1, 2007 ...Granted......

  • Page 237
    ... to the Consolidated Financial Statements (Continued) 23. Share­based payment (Continued) Nokia calculates the fair value of stock options using the Black­Scholes model. The fair value of the stock options is estimated at the grant date using the following assumptions: 2009 2008 2007 Weighted...

  • Page 238
    ... also performance shares granted 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...

  • Page 239
    ... not have any shareholder rights, such as voting or dividend rights, associated with the restricted shares. Restricted Shares Outstanding as at December 31, 2009(1) Number of Restricted Shares Weighted average grant date fair value EUR(2) Restricted Shares at January 1, 2007 ...Granted ...Forfeited...

  • Page 240
    ...Includes also restricted shares granted under other than global equity plans. For further information see "Other equity plans for employees" below. The fair value of restricted shares is estimated based on the grant date market price of the Company's share less the present value of dividends, if any...

  • Page 241
    ...Total deferred tax liabilities ...(1 303) In 2009 other temporary differences include a deferred tax liability of EUR 744 million (EUR 1 140 million in 2008) arising from purchase price allocation related to Nokia Siemens Networks and NAVTEQ. At December 31, 2009 the Group had loss carry forwards...

  • Page 242
    ... outflows related to tax provisions is inherently uncertain. In 2009, tax provisions decreased due to the positive development and outcome of various prior year items. The restructuring provision is mainly related to restructuring activities in Devices & Services and Nokia Siemens Networks segments...

  • Page 243
    ... associated expenses incurred in Nokia Siemens Networks in 2009 totaled EUR 310 million (EUR 646 million in 2008) including mainly personnel related expenses as well as expenses arising from the elimination of overlapping functions, and the realignment of product portfolio and related replacement...

  • Page 244
    ... of EUR 99 million in 2009 (EUR 197 million in 2008) are available under loan facilities negotiated mainly with Nokia Siemens Networks' customers. Availability of the amounts is dependent upon the borrower's continuing compliance with stated financial and operational covenants and compliance with...

  • Page 245
    ... standards and other technologies, Nokia has been granted a license under all Qualcomm'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...

  • Page 246
    ... the members of the Group Executive Board and Board of Directors at December 31, 2009, 2008 or 2007. 2009 EURm 2008 EURm 2007 EURm Transactions with associated companies Share of results of associated companies ...Dividend income ...Share of shareholders' equity of associated companies ...Sales to...

  • Page 247
    ... the Consolidated Financial Statements (Continued) 30. Related party transactions (Continued) Board of Directors The following table depicts the annual remuneration structure paid to the members of our Board of Directors, as resolved by the Annual General Meetings in the respective years. 2009 Gross...

  • Page 248
    Notes to the Consolidated Financial Statements (Continued) 30. Related party transactions (Continued) (9) The 2009 and 2008 fee of Mr. Siilasmaa amounted to a total of EUR 140 000, consisting of fee of 130 000 for services as a member of the Board and EUR 10 000 for services as a member of the ...

  • Page 249
    ... to cash flow statements 2009 EURm 2008 EURm 2007 EURm Adjustments for: Depreciation and amortization (Note 9) ...(Profit)/loss on sale of property, plant and equipment and available­for­sale investments ...Income taxes (Note 11) ...Share of results of associated companies (Note 14) ...Minority...

  • Page 250
    ... appoint key officers and the majority of the members of its Board of Directors, and accordingly, Nokia consolidated Nokia Siemens Networks. 33. Risk management General risk management principles Nokia has a common and systematic approach to risk management across business operations and processes...

  • Page 251
    ..., evaluate and hedge financial risks. There is a strong focus in Nokia on creating shareholder value. Treasury activities support this aim by: i) mitigating the adverse effects caused by fluctuations in the financial markets on the profitability of the underlying businesses; and ii) managing the...

  • Page 252
    ...fair value through profit and loss (net amount)(3) ... 2 674 - (494) 480 - (699) (579) 527 (122) (179) 236 (443) (1) (2) (3) The FX derivatives are used to hedge the foreign exchange risk from forecasted highly probable cash flows related to sales, purchases and business acquisition activities...

  • Page 253
    ...result of market price fluctuations in the listed equity instruments held mainly for strategic business reasons. Nokia has certain strategic minority investments in publicly listed equity shares. The fair value of the equity investments which are subject to equity price risk at December 31, 2009 was...

  • Page 254
    ...rates. Table 2 Treasury investment and debt portfolios Value­at­Risk 2009 EURm 2008 EURm At December 31 ...Average for the year ...Range for the year...Equity price risk The VaR for the Group equity investment in publicly traded companies is insignificant. (b) Credit Risk 41 33 4­52 6 10 4­25...

  • Page 255
    ... the Consolidated Financial Statements (Continued) 33. Risk management (Continued) Business Related Credit Risk The Company aims to ensure highest possible quality in accounts receivable and loans due from customers and other third parties. The Group Credit Policy, approved by Group Executive Board...

  • Page 256
    ... this investment policy approach and active management of outstanding investment 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 257
    ... Revolving Credit Facility, maturing 2012 Nokia Siemens Networks Finance B.V.: ...EUR 750 million Credit Facility, maturing 2013 USD 1 923 million Revolving Credit Facility of Nokia Corporation is used primarily for US and Euro Commercial Paper Programs back up purposes. As at year end 2009, this...

  • Page 258
    ... and USD 693 million were outstanding under these programs, respectively. Local commercial paper program and ECP program have not been used to a material degree in 2009. Nokia's international creditworthiness facilitates the efficient use of international capital and loan markets. The ratings as of...

  • Page 259
    ... ...Other non­current assets ...Current financial assets Current portion of long­term loans receivable ...Short­term loans receivable ...Investments at fair value through profit and loss ...Available­for­sale investment ...Cash ...Cash flows related to derivative financial assets net settled...

  • Page 260
    Notes to the Consolidated Financial Statements (Continued) 33. Risk management (Continued) Due between 3 and 12 months EURm Due between 3 and 5 years EURm At 31 December 2008 Due within 3 months EURm Due between 1 and 3 years EURm Due beyond 5 years EURm Non­current financial assets Long­term...

  • Page 261
    ...managed and where insurance markets offer acceptable terms and conditions. The objective is to ensure that hazard risks, whether related to physical assets (e.g. buildings) or intellectual assets (e.g. Nokia) or potential liabilities (e.g. product liability) are optimally insured taking into account...

  • Page 262
    ... certifies that 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...

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