Nokia 2007 Annual Report Download - page 84

relative to the euro has an adverse effect on our sales and operating profit, while appreciation of
another currency relative to the euro has a positive effect, with the exception of Japanese yen, being
the only significant foreign currency in which we have more purchases than sales.
During 2007, the US dollar depreciated by approximately 9.1% against the euro (measured by the
average rate used to record transactions in foreign currency for accounting purposes for the year
compared to average rate for the previous year). During 2006 the US dollar appreciated by
approximately 0.7% and during 2005 the US dollar depreciated by approximately 1.7%. The change in
value of the US dollar had a negative impact on our operating profit in 2007 and a slight positive
impact in 2006 and slight negative impact in 2005. During 2007, the Chinese yuan depreciated by
approximately 4.2% against the euro. During 2006 the Chinese Yuan appreciated by approximately
3.3% and during 2005 the Chinese Yuan depreciated by approximately 0.8%. The change in value of
the Chinese Yuan had a negative impact on our operating profit in 2007 and 2005 and a slight
positive impact in 2006. During 2007 and 2006, the UK pound sterling appreciated by approximately
0.1% and 0.3% against the euro, respectively. During 2005, the UK pound depreciated by
approximately 0.5%. The change in value of the UK pound sterling had a slightly positive impact on
our net sales expressed in euros as well as operating profit in 2007 and 2006 and a slight negative
impact in 2005. During 2007, 2006 and 2005, the Japanese yen depreciated by approximately 10.6%,
6.0% and 1.6%, respectively against the euro. The change in value of the Japanese yen had a positive
impact on our operating profit in 2007 and a slightly positive impact in 2006 and 2005. To mitigate
the impact of changes in exchange rates on net sales, average product cost as well as operating
profit, we hedge all material transaction exposures on a gross basis.
Our balance sheet is also affected by the translation into euro for financial reporting purposes of the
shareholders’ equity of our foreign subsidiaries that are denominated in currencies other than the
euro. In general, this translation increases our shareholders’ equity when the euro depreciates, and
affects shareholders’ equity adversely when the euro appreciates against the relevant other currencies
(yearend rate to previous yearend rate).
For a discussion on the instruments used by Nokia in connection with our hedging activities, see
Note 35 to our consolidated financial statements included in Item 18 of this Form 20F. See also
“Item 3.D Risk Factors—Our sales, costs and results of operations are affected by exchange rate
fluctuations, particularly between the euro, which is our reporting currency, and the US dollar, the
Chinese yuan, the UK pound sterling and the Japanese yen as well as certain other currencies.”
5.B Liquidity and Capital Resources
At December 31, 2007, our cash and other liquid assets (bank and cash; availableforsale
investments, cash equivalents; and availableforsale investments, liquid assets) increased to
EUR 11 753 million, compared with EUR 8 537 million at December 31, 2006, primarily as a result of
increased profitability as well as a result of a decline in cash used in financial activities partly offset
with an increase in cash used in investing activities.
Cash and cash equivalents increased to EUR 6 850 million compared with EUR 3 525 million at
December 31, 2006. We hold our cash and cash equivalents predominantly in euros. Cash and cash
equivalents totaled EUR 3 058 million at December 31, 2005.
Net cash from operating activities was EUR 7 882 million in 2007 compared with EUR 4 478 million in
2006, and EUR 4 144 million in 2005. In 2007, net cash from operating activities increased primarily
due to an increase in cash generated from operations partly offset by increased amount of income
taxes paid. In 2006, net cash generated from operating activities increased primarily due to an
increase in cash generated from operations and lower income taxes paid. Taxes paid in 2006 included
tax refunds of EUR 52 million.
Net cash used in investing activities in 2007 was EUR 710 million compared with net cash from
investing activities of EUR 1 006 million in 2006, and net cash from investing activities of
EUR 1 844 million in 2005. Cash flow from investing activities in 2007 included purchases of current
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