Nokia in 2011 REVIEW BY THE BOARD OF DIRECTORS AND NOKIA ANNUAL ACCOUNTS 2011 Key data .......................................................................................................................... 2 Review by the Board of Directors 2011 .................................................................... 3 Annual Accounts 2011 Consolidated income statements, IFRS ................................................................. 20 Consolidated statements of comprehensive income, IFRS ............................... 21 Consolidated statements of fi nancial position, IFRS .......................................... 22 Consolidated statements of cash fl ows, IFRS ...................................................... 23 Consolidated statements of changes in shareholders’ equity, IFRS ................. 24 Notes to the consolidated fi nancial statements .................................................. 26 Income statements, parent company, FAS ........................................................... 72 Balance sheets, parent company, FAS ................................................................... 72 Statements of cash fl ows, parent company, FAS ................................................. 73 Notes to the fi nancial statements of the parent company ................................. 74 Nokia shares and shareholders ............................................................................... 78 Nokia Group 2007–2011, IFRS .................................................................................. 84 Calculation of key ratios ............................................................................................ 86 Signing of the Annual Accounts 2011 and proposal for distribution of profi t .................................................................. 87 Auditors’ report .......................................................................................................... 88 Additional information Critical accounting policies ...................................................................................... 90 Corporate governance statement Corporate governance .......................................................................................... 98 Board of Directors ............................................................................................... 104 Nokia Leadership Team ....................................................................................... 107 Compensation of the Board of Directors and the Nokia Leadership Team ............................................................................. 110 Auditors fees and services ..................................................................................... 132 Investor information ................................................................................................ 133 Contact information ................................................................................................. 135 NOKIA IN 2011 KEY DATA Nokia, EURm 2011 2010 Change, % Net sales 38 659 42 446 – 9 Based on fi nancial Operating profi t – 1 073 2 070 statements according Profi t before tax – 1 198 1 786 to International Profi t attributable to equity holders’ of the parent – 1 164 1 850 Financial Reporting Research and development expenses 5 612 5 863 – 4 Standards, IFRS % 2011 2010 Return on capital employed neg. 11 Net debt to equity (gearing) – 40 – 43 EUR 2011 2010 Change, % Earnings per share, basic – 0.31 0.50 Dividend per share 0.20 * 0.40 – 50 Average number of shares (1 000 shares) 3 709 947 3 708 816 * Board’s proposal Nokia businesses, EURm 2011 2010 Change, % Devices & Services Net sales 23 943 29 134 – 18 Operating profi t 884 3 540 – 75 Location & Commerce Net sales 1 091 869 26 Operating profi t – 1 526 – 663 Nokia Siemens Networks Net sales 14 041 12 661 11 Operating profi t – 300 – 686 Personnel, December 31 2011 2010 Change, % Devices & Services 49 406 58 712 – 16 Location & Commerce 6 659 7 232 – 8 Nokia Siemens Networks 73 686 66 160 11 Corporate Common Functions 299 323 – 7 Nokia Group 130 050 132 427 – 2 10 major markets, net sales; EURm 2011 2010 China 6 130 7 149 India 2 923 2 952 Brazil 1 901 1 506 Russia 1 843 1 744 Germany 1 606 2 019 Japan 1 539 730 USA 1 405 1 630 UK 996 1 470 Italy 982 1 266 Spain 907 1 313 10 major countries, personnel, December 31 2011 2010 Main currencies, India 22 279 22 734 rates at the end of China 22 165 20 668 Finland 16 970 19 841 1 EUR USD 1.3059 Brazil 11 887 10 925 GBP 0.8391 Germany 10 992 11 243 CNY 8.2723 USA 7 980 7 415 INR 69.0430 Hungary 5 198 5 931 RUB 41.7680 UK 3 237 3 859 JPY 101.70 Poland 2 541 2 122 Mexico 1 970 2 554 REVIEW BY THE BOARD OF DIRECTORS REVIEW BY THE BOARD OF DIRECTORS 2011 Before the statutory information and other disclosures of the » Symbian transition and Nokia N. During the transition to review by the Board of Directors, the Nokia Board of Directors Windows Phone as Nokia’s primary smartphone platform, notes that year was a year of transition for Nokia, and Nokia announced and started shipping various new Symbian that year is expected to continue to be a year of transi- devices and made available Symbian smartphone software tion. The Board continues to closely monitor the implementa- updates. Nokia also announced and started shipping the N, tion of the strategy as well as the execution of operational the outcome of eff orts in Nokia’s MeeGo program. activities, all with the goal of improving shareholder value. In » Location & Commerce. As a natural next step in Nokia’s the following, the Board of Directors outlines a brief summary services journey, Nokia announced in June its new of the key developments and actions in and early . Location & Commerce business, which was formed by com- » New strategy and operational structure. In February , bining NAVTEQ with Nokia’s social location services opera- Nokia outlined its new strategic direction, including changes tions from Devices & Services. The Location & Commerce in leadership and operational structure to accelerate the business develops a new class of integrated social location company’s speed of execution in a dynamic competitive products and services for consumers, as well as platform environment. In connection with the new Nokia strategy, and local commerce services for device manufacturers, ap- Nokia and Microsoft announced plans to form a partnership plication developers, Internet services providers, merchants that brings together their complementary strengths and and advertisers. expertise to create a new global mobile ecosystem. Under » Nokia Siemens Networks. Some of the main events re- the partnership, Windows Phone serves as Nokia’s primary garding Nokia Siemens Networks during include the smartphone platform. Nokia and Microsoft signed a defi ni- completion of Nokia Siemens Networks’ acquisition of tive agreement on the partnership in April . Motorola Solutions’ Networks assets, which strengthened » Changes to Nokia’s operations. Nokia announced a number of Nokia Siemens Networks’ position in key regions, particu- planned changes to Nokia’s operations during and larly North America and Japan, as well as with some of the in connection with the implementation of the new strategy world’s major service providers. Further, in November , in Nokia’s Devices & Services business and the creation of Nokia Siemens Networks announced its strategy to focus on Nokia’s new Location & Commerce business. The planned mobile broadband and services and the launch of an exten- changes include substantial personnel reductions, site and sive global restructuring program. facility closures and reconfi guration of certain facilities. » Proposal for new Chairman of the Board of Directors. The Nokia expects personnel reductions to occur in phases until current Chairman of the Board of Directors, Jorma Ollila, the end of . Nokia also launched a comprehensive social informed that he will no longer be available to serve on responsibility program for employees and communities likely the Nokia Board of Directors after the Annual General to be aff ected by the personnel reductions. Meeting . In January , the Corporate Governance » Collaboration with Accenture. In April , Nokia an- and Nomination Committee announced that it will propose nounced a strategic collaboration with Accenture resulting in the assembly meeting of the new Board of Directors in the transfer of Nokia’s Symbian-based software develop- after the Annual General Meeting on May , that Risto ment and support services to Accenture. At the same time Siilasmaa be elected as Chairman of the Board. Accenture will provide mobility software services to Nokia for future smartphones. As a result of the transaction, ap- CHANGES IN OPERATING AND REPORTABLE proximately employees transferred to Accenture. SEGMENTS » Lumia products. Eight months after the announcement of Nokia adopted its current operational structure during Nokia’s new strategic direction, at the Nokia World event in and has three businesses: Devices & Services, Location & October, Nokia demonstrated clear progress on its strategy Commerce and Nokia Siemens Networks. As of April , , by unveiling a portfolio of innovative devices, services and Nokia’s Devices & Services business includes two operating accessories, including the fi rst smartphones in its Windows and reportable segments – Smart Devices, which focuses on Phone-based Nokia Lumia range, Nokia Lumia and . smartphones, and Mobile Phones, which focuses on mass In early , Nokia added to the Lumia range and an- market