of Nokia Corporation

1. Annual Report ofNokia Corporation Gary Xavier Andre Chandellier ACG2021, 004

2. Executive Summary Nokia Corporation is an unsurpassed global leader in communications and networking. With locations all over the world, Nokia is growing, but at a slower pace than in the past. Nokia has high expectations for their future and continues to improve their technology. Annual Report: http://www.nokia.com/investors/reports

3. Part A. Introduction • Chief Executive Officer: • Jorma Ollila • Location of home office: • Keilalahdentie 2-4 P.O. Box 226, FIN-00045 Nokia Group Espoo, Finland • Ending date of latest fiscal year: • December 31, 2005 • Description of principle products and services: • Nokia Corporation leads the world market in mobile communication and network technology, offering a highly innovative line of cellular devices. • Main geographic area of activity: • Nokia is a global corporation currently operating in more than 120 countries around the world. 42% of 2005 came from Europe.

4. PricewaterhouseCoopers Oyserved as Nokia’s independent auditor for each of the fiscal years in the three year period ended December 31, 2005. In the opinion of PricewaterhouseCoopers Oy, the consolidated financial statement give a true and fairview and can be adopted. Nokia Corporation’s financial statement have been prepared in accordance with all rules and regulations governing the preparations of financial statement in Finland. Net income and shareholders’ equity have been reconciled to the US GAAP. Part A. Audit Report Independent Auditors:

5. Part A. Stock Market Information • Most recent stock price: • 16.04 • Twelve month range: • 14.43-18.20 • Dividend per share: • 0.37 • Date: March 31, 2006 • In my opinion Nokia stock is a steady investment and should be held for now. The current high is around 20, and the high for the year is 23- these numbers are very close and the stock is relatively established.

6. Part B. Industry Situation and Company Plans Nokia intends to invest heavily in its channel partners. Nokia Corporation is striving to achieve a device market volume exceeding 10%. According to my researcher, Nokia has been growing slowly but surely since 2004 to try to meet their financial expectation for the year 2006. By creating the Nokia Siemens network, Nokia’s future situation will be a lot higher than now. http://www.nokia.com/A4126492 http://seekingalpha.com/article/13947

7. Part C. Income Statement Multistep Income Statement 2005 2004 2003 Gross Profit 11,982 11,192 12,208 Operating Profit 4,639 4,326 4,960 Net Income 3,582 3,343 4,097 (in millions) The company had a decrease in net income from 2003 to 2004. In 2005 the net income has begun to increase again, but is still not where it was in 2003. As income increases, Nokia is putting more back into retained earnings.

8. Part C. Balance Sheet In general, the asset account decreased by 1.63 percent. The largest decrease in the equation comes from stockholders’ equity. Liabilities also decreased by about 1,700.

9. Part C. Statement of Cash Flows • Nokia shows Cash Flows operations to be greater than Net Income for the years 2005 and 2004. • Nokia Company is growing through the sale of liquid assets; proceeds from maturities and sale of investments. • The primary source of financing for Nokia is short term loans. • Over the past two years cash has increased, with a slight decrease in 2004.

10. Part D. Accounting Policies Revenue from the greater part of the group is recognized when persuasive evidence of an agreement exists, delivery has occurred, the fee is preset or determinable and collectibility is probable. The rest of the revenue is recorded by using the percentage of completion method. Nokia has provided customer financing, where there are limits, and extended payment terms. Nokia capitalizes specific development costs when it is likely that a development project will a success. These costs are systematically amortized over their useful life; two to five years. The carrying value of identifiable intangible assets, long-lived assets and goodwill is assessed annually. Topics included in the notes to the financial statement: Accounting presentation, goodwill, transactions in foreign currencies, fair valuing principles, hedge accounting, shipping and handling costs, pensions, property, plant and equipment, leases, inventories, and income taxes.

11. Part E. Financial Analysis Liquidity Ratios 20052004 Working Capital: 9,281 11,532 Current Ratio: 1.95 2.44 Receivable turnover: 4.6 4.5 Average days sales 79 81 uncollected: Working capital has significantly decreased from 2004 to 2005. The current ratio has also decreased indicating that Nokia’s liquidity is in a decline. The Receivable turnover has increased through the year 2004 to 2005 which indicates that the relative size of the A/R increased in 2005. The average days sales decreased by two days.

12. Part E. Financial Analysis Profitability Ratios 2005 2004 Profit Margin: 15.3% 38.1% Asset Turnover: 1.53 1.29 Return on Assets: 0.53 0.49 Return on Equity: 0.96 0.77 The profit margin ratio decreased significantly from 2004 to 2005 indicating that net income decreased relative to net sales. The asset turnover ratio increased, meaning that Nokia was more efficient in using assets during 2005 to generate sales. In 2005, The return on assets increased as well, therefore each dollar invested produced more of the net income than in 2004. The return on equity increased during the past year, so the stockholders are happy with their investment!

13. Part E. Financial Analysis Market Strength Ratios 2005 2004 Price/earning per share: .83 .69 Dividend Yield: 2.4% 2.8% Price/earnings per share increased since 2004 so investors are happy!

14. Part E. Financial Analysis Solvency Ratio 2005 2004 Debt to equity: .7 .5 In 2005, the debt to equity ratio increased, meaning they’ve increased Their capital structure and leverage.