Executive SummaryExecutive Summary

• Nokia's net sales in 2003 decreased by 2% Nokia's net sales in 2003 decreased by 2% compared with 2002 and totaled EUR 29 compared with 2002 and totaled EUR 29 455 million (EUR 30 016 million in 2002). 455 million (EUR 30 016 million in 2002). Operating profit in 2003 increased by 5% Operating profit in 2003 increased by 5% and totaled EUR 5 011 million (EUR 4 780 and totaled EUR 5 011 million (EUR 4 780 million in 2002). Financial income totaled million in 2002). Financial income totaled EUR 352 million in 2003 (EUR 156 million EUR 352 million in 2003 (EUR 156 million in 2002). In 2003, Nokia continued to in 2002). In 2003, Nokia continued to invest in its worldwide research and invest in its worldwide research and development network and cooperation. At development network and cooperation. At the end of the year Nokia had 19 849 R&D the end of the year Nokia had 19 849 R&D employees, representing approximately employees, representing approximately 39% of39% of

EXECUTIVE SUMMARY EXECUTIVE SUMMARY CONTINUEDCONTINUED

• Nokia's total personnel. Nokia has R&D centers Nokia's total personnel. Nokia has R&D centers in 11 countries. Research and development in 11 countries. Research and development expenses increased by 23% (2% in 2002) and expenses increased by 23% (2% in 2002) and totaled EUR 3 760 million (EUR 3 052 million in totaled EUR 3 760 million (EUR 3 052 million in 2002), representing 12.8% of net sales (10.2% 2002), representing 12.8% of net sales (10.2% of net sales in 2002). Towards the end of 2003, of net sales in 2002). Towards the end of 2003, Nokia decided to reorganize. Nokia's now has Nokia decided to reorganize. Nokia's now has four business groups: Mobile Phones; reporting four business groups: Mobile Phones; reporting structure: Mobile Phones; Multimedia; Networks; structure: Mobile Phones; Multimedia; Networks; and Enterprise Solutions. This provides them and Enterprise Solutions. This provides them with a very good chance to make progress in with a very good chance to make progress in the mobile industry. the mobile industry.

www.nokia.com/nokia/0,8764,302,00.html

Part A: IntroductionPart A: Introduction• Chairman: Jorma OllilaChairman: Jorma Ollila• Nokia Head OfficeNokia Head Office

Keilalahdentie 2-4Keilalahdentie 2-4P.O. Box 226P.O. Box 226FIN-00045 Nokia GroupFIN-00045 Nokia GroupFinlandFinland

• End of last fiscal year: December, 2003End of last fiscal year: December, 2003• Products: Mobile Phones, Multimedia (set top Products: Mobile Phones, Multimedia (set top

boxes, home satellite systems, mobile gaming boxes, home satellite systems, mobile gaming devices) networks (wireless switching and devices) networks (wireless switching and transmission equipment used in carrier networks) transmission equipment used in carrier networks) and enterprise solutions (wireless systems for and enterprise solutions (wireless systems for businesses).businesses).

Part A: Audit ReportPart A: Audit Report

• PricewaterhouseCoopers OyPricewaterhouseCoopers OyAuthorized Public AccountantsAuthorized Public Accountants

• The report of the independent auditors states The report of the independent auditors states that they have examined the consolidated that they have examined the consolidated financial statements and that it accurately financial statements and that it accurately represents the financial standings of the represents the financial standings of the Nokia Cooperation. They have also stated Nokia Cooperation. They have also stated that the financial statements are in that the financial statements are in accordance with the Generally Accepted accordance with the Generally Accepted Accounting Principles established in the Accounting Principles established in the United States. United States.

Part A: Stock Market Part A: Stock Market InformationInformation

• Recent Stock Price: $15.42Recent Stock Price: $15.42• 12 month trading range: $12.67- $18.4512 month trading range: $12.67- $18.45• Dividends per share: .304Dividends per share: .304• Date of info: 3/26/04Date of info: 3/26/04• I would personally buy stock in Nokia. I would personally buy stock in Nokia.

They are the largest producer of mobile They are the largest producer of mobile phones (a pretty important part of the phones (a pretty important part of the world today) and they seem to of made world today) and they seem to of made some recent improvements that ought to some recent improvements that ought to help the company greatly. help the company greatly.

Part B: Industry Situation Part B: Industry Situation and Company Plansand Company Plans• Nokia has been around since the beginning of Nokia has been around since the beginning of

mobile phones. Nokia believes that “mobility mobile phones. Nokia believes that “mobility changes the way people live there lives.” That changes the way people live there lives.” That statement is not too hard to believe when you statement is not too hard to believe when you consider the fact that they have over 1.5 billion consider the fact that they have over 1.5 billion mobile phone subscriptions globally. Nokia sees mobile phone subscriptions globally. Nokia sees mobility expanding into new areas such as mobility expanding into new areas such as imaging, games, entertainment, media and imaging, games, entertainment, media and enterprises. They believe there are already new enterprises. They believe there are already new mobile devices that are bringing more business to mobile devices that are bringing more business to them. They also believe even though they are them. They also believe even though they are starting to sell other mobile devices that there are starting to sell other mobile devices that there are still many mobile phones that will be sold to still many mobile phones that will be sold to completely new users.completely new users.

Part C: Income Part C: Income StatementStatement

20032003 20022002 20012001

Gross Gross incomeincome

$29,455$29,455 30,01630,016 31,19131,191

Operating Operating incomeincome

5,0115,011 4,7804,780 3,3623,362

Net Net incomeincome

3,5923,592 3,3813,381 2,2002,200

*Amounts in millions

Income Statement Income Statement (continued)(continued)

• As you can see from the table the As you can see from the table the gross income decreases somewhat gross income decreases somewhat from 2001 to 2002 and from 2002 to from 2001 to 2002 and from 2002 to 2003.2003.

• The operating income goes up in The operating income goes up in each of the years listed.each of the years listed.

• The Net Income also rises slightly as The Net Income also rises slightly as the years go up.the years go up.

Part C: Balance SheetPart C: Balance Sheet

yearyear Assets =Assets = Liabilities Liabilities ++

Owners Owners EquityEquity

20032003 $23,920$23,920 8,7728,772 15,14815,148

20022002 23,32723,327 9,0469,046 14,28114,281

*amounts in millions

Balance Sheet continuedBalance Sheet continued

• There was an increase in both assets There was an increase in both assets and stockholders equity going from and stockholders equity going from the year 2002 to 2003. the year 2002 to 2003.

• There was a slight decrease in There was a slight decrease in liabilities.liabilities.

• The company seems to be doing The company seems to be doing relatively well.relatively well.

Part C: Statement of cash Part C: Statement of cash flowsflows

• Cash flows from Cash flows from operating operating activities (which activities (which were $5,244 in were $5,244 in 2003 and $5,814 2003 and $5,814 in 2002) were in 2002) were more than net more than net income (which income (which was $3,592 in was $3,592 in 2003 and $3,381 2003 and $3,381 in 2002). in 2002).

Part D: Accounting PoliciesPart D: Accounting Policies

• Revenue recognition: Revenue from the majority of the Revenue recognition: Revenue from the majority of the group is recognized when persuasive evidence of group is recognized when persuasive evidence of arrangement exists, delivery has occurred, the fee is arrangement exists, delivery has occurred, the fee is fixed and determinable. The remainder of revenue is fixed and determinable. The remainder of revenue is recorded under the percentage of completion method.recorded under the percentage of completion method.

• Inventory: they periodically review there inventory for Inventory: they periodically review there inventory for excess inventory, obsolescence and declines in market excess inventory, obsolescence and declines in market value below cost and record an allowance against the value below cost and record an allowance against the inventory balance for any such declines. These reviews inventory balance for any such declines. These reviews require management to estimate future demand for require management to estimate future demand for there products. Possible changes in these estimates there products. Possible changes in these estimates could result in revisions to the valuation of inventory.could result in revisions to the valuation of inventory.

Part D: Financial Analysis Part D: Financial Analysis Liquidity RatiosLiquidity Ratios

• Working Capitol: (2003 = $11,803) (2002 = $9,173)Working Capitol: (2003 = $11,803) (2002 = $9,173)• Current Ratio: (2003 = 2.4) (2002 = 2.1)Current Ratio: (2003 = 2.4) (2002 = 2.1)• Receivable Turnover: (2003 = 5.5 times) (2002 = 5.6 Receivable Turnover: (2003 = 5.5 times) (2002 = 5.6

times)times)• Average days sales uncollected: (2003 = 66.4 days) (2002 Average days sales uncollected: (2003 = 66.4 days) (2002

= 64.7 days)= 64.7 days)• Inventory turnover: (2003 = 19.19) (2002 = 18.80)Inventory turnover: (2003 = 19.19) (2002 = 18.80)• Average days inventory on hand: (2003 = 19.02 days) Average days inventory on hand: (2003 = 19.02 days)

(2002 = 19.41 days)(2002 = 19.41 days)The only really major change in any of the amounts was in the working capitol and of course the current ratio. There was an increase of $263000000 in working capitol. That to me seems like A LOT! The other amount changes are quite a lot too considering the large numbers we dealing with.

Part E: Financial Analysis Part E: Financial Analysis Profitability RatiosProfitability Ratios

• Profit Margin: (2003 = 12.19%) (2002 = 11.26%)Profit Margin: (2003 = 12.19%) (2002 = 11.26%)• Asset Turnover: ( 2003 = 1.25 times) (2002 = 1.34 Asset Turnover: ( 2003 = 1.25 times) (2002 = 1.34

times)times)• Return on Assets: (2003 = 15.2%) (2002 = 15.1%)Return on Assets: (2003 = 15.2%) (2002 = 15.1%)• Return on Equity: (2003 = 24.41%) (2002 = Return on Equity: (2003 = 24.41%) (2002 =

25.53%)25.53%)

There was no really big gains or losses in any of the above ratios. The above amounts are somewhat average for a company that size. None of the amounts really stick out.

Part E: Financial Analysis Part E: Financial Analysis Solvency RatioSolvency Ratio

• Debt to Equity: (2003 = 54.7%) Debt to Equity: (2003 = 54.7%) (2002 = 58.9%)(2002 = 58.9%)

• As you can see from the ratio, the As you can see from the ratio, the company is in relatively well company is in relatively well economic standing. Nokia is doing economic standing. Nokia is doing even better now (in 2003) that even better now (in 2003) that investors actually own more of the investors actually own more of the company than creditors. company than creditors.

Part E: Financial Analysis Part E: Financial Analysis Market Strength RatioMarket Strength Ratio

• Price/ earnings per share: (2003 = 18.25 Price/ earnings per share: (2003 = 18.25 times) (2002 = 21.34 times)times) (2002 = 21.34 times)

• Dividend Yield: (2003 = 2.2%) (2002 =1.8%)Dividend Yield: (2003 = 2.2%) (2002 =1.8%)• From the above information I can tell you From the above information I can tell you

shareholders of Nokia must expect some of shareholders of Nokia must expect some of their return to come from increases in the their return to come from increases in the price of there shares. Since the market price is price of there shares. Since the market price is between 18 and 22 times earnings investors between 18 and 22 times earnings investors are paying a kind of high price in relation to are paying a kind of high price in relation to earnings. Hopefully the company will continue earnings. Hopefully the company will continue to do well. to do well.