ORGANISATIONAL STRUCTURE:

Nokia comprises four business groups: Mobile Phones; Multimedia; Enterprise Solutions andNetworks. The company also includes two horizontal groups: Customer and Market Operations and Technology Platforms. The following chart shows Nokia's organizational structure: The organizational structure at Nokia was extremely mobile and flexible. Nokia's organizational structure is horizontal and it allows for greater flexibility and speedy communication channels between different departments. The devices unit looks after the development and management of mobile devices portfolio which is targeted at all major consumer segments. The solutions department ensures that it continuously develops solutions whereby ensuring that a particular mobile device has integrated contents and personalized services and the output of these three components results into a leading mobile phone for the end user. The solutions unit works with other departments in close proximity to provide such solutions.

The services department creates and designs internet services that enhance the consumer experience when Nokia phone users interact with the web. The main areas where this unit focuses on include messaging, maps, music, and Ovi developer tools. This department also ensures that there is a consistent increase in different services as the market evolves. The other significant department is Markets which acts like a supply chain department for Nokia. The unit is also responsible for sales channels, branding and marketing activities for various products and services. The corporate development department looks for future growth opportunities and it also plans for future strategic actions that will give the company a competitive advantage against competitors. This department also provides operational supports to other core departments such as Devices, Services, Solutions and markets. Nokia Siemens Networks is a joint venture with Siemens and it provides network infrastructure which is both fixed and wireless. This division also provides communications and networks service platforms. Finally, the last major division is NAVTEQ; this unit is a provider of detailed navigational maps and digital map data automobile navigation systems, navigation systems for mobile devices, internet mapping applications and mapping

solutions to government and other businesses. NAVTEQ is an important part of Nokia's operations since it provides downloadable maps and other content that will enhance the experience of consumers who use Nokia's smart phones.

Corporate Governance: The way authority and responsibility is organized at Nokia it shows that the company is exemplary in its approach towards corporate governance. The company's strategic and significant natured decisions are made by the board. These matters might include strategic guidelines, approval of periodic plans and decisions on major divestments or investments. The company charter, article of association and Finnish Companies Act determine the roles and responsibilities of all directors and executive members. According to the auditors and company information strict guidelines are followed in terms of code of conduct and ethical behavior of each employee. Similarly the company complies with all stock market requirements of the Helsinki stock market, New York and Frankfurt stock exchanges. The company provides all necessary data to authorities at NYSE because the under the rules any firm that complies with its national laws must file any differences that exist between its national laws and the laws to be followed under NYSE. Nokia has businesses all over the world; this global presence means that assets and sales, liabilities and loans taken or completed in different parts of the world may be higher or lower in value when translated into the Euro or any home base currency. Because Nokia owns substantial assets in foreign markets therefore the company has to hedge and protect itself against the potential of currency adjustments in the negative direction. Nokia's foreign exchange policy is developed by the treasury department of the company which looks after the interests of the company such that foreign exchange exposure is minimized and shareholder value is maximized. Under the policy; transactions which are considered of material value are hedged against foreign exchange exposures as long as the hedging tool is not uneconomical i.e. the hedging cost is lower or market liquidity is favorable. The company uses derivative financial instruments such as foreign exchange options and forward foreign exchange contracts to manage hedging and reduce the exposure. The group has a policy of not hedging 2year or beyond forecasted foreign currency cash flows. Nokia operates in a highly drastic and technologically changing industry; on the consumer side the company also sees the acceptance and increasing demand for more sophisticated products therefore the company has to remain on its toes and come up with new products and services. The recent financial crisis which was coupled with economic downturn as well saw most industries and companies experiencing reduced profits or even losses. 2008 RD Expenditure 5968 RD as % of net sales 11.8 2007 5647 11.1 2006 3897 9.5 2005 3825 11.2 2004 3776 12.9

If we look at the table above we see that for the period 2004-08 the average R&D expenditure as a percentage of sales was around 11%. This explains how important the development of new products and markets are to companies like Nokia. R&D expenditure dipped slightly during 2009 by about 1% compared with 2008 figures because of the decline in sales. The reduction in total revenues during the year 2009 was because the brunt of the crisis or the lowest point of the crisis was considered to be the third and fourth quarters of 2009. The major problem faced by Nokia mobile devices sales was the fact that as macroeconomic aggregates plummeted world wide; people were laid off, disposal incomes squeezed and purchasing power declined in some regions because of currency depreciation, all these factors led to the decrease in demand for Nokia phones. Despite these tough circumstances Nokia continued to expand product development and introduced new products in the mobile device markets, new systems and networks from Nokia Siemens Partnership and navigation phones under the NAVTEQ division. Capital Structure and Liabilities Management at Nokia: The average basic number of shares during 2009 was 3.705 billion, 2008 was 3.743 billion and 2007 was 3.885 billion. The difference between diluted and basic average number of shares was negligible during all the three years stated above. About 1% of the shares were owned by Nokia Corporation during 2009. There was not much change in the capital structure during the three years apart from a buy-back and cancellation of shares that were owned by the company during 2008 and 2009 respectively. 2008 Net debt to equity % -14 Equity Ratio % 41.2 Return on Equity % 27.5 Interest-bearing liabilities 4 452 2007 -62 45.5 53.9 1 090 2006 -69 52.6 35.5 249 2005 -77 56.4 27.1 300 2004 -78 64.6 21.5 132

If we closely analyze the net debt to equity ratio for the 5 year period we see that initially in the years 04, 05 06 and even 07 the company had surplus assets over total debt. Though this situation drastically declined during 2008 as the credit crunch forced Nokia to borrow money and bridge the gap between its working capital. This factor eroded the asset base advantage the company was holding for the previous 4 years before 2008. Another important factor was that short-term borrowings rose substantially during 2008. Short-term borrowings increased from 714 million Euros in 2007 to 3,578 million Euros in 2008. The equity ratio represents the amount of assets represented or funded by the equity holders. From the table above we can see that the assets funded through equity has been on a declining run throughout the five year period. This also explains that as years have passed by liabilities have been increasing used as a way of financing assets. Many analysts believe that borrowing is a lesser expensive way of raising funds compared to equity as interest paid reduces effective tax rate; secondly creditors do not have a say in the way management runs the business; thirdly no dividends need to be paid out. On the other hand equity has its own advantages such as no

finance costs; in case of bankruptcy the claim of common shareholders is last only after other creditors have been paid out. Overall companies are suggested to find an optimum equity and liability combination by working out the WACC at different levels. 2007 was considered one of the best years in Nokia's history not only did the stock do well but the company's other major indicators were in green as well. For instance the return on equity was around 53% during 2007; that is a phenomenal return for shareholders from a company that competes in such a tough competitive environment. The return on equity declined significantly during 2008. As we see from the table that the value declined to 27.5% from 53.9% in 2007. This again explains the difficulty the company faced during 2008 in terms of low sales volumes, depressed prices and difficult financial conditions. Nokia Corporation's shares are listed on the following stock markets: NASDAQ OMX, (Helsinki), Frankfurter, and New York Stock Exchange. The company delisted its Swedish Depository Receipts (SDRs) from the Stockholm Stock Exchange. The last day of trading of these SDRs was June 1, 2007. Raising capital and loans from foreign capital markets has a number of benefits and a few disadvantages as well. In terms of the benefits; firstly by listing stocks in a market such as NYSE a company like Nokia gave itself exposure to one of the most valuable and important stock markets in the world. New York is the financial capital of the world's largest economy and having the ability to raise funds in such a market builds great reputation for a company apart from substantial capital. Similarly the SDR move into the Swedish Stock Market was a strong move as that would have strengthened the capital structure before the delisting. SDRs provide a substantial capital inflow in lieu of a stable and known cost of capital that gives the firm's financial cost structure sustainability and consistency. In terms of the disadvantages economic activities in a foreign country might impact the shareholder value of the whole group. Though this cost is offset by the point that today's financial markets are so dependent on each other that market risks are almost similar in virtually all countries and their stock markets. The important thing here is that companies like Nokia must be aware of the trade cycles and the economic cycles of the world and individual markets and there relationship between each other because that will determine the impact of raising capital in foreign markets. Impact on Market Value as a Result of Strategies in Foreign Exchange Risk, Raising Capital and Moving into New Markets: Technological firms generally have higher risk attached to their stock prices and market values therefore we expect them to do extremely well when the economy is booming and the company is able to come up with consistent and high quality products. The case of Nokia is no different the company has successfully established itself as one of the most reliable and advanced manufacturer of mobile devices. Steadily over the years Nokia has moved into new markets which have diversified the portfolio of the company hence spreading the risk over different but related markets.

Nokia's move to enter new markets has been a good way of diversifying business interests in the sense that the company has not only developed new products but it has also moved into new physical markets. Developing new products has its own advantages but moving into new geographical markets can benefit companies from the all important concept of economies of new scale. Going into new markets exposes the company to absolutely new customers hence increasing the total potential customer base of the company. Raising capital in foreign markets also impacts the market value of the company in a positive way. The company, by raising additional capital in new markets, not only increases its ability to spend money on acquisitions, development, and supply-chain but also gives credibility and higher standing to the company's share in the capital markets and makes the company a strong candidate for a better rating from agencies. ORGANIZATIONAL FORMS: Networking equipment: In the 1970s, Nokia became more involved in the telecommunications industry by developing the Nokia DX 200, a digital switch for telephone exchanges. The DX 200 became the workhorse of the network equipment division. Its modular and flexible architecture enabled it to be developed into various switching products. In 1984, development of a version of the exchange for the Nordic Mobile Telephony network was started. For a while in the 1970s, Nokia's network equipment production was separated into Telefenno, a company jointly owned by the parent corporation and by a company owned by the Finnish state. In 1987, the state sold its shares to Nokia and in 1992 the name was changed to Nokia Telecommunications. In the 1970s and 1980s, Nokia developed the Sanomalaitejrjestelm ("Message device system"), a digital, portable and encrypted text-based communications device for the Finnish Defence Forces. The current main unit used by the Defence Forces is the Sanomalaite M/90 (SANLA M/90). In 1998, Check Point established a partnership with Nokia, which bundled Check Point's Software with Nokia's computer Network Security Appliances.

Divisions: Since 1 July 2010, Nokia comprises three business groups: Mobile Solutions, Mobile Phones and Markets. The three units receive operational support from the Corporate Development Office, led by Kai istm, which is also responsible for exploring corporate strategic and future growth opportunities. On 1 April 2007, Nokia's Networks business group was combined with Siemens's carrier-related operations for fixed and mobile networks to form Nokia Siemens Networks, jointly owned by Nokia and Siemens and consolidated by Nokia. Mobile Solutions: Mobile Solutions is responsible for Nokia's portfolio of smartphones and mobile computers, including the more expensive multimedia and enterprise-class devices. The team is also responsible for a suite of internet services under the Ovi brand, with a strong focus

on maps and navigation, music,messaging and media. This unit is led by Anssi Vanjoki, along with Tero Ojanper (for Services) and Alberto Torres (for MeeGo Computers). Mobile Phones: Mobile Phones is responsible for Nokia's portfolio of affordable mobile phones, as well as a range of services that people can access with them, headed by Mary T. McDowell. This unit provides the general public with mobile voice and data products across a range of devices, including high-volume, consumer oriented mobile phones. The devices are based on GSM/EDGE, 3G/W-CDMA and CDMA cellular technologies. At the end of the year 2007, Nokia managed to sell almost 440 million mobile phones which accounted for 40% of all global mobile phones sales. In 2011, Nokia's market share in the mobile phone market had dropped to 27% (417 million phones). Anssi Vanjoki resigned a few days before Nokia World 2010 and under new leadership team Jo Harlow will look into the affairs of Smartphones portfolio. On 27 April 2011, The Register reported that Nokia was secretly developing a new operating system called Meltemi aiming at the low-end market. It was believed it would be replacing the S30 and S40 operating systems. Due to low-end market customers' demand of having smartphone features in their feature phone, the OS would have included some features exclusive to high-end smartphones. On 26 July 2012, it was announced that Nokia had abandoned the Meltemi project as a cost-cutting measure. Markets is responsible for Nokia's supply chains, sales channels, brand and marketing functions of the company, and is responsible for delivering mobile solutions and mobile phones to the market. The unit is headed by Niklas Savander. Subsidiaries: Nokia has numerous subsidiaries. The largest in terms of revenues is Navteq, a Chicago, Illinoisbased provider of digital map data and location-based content and services for automotive navigation systems, mobile navigation devices, Internet-based mapping applications, and government and business solutions. Navteq was acquired by Nokia on 1 October 2007. Navteq's map data is part of the Nokia Maps online service where users can download maps, use voiceguided navigation and other context-aware web services. Nokia Maps is part of the Ovi brand of Nokia's Internet based online services. Other notable subsidiaries include, but are not limited to Vertu, a British-based manufacturer and retailer of luxury mobile phones; Qt Software, a Norwegian-based software company, and OZ Communications, a consumer e-mail and instant messaging provider. Until 2008 Nokia was the major shareholder in Symbian Limited, a software development and licensing company that produced Symbian OS, a smartphone operating system used by Nokia and other manufacturers. In 2008 Nokia acquired Symbian Ltd and, along with a number of other companies, created the Symbian Foundation to distribute the Symbian platform royalty free and asopen source.

Nokia Siemens Networks: Nokia Siemens Networks B.V. is a multinational data networking and telecommunications equipment company headquartered in Espoo, Finland and a joint venture between Nokia (50.1%) andSiemens (49.9%). It is the world's fourth-largest telecoms equipment manufacturer measured by 2011 revenues (after Ericsson, Huawei and Alcatel-Lucent). Nokia Siemens Networks has operations in around 150 countries. The creation of Nokia Siemens Networks was announced on 19 June 2006, when Nokia and Siemens announced that they would merge their mobile and fixed-line phone network equipment businesses. The Nokia Siemens Networks brand identity was subsequently launched at the 3GSM World Congress in Barcelona in February 2007. Nokia Siemens Networks provides wireless and fixed network infrastructure, communications and networks service platforms, as well as professional services to operators and service providers. Nokia Siemens Networks focuses in GSM, EDGE, 3G/W-CDMA and WiMAX radio access networks; core networks with increasing IP and multiaccess capabilities; and services.