Nokia in 2007
Review by the Board of Directors and
Nokia Annual Accounts 2007
Key data 2007 ........................................................................................................................................... 2
Review by the Board of Directors ...................................................................................................... 3
Annual Accounts 2007
Consolidated profit and loss accounts, IFRS ..................................................................................... 8
Consolidated balance sheets, IFRS ....................................................................................................... 9
Consolidated cash flow statements, IFRS ....................................................................................... 10
Consolidated statements of changes in shareholders’ equity, IFRS ........................................ 12
Notes to the consolidated financial statements ........................................................................... 13
Profit and loss accounts, parent company, FAS ............................................................................. 46
Balance sheets, parent company, FAS .............................................................................................. 46
Cash flow statements, parent company, FAS ................................................................................. 47
Notes to the financial statements of the parent company ........................................................ 48
Nokia shares and shareholders ......................................................................................................... 52
Nokia Group 2003–2007, IFRS ............................................................................................................. 56
Calculation of key ratios ...................................................................................................................... 58
Proposal by the Board of Directors for distribution of profit .................................................... 59
Auditors’ report ..................................................................................................................................... 60
Additional information
Critical accounting policies ................................................................................................................ 62
Group Executive Board ........................................................................................................................ 66
Board of Directors ................................................................................................................................. 68
Corporate governance ......................................................................................................................... 70
Investor information ............................................................................................................................ 86
Contact information ............................................................................................................................. 87
Key data *
Based on financial
statements according to
International Financial
Reporting Standards, IFRS
Nokia, EURm
2007
51 058
Net sales
7 985
Operating profit
Profit before taxes
8 268
Profit attributable to equity holders’ of the parent 7 205
5 647
Research and development
%
Return on capital employed
Net debt to equity (gearing)
EUR
Earnings per share, basic
Dividend per share
Average number of shares (1 000 shares)
** Board’s proposal
2007
54.3
– 61
2007
1.85
0.53 **
3 885 408
Change, %
24
45
44
67
45
2006
41 121
5 488
5 723
4 306
3 897
2006
45.8
– 68
2006
Change, %
1.06
0.43
4 062 833
75
23
2007
2006
Change, %
Business Groups, EURm
Mobile Phones
Net sales
Operating profit
Multimedia
Net sales
Operating profit
Enterprise Solutions
Net sales
Operating profit
Nokia Siemens Networks
Net sales
Operating profit
Personnel, December 31
Mobile Phones
Multimedia
Enterprise Solutions
Nokia Siemens Networks
Common Group Functions
Nokia Group
10 major markets, net sales, EURm
China
India
Germany
UK
USA
Russia
Spain
Italy
Indonesia
Brazil
25 083
5 434
10 538
2 230
2 070
267
13 393
– 1 308
2007
3 614
3 923
2 059
58 423
44 243
112 262
2007
5 898
3 684
2 641
2 574
2 124
2 012
1 830
1 792
1 754
1 257
10 major countries, personnel, December 31
2007
Finland
Germany
China
India
Brazil
Hungary
United States
Mexico
UK
Italy
23 015
13 926
12 856
11 491
8 527
6 601
5 269
3 056
2 618
2 129
1
33
34
69
101
80
Change, %
6
15
– 11
177
15
64
24 769
4 100
7 877
1 319
1 031
– 258
7 453
808
2006
3 409
3 397
2 308
21 061
38 308
68 483
2006
4 913
2 713
2 060
2 425
2 815
1 518
1 139
1 394
1 069
1 044
2006
23 894
3 887
7 191
6 494
1 960
4 947
5 127
2 764
2 317
493
* As of April 1, 2007, Nokia results include those of Nokia Siemens Networks on a fully consolidated basis. Nokia Siemens
Networks, a company jointly owned by Nokia and Siemens, is comprised of Nokia’s former Networks business group and
Siemens’ carrier-related operations for fixed and mobile networks. Accordingly, the results of the Nokia Group and Nokia
Siemens Networks for the year ended December 31, 2007 are not directly comparable with the results of the year ended
December 31, 2006. Nokia’s 2006 results included Nokia’s former Networks business group only.
Main currencies,
rates at the end of 2007
1 EUR
USD 1.4439
GBP 0.7148
SEK 9.4397
JPY 163.52
2
Nokia in 2007
Review by the Board of Directors 2007 *
Nokia’s net sales for 2007 increased 24% to EUR 51 058
million (EUR 41 121 million for 2006). Net sales of
Mobile Phones for 2007 increased 1% to EUR 25 083
million (EUR 24 769 million). Net sales of Multimedia
for 2007 increased 34% to EUR 10 538 million (EUR
7 877 million). Net sales of Enterprise Solutions for
2007 increased 101% to EUR 2 070 million (EUR 1 031
million). Net sales of Nokia Siemens Networks were
EUR 13 393 million.
In 2007, Europe accounted for 39% of Nokia’s net
sales (38% in 2006), Asia-Pacific 22% (20%), China
12% (13%), North America 5% (7%), Latin America
8% (9%), and Middle East & Africa 14% (13%). The 10
markets in which Nokia generated the greatest net
sales in 2007 were, in descending order of magnitude,
China, India, Germany, the UK, the US, Russia, Spain,
Italy, Indonesia and Brazil, together representing
approximately 50% of total net sales in 2007. In com-
parison, the 10 markets in which Nokia generated the
greatest net sales in 2006 were China, the US, India,
the UK, Germany, Russia, Italy, Spain, Indonesia and
Brazil, together representing approximately 51% of
total net sales in 2006.
Nokia’s operating profit for 2007 increased 45%
to EUR 7 985 million, including net positive special
items of EUR 858 million (operating profit of EUR 5 488
million in 2006, including net positive special items
of EUR 171 million), representing a 2007 operating
margin of 15.6% (13.3%). Operating profit in Mobile
Phones increased 33% to EUR 5 434 million (operating
profit of EUR 4 100 million in 2006), representing a
2007 operating margin of 21.7% (16.6%). Operating
profit in Multimedia increased to EUR 2 230 million
(operating profit of EUR 1 319 million in 2006), rep-
resenting a 2007 operating margin of 21.2% (16.7%).
Enterprise Solutions operating profit was EUR 267 mil-
lion (operating loss of EUR 258 million in 2006), rep-
resenting a 2007 operating margin of 12.9% (–25.0%)
Nokia Siemens Networks had an operating loss of EUR
1 308 million, including net negative special items of
EUR 1 069 million, representing an operating margin
of –9.8%.
Research and development expenses were EUR
5 647 million in 2007, up 45% from EUR 3 897 million
in 2006. The increase in research and development
spending was primarily due to the formation of Nokia
Siemens Networks, which added Siemens’ carrier-
related operations and associated research and
development expenses. Research and development
expenses for 2007 also included special items of EUR
439 million. Research and development expenses have
been higher as a percent of sales for both Nokia’s
former Networks business group and Nokia Siemens
Networks than for the Nokia Group. Research and
development costs represented 11.1% of Nokia Group
net sales in 2007, up from 9.5% in 2006. Research and
development expenses for the device business repre-
sented 6.6% of its net sales in 2007, down from 7.1% in
2006, reflecting continued efforts to gain efficiencies
in our investments. As of December 31, 2007, Nokia
employed 30 415 people in research and development,
representing approximately 27% of the group’s total
workforce, and had a strong research and develop-
ment presence in 10 countries.
In 2007, Nokia’s selling and marketing expenses
were EUR 4 380 million, up 32% from EUR 3 314 million
in 2006, reflecting increased selling and marketing
spend in all business groups to support new product
introductions and the higher level of overall Nokia net
sales. The increased selling and marketing expense
also was impacted by the formation of Nokia Siemens
Networks, which added Siemens’ carrier-related
operations and associated selling and marketing ex-
penses. Selling and marketing expenses for 2007 also
included special items of EUR 149 million. Selling and
marketing expenses have been higher as a percent
of sales for both Nokia’s former Networks business
group and Nokia Siemens Networks than for the Nokia
Group. Selling and marketing expenses for the Nokia
Group represented 8.6% of its net sales in 2007, up
from 8.1% in 2006. Selling and marketing expenses for
the device business represented 7.5% of its net sales
in 2007, down from 7.9% in 2006, reflecting continued
efforts to gain efficiencies in our investments.
Administrative and general expenses were EUR
1 180 million in 2007, compared to EUR 666 million in
2006. Administrative and general expenses were equal
to 2.3% of net sales in 2007 (1.6%). Administrative and
general expenses for 2007 also included special items
of EUR 146 million.
Operating highlights in 2007
Nokia Group
» On June 20, 2007, Nokia announced that it would
introduce a new integrated company structure
for its devices business from January 1, 2008. As
part of this reorganization, Nokia has replaced its
three reportable devices segments with an inte-
grated reportable segment, Devices & Services.
»
»
»
In August, Nokia introduced Ovi, the company’s
new Internet services brand name. Ovi will en-
able people to easily access their existing social
network, communities and content, as well as act
as a gateway to Nokia services.
As part of Ovi, Nokia announced the Nokia Music
Store and N-Gage, two services that make it easy
for people to discover, try and buy music and
games respectively, from a range of artists and
publishers, including exclusive content only avail-
able through Nokia. The Nokia Music Store went
live in the UK in November 2007 and the N-Gage
games service is expected to go live in early 2008.
In December, we announced Nokia Comes With
Music, a program that will enable people to buy
a Nokia device with access to millions of tracks
from a range of artists. Nokia Comes With Music
is expected to become commercially available in
the second half of 2008.
Group Common Functions operating profit
Mobile Phones
totaled EUR 1 362 million in 2007 (Group Common
Functions expenses totaled EUR 481 million in 2006),
including a EUR 1 879 million non-taxable gain on the
formation of Nokia Siemens Networks, EUR 75 million
real estate gains and a EUR 53 million gain on a busi-
ness transfer.
Net financial income was EUR 239 million in 2007
(EUR 207 million in 2006).
Profit before tax and minority interests was EUR
8 268 million (EUR 5 723 million in 2006). Net profit
totaled EUR 7 205 million (EUR 4 306 million). Earnings
per share increased to EUR 1.85 (basic) and EUR 1.83
(diluted), compared to EUR 1.06 (basic) and EUR 1.05
(diluted) in 2006.
Operating cash flow for the year ended December
31, 2007, was EUR 7 882 million (EUR 4 478 million in
2006) and total combined cash and other liquid assets
were EUR 11 753 million (EUR 8 537 million in 2006).
As of December 31, 2007, our net debt-to-equity ratio
(gearing) was – 61% (– 68% as of December 31, 2006).
In 2007, capital expenditure (excluding acquisitions)
amounted to EUR 715 million (EUR 650 million).
The key financial data, including the calculation
of key ratios, for the years 2007, 2006 and 2005 may be
found in the Annual Accounts.
» Mobile Phones introduced a broader entry-level
portfolio, focusing on thinner design, and adding
features such as music playing capability to many
devices.
»
»
»
»
Shipments of the slim and stylish Nokia 6300 GSM
device, announced in late 2006, began in 2007.
The Nokia 8800 Arte and Nokia 8800 Sapphire
Arte were announced, bringing 3G capabilities to
the Nokia 8800 series. The Nokia 8800 Arte began
shipping during 2007.
The Nokia 3110 Evolve, a mobile device with
bio-covers made from more than 50% renewable
material, was announced in December 2007.
There were also several announcements from
Vertu, including the Vertu Ascent Ferrari 1947
Limited Edition; The Vertu Ascent Ti collection;
the Vertu Constellation Burgundy; the Vertu
Constellation Mixed Metals; and various Vertu
Signature phones.
* As of April 1, 2007, Nokia results include those of Nokia Siemens Networks on a fully consolidated basis. Nokia Siemens Networks, a company
jointly owned by Nokia and Siemens, is comprised of Nokia’s former Networks business group and Siemens’ carrier-related operations for
fixed and mobile networks. Accordingly, the results of the Nokia Group and Nokia Siemens Networks for 2007 are not directly comparable to
results for 2006 and 2005. Nokia’s 2006 and 2005 results included Nokia’s former Networks business group only.
Review by the Board of Directors
3
Review by the Board of Directors
In addition, the following devices were announced
and began shipping during 2007:
»
»
»
»
»
»
»
»
Seven devices with functions and features
specially designed for consumers in emerging
markets: Nokia 1200, Nokia 1208, Nokia 1650,
Nokia 2505, Nokia 2630, Nokia 2660 and Nokia
2760.
The Nokia 6110 Navigator, an HSDPA device with
GPS and A-GPS.
The Nokia 6500 classic, a thin 3G phone with a
sleek design; and the Nokia 6120 classic, Nokia’s
smallest 3G device.
The Nokia 6555, the first phone with a unique
smooth-back fold design. In the US, the Nokia
6555 is exclusively available from AT&T.
The Nokia 6263 device for the US market,
complete with e-mail capability and support
for attachments, a 1.3 megapixel camera, video
recorder and music player.
A new music range including the Nokia 5610
XpressMusic and The Nokia 5310 XpressMusic.
A new fashion collection with the Nokia 7900
Prism and the Nokia 7500 Prism, featuring a
diamond-cut design with sharp angled lines,
geometric patterns and graphic light-refracting
colors.
In CDMA: the Nokia 2505, a sleek fold-style phone;
the Nokia 7088, the first CDMA model in the
popular L’Amour Collection; and the Nokia 2135, a
compact device with a contemporary design and
solid basic features.
Multimedia
» Multimedia continued to build the Nokia Nseries
sub-brand and multimedia computer product
category, and developed and brought to market
Nokia’s first Internet services, such as Nokia Maps
and the Nokia Music Store.
»
»
Key volume devices for 2007 included the Nokia
N95, Nokia’s flagship product for technology
enthusiasts, the Nokia N73 and the Nokia N70.
Important new products launched and shipping
during the year included the Nokia N95 8GB,
which follows on from the success of the original
Nokia N95 with a larger display, enhanced usage
times and 8 gigabytes memory capacity; Nokia
N81, an entertainment focused multimedia
computer, and the Nokia N82, a multimedia
computer optimized for photography, navigation
and Internet connectivity.
» Multimedia also announced and started ship-
ments of the Nokia N810 Internet Tablet with
slide-out keyboard, built-in GPS, digital audio/
video playback and WLAN capability for VoIP
calling.
4
Nokia in 2007
Enterprise Solutions
Nokia Siemens Networks
»
»
Four new Nokia Eseries business devices were
announced and started shipping: Nokia E90 Com-
municator, Nokia E61i, Nokia E65 and Nokia E51.
The four dual-mode devices, capable of utilizing
both cellular and Wi-Fi networks, are designed to
offer faster and better quality access to important
business information and processes over wireless
technologies.
The Nokia Eseries became available in the United
States through complementary channels, includ-
ing Ingram Micro and Dell.com, for businesses
and consumers.
» Nokia Call Connect for Cisco became commer-
cially available, allowing businesses to route
calls through corporate PBXs instead of cellular
networks, with the aim of realizing significant
cost savings and improved worker flexibility, col-
laboration and productivity.
» Nokia Intellisync Mobile Suite 8.0 was launched.
This comprehensive platform of wireless email,
file synchronization and application synchroniza-
tion features is designed to bring flexibility and
cost-control.
» New device management features for Nokia Intel-
lisync Mobile Suite were announced, including
wider device support, remote control, improved
theft-loss protection and hardware control.
»
»
The Nokia Intellisync Mobile Suite customer base
was expanded to include more than 40 operators
around the globe by December 31, 2007, with
more than 3.7 million user licenses signed.
Three new IP security appliances were launched:
Nokia IP290, Nokia IP690 and Nokia IP2450. The
appliances are based on a scalable new hardware
platform design aimed at offering better IT
investment protection and a greater choice of
security software applications to address emerg-
ing threats to company networks and data.
» Nokia announced collaboration with Check
Point and Intel aimed at improving enterprise
security by delivering new security appliances
that inspect network traffic in multi-gigabit en-
vironments. The Nokia IP2450 security platform
was the first product announced as part of this
collaboration.
»
»
The first Accelerated Data Path (ADP) Service
Modules were delivered, as was the latest ver-
sion of the Nokia IPSO operating system – IPSO
6.0 – aimed at allowing customers to expand the
performance of their Nokia IP Security appliances.
The new Nokia for Business Channel Program
came to market in January and more than 500
accredited partners joined during the year. In
October, Nokia announced plans to expand the
program to include operators and independent
software vendors.
»
The new company defined its values and intro-
duced ethics and integrity guidelines, as well as a
compliance program, for all its employees.
» Nokia Siemens Networks showed its commitment
to emerging markets with the expansion of R&D
capacity in Chengdu, China, and the investment of
USD 100 million to strengthen operations in India.
The company also moved its Services business
unit to India.
» Deals signed in India included a USD 500 million
network expansion contract with Idea Cellular
and a USD 900m end-to-end network expansion
with Bharti Airtel; and in China a EUR 180 million
GSM/EDGE deal with Henan MCC.
» Nokia Siemens Networks won a deal with Sprint
Nextel to become an infrastructure provider for
its 4G WiMAX network; won the first commercial
deployment for its I-HSPA solution with TerreStar;
won a trial deal with Verizon for LTE; and was
chosen together with Panasonic by NTT DoCoMo
in Japan for its super 3G (LTE) base station project.
» Nokia Siemens Networks demonstrated the
world’s first multi-user field trial in an urban
environment using LTE technology, which delivers
data rates up to 10 times the current level. Nokia
Siemens Networks also became the first company
to successfully deploy hybrid backhaul in a live
network, aimed at allowing operators to reduce
costs while boosting capacity.
»
The company signed a cooperation agreement
with Intel in IPTV; and launched a new 3G Femto
Home Access solution and then struck Femto
cooperation deals with Airvana Inc. and Thomson.
» Nokia Siemens Networks announced an energy
efficiency solution designed to lower customers’
energy consumption and operating expenses.
»
In December, Nokia Siemens Networks reached
an agreement on supplying 2G and 3G network
equipment to Zain in Saudi Arabia (the USD 935
million deal was announced on January 7, 2008.)
Acquisitions and divestments
On April 1, 2007, Nokia’s Networks business group was
combined with Siemens’ carrier-related operations
for fixed and mobile networks to form Nokia Siemens
Networks, a company jointly owned by Nokia and
Siemens and consolidated by Nokia.
On July 24, 2007, Nokia announced that it had
acquired substantially all the assets of Twango, a
provider of a comprehensive media sharing solution
for organizing and sharing photos, videos and other
personal media.
Review by the Board of Directors
On August 8, 2007, in connection with Nokia’s
announcement of introducing a licensing and mul-
tisourcing model for its chipset strategy, Nokia also
announced that it planned to deepen its collaboration
with STMicroelectronics on the licensing and supply of
integrated circuit designs and modem technologies for
3G and its evolution. This included a transfer of a part
of Nokia’s integrated circuit operations to STMicro-
electronics, the closing of which was announced on
November 5, 2007.
On September 17, 2007, Nokia announced the
acquisition of Enpocket, a global leader in mobile
advertising. The completion of the acquisition was
announced on October 8, 2007.
On October 1, 2007, Nokia and NAVTEQ Corporation
announced a definitive agreement for Nokia to acquire
NAVTEQ, a leading provider of comprehensive digital
map information for automotive navigation systems,
mobile navigation devices, Internet-based mapping
applications, and government and business solutions.
Under the terms of the agreement, Nokia agreed to
pay USD 78 in cash for each share of NAVTEQ including
outstanding options for an aggregate purchase price
of USD 8.1 billion, or approximately USD 7.7 billion net
of NAVTEQ’s existing cash balance. The acquisition has
been approved by the board of directors of each com-
pany and the shareholders of NAVTEQ and is subject
to customary closing conditions, including regulatory
approvals.
On October 23, 2007, Nokia Siemens Networks an-
nounced that it would assume control of Vivento Tech-
nical Services (VTS), a division of Deutsche Telekom’s
personnel service provider, Vivento. As part of the
deal, approximately 2 000 VTS employees transferred
to Nokia Siemens Networks in Germany.
On October 25, 2007, Nokia Siemens Networks
announced the acquisition of Atrica, which provides
a full range of Carrier Ethernet transport solutions to
service providers delivering Metro Ethernet services.
The completion of the acquisition was announced on
January 7, 2008.
On December 5, 2007, Nokia announced the
completion of the acquisition of Avvenu, a company
providing secure remote access and private sharing
technology that allows users to access and view PC
files remotely.
Personnel
The average number of employees for 2007 was
100 534 (65 324 for 2006 and 56 896 for 2005). At
December 31, 2007, Nokia employed a total of 112 262
people (68 483 people at December 31, 2006). The
increase in personnel in 2007 is primarily attributable
to the formation of Nokia Siemens Networks. The total
amount of wages and salaries paid in 2007 was EUR
4 664 million (EUR 3 457 million in 2006 and EUR 3 127
million in 2005).
Management and Board of Directors
Provisions on the amendment
of articles of association
Board of Directors and President
Pursuant to the articles of association, Nokia has a
Board of Directors composed of a minimum of seven
and a maximum of twelve members. The members of
the Board are elected at each Annual General Meeting
for a term of one year expiring at the close of the
following Annual General Meeting. The Annual General
Meeting convenes each year by June 30. A general
meeting may also dismiss a member of the Board
of Directors. The Board of Directors shall elect and
dismiss the President of Nokia.
The current members of the Board of Directors
were elected at the Annual General Meeting on May 3,
2007. On December 31, 2007, the Board consisted of
the following members: Jorma Ollila (Chair), Marjorie
Scardino (Vice Chair), Georg Ehrnrooth, Lalita D. Gupte,
Bengt Holmström, Henning Kagermann, Per Karlsson,
Olli-Pekka Kallasvuo, Keijo Suila and Vesa Vainio. Also
Daniel R. Hesse was re-elected as a Nokia Board mem-
ber in the Annual General Meeting on May 3, 2007. Due
to his resignation from the Board of Directors after
being appointed as President and CEO of Sprint Nextel
Corporation, Nokia announced on December 28, 2007,
that its Board consisted of the above-mentioned ten
members.
Information on shares and stock options held
by the members of the Board of Directors and the
President and CEO of Nokia may be found in the Annual
Accounts.
Changes in the Group Executive Board
Timo Ihamuotila was appointed as a new member of
the Group Executive Board effective April 1, 2007.
Service contracts
Olli Pekka Kallasvuo’s service contract covers his cur-
rent position as President and CEO and Chairman of
the Group Executive Board. As of December 31, 2007,
Mr. Kallasvuo’s annual total gross base salary, which is
subject to an annual review by the Board of Directors
and confirmation by the independent members of the
Board, is EUR 1 050 000. His incentive targets under
the Nokia short-term cash incentive plan are 150% of
the annual gross base salary. In case of termination by
Nokia for reasons other than cause, including a change
of control, Mr. Kallasvuo is entitled to a severance pay-
ment of up to 18 months of compensation (both the
annual total gross base salary and target incentive).
In case of termination by Mr. Kallasvuo, the notice
period is 6 months and he is entitled to a payment
for such notice period (both annual total gross base
salary and target incentive for 6 months). Mr. Kallasvuo
is subject to a 12-month non-competition obligation
after termination of the contract. Unless the contract is
terminated for cause, Mr. Kallasvuo may be entitled to
compensation during the non-competition period or a
part of it. Such compensation amounts to the annual
total gross base salary and target incentive for the
respective period during which no severance payment
is paid.
Amendment of the articles of association requires
a decision of the general meeting, supported by
two-thirds of the votes cast and two-thirds of the
shares represented at the meeting. Amendment of the
provisions of Article 13 of the articles of association
requires a resolution supported by three-quarters of
the votes cast and three-quarters of the shares repre-
sented at the meeting.
Shares and share capital
Nokia has one class of shares. Each Nokia share
entitles the holder to one vote at general meetings of
Nokia.
In 2007, Nokia’s shareholders’ equity increased
by EUR 193 904.82 as a result of the issue of 3 231 747
new shares upon exercise of stock options issued to
personnel in 2003 and 2005. Effective April 4, 2007, a
total of 169 500 000 shares held by the company were
cancelled. The cancellation of shares does not have an
effect on the amount of share capital of the company.
Neither the aforementioned issuances nor the cancel-
lation of shares had any significant effect on the rela-
tive holdings of the other shareholders of the company
nor on their voting power.
Nokia repurchased through its share repurchase
plan a total of 180.6 million shares on the Helsinki
Stock Exchange at an aggregate price of approximately
EUR 3 884 million during the period from January 26,
2007, to December 21, 2007. The price paid was based
on the market price at the time of repurchase. The
shares were repurchased to be used for the purposes
specified in the authorizations given by the Annual
General Meetings of 2006 and 2007 to the Board. The
aggregate amount of shares repurchased in 2007
represented approximately 4.6% of the total number
of shares of the company and the total voting rights.
These new holdings did not have any significant effect
on the relative holdings of the other shareholders of
the company nor on their voting power.
As announced on May 21, 2007, Nokia transferred
a total of 2.3 million Nokia shares held by it under the
Performance Share Plans and 0.9 million shares held by
it under its Restricted Share Plans as settlement under
the plans to the Plan participants, personnel of Nokia
Group. The amount of shares transferred represented
approximately 0.08% of the total number of shares of
the company and the total voting rights. The transfers
did not have a significant effect on the relative hold-
ings of the other shareholders of the company nor on
their voting power.
On December 31, 2007, Nokia and its subsidiary
companies owned 136 862 005 Nokia shares. The
shares represented approximately 3.4% of the total
number of the shares of the company and the total
voting rights. The total number of shares at December
31, 2007, was 3 982 811 957. On December 31, 2007,
Nokia’s share capital was EUR 245 896 461.96.
Review by the Board of Directors
5
Review by the Board of Directors
Information on the authorizations held by the
Board in 2007 to increase the share capital, transfer
shares and repurchase own shares as well as informa-
tion on the shareholders, stock options, dividend
yield, price per earnings ratio, share prices, market
capitalization, share turnover and average number of
shares may be found in the Annual Accounts.
Industry and Nokia outlook for
full year 2008
» Nokia continues to expect industry mobile device
volumes in 2008 to grow approximately 10%
from the approximately 1.14 billion units Nokia
estimates for 2007.
» Nokia continues to expect the device industry
to experience value growth in 2008, but expects
some decline in industry ASPs, primarily reflect-
ing the increasing impact of the emerging
markets and competitive factors in general.
» Nokia continues to target an increase in its mar-
ket share in mobile devices in 2008.
» Nokia continues to expect very slight growth for
the mobile and fixed infrastructure and related
services market in euro terms in 2008.
» Nokia and Nokia Siemens Networks continue to
target that Nokia Siemens Networks will grow
faster than the market in 2008.
completion of the acquisition is subject to custom-
ary closing conditions, including acceptance by
shareholders of Trolltech representing more than 90%
of the fully diluted share capital and the necessary
regulatory approvals.
Risk factors
Set forth below is a description of factors that may
affect our business, results of operations and share
price from time to time.
» We need to have a competitive portfolio of prod-
ucts, services and solutions that are preferred by
our current and potential customers to those of
our competitors. If we fail to achieve or maintain
a competitive portfolio, our business, market
share and results of operations may be materially
adversely affected.
» Our sales and profitability depend materially on
the continued growth of the mobile communica-
tions industry in terms of the number of new
mobile subscribers, number of existing subscrib-
ers who upgrade and/or replace their devices,
and increased usage and demand for value-
added services as well as on general economic
conditions globally and regionally. If the mobile
communications industry does not grow as we
expect or general economic conditions deterio-
rate, our business and results of operations may
be materially adversely affected.
» Nokia and Nokia Siemens Networks cost synergy
target for Nokia Siemens Networks is to achieve
substantially all of the EUR 2.0 billion of targeted
annual cost synergies by the end of 2008, as
previously announced.
»
The mobile communications industry contin-
ues to undergo significant changes and new
market segments within our industry have been
introduced and are still being introduced. Our
sales and profitability are significantly affected
by the growth and profitability of the new market
segments that we target and our ability to suc-
cessfully develop or acquire and market products,
services and solutions in those segments. If the
new market segments we target and invest in
grow less or are less profitable than expected, or
if new faster growing market segments emerge
in which we have not invested, our business,
results of operations and financial condition may
be materially adversely affected.
» Our business and results of operations, particu-
larly our profitability, may be materially adversely
affected if we are not able to successfully manage
costs related to our products, services, solutions
and operations.
»
Competition in our industry is intense. Our failure
to maintain or improve our market position or
respond successfully to changes in the competi-
tive landscape may have a material adverse effect
on our business and results of operations.
Subsequent events
On December 20, 2007, Nokia announced its decision
to transfer the Finnish statutory pension liability of
Nokia and Nokia Siemens Networks to the pension in-
surance companies Ilmarinen and Varma, respectively,
as of March 1, 2008.
On January 15, 2008, Nokia announced plans
to discontinue the production of mobile devices
in Germany and close its Bochum site by mid-2008.
Nokia plans to move the production to its other, more
cost-competitive European facilities.
On January 2, 2008, Nokia Siemens Networks an-
nounced the acquisition of the UK-based subscriber-
centric network specialist Apertio Ltd for approxi-
mately EUR 140 million. The acquisition closed on
February 11, 2008.
On January 28, 2008, Nokia and Norway-based
software provider Trolltech ASA announced that they
have entered into an agreement that Nokia will make
a public voluntary offer to acquire Trolltech. The
6
Nokia in 2007
» We must develop or otherwise acquire complex,
evolving technologies to use in our business. If
we fail to develop or otherwise acquire these
complex technologies as required by the market,
with full rights needed to use in our business, or
to protect them, or to successfully commercial-
ize such technologies as new advanced products,
services and solutions that meet customer de-
mand, or fail to do so on a timely basis, this may
have a material adverse effect on our business
and results of operations.
» Our products, services and solutions include in-
creasingly complex technologies, some of which
have been developed by us or licensed to us by
certain third parties. As a consequence, evaluat-
ing the rights related to the technologies we use
or intend to use is more and more challenging,
and we expect increasingly to face claims that we
have infringed third parties’ intellectual property
rights. The use of these technologies may also
result in increased licensing costs for us, restric-
tions on our ability to use certain technologies
in our products, services and solution offerings,
and/or costly and time-consuming litigation,
which could have a material adverse effect on our
business and results of operations.
» Our products, services and solutions include nu-
merous new Nokia and Nokia Siemens Networks
patented, standardized or proprietary technolo-
gies on which we depend. Third parties may
use without a license or unlawfully infringe our
intellectual property or commence actions seek-
ing to establish the invalidity of the intellectual
property rights of these technologies. This may
have a material adverse effect on our business
and results of operations.
»
»
Currently expected benefits and synergies from
forming Nokia Siemens Networks may not be
achieved to the extent or within the time period
that is currently anticipated or the currently
expected benefits or synergies may not be suf-
ficient to achieve the objectives for the formation
of Nokia Siemens Networks. We may also encoun-
ter costs and difficulties related to the integra-
tion of Nokia Siemens Networks which could
reduce or delay the realization of anticipated net
sales, cost savings and operational benefits.
The Siemens carrier-related operations trans-
ferred to Nokia Siemens Networks are the subject
of various ongoing criminal and other govern-
mental investigations related to whether certain
transactions and payments arranged by some
former employees of Siemens’ Com business
group were unlawful. As a result of those inves-
tigations, government authorities and others
have taken and may take further actions against
Siemens and/or its employees that may involve
and affect the assets and employees transferred
our products, services and solutions to market
successfully or in a timely way and this could
have a material adverse effect on our sales and
results of operations.
» Our sales, costs and results of operations are af-
fected by exchange rate fluctuations, particularly
between the euro, which is our reporting cur-
rency, and the US dollar, the Chinese yuan, the UK
pound sterling and the Japanese yen, as well as
certain other currencies.
»
»
»
»
»
»
Providing customer financing or extending pay-
ment terms to customers can be a competitive
requirement and could have a material adverse
effect on our results of operations and financial
condition.
Allegations of possible health risks from the
electromagnetic fields generated by base sta-
tions and mobile devices, and the lawsuits and
publicity relating to them, regardless of merit,
could have a material adverse effect on our sales,
results of operations and share price by leading
consumers to reduce their use of mobile devices,
or by leading regulatory bodies to set arbitrary
use restrictions and exposure limits, or by
causing us to allocate additional monetary and
personnel resources to these issues.
An unfavorable outcome of litigation could have
a material adverse effect on our business, results
of operations and financial condition.
If we are unable to recruit, retain and develop
appropriately skilled employees, our ability to
implement our strategies may be hampered and,
consequently, that may have a material adverse
effect on our business and results of operations.
Changes in various types of regulation and trade
policies in countries around the world could have
a material adverse effect on our business.
If we are unable to effectively and smoothly
implement the new organizational structure
effective January 1, 2008, we may experience a
material adverse effect on our business, sales
and results of operations.
Dividend
Nokia’s Board of Directors will propose a dividend of
EUR 0.53 per share for 2007.
by Siemens to Nokia Siemens Networks, or
there may be undetected additional violations
that may have occurred prior to the transfer
or violations that may have occurred after the
transfer, of such assets and employees that could
have a material adverse effect on Nokia Siemens
Networks and our reputation, business, results of
operations and financial condition.
»
Any actual or even alleged defects or other qual-
ity issues in our products, services and solutions
could materially adversely affect our sales, results
of operations, reputation and the value of the
Nokia brand.
» Our sales and results of operations could be ma-
terially adversely affected if we fail to efficiently
manage our manufacturing and logistics without
interruption, or fail to ensure that our products,
services and solutions meet our and our custom-
ers’ quality, safety, security and other require-
ments and are delivered on time and in sufficient
volumes.
» We depend on a limited number of suppliers for
the timely delivery of sufficient amounts of fully
functional components and subassemblies and
for their compliance with our supplier require-
ments, such as our and our customers’ product
quality, safety, security and other standards.
Their failure to do so could materially adversely
affect our ability to deliver our products, services
and solutions successfully and on time.
» Our operations rely on complex and centralized
information technology systems and networks.
If any system or network disruption occurs, this
could have a material adverse effect on our busi-
ness and results of operations.
»
The global networks business relies on a limited
number of customers and large multiyear con-
tracts. Unfavorable developments under such a
contract or in relation to a major customer may
adversely and materially affect our sales, results
of operations and financial position.
» Our sales derived from, and assets located in,
emerging market countries may be materially
adversely affected by economic, regulatory and
political developments in those countries or by
other countries imposing regulations against
imports to such countries. As sales from these
countries represent a significant portion of our
total sales, economic or political turmoil in these
countries could materially adversely affect our
sales and results of operations. Our investments
in emerging market countries may also be sub-
ject to other risks and uncertainties.
» We are developing a number of our new products,
services and solutions together with other com-
panies. If any of these companies were to fail to
perform as planned, we may not be able to bring
Review by the Board of Directors
Review by the Board of Directors
7
Nokia Corporation and Subsidiaries
Consolidated profit and loss accounts, IFRS
Financial year ended December 31
Notes
Net sales
Cost of sales
Gross profit
Research and development expenses
Selling and marketing expenses
Administrative and general expenses
Other income
Other expenses
Operating profit
Share of results of associated companies
Financial income and expenses
Profit before tax
Tax
Profit before minority interests
Minority interests
6
6, 7
2–9
14, 31
10
11
2007
EURm
51 058
– 33 754
17 304
– 5 647
– 4 380
– 1 180
2 312
– 424
7 985
44
239
8 268
– 1 522
6 746
459
2006
EURm
41 121
– 27 742
13 379
– 3 897
– 3 314
– 666
522
– 536
5 488
28
207
5 723
– 1 357
4 366
– 60
2005
EURm
34 191
– 22 209
11 982
– 3 825
– 2 961
– 609
285
– 233
4 639
10
322
4 971
– 1 281
3 690
– 74
Profit attributable to equity holders of the parent
7 205
4 306
3 616
Earnings per share
(for profit attributable to the equity holders of the parent)
28
Basic
Diluted
2007
EUR
1.85
1.83
2006
EUR
1.06
1.05
2005
EUR
0.83
0.83
Average number of shares (1 000 shares)
28
2007
2006
2005
Basic
Diluted
See Notes to consolidated financial statements.
3 885 408
3 932 008
4 062 833
4 086 529
4 365 547
4 371 239
8
Nokia in 2007
Nokia Corporation and Subsidiaries
Consolidated balance sheets, IFRS
December 31
ASSETS
Non-current assets
Capitalized development costs
Goodwill
Other intangible assets
Property, plant and equipment
Investments in associated companies
Available-for-sale investments
Deferred tax assets
Long-term loans receivable
Other non-current assets
Current assets
Inventories
Accounts receivable, net of allowances for doubtful accounts
(2007: EUR 332 million, 2006: EUR 212 million)
Prepaid expenses and accrued income
Current portion of long-term loans receivable
Other financial assets
Available-for-sale investments, liquid assets
Available-for-sale investments, cash equivalents
Bank and cash
Total assets
SHAREHOLDERS’ EQUITY AND LIABILITIES
Capital and reserves attributable to equity holders of the parent
Share capital
Share issue premium
Treasury shares, at cost
Translation differences
Fair value and other reserves
Reserve for invested non-restricted equity
Retained earnings
Minority interests
Total equity
Non-current liabilities
Long-term interest-bearing liabilities
Deferred tax liabilities
Other long-term liabilities
Current liabilities
Current portion of long-term loans
Short-term borrowings
Accounts payable
Accrued expenses
Provisions
Total shareholders’ equity and liabilities
See Notes to consolidated financial statements.
Notes
2007
EURm
2006
EURm
12
12
12
13
14
15
24
16, 25
17, 19
19, 35
18
35
15, 35
15, 32, 35
32, 35
21
20
23, 35
24
35
35
35
25
27
378
1 384
2 358
1 912
325
341
1 553
10
44
8 305
2 876
11 200
3 070
156
239
4 903
4 725
2 125
29 294
37 599
246
644
– 3 146
– 163
23
3 299
13 870
14 773
2 565
17 338
203
963
119
1 285
173
898
7 074
7 114
3 717
18 976
37 599
251
532
298
1 602
224
288
809
19
8
4 031
1 554
5 888
2 496
—
111
5 012
2 046
1 479
18 586
22 617
246
2 707
– 2 060
– 34
– 14
—
11 123
11 968
92
12 060
69
205
122
396
—
247
3 732
3 796
2 386
10 161
22 617
Consolidated financial statements
9
Nokia Corporation and Subsidiaries
Consolidated cash flow statements, IFRS
Financial year ended December 31
Notes
Cash flow from operating activities
Profit attributable to equity holders of the parent
Adjustments, total
Profit attributable to equity holders of the parent
before change in net working capital
Change in net working capital
Cash generated from operations
Interest received
Interest paid
Other financial income and expenses, net
Income taxes paid, net received
Net cash from operating activities
32
32
Cash flow from investing activities
Acquisition of Group companies, net of acquired cash
Purchase of current available-for-sale investments, liquid assets
Purchase of non-current available-for-sale investments
Purchase of shares in associated companies
Additions to capitalized development costs
Long-term loans made to customers
Proceeds from repayment and sale of long-term loans receivable
Recovery of impaired long-term loans made to customers
Proceeds from (+) /payment of (–) other long-term receivables
Proceeds from (+) /payment of (–) short-term loans receivable
Capital expenditures
Proceeds from disposal of shares in Group companies,
net of disposed cash
Proceeds from disposal of shares in associated companies
Proceeds from disposal of businesses
Proceeds from maturities and sale of current available-for-sale
investments, liquid assets
Proceeds from sale of current available-for-sale investments
Proceeds from sale of non-current available-for-sale investments
Proceeds from sale of fixed assets
Dividends received
2007
EURm
7 205
1 269
8 474
605
9 079
362
– 59
– 43
– 1 457
7 882
253
– 4 798
– 126
– 25
– 157
– 261
163
—
5
– 119
– 715
—
6
—
2006
EURm
4 306
1 857
6 163
– 793
5 370
235
– 18
54
– 1 163
4 478
– 517
– 3 219
– 88
– 15
– 127
– 11
56
276
– 3
199
– 650
—
1
—
2005
EURm
3 616
1 774
5 390
– 366
5 024
353
– 26
47
– 1 254
4 144
– 92
– 7 277
– 89
– 16
– 153
– 56
—
—
14
182
– 607
5
18
95
4 930
5 058
9 402
—
50
72
12
—
17
29
—
247
3
167
1
Net cash from (used in) investing activities
– 710
1 006
1 844
Cash flow from financing activities
Proceeds from stock option exercises
Purchase of treasury shares
Proceeds from long-term borrowings
Repayment of long-term borrowings
Proceeds from (+) /repayment of (–) short-term borrowings
Dividends paid
Net cash used in financing activities
Foreign exchange adjustment
Net increase (+) /decrease (–) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
987
– 3 819
115
– 16
661
– 1 760
– 3 832
– 15
3 325
3 525
6 850
46
– 3 371
56
– 7
– 137
– 1 553
– 4 966
– 51
467
3 058
3 525
2
– 4 258
5
—
212
– 1 531
– 5 570
183
601
2 457
3 058
10
Nokia in 2007
Nokia Corporation and Subsidiaries
Consolidated cash flow statements, IFRS (continued)
Financial year ended December 31
Notes
Cash and cash equivalents comprise of:
Bank and cash
Current available-for-sale investments,
cash equivalents
15, 35
The figures in the consolidated cash flow statement cannot be directly traced from
the balance sheet without additional information as a result of acquisitions and dis-
posals of subsidiaries and net foreign exchange differences arising on consolidation.
See Notes to consolidated financial statements.
2007
EURm
2 125
4 725
6 850
2006
EURm
1 479
2 046
3 525
2005
EURm
1 565
1 493
3 058
Consolidated financial statements
11
Nokia Corporation and Subsidiaries
Consolidated statements of changes in shareholders’ equity, IFRS
EURm
Number of
shares (1 000’s)
Share
capital premium
Share
issue Treasury
shares
Fair value
Translation and other
reserves
differences
Reserve for
invested
non-restrict
equity
Before
Retained minority Minority
interests
interests
earnings
Total
Balance at December 31, 2004
4 486 941
280
2 366
– 2 022
– 126
13
—
13 874
14 385
168 14 553
Tax benefit on stock options exercised
Translation differences
Net investment hedge losses
Cash flow hedges, net of tax
Available-for-sale investments, net of tax
Other decrease, net
Profit
Total recognized income and expense
—
125
Stock options exercised
Stock options exercised related to acquisitions
Share-based compensation 1
Acquisition of treasury shares
Reissuance of treasury shares
– 315 174
484
Cancellation of treasury shares
Dividend
Total of other equity movements
Balance at December 31, 2005
– 14
– 14
266
4 172 376
Tax benefit on stock options exercised
Excess tax benefit on share-based compensation
Translation differences
Net investment hedge gains, net of tax
Cash flow hedges, net of tax
Available-for-sale investments, net of tax
Other decrease, net
Profit
Total recognized income and expense
Stock options exercised
Stock options exercised related to acquisitions
Share-based compensation 1
Settlement of performance
3 046
—
0
– 2
– 2
2
– 1
79
14
406
– 211
– 132
– 57
—
195
– 189
—
– 4 268
10
2 664
94
2 458
– 1 594
– 3 616
—
69
—
– 176
—
—
– 141
38
171
– 9
—
– 103
162
—
– 55
3 616
3 561
– 2 664
– 1 463
– 4 127
13 308
– 52
4 306
4 254
23
14
37
43
– 1
219
– 69
and restricted shares
Acquisition of treasury shares
Reissuance of treasury shares
Cancellation of treasury shares
Dividend
Acquisition of minority interests
Total of other equity movements
Balance at December 31, 2006
2 236
– 212 340
412
38
– 3 413
4
4 927
– 20
20
3 965 730
– 20
246
Excess tax benefit on share-based compensation
Translation differences
Net investment hedge gains, net of tax
Cash flow hedges, net of tax
Available-for-sale investments, net of tax
Other decrease, net
Profit
Total recognized income and expense
Stock options exercised
Stock options exercised related to acquisitions
Share-based compensation
Settlement of performance
57 269
and restricted shares
Acquisition of treasury shares
Reissuance of treasury shares
3 138
– 180 590
403
Cancellation of treasury shares
Share premium reduction and transfer
1 556
– 2 060
212
2 707
128
—
– 34
– 167
38
—
– 14
– 11
48
—
0
128
46
– 3
228
– 104
– 2 358
—
– 129
37
58
– 3 884
7
2 733
– 4 927
– 1 512
– 6 439
11 123
—
– 40
7 205
7 165
—
932
9
2 358
– 2 733
– 1 685
Dividend
Minority interest on formation of Nokia Siemens Networks
Total of other equity movements
Balance at December 31, 2007
3 845 950
0
246
– 2 191
644
– 1 086
– 3 146
—
– 163
—
23
3 299
3 299
– 4 418
13 870
– 2
406
– 211
– 132
– 57
– 55
3 616
3 565
2
– 1
79
– 4 268
10
—
– 1 463
– 5 641
12 309
23
14
– 141
38
171
– 9
– 52
4 306
4 350
43
– 1
219
– 31
– 3 413
4
—
– 1 512
—
– 4 691
11 968
128
– 167
38
– 11
48
– 40
7 205
7 201
978
– 3
228
– 37
– 3 884
7
—
—
– 1 685
—
– 4 396
14 773
31
1
74
106
– 2
437
– 211
– 132
– 57
– 54
3 690
3 671
2
– 1
79
– 4 268
10
—
– 69 – 1 532
– 69 – 5 710
205 12 514
– 13
– 1
60
46
23
14
– 154
38
171
– 9
– 53
4 366
4 396
43
– 1
219
– 31
– 3 413
4
—
– 40 – 1 552
– 119
– 119
– 159 – 4 850
92 12 060
16
– 459
– 443
128
– 151
38
– 11
48
– 40
6 746
6 758
978
– 3
228
– 37
– 3 884
7
—
—
– 75 – 1 760
2 991
2 991
2 916 – 1 480
2 565 17 338
1
In 2005 and 2006, share-based compensation is shown net of deferred compensation recorded related
to social security costs on share-based payments.
Dividends declared per share were EUR 0.53 for 2007 (EUR 0.43 for 2006 and EUR 0.37 for 2005), subject to
shareholders’ approval.
12
Nokia in 2007
Notes to the consolidated financial statements
1. Accounting principles
Basis of presentation
The consolidated financial statements of Nokia
Corporation (“Nokia” or “the Group”), a Finnish public
limited liability company with domicile in Helsinki, in
the Republic of Finland, are prepared in accordance
with International Financial Reporting Standards as
issued by the International Accounting Standards
Board (“IASB”) and in conformity with IFRS as adopted
by the European Union (“IFRS”). The consolidated
financial statements are presented in millions of euros
(“EURm”), except as noted, and are prepared under
the historical cost convention, except as disclosed
in the accounting policies below. The notes to the
consolidated financial statements also conform with
Finnish Accounting legislation. On March 19, 2008,
Nokia’s Board of Directors authorized the financial
statements for issuance and filing.
As described in Note 8 the Group and Siemens AG
(“Siemens”) completed a transaction to form Nokia
Siemens Networks on April 1, 2007. Nokia and Siemens
contributed to Nokia Siemens Networks certain
tangible and intangible assets and certain business in-
terests that comprised Nokia’s networks business and
Siemens’ carrier-related operations. This transaction
had a material impact on the consolidated financial
statements and associated notes.
Adoption of pronouncements under IFRS
In the current year, the Group has adopted all of the
new and revised standards, amendments and inter-
pretations to existing standards issued by the IASB
that are relevant to its operations and effective for
accounting periods commencing on or after January 1,
2007.
»
»
»
»
IFRS 7 Financial Instruments: Disclosures. The
impact of the new standard has been to expand
the disclosures provided in the financial state-
ments regarding the Group’s financial instru-
ments. The Group’s financial instruments include
available-for-sale investments, derivatives, loans
receivable and payable and accounts receivable
and payable.
IFRIC 8, Scope of IFRS 2 requires consideration
of transactions involving the issuance of equity
instruments where the identifiable consideration
received is less than the fair value of the equity
instruments issued to establish whether or not
they fall within the scope of IFRS 2.
IFRIC 9, Reassessment of Embedded Derivatives
requires an entity to assess whether an embed-
ded derivative is required to be separated from
the host contract and accounted for as a deriva-
tive when the entity first becomes a party to the
contract.
IAS 1 (Amendment), Presentation of Financial
Statements: Capital Disclosures requires qualita-
tive and quantitative disclosures to enable users
to evaluate an entity’s objectives, policies and
processes for managing capital.
The adoption of each of the above mentioned stan-
dards did not have a material impact to the Group’s
balance sheet, profit and loss or cash flows.
Principles of consolidation
The consolidated financial statements include
the accounts of Nokia’s parent company (“Parent
Company”), and each of those companies over which
the Group exercises control. Control over an entity
is presumed to exist when the Group owns, directly
or indirectly through subsidiaries, over 50% of the
voting rights of the entity, the Group has the power
to govern the operating and financial policies of the
entity through agreement or the Group has the power
to appoint or remove the majority of the members of
the board of the entity. The Group’s share of profits
and losses of associated companies is included in the
consolidated profit and loss account in accordance
with the equity method of accounting. An associated
company is an entity over which the Group exercises
significant influence. Significant influence is generally
presumed to exist when the Group owns, directly or
indirectly through subsidiaries, over 20% of the voting
rights of the company.
All inter-company transactions are eliminated as
part of the consolidation process. Minority interests
are presented separately in arriving at the net profit
and they are shown as a component of shareholders’
equity in the consolidated balance sheet.
Profits realized in connection with the sale
of fixed assets between the Group and associated
companies are eliminated in proportion to share
ownership. Such profits are deducted from the Group’s
equity and fixed assets and released in the Group
accounts over the same period as depreciation is
charged.
The companies acquired during the financial
periods presented have been consolidated from the
date on which control of the net assets and operations
was transferred to the Group. Similarly the result of a
Group company divested during an accounting period
is included in the Group accounts only to the date of
disposal.
Business combinations
The purchase method of accounting is used to account
for acquisitions of businesses by the Group. The cost
of an acquisition is measured as the aggregate of the
fair values at the date of exchange of the assets given,
liabilities assumed or incurred, equity instruments is-
sued and costs directly attributable to the acquisition.
Identifiable assets, liabilities and contingent liabilities
acquired or assumed by the Group are measured sepa-
rately at their fair value as of the acquisition date. The
excess of the cost of the acquisition over the Group’s
interest in the fair value of the identifiable net assets
acquired is recorded as goodwill.
Notes to the consolidated financial statements
Assessment of the recoverability of long-lived
and intangible assets and goodwill
For the purposes of impairment testing, goodwill is al-
located to cash-generating units that are expected to
benefit from the synergies of the acquisition in which
the goodwill arose.
The Group assesses the carrying value of goodwill
annually, or more frequently if events or changes in
circumstances indicate that such carrying value may
not be recoverable. The Group assesses the carrying
value of identifiable intangible assets and long-lived
assets if events or changes in circumstances indicate
that such carrying value may not be recoverable.
Factors that trigger an impairment review include
underperformance relative to historical or projected
future results, significant changes in the manner of
the use of the acquired assets or the strategy for the
overall business and significant negative industry or
economic trends.
The Group conducts its impairment testing by
determining the recoverable amount for the asset or
cash-generating unit. The recoverable amount of an
asset or a cash-generating unit is the higher of its
fair value less costs to sell and its value in use. The
recoverable amount is then compared to its carrying
amount and an impairment loss is recognized if the
recoverable amount is less than the carrying amount.
Impairment losses are recognized immediately in the
profit and loss account.
Foreign currency translation
Functional and presentation currency
The financial statements of all Group entities are
measured using the currency of the primary economic
environment in which the entity operates (functional
currency). The consolidated financial statements are
presented in Euro, which is the functional and presen-
tation currency of the Parent Company.
Transactions in foreign currencies
Transactions in foreign currencies are recorded at
the rates of exchange prevailing at the dates of the
individual transactions. For practical reasons, a rate
that approximates the actual rate at the date of the
transaction is often used. At the end of the account-
ing period, the unsettled balances on non-functional
foreign currency receivables and liabilities are valued
at the rates of exchange prevailing at the year-end.
Foreign exchange gains and losses arising from bal-
ance sheet items, as well as fair value changes in the
related hedging instruments, are reported in Financial
Income and Expenses.
Foreign Group companies
In the consolidated accounts all income and expenses
of foreign subsidiaries are translated into Euro at
the average foreign exchange rates for the account-
ing period. All assets and liabilities of foreign Group
companies are translated into Euro at the year-end
foreign exchange rates with the exception of goodwill
arising on the acquisition of foreign companies prior
Notes to the consolidated financial statements
13
Notes to the consolidated financial statements
to the adoption of IAS 21 (revised 2004) on January 1,
2005, which is translated to Euro at historical rates.
Differences resulting from the translation of income
and expenses at the average rate and assets and
liabilities at the closing rate are treated as an adjust-
ment affecting consolidated shareholders’ equity. On
the disposal of all or part of a foreign Group company
by sale, liquidation, repayment of share capital or
abandonment, the cumulative amount or proportion-
ate share of the translation difference is recognized as
income or as expense in the same period in which the
gain or loss on disposal is recognized.
Revenue recognition
Sales from the majority of the Group are recognized
when the significant risks and rewards of ownership
have transferred to the buyer, continuing managerial
involvement usually associated with ownership and
effective control have ceased, the amount of revenue
can be measured reliably, it is probable that economic
benefits associated with the transaction will flow to
the Group and the costs incurred or to be incurred in
respect of the transaction can be measured reliably.
An immaterial part of the revenue from products sold
through distribution channels is recognized when the
reseller or distributor sells the products to the end
users. The Group records reductions to revenue for
special pricing agreements, price protection and other
volume based discounts. Service revenue is generally
recognized on a straight line basis over the service pe-
riod unless there is evidence that some other method
better represents the stage of completion.
The Group enters into transactions involving
multiple components consisting of any combination of
hardware, services and software. The commercial ef-
fect of each separately identifiable component of the
transaction is evaluated in order to reflect the sub-
stance of the transaction. The consideration received
from these transactions is allocated to each separately
identifiable component based on the relative fair
value of each component. The Group determines the
fair value of each component by taking into consider-
ation factors such as the price when the component
or a similar component is sold separately by the
Group or a third party. The consideration allocated to
each component is recognized as revenue when the
revenue recognition criteria for that component have
been met. If the Group is unable to reliably determine
the fair value attributable to separately identifiable
undelivered components, the Group defers revenue
until the revenue recognition criteria for the undeliv-
ered components have been met.
In addition, sales and cost of sales from contracts
involving solutions achieved through modification
of complex telecommunications equipment are rec-
ognized using the percentage of completion method
when the outcome of the contract can be estimated
reliably. A contract’s outcome can be estimated
reliably when total contract revenue and the costs to
complete the contract can be estimated reliably, it is
probable that the economic benefits associated with
the contract will flow to the Group and the stage of
14
Nokia in 2007
contract completion can be measured reliably. When
the Group is not able to meet those conditions, the
policy is to recognize revenue only equal to costs
incurred to date, to the extent that such costs are
expected to be recovered.
Progress towards completion is measured by
reference to cost incurred to date as a percentage of
estimated total project costs using the cost-to-cost
method.
The percentage of completion method relies
on estimates of total expected contract revenue
and costs, as well as dependable measurement of
the progress made towards completing a particular
project. Recognized revenues and profits are subject
to revisions during the project in the event that the
assumptions regarding the overall project outcome
are revised. The cumulative impact of a revision in
estimates is recorded in the period such revisions
become likely and estimable. Losses on projects in
progress are recognized in the period they become
probable and estimable.
Shipping and handling costs
The costs of shipping and distributing products are
included in cost of sales.
Research and development
Research and development costs are expensed as
they are incurred, except for certain development
costs, which are capitalized when it is probable that
a development project will generate future economic
benefits, and certain criteria, including commercial
and technological feasibility, have been met. Capital-
ized development costs, comprising direct labor and
related overhead, are amortized on a systematic basis
over their expected useful lives between two and five
years.
Capitalized development costs are subject to
regular assessments of recoverability based on
anticipated future revenues, including the impact
of changes in technology. Unamortized capitalized
development costs determined to be in excess of their
recoverable amounts are expensed immediately.
Other intangible assets
Acquired patents, trademarks, licenses, software
licenses for internal use, customer relationships and
developed technology are capitalized and amortized
using the straight-line method over their useful lives,
generally 3 to 6 years, but not exceeding 20 years.
Where an indication of impairment exists, the carry-
ing amount of any intangible asset is assessed and
written down to its recoverable amount.
Pensions
The Group companies have various pension schemes
in accordance with the local conditions and practices
in the countries in which they operate. The schemes
are generally funded through payments to insurance
companies or to trustee-administered funds as deter-
mined by periodic actuarial calculations.
The Group’s contributions to defined contribution
plans and to multi-employer and insured plans are
recognized in the profit and loss account in the period
to which the contributions relate.
For defined benefit plans, pension costs are
assessed using the projected unit credit method:
The pension cost is recognized in the profit and loss
account so as to spread the service cost over the
service lives of employees. The pension obligation is
measured as the present value of the estimated future
cash outflows using interest rates on high quality cor-
porate bonds with appropriate maturities. Actuarial
gains and losses outside the corridor are recognized
over the average remaining service lives of employees.
The corridor is defined as ten percent of the greater of
the value of plan assets or defined benefit obligation
at the beginning of the respective year.
Past service costs are recognized immediately in
income, unless the changes to the pension plan are
conditional on the employees remaining in service
for a specified period of time (the vesting period). In
this case, the past service costs are amortized on a
straight-line basis over the vesting period.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation is recorded
on a straight-line basis over the expected useful lives
of the assets as follows:
Buildings and constructions
20–33 years
Production machinery,
measuring and test equipment
1–3 years
Other machinery and equipment
3–10 years
Land and water areas are not depreciated.
Maintenance, repairs and renewals are generally
charged to expense during the financial period in
which they are incurred. However, major renovations
are capitalized and included in the carrying amount
of the asset when it is probable that future economic
benefits in excess of the originally assessed standard
of performance of the existing asset will flow to the
Group. Major renovations are depreciated over the
remaining useful life of the related asset. Leasehold
improvements are depreciated over the shorter of the
lease term or useful life.
Gains and losses on the disposal of fixed assets
are included in operating profit/loss.
Leases
The Group has entered into various operating leases,
the payments under which are treated as rentals
and recognized in the profit and loss account on a
straight-line basis over the lease terms.
Inventories
Inventories are stated at the lower of cost or net
realizable value. Cost is determined using standard
cost, which approximates actual cost on a FIFO basis.
Net realizable value is the amount that can be realized
from the sale of the inventory in the normal course of
business after allowing for the costs of realization.
In addition to the cost of materials and direct
labor, an appropriate proportion of production over-
head is included in the inventory values.
An allowance is recorded for excess inventory
and obsolescence based on the lower of cost or net
realizable value.
Financial assets
The Group has classified its financial assets as one of
the following categories: available-for-sale invest-
ments, loans and receivables, bank and cash and
financial assets at fair value through profit or loss.
Available-for-sale investments
The Group classifies the following investments as
available for sale based on the purpose for acquiring
the investments as well as ongoing intentions: (1)
highly liquid, interest-bearing investments with ma-
turities at acquisition of less than 3 months, which are
classified in the balance sheet as current available-for-
sale investments, cash equivalents, (2) similar types of
investments as in category (1), but with maturities at
acquisition of longer than 3 months, classified in the
balance sheet as current available-for-sale invest-
ments, liquid assets, (3) investments in technology
related publicly quoted equity shares, or unlisted
private equity shares and unlisted funds, classified in
the balance sheet as non-current available-for-sale
investments.
Current fixed income and money-market invest-
ments are fair valued by using quoted market rates,
discounted cash flow analyses and other appropriate
valuation models at the balance sheet date. Invest-
ments in publicly quoted equity shares are measured
at fair value using exchange quoted bid prices. Other
available-for-sale investments carried at fair value in-
clude holdings in unlisted shares. Fair value for these
unlisted shares is estimated by using various factors,
including, but not limited to: (1) the current market
value of similar instruments, (2) prices established
from a recent arm’s length financing transaction of
the target companies, (3) analysis of market prospects
and operating performance of the target companies
taking into consideration of public market comparable
companies in similar industry sectors. The remaining
available-for-sale investments are carried at cost less
impairment, which are technology related invest-
ments in private equity shares and unlisted funds for
which the fair value cannot be measured reliably due
to non-existence of public markets or reliable valua-
tion methods, against which to value these assets. The
investment and disposal decisions on these invest-
ments are business driven.
All purchases and sales of investments are
recorded on the trade date, which is the date that the
Group commits to purchase or sell the asset.
The fair value changes of available-for-sale
investments are recognized in fair value and other
reserves as part of shareholders’ equity, with the
exception of interest calculated using effective inter-
est method and foreign exchange gains and losses
on monetary assets, which are recognized directly in
profit and loss. Dividends on available-for-sale equity
instruments are recognized in profit and loss when
the Group’s right to receive payment is established.
When the investment is disposed of, the related
accumulated fair value changes are released from
shareholders’ equity and recognized in the profit and
loss account. The weighted average method is used
when determining the cost-basis of publicly listed
equities being disposed of. FIFO (First-in First-out)
method is used to determine the cost basis of fixed
income securities being disposed of. An impairment is
recorded when the carrying amount of an available-
for-sale investment is greater than the estimated fair
value and there is objective evidence that the asset
is impaired. The cumulative net loss relating to that
investment is removed from equity and recognized
in the profit and loss account for the period. If, in a
subsequent period, the fair value of the investment in
a non-equity instrument increases and the increase
can be objectively related to an event occurring after
the loss was recognized, the loss is reversed, with the
amount of the reversal included in the profit and loss
account.
Loans receivable
Loans receivable include loans to customers and
suppliers and are measured at amortized cost using
the effective interest method less impairment. Loans
are subject to regular and thorough review as to
their collectibility and as to available collateral; in the
event that any loan is deemed not fully recoverable,
a provision is made to reflect the shortfall between
the carrying amount and the present value of the ex-
pected cash flows. Interest income on loans receivable
is recognized by applying the effective interest rate.
The long term portion of loans receivable is included
in the balance sheet under long-term loans receivable
and the current portion under current portion of long-
term loans receivable.
Bank and cash
Bank and cash consist of cash at bank and in hand.
Accounts receivable
Accounts receivable are carried at the original amount
invoiced to customers, which is considered to be fair
value, less allowances for doubtful accounts based
on a periodic review of all outstanding amounts
Notes to the consolidated financial statements
including an analysis of historical bad debt, customer
concentrations, customer creditworthiness, current
economic trends and changes in our customer pay-
ment terms. Bad debts are written off when identified.
Financial liabilities
Loans payable
Loans payable are recognized initially at fair value, net
of transaction costs incurred. Any difference between
the fair value and the proceeds received is recognized
in profit and loss at initial recognition. In the subse-
quent periods, they are stated at amortized cost using
the effective interest method. The long term portion
of loans payable is included in the balance sheet under
long-term interest-bearing liabilities and the current
portion under current portion of long-term loans.
Accounts payable
Accounts payable are carried at the original invoiced
amount, which is considered to be fair value due to
the short-term nature.
Derivative financial instruments
All derivatives are recorded at fair value according
to the same principles but the accounting treatment
varies according to whether the derivatives are desig-
nated and qualify under hedge accounting.
Derivatives not designated in hedge accounting
relationships carried at fair value through profit
and loss
Fair values of forward rate agreements, interest
rate options, futures contracts and exchange traded
options are calculated based on quoted market rates
at each balance sheet date. Discounted cash flow
analyses are used to value interest rate and currency
swaps. Changes in the fair value of these contracts are
recognized in the profit and loss account.
Fair values of cash settled equity derivatives
are calculated by revaluing the contract at year end
quoted market rates. Changes in fair value are recog-
nized in the profit and loss account.
Forward foreign exchange contracts are valued
at the market forward exchange rates. Changes in fair
value are measured by comparing these rates with
the original contract forward rate. Currency options
are valued at each balance sheet date by using the
Garman & Kohlhagen option valuation model. Changes
in the fair value on these instruments are recognized
in the profit and loss account.
Embedded derivatives are identified and moni-
tored by the Group and recorded at fair value as at
each balance sheet date. In assessing the fair value of
embedded derivatives, the Group employs a variety
of methods including option pricing models and dis-
counted cash flow analysis using assumptions that are
based on market conditions existing at each balance
sheet date. The fair value changes are recognized in
the profit and loss account.
Notes to the consolidated financial statements
15
Notes to the consolidated financial statements
Hedge accounting
Cash flow hedges: Hedging of anticipated foreign
currency denominated sales and purchases
The Group applies hedge accounting for “Qualifying
hedges”. Qualifying hedges are those properly docu-
mented cash flow hedges of the foreign exchange rate
risk of future anticipated foreign currency denomi-
nated sales and purchases that meet the requirements
set out in IAS 39 (R). The cash flow being hedged must
be “highly probable” and must present an exposure
to variations in cash flows that could ultimately affect
profit or loss. The hedge must be highly effective both
prospectively and retrospectively.
The Group claims hedge accounting in respect
of certain forward foreign exchange contracts and
options, or option strategies, which have zero net pre-
mium or a net premium paid, and where the critical
terms of the bought and sold options within a collar or
zero premium structure are the same and where the
nominal amount of the sold option component is no
greater than that of the bought option.
For qualifying foreign exchange forwards the
change in fair value that reflects the change in spot
exchange rates is deferred in shareholders’ equity to
the extent that the hedge is effective. For qualifying
foreign exchange options, or option strategies, the
change in intrinsic value is deferred in shareholders’
equity to the extent that the hedge is effective. In all
cases the ineffective portion is recognized immedi-
ately in the profit and loss account as financial income
and expenses. Hedging costs, either expressed as
the change in fair value that reflects the change in
forward exchange rates less the change in spot ex-
change rates for forward foreign exchange contracts,
or changes in the time value for options, or options
strategies, are recognized within other operating
income or expenses.
Accumulated fair value changes from qualifying
hedges are released from shareholders’ equity into
the profit and loss account as adjustments to sales
and cost of sales, in the period when the hedged cash
flow affects the profit and loss account. If the hedged
cash flow is no longer expected to take place, all
deferred gains or losses are released immediately into
the profit and loss account as adjustments to sales
and cost of sales. If the hedged cash flow ceases to be
highly probable, but is still expected to take place, ac-
cumulated gains and losses remain in equity until the
hedged cash flow affects the profit and loss account.
Changes in the fair value of any derivative instru-
ments that do not qualify for hedge accounting under
IAS 39 (R) are recognized immediately in the profit
and loss account. The fair value changes of derivative
instruments that directly relate to normal business
operations are recognized within other operating
income and expenses. The fair value changes from
all other derivative instruments are recognized in
financial income and expenses.
Cash flow hedges: Hedging of highly probable
business acquisition
The Group hedges the foreign currency risk in highly
probable business acquisition transactions, which cre-
16
Nokia in 2007
ates cash flow variation in the transaction settlement
flow and could potentially impact Group’s profit and
loss through goodwill assessment from the Group’s
perspective. In order to apply for hedge accounting,
the planned business acquisition must be highly prob-
able and the hedges must be effective prospectively
and retrospectively.
The Group claims hedge accounting in respect of
forward foreign exchange contracts, foreign currency
denominated loans, and options, or option strategies,
which have zero net premium or a net premium paid,
and where the terms of the bought and sold options
within a collar or zero premium structure are the
same.
For qualifying foreign exchange forwards, the
change in fair value that reflects the change in spot
exchange rates is deferred in shareholders’ equity. The
change in fair value that reflects the change in for-
ward exchange rates less the change in spot exchange
rates is recognized in the profit and loss account
within financial income and expenses. For qualify-
ing foreign exchange options the change in intrinsic
value is deferred in shareholders’ equity. Changes
in the time value are at all times recognized directly
in the profit and loss account as financial income
and expenses. In all cases the ineffective portion is
recognized immediately in the profit and loss account
as financial income and expenses.
Accumulated fair value changes from qualifying
hedges are released from shareholders’ equity to ad-
just the EUR equivalent amount of the purchase price
upon the completion of the business acquisition.
Cash flow hedges: Foreign currency hedging
of net investments
The Group also applies hedge accounting for its for-
eign currency hedging on net investments.
Qualifying hedges are those properly document-
ed hedges of the foreign exchange rate risk of foreign
currency denominated net investments that meet the
requirements set out in IAS 39 (R). The hedge must be
effective both prospectively and retrospectively.
The Group claims hedge accounting in respect of
forward foreign exchange contracts, foreign currency
denominated loans, and options, or option strategies,
which have zero net premium or a net premium paid,
and where the terms of the bought and sold options
within a collar or zero premium structure are the
same.
For qualifying foreign exchange forwards, the
change in fair value that reflects the change in spot
exchange rates is deferred in shareholders’ equity. The
change in fair value that reflects the change in for-
ward exchange rates less the change in spot exchange
rates is recognized in the profit and loss account
within financial income and expenses. For qualify-
ing foreign exchange options the change in intrinsic
value is deferred in shareholders’ equity. Changes in
the time value are at all times recognized directly in
the profit and loss account as financial income and
expenses. If a foreign currency denominated loan is
used as a hedge, all foreign exchange gains and losses
arising from the transaction are recognized in share-
holders’ equity. In all cases the ineffective portion is
recognized immediately in the profit and loss account
as financial income and expenses.
Accumulated fair value changes from qualifying
hedges are released from shareholders’ equity into
the profit and loss account only if the legal entity in
the given country is sold, liquidated, repays its share
capital or is abandoned.
Income taxes
Current taxes are based on the results of the Group
companies and are calculated according to local tax
rules.
Deferred tax assets and liabilities are determined,
using the liability method, for all temporary differ-
ences arising between the tax bases of assets and li-
abilities and their carrying amounts in the consolidat-
ed financial statements. The enacted or substantially
enacted tax rates as of each balance sheet date that
are expected to apply in the period when the asset is
realized or the liability is settled are used in the mea-
surement of deferred tax assets and liabilities.
The principal temporary differences arise from
intercompany profit in inventory, warranty and other
provisions, untaxed reserves and tax losses carried
forward. Deferred tax assets are recognized to the
extent that it is probable that future taxable profit
will be available against which the unused tax losses
can be utilized. Deferred tax liabilities are recognized
for temporary differences that arise between the fair
value and tax base of identifiable net assets acquired
in business combinations.
Provisions
Provisions are recognized when the Group has a
present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources
will be required to settle the obligation and a reli-
able estimate of the amount can be made. Where
the Group expects a provision to be reimbursed, the
reimbursement is recognized as an asset only when
the reimbursement is virtually certain. At each bal-
ance sheet date, the Group assesses the adequacy of
its pre-existing provisions and adjusts the amounts as
necessary based on actual experience and changes in
future estimates.
Warranty provisions
The Group provides for the estimated liability to
repair or replace products under warranty at the time
revenue is recognized. The provision is an estimate
calculated based on historical experience of the level
of repairs and replacements.
Intellectual property rights (IPR) provisions
The Group provides for the estimated future settle-
ments related to asserted and unasserted past IPR
infringements based on the probable outcome of
potential infringement.
Tax provisions
The Group recognizes a provision for tax contingen-
cies based upon the estimated future settlement
amount at each balance sheet date.
Restructuring provisions
The Group provides for the estimated cost to restruc-
ture when a detailed formal plan of restructuring has
been completed and the restructuring plan has been
announced.
Other provisions
The Group recognizes the estimated liability for
non-cancelable purchase commitments for inventory
in excess of forecasted requirements at each balance
sheet date.
The Group recognizes a provision for pension and
other social costs on unvested equity instruments
based upon local statutory law. In accordance with the
requirements applying to cash-settled share-based
payment transactions, this provision is measured at
fair value and remeasurement of the fair value of the
provision is recognized in profit or loss for the period.
The Group provides for onerous contracts based
on the lower of the expected cost of fulfilling the
contract and the expected cost of terminating the
contract.
Share-based compensation
The Group offers three types of equity settled share-
based compensation schemes for employees: stock
options, performance shares and restricted shares.
Employee services received, and the corresponding
increase in equity, are measured by reference to the
fair value of the equity instruments as of the date of
grant, excluding the impact of any non-market vesting
conditions. Non-market vesting conditions attached
to the performance shares are included in assump-
tions about the number of shares that the employee
will ultimately receive. On a regular basis, the Group
reviews the assumptions made and, where necessary,
revises its estimates of the number of performance
shares that are expected to be settled. Share-based
compensation is recognized as an expense in the
profit and loss account on straight line basis over the
service period. A separate vesting period is defined
for each quarterly lot of the stock options plans. When
stock options are exercised, the proceeds received net
of any transaction costs are credited to share premium
and the reserve for invested non-restricted equity.
Treasury shares
The Group recognizes acquired treasury shares as a
deduction from equity at their acquisition cost. When
cancelled, the acquisition cost of treasury shares is
recognized in retained earnings.
Dividends
Dividends proposed by the Board of Directors are not
recorded in the financial statements until they have
been approved by the shareholders at the Annual
General Meeting.
Earnings per share
The Group calculates both basic and diluted earnings
per share. Basic earnings per share is computed using
the weighted average number of shares outstanding
during the period. Diluted earnings per share is com-
puted using the weighted average number of shares
outstanding during the period plus the dilutive effect
of stock options, restricted shares and performance
shares outstanding during the period.
Use of estimates
The preparation of financial statements in conformity
with IFRS requires the application of judgment by
management in selecting appropriate assumptions
for calculating financial estimates, which inherently
contain some degree of uncertainty. Management
bases its estimates on historical experience and
various other assumptions that are believed to be
reasonable under the circumstances, the results of
which form the basis for making judgments about
the reported carrying values of assets and liabilities
and the reported amounts of revenues and expenses
that may not be readily apparent from other sources.
Actual results may differ from these estimates under
different assumptions or conditions.
Set forth below are areas requiring significant
judgment and estimation that may have an impact on
reported results and the financial position.
Revenue recognition
Sales from the majority of the Group are recognized
when the significant risks and rewards of ownership
have transferred to the buyer, continuing managerial
involvement usually associated with ownership and
effective control have ceased, the amount of revenue
can be measured reliably, it is probable that economic
benefits associated with the transaction will flow to
the Group and the costs incurred or to be incurred in
respect of the transaction can be measured reliably.
Sales may materially change if management’s assess-
ment of such criteria was determined to be inaccurate.
The Group makes price protection adjustments
based on estimates of future price reductions and
certain agreed customer inventories at the date of the
price adjustment. Possible changes in these estimates
could result in revisions to the sales in future periods.
Revenue from contracts involving solutions
achieved through modification of complex tele-
communications equipment is recognized on the
percentage of completion basis when the outcome
of the contract can be estimated reliably. Recog-
nized revenues and profits are subject to revisions
during the project in the event that the assumptions
Notes to the consolidated financial statements
regarding the overall project outcome are revised.
Current sales and profit estimates for projects may
materially change due to the early stage of a long-
term project, new technology, changes in the project
scope, changes in costs, changes in timing, changes in
customers’ plans, realization of penalties, and other
corresponding factors.
Customer financing
The Group has provided a limited amount of customer
financing and agreed extended payment terms with
selected customers. Should the actual financial posi-
tion of the customers or general economic conditions
differ from assumptions, the ultimate collectibility
of such financings and trade credits may be required
to be re-assessed, which could result in a write-off of
these balances and thus negatively impact profits in
future periods.
Allowances for doubtful accounts
The Group maintains allowances for doubtful accounts
for estimated losses resulting from the subsequent in-
ability of customers to make required payments. If the
financial conditions of customers were to deteriorate,
resulting in an impairment of their ability to make
payments, additional allowances may be required in
future periods.
Inventory-related allowances
The Group periodically reviews inventory for excess
amounts, obsolescence and declines in market value
below cost and records an allowance against the
inventory balance for any such declines. These reviews
require management to estimate future demand for
products. Possible changes in these estimates could
result in revisions to the valuation of inventory in
future periods.
Warranty provisions
The Group provides for the estimated cost of product
warranties at the time revenue is recognized. The
Group’s warranty provision is established based upon
best estimates of the amounts necessary to settle
future and existing claims on products sold as of each
balance sheet date. As new products incorporating
complex technologies are continuously introduced,
and as local laws, regulations and practices may
change, changes in these estimates could result in ad-
ditional allowances or changes to recorded allowances
being required in future periods.
Provision for intellectual property rights,
or IPR, infringements
The Group provides for the estimated future settle-
ments related to asserted and unasserted past IPR
infringements based on the probable outcome of po-
tential infringement. IPR infringement claims can last
for varying periods of time, resulting in unpredictable
movements in the IPR infringement provision. The ul-
timate outcome or actual cost of settling an individual
infringement may materially vary from estimates.
Notes to the consolidated financial statements
17
Notes to the consolidated financial statements
Legal contingencies
Legal proceedings covering a wide range of matters
are pending or threatened in various jurisdictions
against the Group. Provisions are recorded for pending
litigation when it is determined that an unfavorable
outcome is probable and the amount of loss can be
reasonably estimated. Due to the inherent uncertain
nature of litigation, the ultimate outcome or actual
cost of settlement may materially vary from estimates.
Capitalized development costs
The Group capitalizes certain development costs when
it is probable that a development project will generate
future economic benefits and certain criteria, includ-
ing commercial and technological feasibility, have
been met. Should a product fail to substantiate its
estimated feasibility or life cycle, material develop-
ment costs may be required to be written-off in future
periods.
Business combinations
The Group applies the purchase method of accounting
to account for acquisitions businesses. The cost of an
acquisition is measured as the aggregate of the fair
values at the date of exchange of the assets given,
liabilities assumed or incurred, equity instruments is-
sued and costs directly attributable to the acquisition.
Identifiable assets, liabilities and contingent liabilities
acquired or assumed are measured separately at
their fair value as of the acquisition date. The excess
of the cost of the acquisition over our interest in the
fair value of the identifiable net assets acquired is
recorded as goodwill.
The determination and allocation of fair values
to the identifiable assets acquired and liabilities as-
sumed is based on various assumptions and valuation
methodologies requiring management judgment.
Actual results may differ from the forecasted amounts
and the difference could be material.
Assessment of the recoverability of long-lived
and intangible assets and goodwill
The Group assesses the carrying value of goodwill
annually, or more frequently if events or changes in
circumstances indicate that such carrying value may
not be recoverable. The Group assesses the carrying
value of identifiable intangible assets and long-lived
assets if events or changes in circumstances indicate
that such carrying value may not be recoverable.
Factors that trigger an impairment review include
underperformance relative to historical or projected
future results, significant changes in the manner of
the use of the acquired assets or the strategy for the
overall business and significant negative industry or
economic trends. The most significant variables in
determining cash flows are discount rates, terminal
values, the number of years on which to base the
cash flow projections, as well as the assumptions and
estimates used to determine the cash inflows and out-
flows. Amounts estimated could differ materially from
what will actually occur in the future.
18
Nokia in 2007
Fair value of derivatives and other
financial instruments
The fair value of financial instruments that are not
traded in an active market (for example, unlisted equi-
ties, currency options and embedded derivatives) are
determined using various valuation techniques. The
Group uses judgment to select an appropriate valua-
tion methodology as well as underlying assumptions
based on existing market practice and conditions.
Changes in these assumptions may cause the Group to
recognize impairments or losses in future periods.
Income taxes
Management judgment is required in determining
provisions for income taxes, deferred tax assets and
liabilities and the extent to which deferred tax assets
can be recognized. If the final outcome of these
matters differs from the amounts initially recorded,
differences will impact the income tax and deferred
tax provisions in the period in which such determina-
tion is made.
Pensions
The determination of pension benefit obligation
and expense for defined benefit pension plans is
dependent on the selection of certain assumptions
used by actuaries in calculating such amounts. Those
assumptions include, among others, the discount rate,
expected long-term rate of return on plan assets and
annual rate of increase in future compensation levels.
A portion of plan assets is invested in equity securities
which are subject to equity market volatility. Changes
in assumptions and actuarial conditions may materi-
ally affect the pension obligation and future expense.
Share-based compensation
The Group operates various types of equity settled
share-based compensation schemes for employees.
Fair value of stock options is based on certain assump-
tions, including, among others, expected volatility and
expected life of the options. Non-market vesting con-
ditions attached to performance shares are included
in assumptions about the number of shares that the
employee will ultimately receive relating to projec-
tions of net sales and earnings per share. Significant
differences in equity market performance, employee
option activity and the Group’s projected and actual
net sales and earnings per share performance, may
materially affect future expense.
New accounting pronouncements under IFRS
The Group will adopt the following new and revised
standards, amendments and interpretations to exist-
ing standards issued by the IASB that are expected to
be relevant to its operations:
IFRS 8, Operating Segments requires that seg-
ments are identified and reported based on how
management views and operates the business.
Under IFRS 8, segments are components of an entity
regularly reviewed by an entity’s chief operating
decision-maker.
Amendment to IFRS 2, Share-based payment,
Group and Treasury Share Transactions, clarifies the
definition of different vesting conditions, treatment of
all non-vesting conditions and provides further guid-
ance on the accounting treatment of cancellations by
parties other than the entity.
IFRIC 13, Customer Loyalty Programs addresses
service concession arrangements and the accounting
surrounding customer loyalty programs and whether
some consideration should be allocated to free
goods or services provided by a company. Consider-
ation should be allocated to award credits based on
their fair value, as they are a separately identifiable
component.
Amendment to IAS 1, Presentation of financial
statements, prompts entities to aggregate informa-
tion in the financial statements on the basis of shared
characteristics. All non-owner changes in equity (i.e.
comprehensive income) should be presented either
in one statement of comprehensive income or in a
separate income statement and statement of compre-
hensive income.
Amendment to IAS 23, Borrowing costs, changes
the treatment of borrowing costs that are directly
attributable to an acquisition, construction or
production of a qualifying asset. These costs will
consequently form part of the cost of that asset. Other
borrowing costs are recognized as an expense.
Under the amended IAS 32 Financial Instru-
ments: Presentation, the Group must classify puttable
financial instruments or instruments or components
thereof that impose an obligation to deliver to
another party, a pro-rata share of net assets of the
entity only on liquidation, as equity. Previously, these
instruments would have been classified as financial
liabilities.
IFRS 3 (revised) Business Combinations replaces
IFRS 3 (as issued in 2004). The main changes brought
by IFRS 3 (revised) include immediate recognition
of all acquisition-related costs in profit or loss,
recognition of subsequent changes in the fair value
of contingent consideration in accordance with other
IFRSs and measurement of goodwill arising from step
acquisitions at the acquisition date.
Amendment to IAS 27 “Consolidated and Separate
Financial Statements” clarifies presentation of
changes in parent-subsidiary ownership. Changes
in a parent’s ownership interest in a subsidiary that
do not result in the loss of control are accounted for
exclusively within equity. If a parent loses control of a
subsidiary it shall derecognize the consolidated assets
and liabilities and any investment retained in the
former subsidiary shall be recognized at fair value at
the date when control is lost. Any differences resulting
from this shall be recognized in profit or loss. When
losses attributed to the minority (non-controlling)
interests exceed the minority’s interests in the
subsidiary’s equity, these losses shall be allocated to
the non-controlling interests even if this results in a
deficit balance.
The Group will adopt IFRS 8 on January 1, 2008,
and the amendments to IFRS 2, IFRIC 13, IAS 1, IAS 23
and IAS 32 on January 1, 2009. The Group does not
expect the adoption of revised standards to have a
material impact on the financial conditions or result
of operations.
The Group is required to adopt both IFRS 3
(revised) and IAS 27 (revised) on January 1, 2010, with
early adoption permitted and is currently evaluat-
ing the impact of these standards on the Group’s
accounts.
Notes to the consolidated financial statements
2. Segment information
Nokia is organized on a worldwide basis into four pri-
mary business segments: Mobile Phones; Multimedia;
Enterprise Solutions; and Nokia Siemens Networks.
Nokia’s reportable segments represent the strate-
gic business units that offer different products and
services for which monthly financial information is
provided to the Board.
Mobile Phones currently offers mobile phones
and devices based on the following global cellular
technologies: GSM/EDGE, 3G/WCDMA and CDMA.
Multimedia brings connected mobile multimedia
experiences to consumers in the form of advanced
mobile devices and applications.
Enterprise Solutions works with businesses and
institutions to improve their performance through
mobility, currently focusing on two key areas of
corporate communication expenditure; voice and
mobile e-mail.
Nokia Siemens Networks provides wireless and
fixed network infrastructure, communications and
networks service platforms as well as professional
services to operators and service providers.
In addition to the four business groups, the
Group’s organization has two horizontal units to
support the mobile device business groups, increase
operational efficiency and competitiveness, and to
take advantage of economies of scale: Customer and
Market Operations and Technology Platforms. The
horizontal groups are not separate reporting entities,
but their costs are carried mainly by the mobile device
business groups, which comprises of Mobile Phones,
Multimedia and Enterprise Solutions, with the bal-
ance included in Common Group Functions. The costs
and revenues as well as assets and liabilities of the
horizontal groups are allocated to the mobile device
business groups on a symmetrical basis; with any
amounts not so allocated included in Common Group
Functions. Common Group Functions consists of com-
mon research and general Group functions.
The accounting policies of the segments are the
same as those described in Note 1. Nokia accounts
for intersegment revenues and transfers as if the rev-
enues or transfers were to third parties, that is, at cur-
rent market prices. Nokia evaluates the performance
of its segments and allocates resources to them based
on operating profit.
No single customer represents 10% or more of
Group net sales.
As of January 1, 2008, the Group’s three mobile
device business groups and the supporting horizontal
groups have been replaced by an integrated business
segment, Devices & Services. For financial reporting
purposes, the Group will have two reportable seg-
ments from January 1, 2008: Devices & Services and
Nokia Siemens Networks.
Notes to the consolidated financial statements
19
Notes to the consolidated financial statements
2007, EURm
Profit and loss information
Mobile
Phones
Multimedia
Enterprise
Solutions
Nokia
Siemens
Networks 1
Total
reportable
segments
Common
Group
Functions
Elimina-
tions
Net sales to external customers
25 083
10 537
2 048
13 376
51 044
Net sales to other segments
Depreciation and amortization
Impairments
Operating profit/loss 2
Share of results of associated companies
Balance sheet information
Capital expenditures 3
Segment assets 4, 8
of which:
—
239
—
5 434
—
250
5 234
1
109
—
2 230
—
100
2 339
Investments in associated companies
—
—
22
32
—
267
—
16
777
—
17
714
27
– 1 308
4
182
15 564
40
1 094
27
6 623
4
548
23 914
14
– 14
112
36
1 362
40
167
1 713
– 26
– 365
58
58
267
Unallocated assets 5, 8
Total assets
Segment liabilities 6, 9
Unallocated liabilities 7, 9
Total liabilities
2006, EURm
Profit and loss information
6 060
2 309
509
9 700
18 578
592
– 418
Net sales to external customers
24 769
7 877
1 015
7 453
41 114
Net sales to other segments
Depreciation and amortization
Impairments
Operating profit/loss 2
Share of results of associated companies
Balance sheet information
Capital expenditures 3
Segment assets 4
of which:
—
279
—
4 100
—
244
4 921
—
99
—
1 319
—
73
1 474
Investments in associated companies
—
—
16
36
—
– 258
—
30
604
—
—
203
—
808
—
126
3 746
16
617
—
5 969
—
473
10 745
7
– 7
95
51
– 481
28
177
1 190
– 9
– 31
—
—
224
Unallocated assets 5, 8
Total assets
Segment liabilities 6
Unallocated liabilities 7, 9
Total liabilities
2005, EURm
Profit and loss information
5 140
1 622
395
1 703
8 860
337
– 333
Net sales to external customers
20 811
5 979
Net sales to other segments
Depreciation and amortization
Impairment and customer finance charges
Operating profit/loss
Share of results of associated companies
—
247
—
3 598
—
2
83
36
836
—
839
22
22
—
– 258
—
6 556
34 185
1
241
—
855
—
25
593
36
5 031
—
6
– 6
119
30
– 392
10
– 19
Group
51 058
—
1 206
63
7 985
44
715
25 262
325
12 337
37 599
18 752
1 509
20 261
41 121
—
712
51
5 488
28
650
11 904
224
10 713
22 617
8 864
1 693
10 557
34 191
—
712
66
4 639
10
1 As from April 1, 2007, Nokia consolidated financial data includes
that of Nokia Siemens Networks on a fully consolidated basis.
Nokia Siemens Networks, a company jointly owned by Nokia and
Siemens, is comprised of our former Networks business group
and Siemens’ carrier-related operations for fixed and mobile net-
works. Accordingly, our consolidated financial data for the year
ended at December 31, 2007, is not directly comparable to our
consolidated financial data for the prior years. Our consolidated
financial data for the years prior to the year ended at December
31, 2007, included our former Networks business group only.
2 Common Group Functions operating profit in 2007 includes a
non-taxable gain of EUR 1 879 million related to the formation
of Nokia Siemens Networks. Networks operating profit in 2006
includes a gain of EUR 276 million relating to a partial recovery of
a previously impaired financing arrangement with Telsim.
3
Including goodwill and capitalized development costs, capital
expenditures in 2007 amount to EUR 1 753 million (EUR 1 240
million in 2006). The goodwill and capitalized development costs
consist of EUR 33 million in 2007 (EUR 60 million in 2006) for
Mobile Phones, EUR 21 million in 2007 (EUR 171 million in 2006)
for Multimedia, EUR 15 million in 2007 (EUR 271 million in 2006)
for Enterprise Solutions, EUR 888 million in 2007 (EUR 88 million
in 2006) for Nokia Siemens Networks and EUR 81 million in 2007
(EUR 0 million in 2006) for Common Group Functions.
4 Comprises intangible assets, property, plant and equipment,
investments, inventories and accounts receivable as well as
prepaid expenses and accrued income except those related to
interest and taxes for Mobile Phones, Multimedia and Enterprise
Solutions. In addition, Nokia Siemens Networks’ assets include
cash and other liquid assets, available-for-sale investments,
long-term loans receivable and other financial assets as well as
interest and tax related prepaid expenses and accrued income.
These are directly attributable to Nokia Siemens Networks as it is
a separate legal entity.
5 Unallocated assets include cash and other liquid assets,
available-for-sale investments, long-term loans receivable and
other financial assets as well as interest and tax related prepaid
expenses and accrued income for Mobile Phones, Multimedia,
Enterprise Solutions and Common Group Functions.
20
Nokia in 2007
6 Comprises accounts payable, accrued expenses and provisions except those related to interest and
taxes for Mobile Phones, Multimedia and Enterprise Solutions. In addition, Nokia Siemens Networks’
liabilities include non-current liabilities and short-term borrowings as well as interest and tax related
prepaid income, accrued expenses and provisions. These are directly attributable to Nokia Siemens
Networks as it is a separate legal entity.
7 Unallocated liabilities include non-current liabilities and short-term borrowings as well as interest and
tax related prepaid income, accrued expenses and provisions related to Mobile Phones, Multimedia,
Enterprise Solutions and Common Group Functions.
8 Tax related prepaid expenses and accrued income, and deferred tax assets amount to EUR 2 060 mil-
lion in 2007 (EUR 1 240 million in 2006).
9 Tax related to accrued expenses and deferred tax liabilities amount to EUR 2 099 million in 2007 (EUR
497 million in 2006).
Net sales to external customers
by geographic area
by location of customer
Finland
China
India
Germany
Great Britain
USA
Other
Total
Segment assets by geographic area
Finland
China
India
Germany
Great Britain
USA
Other
Total
2005
EURm
331
3 403
2 022
1 982
2 405
2 743
21 305
34 191
2007
EURm
322
5 898
3 684
2 641
2 574
2 124
33 815
51 058
2007
EURm
5 595
2 480
1 028
2 842
649
1 279
11 389
25 262
2006
EURm
387
4 913
2 713
2 060
2 425
2 815
25 808
41 121
2006
EURm
4 165
1 257
618
615
523
1 270
3 456
11 904
Notes to the consolidated financial statements
4. Personnel expenses
EURm
Wages and salaries
Share-based compensation expense, total
Pension expenses, net
Other social expenses
Personnel expenses as per profit
and loss account
2007
4 664
236
420
618
2006
2005
3 457
192
310
439
3 127
104
252
394
5 938
4 398
3 877
Share-based compensation expense includes pension and other social costs of EUR
8 million (EUR – 4 million in 2006 and EUR 9 million in 2005) based upon the related
employee benefit charge recognized during the year. In 2006, a benefit was recogn-
ised due to a change in the treatment of pension and other social costs.
Pension expenses, comprised of multi-employer, insured and defined contribu-
tion plans were EUR 289 million in 2007 (EUR 198 million in 2006 and EUR 206 million
in 2005).
Average personnel
2007
2006
2005
Mobile Phones
Multimedia
Enterprise Solutions
Nokia Siemens Networks
Common Group Functions
Nokia Group
3 475
3 708
2 095
50 336
40 920
100 534
3 639
3 058
2 264
20 277
36 086
65 324
2 647
2 750
2 185
17 676
31 638
56 896
Capital expenditures by market area
2007
EURm
2006
EURm
2005
EURm
5. Pensions
Finland
China
India
Germany
Great Britain
USA
Other
Total 1
237
125
72
67
26
21
167
715
275
125
65
23
11
63
88
650
259
93
31
26
12
74
112
607
1
Including goodwill and capitalized development costs, capital expenditures amount to EUR 1 753
million in 2007 (EUR 1 240 million in 2006 and EUR 760 million in 2005). The goodwill and capital-
ized development costs in 2007 consist of EUR 78 million in USA (EUR 268 million in USA in 2006 and
EUR 0 million in USA in 2005) and EUR 960 million in other areas (EUR 321 million in 2006 and EUR 153
million in 2005).
3. Percentage of completion
Contract sales recognized under percentage of completion accounting were EUR
10 171 million in 2007 (EUR 6 308 million in 2006 and EUR 5 520 million in 2005).
Advances received related to construction contracts, included under accrued
expenses, were EUR 303 million at December 31, 2007 (EUR 220 million in 2006).
Contract revenues recorded prior to billings, included in accounts receivable, were
EUR 1 587 million at December 31, 2007 (EUR 371 million in 2006 and EUR 0 million
in 2005). Billing in excess of costs incurred, included in contract revenues recorded
prior to billings, were EUR 482 million at December 31, 2007.
The aggregate amount of costs incurred and recognized profits (net of recog-
nized losses) under construction contracts in progress since inception (for contracts
acquired inception refers to April 1, 2007) was EUR 10 173 million at December 31,
2007 (EUR 6 705 million at December 31, 2006).
Retentions related to construction contracts, included in accounts receivable,
were EUR 166 million at December 31, 2007 (EUR 131 million at December 31, 2006).
The Group’s most significant pension plans are in Finland and Germany. The Finnish
plan is comprised of the Finnish state Employees’ Pension Act (TyEL) system with
benefits directly linked to employee earnings. These benefits are financed in two
distinct portions. Majority of the benefits are financed by contributions to a central
pool with the majority of the contributions being used to pay current benefits. The
rest is comprised of reserved benefits which are pre-funded through a trustee-
administered Nokia Pension Foundation. The pooled portion of the TyEL system is
accounted for as a defined contribution plan and the reserved portion as a defined
benefit plan. Foreign plans include both defined contribution and defined benefit
plans.
In connection with the formation of Nokia Siemens Networks, the Group as-
sumed multiple pension plans reflected as acquisitions in the following tables. The
majority of active employees in Germany participate in a pension scheme which
is designed according to the Beitragsorientierte Siemens Altersversorgung (BSAV).
The funding vehicle for the BSAV is the NSN Pension Trust. In Germany, individual
benefits are generally dependent on eligible compensation levels, ranking within
the Group and years of service.
The pension acts applying to wage and salary earners in private sectors in
Finland, including the former TEL Act, were combined on January 1, 2007, into one
earnings-related pensions act, the Employee Pensions Act (TyEL). The change had
no impact to the Group’s net pension asset in Finland.
Effective on January 1, 2005, the former Finnish Employees’ Pension Act (TEL)
system was reformed. The most significant change that has an impact on the
Group’s future financial statements is that pensions accumulated after 2005 are
calculated on the earnings during the entire working career, not only based on the
last few years of employment as provided by the old rules.
As a result of the 2005 changes in the TEL system, which increased the Group’s
obligation in respect of ex-employees, and reduced the obligation in respect of
recent recruits, a change in the liability has been recognised to cover future disability
pensions. In 2005, to compensate the Group for the additional liability in respect of
Notes to the consolidated financial statements
21
– 1 031
– 546
– 890
– 495
The prepaid pension cost above is made up of a prepayment of EUR 218 million
(EUR 206 million in 2006) and an accrual of EUR 254 million (EUR 98 million in 2006).
Notes to the consolidated financial statements
ex-employees, assets of EUR 24 million were transferred from the pooled part of the
pension system to cover future disability pensions inside Nokia Pension Foundation.
As this transfer of assets is effectively a reduction of the obligation to the pooled
premium, it has been accounted for as a credit to the profit and loss account during
2005.
The following table sets forth the changes in the benefit obligation and fair
value of plan assets during the year and the funded status of the significant defined
benefit pension plans showing the amounts that are recognized in the Group’s
consolidated balance sheet at December 31:
2007
2006
Domestic Foreign Domestic Foreign
plans
plans
plans
plans
EURm
Present value of defined benefit
obligations at beginning of year
Foreign exchange
Current service cost
Interest cost
Plan participants’ contributions
Actuarial gain (+)/loss(–)
Acquisitions
Curtailment
Settlements
Benefits paid
—
– 59
– 50
—
115
—
3
—
11
27
– 66
– 54
– 8
126
– 780
1
15
30
—
– 63
– 40
—
– 51
—
3
—
10
– 3
– 38
– 26
– 7
14
—
—
—
9
Present value of defined benefit
obligations at end of year
– 1 011 – 1 255
– 1 031
– 546
Plan assets at fair value at beginning of year
985
Foreign exchange
Expected return on plan assets
Actuarial gain (+)/loss(–) on plan assets
Employer contribution
Plan participants’ contributions
Benefits paid
Settlements
Acquisitions
—
49
– 33
73
—
– 11
—
—
424
– 27
46
– 2
90
8
– 30
– 3
605
904
372
—
41
– 8
59
—
– 11
—
—
3
21
– 3
32
8
– 9
—
—
Plan assets at fair value at end of year
1 063
1 111
985
424
Surplus (+)/deficit (–)
Unrecognized net actuarial gains/losses
Prepaid (+)/accrued (–) pension cost in
balance sheet
52
97
– 144
– 41
– 46
– 122
187
89
149
– 185
141
– 33
Present value of obligations include EUR 1 799 million (EUR 300 million in 2006) of
wholly funded obligations, EUR 333 million of partly funded obligations (EUR 1 244
million in 2006) and EUR 134 million (EUR 33 million in 2006) of unfunded obligations.
The amounts recognized in the profit and loss account are as follows:
EURm
2007
2006
2005
Current service cost
Interest cost
Expected return on plan assets
Net actuarial losses recognized in year
Past service cost gain (-)/loss (+)
Transfer from central pool
Curtailment
Settlement
Total, included in personnel expenses
125
104
– 95
10
—
—
– 1
– 12
131
101
66
– 62
8
3
—
– 4
—
112
69
58
– 64
9
1
– 24
– 3
—
46
22
Nokia in 2007
Movements in prepaid pension cost recognized in the balance sheet are as follows:
EURm
Prepaid pension cost at beginning of year
Net income (+)/expense (–) recognized in the profit
and loss account
Contributions paid
Acquisitions
Foreign currency exchange rate change
Prepaid (+)/accrued( –) pension cost at end of year 1
2007
2006
108
127
– 131
163
– 175
– 1
– 36
– 112
91
—
2
108
1
Included within prepaid expenses and accrued income/accrued expenses.
EURm
2007
2006
2005
2004
2003
Present value of defined
benefit obligation
Plan assets at fair value
Deficit
– 2 266 – 1 577 – 1 385 – 1 125 – 1 009
887
1 276
– 122
– 109
1 409
– 168
1 071
– 54
2 174
– 92
Experience adjustments arising on plan obligations amount to a loss of EUR 31 mil-
lion in 2007 (EUR 25 million in 2006). Experience adjustments arising on plan assets
amount to a loss of EUR 3 million in 2007 (EUR 11 million in 2006).
The principal actuarial weighted average assumptions used were as follows:
%
Discount rate for determining
present values
Expected long-term rate of return
on plan assets
Annual rate of increase in future
compensation levels
Pension increases
2007
2006
Domestic Foreign Domestic Foreign
5.50
5.40
4.60
4.78
5.30
5.10
4.60
5.50
3.00
2.70
3.30
2.30
3.50
2.00
3.59
2.69
The expected long-term rate of return on plan assets is based on the expected
return multiplied with the respective percentage weight of the market-related value
of plan assets. The expected return is defined on a uniform basis, reflecting long-
term historical returns, current market conditions and strategic asset allocation.
The Group’s weighted average pension plan asset allocation as a percentage of
plan assets at December 31, 2007, and 2006, by asset category is as follows:
%
Asset category:
Equity securities
Debt securities
Insurance contracts
Real estate
Short-term investments
Total
2007
2006
Domestic Foreign Domestic Foreign
12
78
0
1
9
100
11
85
3
1
—
100
11
75
—
1
13
27
61
11
—
1
100
100
The objective of the investment activities is to maximize the excess of plan assets
over projected benefit obligations, within an accepted risk level, taking into account
the interest rate and inflation sensitivity of the assets as well as the obligations.
Notes to the consolidated financial statements
The Pension Committee of the Group, consisting of the CFO, Head of Treasury,
Head of HR and other HR representatives, approves both the target asset allocation
as well as the deviation limit. Derivative instruments can be used to change the
portfolio asset allocation and risk characteristics.
The domestic pension plans’ assets did not include Nokia securities in 2007 or
Available-for-sale investments
During 2007, the Group’s investment in certain equity securities held as non-
current available-for-sale suffered a permanent decline in fair value resulting in an
impairment charge of EUR 29 million (EUR 18 million in 2006, EUR 30 million in 2005)
relating to non-current available-for-sale investments.
in 2006.
The foreign pension plan assets include a self investment through a loan pro-
vided to Nokia by the Group’s German pension fund of EUR 69 million (EUR 69 million
in 2006). See Note 31.
The actual return on plan assets was EUR 61 million in 2007 (EUR 51 million in
2006).
In 2008, the Group expects to make contributions of EUR 70 million and EUR 70
million to its domestic and foreign defined benefit pension plans, respectively.
6. Other operating income and expenses
Other operating income for 2007 includes a non-taxable gain of EUR 1 879 million
relating to the formation of Nokia Siemens Networks. Other operating income also
includes gain on sale of real estate in Finland of EUR 128 million, of which EUR 75
million is included in Common functions’ operating profit and EUR 53 million in
Nokia Siemens Networks’ operating profit. In addition, other operating income
includes a gain on business transfer EUR 53 million impacting Common functions’
operating profit. In 2007, other operating expenses includes EUR 58 million in
charges related to restructuring costs in Nokia Siemens Networks. Enterprise Solu-
tions recorded a charge of EUR 17 million for personnel expenses and other costs as
a result of more focused R&D. Mobile Phones recorded restructuring costs of EUR 35
million primarily related to restructuring of a subsidiary company.
Other operating income for 2006 includes a gain of EUR 276 million represent-
ing Nokia’s share of the proceeds relating to a partial recovery of a previously
impaired financing arrangement with Telsim. Other operating expenses for 2006
includes EUR 142 million charges primarily related to the restructuring for the CDMA
business and associated asset write-downs. Working together with co-development
partners, Nokia intends to selectively participate in key CDMA markets, with special
focus on North America, China and India. Accordingly, Nokia ramped down its CDMA
research, development and production which ceased by April 2007. In 2006, Enter-
prise Solutions recorded a charge of EUR 8 million for personnel expenses and other
costs as a result of more focused R&D.
Other operating income for 2005 includes a gain of EUR 61 million relating to
the divestiture of the Group’s Tetra business, a EUR 18 million gain related to the
partial sale of a minority investment and a EUR 45 million gain related to qualifying
sale and leaseback transactions for real estate. In 2005, Enterprise Solutions record-
ed a charge of EUR 29 million for personnel expenses and other costs in connection
with a restructuring taken in light of general downturn in market conditions, which
were fully paid during 2005.
In all three years presented “Other operating income and expenses” include
the costs of hedging forecasted sales and purchases (forward points of cash flow
hedges).
7. Impairment
EURm
2007
2006
2005
Available-for-sale investments
Investments in associated companies
Capitalized development costs
Other intangible assets
Total, net
29
7
27
—
63
18
—
—
33
51
30
—
—
—
30
Investments in associated companies
After application of the equity method, including recognition of the associate’s
losses, the Group determined that recognition of an impairment loss of EUR 7 million
in 2007 was necessary to adjust the Group’s net investment in the associate to its
recoverable amount.
Capitalized development costs
During 2007, Nokia Siemens Networks recorded an impairment charge on capital-
ized development costs of EUR 27 million. The impairment loss was determined as
the full carrying amount of the capitalized development programs costs related
to products that will not be included in future product portfolios. This impairment
amount is included within research and development expenses in the consolidated
profit and loss statement.
Other intangible assets
In connection with the restructuring of its CDMA business, the Group recorded
an impairment charge of EUR 33 million during 2006 related to an acquired CDMA
license. The impaired CDMA license was included in Mobile Phones business group.
Goodwill
The recoverable amount of each CGU is determined based on a value-in-use calcula-
tion. The pre-tax cash flow projections employed in the value-in-use calculation
are based on financial budgets approved by management. These projections are
consistent with external source of information. Cash flows beyond the explicit
forecast period are extrapolated using an estimated terminal growth rate that does
not exceed the long-term average growth rates for the industry and economies in
which the CGU operates.
The goodwill of EUR 803 million arising from the formation of Nokia Siemens
Networks was allocated to that CGU for the purpose of impairment testing. Manage-
ment expects moderate market share growth in this industry segment will drive
moderate revenue growth. Increased volumes and cost savings derived from the
business combination are expected to drive operating profit margins to improve
to prevailing levels in this industry. Cash flows beyond the explicit forecast period
are extrapolated using an estimated residual growth rate of 2.5%. The pre-tax cash
flow projections are discounted using a pre-tax discount rate of 16%.
Goodwill amounting to EUR 240 million was allocated to the Intellisync CGU,
which is included in the Enterprise Solutions segment. Management expects that
moderate market share growth in a high-growth industry segment will drive strong
revenue growth. Increased volume is expected to cause operating profit margins to
improve to prevailing levels in the industry. Cash flows beyond the explicit forecast
period are extrapolated using an estimated terminal growth rate of 5%. The pre-tax
cash flow projections are discounted using a pre-tax discount rate of 20%.
The aggregate carrying amount of goodwill allocated across multiple CGUs
amounts to EUR 341 million and the amount allocated to each individual CGU is not
individually significant.
8. Acquisitions
Acquisitions completed in 2007
The Group and Siemens AG (“Siemens”) completed a transaction to form Nokia Sie-
mens Networks on April 1, 2007. Nokia and Siemens contributed to Nokia Siemens
Networks certain tangible and intangible assets and certain business interests that
comprised Nokia’s networks business and Siemens’ carrier-related operations. This
transaction combined the worldwide mobile and fixed-line telecommunications
network equipment businesses of Nokia and Siemens. Nokia and Siemens each own
approximately 50% of Nokia Siemens Networks. Nokia has the ability to appoint key
officers and the majority of the members of the Board of Directors. Accordingly, for
Notes to the consolidated financial statements
23
Notes to the consolidated financial statements
accounting purposes, Nokia is deemed to have control and thus consolidates the
results of Nokia Siemens Networks in its financial statements.
The transfer of Nokia’s networks business was treated as a partial sale to
the minority shareholders of Nokia Siemens Networks. Accordingly, the Group
recognized a non-taxable gain on the partial sale amounting to EUR 1 879 million.
The gain was determined as the Group’s retained ownership interest in the excess
of the fair value over book value of the net assets contributed by the Group to Nokia
Siemens Networks.
Nokia Siemens Networks commenced operations on April 1, 2007. The Group’s
contributed networks business was valued at EUR 5 500 million. In addition, the
Group incurred costs directly attributable to the acquisition of EUR 51 million.
Upon closing of the transaction, Nokia and Siemens contributed net assets, with
book values amounting to EUR 1 742 million and EUR 2 385 million, respectively. The
Group’s contributed networks business was valued at EUR 5 500 million. In addition,
the Group incurred costs directly attributable to the acquisition of EUR 51 million.
The table below presents the reported results of Nokia Networks prior to the
formation of Nokia Siemens Networks and the reported results of Nokia Siemens
Networks since inception.
Net sales, EURm
Nokia Networks
Nokia Siemens Networks
Total
Operating profit, EURm
Nokia Networks
Nokia Siemens Networks
Total
2007
2006
January–March
April–December
Total
January–March
April–December
Total
1 697
*
1 697
78
*
78
*
11 696
11 696
*
–1 386
–1 386
1 697
11 696
13 393
78
–1 386
–1 308
1 699
N/A
1 699
149
N/A
149
5 754
N/A
5 754
659
N/A
659
7 453
N/A
7 453
808
N/A
808
* No results presented as Nokia Siemens Networks began operations on April 1, 2007.
It is not practicable to determine the results of the Siemens’ carrier-related opera-
tions for three month period of January 1, 2007 through March 31, 2007 as Siemens
did not report those operations separately. As a result pro forma revenues and
operating profit as if the acquisition had occurred as of January 1, 2007 have not
been presented.
The following table summarizes the estimated fair values of the assets ac-
quired and liabilities assumed at the date of acquisition.
Carrying
amount
EURm
Fair
value
EURm
Useful
lives
years
6
4
5
3
3–5
Intangible assets subject to amortization:
Customer relationships
Developed technology
License to use trade name and trademark
Capitalized development costs
Other intangible assets
Property, plant & equipment
Deferred tax assets
Other non-current assets
Non-current assets
Inventories
Accounts receivable
Prepaid expenses and accrued income
Other financial assets
Bank and cash
Current assets
Total assets acquired
Deferred tax liabilities
Long-term interest-bearing liabilities
Non-current liabilities
Short-term borrowings
Accounts payable
Accrued expenses
Provisions
—
—
—
143
47
190
371
111
153
825
1 010
3 135
870
55
382
5 452
6 277
171
34
205
231
1 539
1 344
463
1 290
710
350
154
47
2 551
344
181
153
3 229
1 138
3 087
846
55
382
5 508
8 737
997
34
1 031
213
1 491
1 502
397
24
Nokia in 2007
Current liabilities
Total liabilities assumed
Minority interest
Net assets acquired
Useful
lives
years
Carrying
amount
EURm
3 577
3 782
110
2 385
Fair
value
EURm
3 603
4 634
108
3 995
Cost of acquisition
Goodwill
Less non-controlling interest in goodwill
Plus costs directly attributable to the acquisition
Goodwill arising on formation of Nokia Siemens Networks
5 500
1 505
753
51
803
The goodwill of EUR 803 million has been allocated to the Nokia Siemens Networks
segment. The goodwill is attributable to assembled workforce and the synergies
expected to arise subsequent to the acquisition. None of the goodwill acquired is
expected to be deductible for income tax purposes.
The amount of the loss specifically attributable to the business acquired from
Siemens since the acquisition date included in the Group’s profit for the period has
not been disclosed as it is not practicable to do so. This is due to the ongoing inte-
gration of the acquired Siemens’ carrier-related operations and Nokia’s networks
business, and management’s focus on the operations and results of the combined
entity, Nokia Siemens Networks.
During 2007, the Group completed the acquisition of the following three com-
panies. The purchase consideration paid and goodwill arising from these acquisi-
tions was not material to the Group.
Notes to the consolidated financial statements
»
»
»
Enpocket Inc., based in Boston, USA, a global leader in mobile advertising
providing technology and services that allow brands to plan, create, execute,
measure and optimize mobile advertising campaigns around the world. The
Group acquired 100% ownership interest in Enpocket Inc. on October 5, 2007.
Avvenu Inc., based in Palo Alto, USA, provides Internet services that allow
anyone to use their mobile devices to securely access, use and share personal
computer files. The Group acquired 100% ownership interest in Avvenu Inc. on
December 5, 2007.
Twango, provides a comprehensive media sharing solution for organizing and
sharing photos, videos and other personal media. The Group acquired substan-
tially all assets of Twango on July 25, 2007.
Goodwill and aggregate net assets acquired in these transactions has been al-
located to Common Group Functions, Enterprise Solutions segment and Multimedia
segment.
Acquisitions completed in 2006
On February 10, 2006, the Group completed its acquisition of all of the outstanding
common stock of Intellisync Corporation. Intellisync is a leader in synchronization
technology for platform-independent wireless messaging and other business appli-
cations for mobile devices. The acquisition of Intellisync will enhance Nokia’s ability
to respond to its customers and effectively puts Nokia at the core of any mobility
solution for businesses of all sizes.
The total cost of the acquisition was EUR 325 million consisting of EUR 319 mil-
lion of cash and EUR 6 million of costs directly attributable to the acquisition.
The following table summarizes the estimated fair values of the assets ac-
quired and liabilities assumed at the date of acquisition. The carrying amount of In-
tellisync net assets immediately before the acquisition amounted to EUR 50 million.
February 10, 2006
EURm
»
»
Loudeye Corporation, based in Bristol, England, a global leader of digital music
platforms and digital media distribution services. The Group acquired a 100%
ownership interest in Loudeye Corporation on October 16, 2006.
gate5 AG, based in Berlin, Germany, a leading supplier of mapping, routing and
navigation software and services. The Group acquired a 100% ownership inter-
est in gate5 AG on October 15, 2006.
Goodwill and aggregate net assets acquired in these three transactions amounted
to EUR 198 million and EUR 168 million, respectively. Goodwill has been allocated
to the Multimedia segment and to the Mobile Phone segment. The goodwill arising
from these acquisitions is attributable to assembled workforce and post acquisition
synergies. None of the goodwill recognized in these transactions is expected to be
tax deductible.
9. Depreciation and amortization
EURm
2007
2006
2005
Depreciation and amortization by function
Cost of sales
Research and development 1
Selling and marketing 1
Administrative and general
Other operating expenses
Total
303
523
232
148
—
1 206
279
312
9
111
1
712
242
349
9
99
13
712
1
In 2007, depreciation and amortization allocated to research and development and selling and
marketing included amortization of acquired intangible assets of EUR 136 million and EUR 214 million,
respectively.
Intangible assets subject to amortization:
Technology related intangible assets
Other intangible assets
Deferred tax assets
Other non-current assets
Non-current assets
Goodwill
Current assets
Total assets acquired
Deferred tax liabilities
Other non-current liabilities
Non-current liabilities
Current liabilities
Total liabilities assumed
Net assets acquired
38
22
60
45
16
121
290
42
453
23
1
24
104
128
325
The goodwill of EUR 290 million has been allocated to the Enterprise Solutions
segment. The goodwill is attributable to assembled workforce and the significant
synergies expected to arise subsequent to the acquisition. None of the goodwill
acquired is expected to be deductible for tax purposes.
In 2006, the Group acquired ownership interests or increased its existing
ownership interests in the following three entities for total consideration of EUR 366
million, of which EUR 347 million was in cash, EUR 5 million in directly attributable
costs and EUR 14 million in deferred cash consideration:
» Nokia Telecommunications Ltd, based in BDA, Beijing, a leading mobile com-
munications manufacturer in China. The Group acquired an additional 22%
ownership interest in Nokia Telecommunications Ltd. on June 30, 2006.
10. Financial income and expenses
EURm
2007
2006
2005
Dividend income on available-for-sale
financial investments
Interest income on available-for-sale
financial investments
Interest income on loans receivables
carried at amortized cost
Interest expense on financial
liabilities carried at amortized cost
Other financial income
Other financial expenses
Net foreign exchange gains
(or net foreign exchange losses)
From foreign exchange derivatives
designated at fair value through
profit and loss accounts
From balance sheet items revaluation
Net gains (net losses) on other derivatives
designated at fair value through
profit and loss accounts
Total
—
—
1
338
225
296
1
– 43
43
– 24
—
– 22
55
– 18
—
– 18
77
– 22
37
– 118
75
– 106
– 167
156
5
239
– 2
207
– 1
322
During 2005, Nokia sold the remaining holdings in the subordinated convertible
perpetual bonds issued by France Telecom. As a result, the Group booked a total
net gain of EUR 57 million in other financial income, of which EUR 53 million was
recycled from fair value and other reserves in shareholders’ equity.
Notes to the consolidated financial statements
25
Notes to the consolidated financial statements
11. Income taxes
12. Intangible assets
2007
2006
2005
EURm
2007
2006
Capitalized development costs
Acquisition cost January 1
Additions during the period
Acquisitions
Impairment losses
Disposals during the period
Accumulated acquisition cost December 31
Accumulated amortization January 1
Disposals during the period
Amortization for the period
Accumulated amortization December 31
Net book value January 1
Net book value December 31
Goodwill
Acquisition cost January 1
Translation differences
Acquisitions
Other changes
Accumulated acquisition cost December 31
Net book value January 1
Net book value December 31
Other intangible assets
Acquisition cost January 1
Translation differences
Additions during the period
Acquisitions
Impairment losses
Disposals during the period
Accumulated acquisition cost December 31
Accumulated amortization January 1
Translation differences
Disposals during the period
Amortization for the period
Accumulated amortization December 31
Net book value January 1
Net book value December 31
1 533
157
154
– 27
—
1 817
– 1 282
—
– 157
– 1 439
251
378
532
– 30
882
—
1 384
532
1 384
772
– 20
102
2 437
—
– 73
3 218
– 474
11
73
– 470
– 860
298
2 358
1 445
127
—
—
– 39
1 533
– 1 185
39
– 136
– 1 282
260
251
90
– 26
488
– 20
532
90
532
676
– 21
99
122
– 33
– 71
772
– 465
10
66
– 85
– 474
211
298
EURm
Income tax expense
Current tax
Deferred tax
Total
Finland
Other countries
Total
– 2 209
687
– 1 522
– 1 323
– 199
– 1 522
– 1 303
– 54
– 1 357
– 941
– 416
– 1 357
– 1 262
– 19
– 1 281
– 759
– 522
– 1 281
The differences between income tax expense computed at the statutory rate in
Finland of 26% and income taxes recognized in the consolidated income statement
is reconciled as follows at December 31, 2007:
EURm
Income tax expense at statutory rate
Provisions without tax benefit/expense
Non-taxable gain on formation of
Nokia Siemens Networks 1
Taxes for prior years
Taxes on foreign subsidiaries’ profits
in excess of (lower than) income taxes
at statutory rates
Operating losses with no current tax benefit
Net increase in provisions
Change in income tax rate 2
Deferred tax liability on undistributed
earnings 3
Other
Income tax expense
2007
2 150
61
– 489
20
– 138
15
50
– 114
– 37
4
1 522
2006
1 488
12
—
– 24
– 73
—
– 12
—
2005
1 295
11
—
1
– 30
—
22
—
– 3
– 31
1 357
8
–26
1 281
1 See Note 8.
2 The change in income tax rate decreased Group tax expense primarly due to the impact of a decrease
in the German statutory tax rate on deferred tax asset balances.
3 The change in deferred tax liability on undistributed earnings mainly related to amendment of the
FIN-US tax treaty, which abolished the withholding tax under certain conditions.
Income taxes include a tax benefit from received and accrued tax refunds from
previous years of EUR 84 million in 2006 and EUR 48 million in 2005.
Certain of the Group companies’ income tax returns for periods ranging from
2001 through 2007 are under examination by tax authorities. The Group does not
believe that any significant additional taxes in excess of those already provided for
will arise as a result of the examinations.
26
Nokia in 2007
13. Property, plant and equipment
EURm
2007
2006
Notes to the consolidated financial statements
EURm
2007
2006
Land and water areas
Acquisition cost January 1
Translation differences
Additions during the period
Acquisitions
Disposals during the period
Accumulated acquisition cost December 31
Net book value January 1
Net book value December 31
Buildings and constructions
Acquisition cost January 1
Translation differences
Additions during the period
Acquisitions
Disposals during the period
Accumulated acquisition cost December 31
Accumulated depreciation January 1
Translation differences
Disposals during the period
Depreciation for the period
Accumulated depreciation December 31
Net book value January 1
Net book value December 31
Machinery and equipment
Acquisition cost January 1
Translation differences
Additions during the period
Acquisitions
Disposals during the period
Accumulated acquisition cost December 31
Accumulated depreciation January 1
Translation differences
Disposals during the period
Depreciation for the period
Accumulated depreciation December 31
Net book value January 1
Net book value December 31
Other tangible assets
Acquisition cost January 1
Translation differences
Additions during the period
Disposals during the period
Accumulated acquisition cost December 31
Accumulated depreciation January 1
Translation differences
Disposals during the period
Depreciation for the period
Accumulated depreciation December 31
Net book value January 1
Net book value December 31
78
– 2
4
5
– 12
73
78
73
925
– 15
97
58
– 57
1 008
– 230
3
25
– 37
– 239
695
769
3 707
– 42
448
264
– 365
4 012
– 2 966
34
364
– 539
– 3 107
741
905
22
– 1
2
– 3
20
– 7
—
1
– 3
– 9
15
11
82
– 1
—
—
– 3
78
82
78
865
– 11
123
—
– 52
925
– 244
4
40
– 30
– 230
621
695
3 735
– 62
466
—
– 432
3 707
– 2 984
48
429
– 459
– 2 966
751
741
17
– 1
6
—
22
– 6
—
—
– 1
– 7
11
15
Advance payments and fixed assets
under construction
Net carrying amount January 1
Translation differences
Additions
Acquisitions
Disposals
Transfers to:
Other intangible assets
Buildings and constructions
Machinery and equipment
Net carrying amount December 31
Total property, plant and equipment
73
—
123
17
– 2
– 7
– 29
– 21
154
1 912
120
– 2
213
—
– 1
– 37
– 89
– 131
73
1 602
14. Investments in associated companies
EURm
2007
2006
Net carrying amount January 1
Translation differences
Additions
Acquisitions
Deductions
Impairments
Share of results
Dividends
Other movements
Net carrying amount December 31
224
—
19
67
– 6
– 7
44
– 12
– 4
325
193
– 2
19
—
– 1
—
28
—
– 13
224
Shareholdings in associated companies are comprised of investments in unlisted
companies in all periods presented.
15. Available-for-sale investments
Available-for-sale investments included the following:
EURm
Fixed income and money-market
investments carried at fair value
Available-for-sale investments in
publicly quoted equity shares
Other available-for-sale investments
carried at fair value
Other available-for-sale investments
carried at cost less impairment
2007
2006
Non-
Current current
Non-
Current current
9 628
—
7 058
—
10
—
—
8
—
184
—
177
—
9 628
147
341
—
7 058
103
288
The current fixed income and money market investments, carried at fair value,
included available-for-sale liquid assets of EUR 4 903 million (EUR 5 012 million in
2006) and cash equivalents of EUR 4 725 million (EUR 2 046 million in 2006). See Note
35 for details of fixed income and money market investments.
Notes to the consolidated financial statements
27
Notes to the consolidated financial statements
16. Long-term loans receivable
EURm
2007
2006
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Long-term loans receivable carried at
amortized cost
10
10
19
19
The long-term loans receivable mainly consist of loans made to suppliers and to
customers principally to support their financing of network infrastructure and ser-
vices or working capital. Their fair value approximates the carrying value. See Note
35 for long-term and short-term portion and related maturities.
17. Inventories
EURm
Raw materials, supplies and other
Work in progress
Finished goods
Total
2007
591
1 060
1 225
2 876
2006
360
600
594
1 554
18. Prepaid expenses and accrued income
Prepaid expenses and accrued income primarily consists of VAT and other tax
receivables. Prepaid expenses and accrued income also include prepaid pension
costs, accrued interest income and other accrued income, but no amounts which are
individually significant.
19. Valuation and qualifying accounts
Balance at
beginning
of year
EURm
Charged to
cost and
expenses
EURm
Deductions 1
EURm
Acquisitions
EURm
154
256
212
218
281
176
361
172
38
145
70
353
80
376
– 72
– 202
– 139
– 311
– 160
– 372
Balance
at end
of year
EURm
332
417
212
218
281
176
Allowances on assets to which they apply:
2007
Allowance for doubtful accounts
Excess and obsolete inventory
2006
Allowance for doubtful accounts
Excess and obsolete inventory
2005
Allowance for doubtful accounts
Excess and obsolete inventory
1 Deductions include utilization and releases of the allowances.
28
Nokia in 2007
20. Fair value and other reserves
Balance at December 31, 2004
Cash flow hedges:
Net fair value gains (+)/losses (–)
Transfer to profit and loss account as adjustment to net sales
Transfer to profit and loss account as adjustment to cost of sales
Available-for-sale Investments:
Net fair value gains (+)/losses (–)
Transfer to profit and loss account on impairment
Transfer of net fair value gains (–)/losses (+)
to profit and loss account on disposal
Balance at December 31, 2005
Cash flow hedges:
Net fair value gains (+)/losses (–)
Transfer to profit and loss account as adjustment to net sales
Transfer to profit and loss account as adjustment to cost of sales
Available-for-sale Investments:
Net fair value gains (+)/losses (–)
Transfer to profit and loss account on impairment
Transfer of net fair value gains (–)/losses (+)
to profit and loss account on disposal
Balance at December 31, 2006
Cash flow hedges:
Net fair value gains (+)/losses (–)
Transfer to profit and loss account as adjustment to net sales
Transfer to profit and loss account as adjustment to cost of sales
Available-for-sale investments:
Net fair value gains (+)/losses (–)
Transfer to profit and loss account on impairment
Transfer of net fair value gains (–)/losses (+)
to profit and loss account on disposal
Balance at December 31, 2007
Notes to the consolidated financial statements
Hedging reserve, EURm
Available-for-sale
investments, EURm
Total, EURm
Gross
Tax
Net
Gross
Tax
Net
Gross
Tax
Net
14
– 3
11
7
– 5
2
21
– 8
13
– 327
568
– 418
84
– 147
108
– 243
421
– 310
—
—
—
– 163
—
—
—
42
—
—
—
– 121
61
– 243
414
– 16
68
– 113
45
– 175
301
—
—
—
69
—
—
—
– 19
—
—
—
50
29
– 687
643
– 7
186
– 175
22
– 501
468
—
—
—
54
—
—
—
– 15
—
—
—
39
—
—
—
– 69
9
– 3
– 56
—
—
—
– 42
18
14
– 66
—
—
—
32
29
– 12
– 17
—
—
—
6
—
—
1
—
—
—
1
—
—
2
—
—
—
– 1
—
—
1
—
—
—
– 63
9
– 3
– 55
—
—
—
– 41
18
14
– 64
—
—
—
31
29
– 12
– 16
– 327
568
– 418
– 69
9
– 3
– 219
84
– 147
108
6
—
—
43
– 243
421
– 310
– 63
9
– 3
– 176
61
– 243
414
– 16
68
– 113
45
– 175
301
– 42
18
14
3
1
—
—
– 41
18
14
– 17
– 14
29
– 687
643
– 7
186
– 175
22
– 501
468
32
29
– 1
—
31
29
– 12
—
– 12
37
– 14
23
In order to ensure that amounts deferred in the cash flow hedging reserve repre-
sent only the effective portion of gains and losses on properly designated hedges
of future transactions that remain highly probable at the balance sheet date, Nokia
has adopted a process under which all derivative gains and losses are initially rec-
ognized in the profit and loss account. The appropriate reserve balance is calculated
at the end of each period and posted to the fair value and other reserves.
The Group continuously reviews the underlying cash flows and the hedges
allocated thereto, to ensure that the amounts transferred to the fair value reserves
during the year ended December 31, 2007, and 2006 do not include gains/losses on
forward exchange contracts that have been designated to hedge forecasted sales or
purchases that are no longer expected to occur.
All of the net fair value gains or losses recorded in the fair value and other
reserve at December 31, 2007, on open forward foreign exchange contracts which
hedge anticipated future foreign currency sales or purchases are transferred from
the Hedging Reserve to the profit and loss account when the forecasted foreign cur-
rency cash flows occur, at various dates up to approximately 1 year from the balance
sheet date.
21. The shares of the Parent Company
See note 14 to the financial statements of the Parent Company.
Notes to the consolidated financial statements
29
Notes to the consolidated financial statements
22. Share-based payment
The Group has several equity-based incentive programs for employees. The pro-
grams include performance share plans, stock option plans and restricted share
plans. Both executives and employees participate in these programs.
The equity-based incentive grants are generally forfeited, if the employ-
ment relationship with the Group terminates, and they are conditioned upon the
fulfillment of such performance, service and other conditions, as determined in the
relevant plan rules.
Share-based compensation expense for all equity-based incentive awards
amounted to EUR 228 million in 2007 (EUR 196 million in 2006 and EUR 95 million in
2005).
Stock options
Nokia’s global stock option plans in effect for 2007, including their terms and condi-
tions, were approved by the Annual General Meeting in the year when each plan was
launched, i.e. in 2001, 2003, 2005 and 2007.
Each stock option entitles the holder to subscribe for one new Nokia share. Un-
der the 2001 stock option plan, the stock options were transferable by the partici-
pants. Under the 2003, 2005 and 2007 plans, the stock options are non-transferable.
All of the stock options have a vesting schedule with a 25% vesting one year after
grant and quarterly vesting thereafter. The stock options granted under the plans
generally have a term of five years.
The exercise price of the stock options is determined at the time of grant on a
quarterly basis. The exercise prices are determined in accordance with a pre-agreed
The table below sets forth certain information relating to the stock options out-
standing at December 31, 2007.
schedule quarterly after the release of Nokia’s periodic financial results and are
based on the trade volume weighted average price of a Nokia share on the Helsinki
Stock Exchange during the trading days of the first whole week of the second
month of the respective calendar quarter (i.e., February, May, August or November).
Exercise prices are determined on a one-week weighted average to mitigate any
short term fluctuations in Nokia’s share price. The determination of exercise price is
defined in the terms and conditions of the stock option plan, which are approved by
the shareholders at the respective Annual General Meeting. The Board of Directors
does not have right to amend the above-described determination of the exercise
price.
The stock option exercises are settled with newly issued Nokia shares which
entitle the holder to a dividend for the financial year in which the subscription
occurs. Other shareholder rights commence on the date on which the shares sub-
scribed for are registered with the Finnish Trade Register.
Pursuant to the stock options issued, an aggregate maximum number of
34 673 312 new Nokia shares may be subscribed for, representing 0.9% of the total
number of votes at December 31, 2007. During 2007 the exercise of 57 269 338 op-
tions resulted in the issuance of 57 269 338 new shares. The exercises during 2007
resulted in an increase of the share capital of the parent company of EUR 193 905
by the Annual General Meeting on May 3, 2007. After that date the exercises of stock
options have no longer resulted in an increase of the share capital as thereafter all
share subscription prices are recorded in the fund for invested non-restricted equity
as resolved by the Annual General Meeting.
There were no stock options or convertible bonds outstanding as of December
31, 2007, which upon exercise would result in an increase of the share capital of the
parent company.
Stock
Plan
(year of
options
launch) outstanding
Number of
participants
(approx.)
Option
(sub)category
2001 1, 2
—
—
2001 C 1Q/02
2003 2
17 113 788
14 000
2005 2
14 498 513
5 000
2007 2
3 061 011
3 000
2001 C 3Q/02
2001 C 4Q/02
2002 A+B
2003 2Q
2003 3Q
2003 4Q
2004 2Q
2004 3Q
2004 4Q
2005 2Q
2005 3Q
2005 4Q
2006 1Q
2006 2Q
2006 3Q
2006 4Q
2007 1Q
2007 2Q
2007 3Q
2007 4Q
Vesting status
(as percentage of
total number
of stock options
outstanding)
Expired
Expired
Expired
Expired
100.00
100.00
93.75
81.25
75.00
68.75
56.25
50.00
43.75
37.50
31.25
25.00
—
—
—
—
—
Exercise period
First vest date
Last vest date
Expiry date
April 1, 2003
April 3, 2006
December 31, 2007
October 1, 2003
October 2, 2006
December 31, 2007
January 2, 2004
January 2, 2007
December 31, 2007
July 1, 2003
July 1, 2004
July 3, 2006
December 31, 2007
July 2, 2007
December 31, 2008
October 1, 2004
October 1, 2007
December 31, 2008
January 3, 2005
January 2, 2008
December 31, 2008
July 1, 2005
July 1, 2008
December 31, 2009
October 3, 2005
October 1, 2008
December 31, 2009
January 2, 2006
January 2, 2009
December 31, 2009
July 1, 2006
July 1, 2009
December 31, 2010
October 1, 2006
October 1, 2009
December 31, 2010
January 1, 2007
January 1, 2010
December 31, 2010
April 1, 2007
April 1, 2010
December 31, 2011
July 1, 2007
July 1, 2010
December 31, 2011
October 1, 2007
October 1, 2010
December 31, 2011
January 1, 2008
January 1, 2011
December 31, 2011
April 1, 2008
April 1, 2011
December 31, 2011
July 1, 2008
July 1, 2011
December 31, 2012
October 1, 2008
October 1, 2011
December 31, 2012
January 1, 2009
January 1, 2012
December 31, 2012
Exercise
price/share
EUR
26.06
12.99
16.86
17.89
14.95
12.71
15.05
11.79
9.44
12.35
12.79
13.09
14.48
14.99
18.02
15.37
15.38
17.00
18.39
21.86
27.53
1 The stock options under the 2001 plan were listed on the Helsinki Stock Exchange.
2 The Group’s current global stock option plans have a vesting schedule with a 25% vesting one year
after grant, and quarterly vesting thereafter, each of the quarterly lots representing 6.25% of the total
grant. The grants vest fully in four years.
30
Nokia in 2007
Notes to the consolidated financial statements
Weighted average exercise price 2 Weighted average share price 2
EUR
13.42
16.70
21.75
EUR
23.29
12.82
10.94
17.86
22.97
16.79
13.71
15.11
33.44
16.28
18.48
16.99
15.13
17.83
15.28
26.18
25.33
16.65
14.66
Options outstanding
Weighted average
remaining contractual
life in years
2.60
2.99
1.10
4.21
Weighted average
exercise price, EUR
11.10
12.84
14.97
18.36
Total stock options outstanding as at December 31, 2007 1
Shares under option at January 1, 2005
Granted
Exercised
Forfeited
Shares under option at December 31, 2005
Granted
Exercised
Forfeited
Expired
Shares under option at December 31, 2006
Granted
Exercised
Forfeited
Expired
Shares under option at December 31, 2007
Options exercisable at December 31, 2004 (shares)
Options exercisable at December 31, 2005 (shares)
Options exercisable at December 31, 2006 (shares)
Options exercisable at December 31, 2007 (shares)
Number of shares
142 957 316
8 552 160
724 796
5 052 794
145 731 886
11 421 939
3 302 437
2 888 474
57 677 685
93 285 229
3 211 965
57 776 205
1 992 666
1 161 096
35 567 227
83 667 122
112 095 407
69 721 916
21 535 000
1
Includes also a minor number of stock options granted under other than global equity plans. For
further information see “Other equity plans for employees” below.
2 The weighted average excercise price and the weighted average share price do not incorporate the
effect of transferable stock option exercises by option holders not employed by the Group.
The weighted average grant date fair value of stock options granted was EUR 3.32 in
2007, EUR 3.65 in 2006 and EUR 2.45 in 2005.
The options outstanding by range of exercise price at December 31, 2007, are
as follows:
Exercise prices, EUR
Number of shares
0.75–11.96
12.06–14.48
14.95–17.61
18.02–38.34
4 140 394
5 939 886
13 805 227
11 681 720
35 567 227
Nokia calculates the fair value of stock options using the Black Scholes model. The
fair value of the stock options is estimated at the grant date using the following
assumptions:
Weighted average expected dividend yield
Weighted average expected volatility
Risk-free interest rate
Weighted average risk-free interest rate
Expected life (years)
Weighted average share price, EUR
2007
2.30%
25.24%
3.79%–4.19%
4.09%
3.59
18.49
2006
2.08%
24.09%
2.86%–3.75%
3.62%
3.60
17.84
2005
2.50%
25.92%
2.16%–3.09%
2.60%
3.59
13.20
Expected term of stock options is estimated by observing general option holder
behaviour and actual historical terms of Nokia stock option plans.
Expected volatility has been set by reference to the implied volatility of options
available on Nokia shares in the open market and in light of historical patterns of
volatility.
Notes to the consolidated financial statements
31
Notes to the consolidated financial statements
Performance shares
The Group has granted performance shares under the Global Plans 2004, 2005, 2006
and 2007, each of which, including its terms and conditions, has been approved
by the Board of Directors. A valid authorization from the Annual General Meeting
is required, when the plans are settled by using the Nokia newly issued shares or
existing treasury shares. The Group may also settle the plans by using Nokia shares
purchased on the open market or by using cash instead of shares.
The performance shares represent a commitment by Nokia to deliver Nokia
shares to employees at a future point in time, subject to Nokia’s fulfillment of
pre-defined performance criteria. No performance shares will vest unless Nokia’s
performance reaches at least one of the threshold levels measured by two indepen-
dent, pre-defined performance criteria: Nokia’s average annual net sales growth for
the performance period of the plan and earnings per share (EPS) at the end of the
performance period.
The 2004 and 2005 plans have a four-year performance period with a two-year
interim measurement period, and the 2006 and 2007 plans have a three-year
performance period without an interim payout. The shares vest after the respective
interim measurement period and/or the performance period. Once the shares vest,
they will be delivered to the participants. Until the Nokia shares are delivered, the
participants will not have any shareholder rights, such as voting or dividend rights
associated with the performance shares.
The following table summarizes our global performance share plans.
Plan
2004
2005
2006
2007
Performance
shares outstanding
at threshold
Number of
participants
(approx.)
3 195 197
3 819 347
4 432 655
2 107 359
10 000
11 000
12 000
5 000
Interim
measurement
period
2004–2005
2005–2006
N/A
N/A
Performance
period
1st (interim)
settlement
2nd (final)
settlement
2004–2007
2005–2008
2006–2008
2007–2009
2006
2007
N/A
N/A
2008
2009
2009
2010
The following table sets forth the performance criteria of each global performance
share plan.
Plan
2004
Interim measurement
Performance period
2005
Interim measurement
2006
2007
Performance period
Performance period
Performance period
Threshold performance
Maximum performance
EPS 1
EUR
0.80
0.84
0.75
0.82
0.96
1.26
Average annual
net sales growth 1
4%
8%
3%
8%
11%
9.5%
EPS 1
EUR
0.94
1.18
0.96
1.33
1.41
1.86
Average annual
net sales growth 1
16%
20%
12%
17%
26%
20%
1 Both the EPS and Average Annual Net Sales Growth criteria have an equal weight of 50%.
32
Nokia in 2007
Notes to the consolidated financial statements
Performance shares outstanding as at December 31, 2007 1
Number of performance shares at threshold
Weighted average grant date fair value EUR 2
3 910 840
4 469 219
337 242
8 042 817
5 140 736
569 164
12 614 389
2 163 901
1 001 332
222 400
13 554 558
11.86
14.83
19.96
4
Includes also performance shares vested under other than global equity plans.
5 Based on the performance of the Group during the Interim Measurement Period 2005–2006, under
the 2005 Performance Share Plan, both performance criteria were met. Hence, 3 980 572 Nokia shares
equalling the threshold number were delivered in 2007. The performance shares related to the interim
settlement of the 2005 Performance Share Plan are included in the number of performance shares out-
standing at December 31, 2007, as these performance shares will remain outstanding until the final
settlement in 2009. The final payout, in 2009, if any, will be adjusted by the shares delivered based on
the Interim Measurement Period.
Performance shares at January 1, 2005
Granted
Forfeited
Performance shares at December 31, 2005
Granted
Forfeited
Performance shares at December 31, 2006 3
Granted
Forfeited
Vested 4
Performance shares at December 31, 2007 5
1
Includes also a minor number of performance shares granted under other than global equity plans.
For further information see “Other equity plans for employees” below.
2 The fair value of performance shares is estimated based on the grant date market price of the Com-
pany’s share less the present value of dividends expected to be paid during the vesting period.
3 Based on the performance of the Group during the Interim Measurement Period 2004–2005, under
the 2004 Performance Share Plan, both performance criteria were met. Hence, 3 595 339 Nokia shares
equalling the threshold number were delivered in 2006.
The performance shares related to the interim settlement of the 2004 Performance Share Plan are in-
cluded in the number of performance shares outstanding at December 31, 2006, as these performance
shares will remain outstanding until the final settlement in 2008. The final payout, in 2008, will be
adjusted by the shares delivered based on the Interim Measurement Period.
Based on the performance of the Group during the Performance Period 2004–2007,
under the 2004 Performance Share Plan, both threshold performance criteria were
exceeded. Hence 7.6 million Nokia shares are expected to vest in 2008. The shares
will vest as of the date of the Annual General Meeting on May 8, 2008.
Restricted shares
The Group has granted restricted shares to recruit, retain, reward and motivate
selected high potential employees, who are critical to the future success of Nokia.
It is Nokia’s philosophy that restricted shares will be used only for key manage-
ment positions and other critical resources. The outstanding global restricted share
plans, including their terms and conditions, have been approved by the Board of
Directors. A valid authorization from the Annual General Meeting is required, when
the plans are settled by using Nokia newly issued shares or existing treasury shares.
The Group may also settle the plans by using Nokia shares purchased on the open
market or by using cash instead of shares.
All of our restricted share plans have a restriction period of three years after
grant, after which period the granted shares will vest. Once the shares vest, they
will be delivered to the participants. Until the Nokia shares are delivered, the
participants will not have any shareholder rights, such as voting or dividend rights,
associated with the restricted shares.
Restricted shares outstanding as at December 31, 2007 1
Restricted shares at January 1, 2005
Granted
Forfeited
Restricted shares at December 31, 2005
Granted
Forfeited
Vested
Restricted shares at December 31, 2006
Granted
Forfeited
Vested
Restricted shares at December 31, 2007
Number of restricted shares
Weighted average grant date fair value EUR 2
2 319 430
3 016 746
150 500
5 185 676
1 669 050
455 100
334 750
6 064 876
1 749 433
297 900
1 521 080
5 995 329
12.14
14.71
24.37
1
Includes also a minor number of restricted shares granted under other than global equity plans. For
further information see “Other equity plans for employees” below.
2 The fair value of restricted shares is estimated based on the grant date market price of the Company’s
share less the present value of dividends expected to be paid during the vesting period.
Notes to the consolidated financial statements
33
Notes to the consolidated financial statements
Other equity plans for employees
In addition to the global equity plans described above, the Group has minor equity
plans for Nokia acquired businesses or employees in the United States or Canada,
which do not result in an increase in the share capital of Nokia.
These plans are settled by using Nokia shares or ADSs acquired from the mar-
ket. When these treasury shares are issued on exercise of stock options any gain or
loss is recognized in share issue premium.
On the basis of these plans the Group had 0.9 million stock options and minor
number of restricted shares outstanding on December 31, 2007. For stock options,
the average exercise price is USD 20.53.
23. Long-term interest-bearing liabilities
2007
2006
Carrying
amount
Fair
value
Carrying
amount
Fair
value
EURm
Long-term interest-bearing
liabilities carried at
amortized cost
At December 31, 2007, the Group had loss carry forwards of EUR 242 million
(EUR 24 million in 2006) for which no deferred tax asset was recognized due to
uncertainty of utilization of these loss carry forwards. Part of these losses do not
have an expiry date.
At December 31, 2007, the Group had undistributed earnings of EUR 315 million,
for which no deferred tax liability was recognized as these earnings are considered
permanently invested.
25. Accrued expenses
EURm
Social security, VAT and other taxes
Wages and salaries
Advance payments
Other
Total
2007
2006
2 024
865
503
3 722
7 114
966
250
303
2 277
3 796
203
203
69
69
Other operating expense accruals include various amounts which are individually
insignificant.
Fair value is estimated based on the current market values of similar instruments.
26. Derivative financial instruments
24. Deferred taxes
EURm
2007
2006
EURm
2007
Assets
2007
Liabilities
Fair
Fair
value 1 Notional 2
value 1 Notional 2
Hedges of net investment
in foreign subsidiaries:
Forward foreign exchange contracts 22
—
Currency options bought
1 264
51
Cash flow hedges:
Forward foreign exchange contracts 89
Currency options bought
20
Currency options sold
15 718
7 618
Derivatives not designated in hedge
accounting relationships carried at
fair value through profit and loss:
Forward foreign exchange contracts 22
4
Currency options bought
6
Interest rate futures
—
Interest rate swaps
41
—
204
Cash settled equity options bought 3
Cash settled equity options sold 3
2 831
1 530
39
43
63
—
29 157
– 6
—
– 64
—
– 25
– 49
—
—
—
—
– 23
– 167
393
—
12 062
—
6 872
4 456
—
—
—
—
40
23 823
Deferred tax assets:
Intercompany profit in inventory
Tax losses carried forward
Warranty provision
Other provisions
Depreciation differences and untaxed reserves
Share-based compensation
Other temporary differences
Total deferred tax assets
Deferred tax liabilities:
Depreciation differences and untaxed reserves
Fair value gains/losses
Undistributed earnings
Other temporary differences 1
Total deferred tax liabilities
Net deferred tax asset
87
314
132
292
367
227
134
1 553
– 165
– 40
– 31
– 727
– 963
590
34
41
134
253
104
70
173
809
– 23
– 16
– 65
– 101
– 205
604
The tax charged to shareholders’ equity is as follows:
Fair value and other reserves, fair value gains/losses
and excess tax benefit on share-based compensation
133
– 43
1
In 2007, other temporary differences included a deferred tax liability of EUR 563 million arising from
purchase price allocation related to Nokia Siemens Networks.
Deferred taxes include deferred tax assets and liabilities arising from the formation
of Nokia Siemens Networks at April 1, 2007. See Note 8.
At December 31, 2007, the Group had loss carry forwards, primarily attributable
to foreign subsidiaries of EUR 1 403 million (EUR 143 million in 2006), most of which
do not have an expiry date.
34
Nokia in 2007
Notes to the consolidated financial statements
2006
Assets
2006
Liabilities
Fair
Fair
value 1 Notional 2
value 1 Notional 2
EURm
Hedges of net investment
in foreign subsidiaries:
Forward foreign exchange contracts 27
—
Currency options bought
1 561
186
– 6
—
686
—
Cash flow hedges:
Forward foreign exchange contracts 27
1 783
– 51
11 641
Derivatives not designated in hedge
accounting relationships carried at
fair value through profit and loss:
Forward foreign exchange contracts 11
2
Currency options bought
—
Currency options sold
7
—
74
Cash settled equity options bought 3
Cash settled equity options sold 3
12 090
218
—
63
—
15 901
– 7
– 1
– 2
—
– 2
– 69
2 098
50
143
—
18
14 636
1 The fair value of derivative financial instruments is included on the asset side under heading Other
financial assets and on the liability side under Short term borrowings.
2
Includes the gross amount of all notional values for contracts that have not yet been settled or can-
celled. The amount of notional value outstanding is not necessarily a measure or indication of market
risk, as the exposure of certain contracts may be offset by that of other contracts.
3 Cash settled equity options are used to hedge risk relating to employee incentive programs and invest-
ment activities.
27. Provisions
EURm
At January 1, 2007
Exchange differences
Acquisitions
Additional provisions
Change in fair value
Changes in estimates
Charged to profit and loss account
Utilized during year
At December 31, 2007
Warranty
Restructuring
IPR
infringements
1 198
–10
263
1 127
– 126
1 001
– 963
1 489
65
—
—
744
– 53
691
– 139
617
284
—
—
345
– 47
298
– 37
545
Tax
402
—
59
– 9
50
—
452
Other
437
—
134
548
16
– 216
348
– 305
614
Total
2 386
–10
397
2 823
16
– 451
2 388
– 1 444
3 717
EURm
Analysis of total provisions at December 31:
Non-current
Current
2007
2006
1 323
2 394
690
1 696
Outflows for the warranty provision are generally expected to occur within the next
18 months. Timing of outflows related to tax provisions is inherently uncertain.
The restructuring provision is mainly related to restructuring activities in Nokia
Siemens Networks. The majority of outflows related to the restructuring is expected
to occur during 2008.
Restructuring and other associated expenses incurred in Nokia Siemens Net-
works in 2007 totaled EUR 1 110 million including mainly personnel related expenses
as well as expenses arising from the elimination of overlapping functions, and
the realignment of the product portfolio and related replacement of discontinued
products at customer sites. These expenses included EUR 318 million impacting
gross profit, EUR 439 million research and development expenses, EUR 149 million
selling and marketing expenses, EUR 146 million administrative expenses and EUR
58 million other operating expenses. EUR 254 million of the expenses was paid
during 2007.
The Group provides for the estimated future settlements related to asserted
and unasserted past IPR infringements based on the probable outcome of potential
infringement. Final resolution of IPR claims generally occurs over several periods.
Other provisions include provisions for non-cancelable purchase commitments,
provision for pension and other social costs on share-based awards and provision
for losses on projects in progress.
Notes to the consolidated financial statements
35
Notes to the consolidated financial statements
28. Earnings per share
Numerator/EURm
Basic/Diluted:
Profit attributable to equity holders
of the parent
Denominator/1 000 shares
Basic:
Weighted average shares
Effect of dilutive securities:
stock options, restricted shares
and performance shares
Diluted:
Adjusted weighted average shares
and assumed conversions
2007
2006
2005
7 205
4 306
3 616
3 885 408
4 062 833 4 365 547
46 600
23 696
5 692
3 932 008
4 086 529 4 371 239
Basic earnings per share is computed using the weighted average number of shares
outstanding during the period. Diluted earnings per share is computed using the
weighted average number of shares outstanding during the period plus the dilutive
effect of stock options, restricted shares and performance shares outstanding dur-
ing the period.
29. Commitments and contingencies
EURm
2007
2006
Other guarantees include guarantees of EUR 2 429 million in 2007 (EUR 259
million in 2006) provided to certain Nokia Siemens Networks’ customers (Nokia’s
network customers in 2006) in the form of bank guarantees, standby letters of
credit and other similar instruments. These instruments entitle the customer to
claim payment as compensation for non-performance by Nokia of its obligations
under network infrastructure supply agreements. Depending on the nature of the
instrument, compensation is payable either immediately upon request, or subject
to independent verification of non-performance by Nokia.
Guarantees for loans and other financial commitments on behalf of other
companies of EUR 130 million in 2007 (EUR 23 million in 2006) represent guarantees
relating to payment by certain Nokia Siemens Networks’ customers and other third
parties under specified loan facilities between such a customer and other third
parties and their creditors. Nokia’s obligations under such guarantees are released
upon the earlier of expiration of the guarantee or early payment by the customer.
Financing commitments of EUR 270 million in 2007 (EUR 164 million in 2006)
are available under loan facilities negotiated with Nokia Siemens Networks’ cus-
tomers. Availability of the amounts is dependent upon the borrower’s continuing
compliance with stated financial and operational covenants and compliance with
other administrative terms of the facility. The loan facilities are primarily available
to fund capital expenditure relating to purchases of network infrastructure equip-
ment and services.
Venture fund commitments of EUR 251 million in 2007 (EUR 208 million in
2006) are financing commitments to a number of funds making technology related
investments. As a limited partner in these funds Nokia is committed to capital con-
tributions and also entitled to cash distributions according to respective partner-
ship agreements.
The Group is party to routine litigation incidental to the normal conduct of
business, including, but not limited to, several claims, suits and actions both initi-
ated by third parties and initiated by Nokia relating to infringements of patents,
violations of licensing arrangements and other intellectual property related mat-
ters, as well as actions with respect to products, contracts and securities. In the
opinion of the management outcome of and liabilities in excess of what has been
provided for related to these or other proceedings, in the aggregate, are not likely
to be material to the financial condition or result of operations.
As of December 31, 2007, the Group had purchase commitments of EUR 2 610
Collateral for our own commitments
Property under mortgages
Assets pledged
18
29
18
27
million (EUR 1 630 million in 2006) relating to inventory purchase obligations,
primarily for purchases in 2008.
Contingent liabilities on behalf of Group companies
Other guarantees
2 563
358
30. Leasing contracts
Collateral given on behalf of other companies
Securities pledged 1
Contingent liabilities on behalf of other companies
Financial guarantees on behalf of third parties 1
Other guarantees
Financing commitments
Customer finance commitments 1
Venture fund commitments 2
1 See also Note 35 b).
2 See also Note 35 a).
—
130
1
270
251
—
23
2
164
208
The amounts above represent the maximum principal amount of commitments and
contingencies.
Property under mortgages given as collateral for our own commitments
include mortgages given to the Finnish National Board of Customs as a general
indemnity of EUR 18 million in 2007 (EUR 18 million in 2006).
Assets pledged for the Group’s own commitments include available-for-sale
investments of EUR 10 million in 2007 (EUR 10 million of available-for-sale invest-
ments in 2006).
The Group leases office, manufacturing and warehouse space under various non-
cancellable operating leases. Certain contracts contain renewal options for various
periods of time.
The future costs for non-cancellable leasing contracts are as follows:
EURm
Leasing payments
2008
2009
2010
2011
2012
Thereafter
Total
Operating leases
281
218
157
117
96
129
998
Rental expense amounted to EUR 328 million in 2007 (EUR 285 million in 2006 and
EUR 262 million in 2005).
36
Nokia in 2007
Notes to the consolidated financial statements
31. Related party transactions
Nokia Pension Foundation is a separate legal entity that manages and holds in trust
the assets for the Group’s Finnish employee benefit plans. These assets do not in-
clude Nokia shares. The Group recorded net rental expense of EUR 0 million in 2007
(EUR 2 million in 2006 and EUR 2 million in 2005) pertaining to a sale-leaseback
transaction with the Nokia Pension Foundation involving certain buildings and a
lease of the underlying land.
At December 31, 2007, the Group had borrowings amounting to EUR 69 million
(EUR 69 million in 2006) from Nokia Unterstützungskasse GmbH, the Group’s Ger-
man pension fund, which is a separate legal entity. The loan bears interest at 6%
annum and its duration is pending until further notice by the loan counterparts
who have the right to terminate the loan with a 90-day notice period.
There were no loans granted to the members of the Group Executive Board and
Board of Directors at December 31, 2007, 2006 or 2005.
Transactions with associated companies
EURm
2007
2006
2005
Share of results of associated companies
Dividend income
Share of shareholders’ equity of
associated companies
Sales to associated companies
Purchases from associated companies
Receivables from associated companies
Liabilities to associated companies
44
12
158
82
125
61
69
28
1
61
—
—
—
14
10
1
33
—
—
—
14
Management compensation
The following table sets forth the salary and cash incentive information awarded
and paid or payable by the company to the Chief Executive Officer and President of
Nokia Corporation for fiscal years 2005–2007 as well as the share-based compensa-
tion expense relating to equity-based awards, expensed by the company.
2007
2006
2005
EUR
Olli-Pekka Kallasvuo
President and CEO 1
Base
salary
Cash
Share-based
incentive compensation
payments
expense
Base
salary
Cash
Share-based
incentive compensation
payments
expense
Base
salary
Cash
Share-based
incentive compensation
payments
expense
1 037 619
2 348 877
4 805 722
898 413
664 227
2 108 197
623 524
947 742
666 313
1 President and CEO as of June 1, 2006; and President and COO until June 1, 2006; Executive Vice Presi-
dent and General Manager and President of Mobile Phones January 1, 2004–October 1, 2005.
Total remuneration of the Group Executive Board awarded for the fiscal years
2005–2007 was EUR 13 634 791 in 2007 (EUR 8 574 443 in 2006 and EUR 14 684 602 in
2005), which consisted of base salaries and cash incentive payments. Total share-
based compensation expense relating to equity-based awards, expensed by the
company was EUR 19 837 583 in 2007 (EUR 15 349 337 in 2006 and EUR 8 295 227 in
2005).
Notes to the consolidated financial statements
37
Notes to the consolidated financial statements
Board of Directors
The following table depicts the annual remuneration structure paid to the members
of our Board of Directors, as resolved by the Annual General Meetings in the respec-
tive years.
2007
2006
2005
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
375 000
150 000
155 000
140 000
130 000
130 000
130 000
155 000
140 000
140 000
8 110
3 245
3 351
3 027
2 810
2 810
2 810
3 351
3 027
3 027
375 000
110 000
120 000
—
110 000
—
—
135 000
120 000
120 000
8 035
2 356
2 570
—
2 356
—
—
2 892
2 570
2 570
165 000
110 000
120 000
—
110 000
—
—
135 000
—
120 000
5 011
3 340
3 644
—
3 340
—
—
4 100
—
3 644
Board of Directors
Chairman
Jorma Ollila 2
Vice Chairman
Dame Marjorie Scardino 3
Georg Ehrnrooth 4
Lalita D. Gupte 5
Dr. Bengt Holmström 6
Dr. Henning Kagermann
Olli-Pekka Kallasvuo 7
Per Karlsson 8
Keijo Suila 9
Vesa Vainio 10
11
1 Approximately 60% of the gross annual fee is paid in cash and the remaining 40% is paid in Nokia
9 The 2007 fee of Mr. Suila amounted to a total of EUR 140 000, consisting of a fee of EUR 130 000 for
services as a member of the Board and EUR 10 000 for services as a member of the Audit Committee.
The 2006 fee of Mr. Suila amounted to a total of EUR 120 000, consisting of a fee of EUR 110 000 for
services as a member of the Board and EUR 10 000 for services as a member of the Audit Committee.
10 The 2007 fee of Mr. Vainio amounted to a total of EUR 140 000 consisting of a fee of EUR 130 000 for
services as a member of the Board and EUR 10 000 for services as a member of the Audit Committee.
The 2005 and 2006 fees of Mr. Vainio amounted to a total of EUR 120 000, consisting of a fee of EUR
110 000 for services as a member of the Board and EUR 10 000 for services as a member of the Audit
Committee.
11 Daniel R. Hesse, who was re-elected as a Nokia Board member in the Annual General Meeting on May 3,
2007, was paid the annual fee of EUR 130 000 for services as a member of the Board, prior to his resig-
nation announced on December 28, 2007. This amount included 2 810 shares. The 2005 and 2006 fees
of Mr. Hesse amounted to EUR 110 000 for services as a member of the Board, which amounts included
2 356 shares in 2006 and 3 340 shares in 2005.
shares purchased from the market and included in the table under “Shares Received.”
2 This table includes fees paid for Mr. Ollila, Chairman, for his services as Chairman of the Board, only.
3 The 2007 fee of Ms. Scardino amounted to a total of EUR 150 000 for services as Vice Chairman. The
2005 and 2006 fees of Ms. Scardino amounted to EUR 110 000 for services as a member of the Board.
4 The 2007 fee of Mr. Ehrnrooth amounted to a total of EUR 155 000, consisting of a fee of EUR 130 000
for services as a member of the Board and EUR 25 000 for services as Chairman of the Audit Committee.
The 2005 and 2006 fees of Mr. Ehrnrooth consisted of a fee of EUR 110 000 for services as a member of
the Board and EUR 10 000 for services as a member of the Audit Committee.
5 The 2007 fee of Ms. Gupte amounted to a total of EUR 140 000, consisting of fee of 130 000 for services
as a member of the Board and EUR 10 000 for services as a member of the Audit Committee.
6 The 2007 fee of Mr. Holmström amounted to EUR 130 000 for services as a member of the Board. The
2005 and 2006 fees of Mr. Holmström amounted to EUR 110 000 for services as a member of the Board.
7 This table includes fees paid for Mr. Kallasvuo for his services as a member of the Board, only.
8 The 2007 fee of Mr. Karlsson amounted to a total of EUR 155 000, consisting of a fee of EUR 130 000
for services as a member of the Board and EUR 25 000 for services as Chairman of the Personnel Com-
mittee. The 2006 and 2005 fees of Mr. Karlsson amounted to a total of EUR 135 000, consisting of a fee
of EUR 110 000 for services as a member of the Board and EUR 25 000 for services as Chairman of the
Audit Committee.
Pension arrangements of certain Group Executive Board Members
Olli-Pekka Kallasvuo can, as part of his service contract, retire at the age of 60
with full retirement benefit should he be employed by Nokia at the time. The full
retirement benefit is calculated as if Mr. Kallasvuo had continued his service with
Nokia through the statutory retirement age of 65. Hallstein Moerk, following his
arrangement with a previous employer, has also in his current position at Nokia a
retirement benefit of 65% of his pensionable salary beginning at the age of 62. Early
retirement is possible at the age of 55 with reduced benefits. Simon Beresford-Wylie
participates in the Nokia International Employee Benefit Plan (NIEBP). The NIEBP is
a defined contribution retirement arrangement provided to some Nokia employees
on international assignments. The contributions to NIEBP are funded two-thirds by
Nokia and one-third by the employee. Because Mr. Beresford-Wylie also participates
in the Finnish TEL system, the company contribution to NIEBP is 1.3% of annual
earnings.
38
Nokia in 2007
Notes to the consolidated financial statements
32. Notes to cash flow statement
The Group is currently evaluating the accounting impact of the closure of the
Bochum site and expects to recognize restructuring and other charges in 2008.
EURm
Adjustments for:
2007
2006
2005
Acquisitions
Depreciation and amortization (Note 9,13)
1 206
712
712
Profit on sale of property, plant
and equipment and available-for-sale
investments
Income taxes (Note 11)
Share of results of associated companies
(Note 14)
Minority interest
Financial income and expenses (Note 10)
Impairment charges (Note 7)
Share-based compensation (Note 22)
Restructuring charges
Customer financing impairment charges
and reversals
Adjustments, total
Change in net working capital
– 1 864
1 522
– 44
– 459
– 239
63
228
856
—
1 269
– 4
1 357
– 28
60
– 131
1 281
– 10
74
– 207
– 322
51
192
—
– 276
1 857
66
104
—
—
1 774
– 896
– 301
831
– 366
Increase in short-term receivable
– 2 146
– 1 770
Increase (–)/decrease (+) in inventories
– 245
84
Increase in interest-free short-term
borrowings
Change in net working capital
2 996
605
893
– 793
The formation of Nokia Siemens Networks was completed through the contribu-
tion of certain tangible and intangible assets and certain business interests that
comprised Nokia’s networks business and Siemens’ carrier-related operations.
See Note 8.
33. Subsequent events
Transfer of statutory pension liability in Finland
to Ilmarinen and Varma
On December 20, 2007, the Group announced its decision to transfer the Finnish
statutory pension liability of Nokia and Nokia Siemens Networks to the pension
insurance companies Ilmarinen and Varma, respectively, as of March 1, 2008. The
transfer did not affect the number of employees covered by the plan nor will it
affect the current employees’ entitlement to pension benefits. At the transfer date,
the Group has retained no direct or indirect obligation to pay employee benefits
relating to employee service in current, prior or future periods.
The Group is currently evaluating the accounting impact of the transfer includ-
ing the recognition of unrecognized actuarial gains and losses.
Closure of Bochum site in Germany
On January 15, 2008, the Group announced plans to discontinue the production of
mobile devices in Germany and close its Bochum site by mid-2008. The company
plans to move manufacturing to its other more cost-competitive sites in Europe.
The Group also intends to discontinue other non-production activities at the
Bochum site. The Group also announced plans to sell its Bochum-based line fit auto-
motive business and it is in negotiations to sell the adaptation software R&D entity
also located in Bochum. The planned closure of the site in Bochum is estimated to
affect approximately 2 300 Nokia employees.
The Group announced the following acquisitions and expects them to close during
2008.
NAVTEQ
On October 1, 2007, the Nokia and US-based digital map provider NAVTEQ announced
a definitive agreement for Nokia to acquire a 100% ownership interest in NAVTEQ
for approximately USD 8.1 billion (EUR 5.7 billion). NAVTEQ is a leading provider of
comprehensive digital map information for automotive systems, mobile naviga-
tion devices, Internet-based mapping applications, and government and business
solutions. NAVTEQ also owns Traffic.com, a web and interactive service that provides
traffic information and content to consumers. Completion of the acquisition is
subject to customary closing conditions including regulatory approvals.
NAVTEQ’s results of operations will be included in the Group’s consolidated
financial statements from the acquisition date and NAVTEQ’s current map data busi-
ness will form a separate reportable segment. The value of the synergies between
NAVTEQ and the Group and the value of NAVTEQ’s assembled workforce will form
the principal items expected to result in the recognition of goodwill. None of the
goodwill is expected to be deductible for tax purposes. Nokia plans to finance the
acquisition with a combination of cash and debt, and has secured a commitment on
the debt.
For its recently completed fiscal year ended December 31, 2007, NAVTEQ
reported revenues, net profit, total assets and shareholders’ equity of USD 853 mil-
lion (EUR 591 million), USD 173 million (EUR 120 million), USD 1 322 million (EUR 916
million) and USD 1 007 million (EUR 697 million), respectively.
Trolltech
On January 28, 2008, Nokia and Norway-based software provider Trolltech ASA
announced that they have entered into an agreement that Nokia will make a public
voluntary offer to acquire a 100% ownership interest in Trolltech which offer has
thereafter commenced. Trolltech is a recognized software provider with world-class
software development platforms and frameworks. Completion of the acquisition
is subject to customary closing conditions, including acceptance by shareholders
representing more than 90% of the fully diluted share capital and the necessary
regulatory approvals.
For its recently completed fiscal year ended December 31, 2007, Trolltech
reported unaudited revenues, net loss, total assets and shareholders’ equity of NOK
218 million (EUR 27 million), NOK 38 million (EUR 5 million), NOK 210 million (EUR 26
million) and NOK 120 million (EUR 15 million), respectively.
Apertio Ltd.
On January 2, 2008, Nokia Siemens Networks announced the acquisition of a 100%
ownership interest in the UK-based subscriber-centric network specialist Apertio Ltd
for approximately EUR 140 million. Apertio is a leading provider of open real-time
subscriber data platforms and applications built specifically for mobile, fixed, and
converged telecommunications operators. The acquisition of Apertio closed on
February 11, 2008. The Group is in the process of evaluating the Apertio acquisition
and expects to finalize the PPA during 2008.
Notes to the consolidated financial statements
39
Notes to the consolidated financial statements
34. Principal Nokia Group companies at
December 31, 2007
Financial risks
%
US
DE
GB
KR
CN
NL
HU
IN
IT
ES
BR
NL
FI
DE
IN
Nokia Inc.
Nokia GmbH
Nokia UK Limited
Nokia TMC Limited
Nokia Telecommunications Ltd
Nokia Finance International B.V.
Nokia Komárom Kft
Nokia India Pvt Ltd
Nokia Italia S.pA.
Nokia Spain S.A.U
Nokia do Brazil Technologia Ltda
Nokia Siemens Networks B.V.
Nokia Siemens Networks Oy
Nokia Siemens Networks GmbH & Co KG
Nokia Siemens Networks Pvt. Ltd.
Associated companies
Symbian Limited
Parent
Group
holding majority
—
100.0
—
100.0
4.5
100.0
100.0
100.0
100.0
100.0
100.0
—
—
—
—
100.0
100.0
100.0
100.0
83.9
100.0
100.0
100.0
100.0
100.0
100.0
50.0 1
50.0
50.0
50.0
The objective for Treasury activities in Nokia is twofold: to guarantee cost-efficient
funding for the Group at all times, and to identify, evaluate and hedge financial risks
in close co-operation with the business groups. There is a strong focus in Nokia on
creating shareholder value. The Treasury activities supports this aim by minimizing
the adverse effects caused by fluctuations in the financial markets on the profit-
ability of the underlying businesses and by managing the balance sheet structure
of the Group.
Nokia has Treasury Centers in Geneva, Singapore/Beijing and New York/Sao
Paolo, and a Corporate Treasury unit in Espoo. This international organization
enables Nokia to provide the Group companies with financial services according to
local needs and requirements.
Treasury activities is governed by policies approved by the CEO. Treasury Policy
provides principles for overall financial risk management and determines the
allocation of responsibilities for financial risk management in Nokia. Operating
Procedures cover specific areas such as foreign exchange risk, interest rate risk, use
of derivative financial instruments, as well as liquidity and credit risk. Nokia is risk
averse in its Treasury activities.
a) Market risk
—
47.9
Foreign exchange risk
1 Nokia Siemens Networks B.V., the ultimate parent of the Nokia Siemens Networks group, is owned ap-
proximately 50% by each of Nokia and Siemens and consolidated by Nokia. Nokia effectively controls
Nokia Siemens Networks as it has the ability to appoint key officers and the majority of the members
of its Board of Directors, and accordingly, Nokia consolidates Nokia Siemens Networks.
A complete list of subsidiaries and associated companies is included in Nokia’s
Statutory Accounts.
35. Risk Management
General risk management principles
Nokia’s overall risk management concept is based on visibility of the key risks
preventing Nokia from reaching its business objectives. This covers all risk areas:
strategic, operational, financial and hazard risks. Risk management at Nokia is
a systematic and pro-active way to analyze, review and manage opportunities,
threats and risks related to Nokia’s objectives rather than to solely eliminate risks.
Nokia operates globally and is thus exposed to foreign exchange risk arising from
various currency combinations. Foreign currency denominated assets and liabilities
together with expected cash flows from highly probable purchases and sales give
rise to foreign exchange exposures. These transaction exposures are managed
against various local currencies because of Nokia’s substantial production and sales
outside the Euro zone.
According to the foreign exchange policy guidelines of the Group, which stays
the same as in the previous year, material transaction foreign exchange exposures
are hedged. Exposures are mainly hedged with derivative financial instruments
such as forward foreign exchange contracts and foreign exchange options. The
majority of financial instruments hedging foreign exchange risk have duration of
less than a year. The Group does not hedge forecasted foreign currency cash flows
beyond two years.
Since Nokia has subsidiaries outside the Euro zone, the euro-denominated val-
ue of the shareholders’ equity of Nokia is also exposed to fluctuations in exchange
rates. Equity changes caused by movements in foreign exchange rates are shown as
a translation difference in the Group consolidation.
Nokia uses, from time to time, foreign exchange contracts and foreign currency
denominated loans to hedge its equity exposure arising from foreign net invest-
ments.
The principles documented in Nokia’s Risk Policy and accepted by the Audit
At the end of year 2007 and 2006, following currencies represent a significant
Committee of the Board of Directors require risk management and its elements to
be integrated into business processes. One of the main principles is that the busi-
ness or function owner is also the risk owner, however, it is everyone’s responsibility
at Nokia to identify risks preventing us from reaching our objectives.
Key risks are reported to the business and Group level management to cre-
ate assurance on business risks and to enable prioritization of risk management
implementation at Nokia. In addition to general principles there are specific risk
management policies covering, for example, treasury and customer business
related credit risks.
portion of the currency mix in the outstanding financial instruments:
40
Nokia in 2007
Notes to the consolidated financial statements
2007
2006
7 716
5 853
1 912
9 628
1 205
7 058
2007, EURm
USD
JPY
GBP
INR
EURm
FX derivatives used as cash flow
hedges (net amount) 1
FX derivatives used as net
investment hedges (net amount) 2
FX exposure from balance sheet
items (net amount) 3
FX derivatives not designated
in a hedge relationship and
carried at fair value through
profit anc loss accounts
(net amount) 3
803
1 274
– 656
—
—
—
2 204
– 739
—
89
– 216
33
Fixed rate instruments in
available-for-sale investment
Floating rate instruments in
available-for-sale investment
Equity price risk
– 2 361
847
– 127
– 51
2006, EURm
USD
JPY
GBP
INR
FX derivatives used as cash flow
hedges (net amount) 1
– 2 439
1 626
– 526
—
FX derivatives used as net
investment hedges (net amount) 2 – 457
—
—
– 785
617
– 488
196
—
FX exposure from balance sheet
items (net amount) 3
FX derivatives not designated
in a hedge relationship and
carried at fair value through
profit anc loss accounts
(net amount) 3
Nokia is exposed to market price risk as the result of market price movement in the
quoted equity instruments held mainly for strategic business reasons.
Nokia has certain strategic minority investments in publicly quoted equity
shares. The fair value of the equity investments which are subject to market price
risk at December 31, 2007 was EUR 10 million (EUR 8 million in 2006). In addition,
Nokia invests in private equity through Nokia Venture Funds, which, from time to
time, could have holdings in equity instruments which are listed in stock exchanges.
These investments are classified as available-for-sale carried at fair value. See Note
15 for more details on available-for-sale investments.
Due to the insignificant amount of exposure to equity price risk, there are
currently no outstanding derivative financial instruments designated as hedges of
these equity investments.
Nokia is exposed to equity price risk on social security costs relating to stock
compensation plans. Nokia hedges this risk by entering into cash settled equity
swap and option contracts.
– 1 442
564
– 235
—
Value-at-Risk
1 The FX derivatives are used to hedge the foreign exchange risk from forecasted highly probably
cash flows related to sales, purchases and business acquisition activities. In some of the currencies,
especially in US Dollar, Nokia has substantial foreign exchange risks in both estimated cash inflows
and outflows, which have been netted in the table. See Note 20 for more details on hedge accounting.
The underlying exposures which these hedges are entered for are not presented in the table, as they
are not financial instruments as defined under IFRS 7.
2 The FX derivatives are used to hedge the Group’s net investment exposure. The underlying exposures
which these hedges are entered for are not presented in the table, as they are not financial instru-
ments as defined under IFRS 7.
3 The balance sheet items which are denominated in the foreign currencies are hedged by a portion of
FX derivatives not designated in a hedge relationship and carried at fair value through profit and loss
accounts, resulting in offsetting FX gains or losses in the financial income and expenses.
Interest rate risk
The Group is exposed to interest rate risk either through market value fluctuations
of balance sheet items (i.e. price risk) or through changes in interest income or
expenses (i.e. re-investment risk). Interest rate risk mainly arises through interest
bearing liabilities and assets. Estimated future changes in cash flows and balance
sheet structure also expose the Group to interest rate risk.
Nokia uses the Value-at-Risk (VaR) methodology to assess the Group exposures
to foreign exchange (FX), interest rate, and equity risks. VaR is a statistical risk
measurement of a potential fair value loss in market risk sensitive instruments, as
the result of adverse changes in specified market factors, at a specified probability
level, over a defined holding period.
In Nokia FX VaR is calculated by Monte Carlo simulation with a sufficient
amount of random market rate scenarios to take the non-linear price function of
certain FX derivative instruments into account. The variance-covariance methodol-
ogy is used to assess and measure the interest rate risk and equity price risk.
VaR is measured based upon volatilities and correlations of rates and prices
calculated from a one-year set of historical market data, at 95% confidence level,
over a one-month period. To reflect the most recent market conditions, the data is
weighted by exponential moving averages with an appropriate decay factor.
This model implies that within a one-month period, the potential loss will not
exceed the VaR estimate in 95% of the possible outcomes. In the remaining 5%
of the possible outcomes, the potential loss will be at minimum equal to the VaR
figure, and on average substantially higher.
The objective of interest rate risk management is to support Nokia in maximiz-
The VaR methodology uses a number of assumptions, such as, a) risks are mea-
ing its shareholder value by optimizing the balance between minimizing uncer-
tainty caused by fluctuations in interest rates and maximizing the consolidated net
interest income and expense within risk limits.
The interest rate exposure of the Group is monitored and managed centrally.
Due to the current balance sheet structure of Nokia, primary emphasis is placed on
managing the interest rate risk of investments. Nokia uses the Value-at-Risk (VaR)
methodology to assess and measure the interest rate risk in the investment port-
folio and related derivatives in managing material exposure from the investment
portfolio.
At the reporting date, the interest rate profile of the Group’s interest-bearing
available-for-sale investment is presented in the table below:
sured under average market conditions, assuming normal distribution of market
risk factors; b) future movements in market risk factors follow estimated historical
movements; c) the assessed exposures do not change during the holding period.
Thus it is possible that, for any given month, the potential losses are different and
could be substantially higher than the estimated VaR.
Notes to the consolidated financial statements
41
Notes to the consolidated financial statements
FX risk
b) Credit risk
The VaR figures for the Group’s financial instruments which are sensitive to foreign
exchange risks are presented in Table 1 below. As defined under IFRS 7, the financial
instruments included in the VaR calculation are:
»
»
FX exposures from outstanding balance sheet items and other FX derivatives
carried at fair value through profit and loss which are not in a hedge relation-
ship and are mostly used for hedging balance sheet FX exposure.
FX derivatives designated as forecasted cash flow hedges and net investment
hedges. Most of the VaR is caused by these derivatives as forecasted cash flow
and net investment exposures are not financial instruments as defined under
IFRS 7 and thus not included in the VaR calculation.
Table 1 Foreign exchange position Value-at-Risk
At December 31
Average for the year
Range for the year
VaR from financial instruments 1
2007
246
96
57–246
2006
77
92
67–134
1 The increase in the VaR in year-over-year comparison is mainly attributable to increased hedging of
forecasted cash flows due to a business acquisition.
Interest rate risk
The VaR for the Group interest rate exposure in the investment portfolio is pre-
sented in Table 2 below.
Table 2 Treasury investment portfolio Value-at-Risk
At December 31
Average for the year
Range for the year
Equity price risk
2007
8
12
5–27
2006
11
15
10–21
The VaR for the Group equity investment in publicly traded companies is presented
in Table 3 below.
Table 3 Equity investment Value-at-Risk
At December 31
Average for the year
Range for the year
2007
0.8
0.5
0.2–0.8
2006
0.3
0.3
0.2–0.5
Credit risk refers to the risk that a counterparty will default on its contractual obli-
gations resulting in financial loss to the Group. Credit risk arises from bank and cash,
fixed income and money-market investments, derivative financial instruments,
loans receivable as well as credit exposures to customers, including outstanding
receivables, financial guarantees and committed transactions. Credit risk is man-
aged separately for business related- and financial-credit exposures.
Except as detailed in the following table, the maximum exposure to credit risk
is limited to the book value of the financial assets as included in Group’s balance
sheet:
EURm
Financial guarantees given on behalf of
customers or suppliers
Loan commitments given but not used
2007
130
270
400
2006
23
164
187
Business related credit risk
The Company aims to ensure highest possible quality in accounts receivable and
loans due from customers and suppliers. The Group Credit Policy, approved by
Group Executive Board, lays out the framework for the management of the business
related credit risks in all Nokia group companies and affiliates.
Credit exposure is measured as the total of accounts receivable and loans out-
standing due from customers and other third parties and committed credits.
Group Credit Policy provides that credit decisions are based on credit rating.
Group Rating Policy defines the rating principles. Ratings are approved by Nokia
Group Rating Committee. Credit risks are approved and monitored according to the
credit policy of each business entity. These policies are based on the Group Credit
Policy. Concentrations of customer or country risks are monitored at the Nokia
Group level. When appropriate, assumed credit risks are mitigated with the use of
approved instruments, such as collateral or insurance and sale of selected receiv-
ables. Bad debt provisions are made if recovery of a credit becomes uncertain.
The Group has provided impairment allowances as needed, including on ac-
counts receivable and loans due from customers and other third parties not past
due, based on the analysis of debtors’ credit quality and credit history. The Group
establishes an allowance for impairment that represents an estimate of incurred
losses. All receivables and loans due from customers and other third parties are
considered on an individual basis for impairment testing.
Three customers account for approximately 4.9%, 2.9% and 2.5% (2006: 4.2%,
4.0%, 3.2%) of Group accounts receivables and loans due from customers and other
third parties as at December 31, 2007 while the top three credit exposures by coun-
try amounted to 8.7%, 6.9% and 6.5% (2006: 8.7%, 7.6%, 7.1%) respectively.
As at December 31, 2007, the carrying amount before deducting any impair-
ment allowance of accounts receivables related to customers other third parties for
which impairment was provided amounted to EUR 3 011 million (2006: EUR 1 368
million). The amount of provision taken against that portion of these receivables
considered to be impaired was EUR 332 million (2006: EUR 212 million) (see also Note
19 Valuation and qualifying accounts).
An amount of EUR 478 million (2006: EUR 518 million) relates to past due receiv-
ables for which no impairment loss was recognized. The aging of these receivables
is as follows:
Past due 1–30 days
Past due 31–180 days
More than 180 days
2007
411
66
1
478
2006
394
101
23
518
42
Nokia in 2007
Notes to the consolidated financial statements
Baa1–Baa3
P-1
A1–A3
Aa1–Aa3
Aaa
As at December 31, 2007, the carrying amount before deducting any impairment al-
lowance of loans due from customers and other third parties for which impairment
was provided amounted to EUR 161 million (2006: none). The amount of provision
taken for these loans was EUR 19 million (2006: none).
There were no past due loans due from customers and other third parties.
Financial credit risk
Financial instruments contain an element of risk of loss resulting from counterpar-
ties being unable to meet their obligations. This risk is measured and monitored
centrally. Nokia minimizes financial credit risk by limiting its counterparties to a
sufficient number of major banks and financial institutions, as well as through en-
tering into netting arrangements, which gives Nokia the right to offset in the case
that the counterparty would not be able to fulfill the obligations.
Nokia’s investment decisions are based on strict creditworthiness criteria as
defined in the Treasury Policy and Operating Procedure. As a result of the constant
monitoring of its outstanding investments, Nokia does not have exposure of any
significance to subprime loans via its investment portfolio.
The table below presents the breakdown of the outstanding available-for-sale
fixed income and money market investment by sector and credit rating grades
ranked as per Moody’s rating categories.
Fixed income and money-market investments 1, 2
EUR million
8 000
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
2006
2007
2006
2007
2006
2007
2006
2007
Banks
Corporates
Governments
ABS
1 Fixed income and money-market investments include term deposits, investments in liquidity funds
and investments in fixed income instruments classified as Available-for-sale. Available-for-sale invest-
ments are carried at fair value in 2007 and 2006.
2
Included within fixed income and money-market investments is EUR 169 million of restricted invest-
ment at December 31, 2007 (EUR 10 million at December 31, 2006). They are restricted financial assets
under various contractual or legal obligations.
73% of Nokia’s Bank and cash is held with banks of credit rating Aa2 or above (70%
for 2006).
Notes to the consolidated financial statements
43
Notes to the consolidated financial statements
c) Liquidity risk
Liquidity risk is defined as financial distress or extraordinary high financing costs
arising due to a shortage of liquid funds in a situation where business conditions
unexpectedly deteriorate and require financing. Transactional liquidity risk is de-
fined as the risk of executing a financial transaction below fair market value, or not
being able to execute the transaction at all, within a specific period of time.
»
»
»
Local commercial paper program in Finland, totaling EUR 750 million
Euro Commercial Paper (ECP) program, totaling USD 500 million
US Commercial Paper (USCP) program, totaling USD 500 million
The objective of liquidity risk management is to maintain sufficient liquidity,
and to ensure that it is available fast enough without endangering its value, in order
to avoid uncertainty related to financial distress at all times.
Nokia guarantees a sufficient liquidity at all times by efficient cash manage-
ment and by investing in liquid interest bearing securities. The transactional
liquidity risk is minimized by only entering into transactions where proper two-way
quotes can be obtained from the market. Due to the dynamic nature of the underly-
ing business, Treasury also aims at maintaining flexibility in funding by keeping
committed and uncommitted credit lines available. At the end of December 31, 2007,
the committed facilities totaled EUR 3 270 million. The committed credit facilities
are intended to be used primarily for US and Euro Commercial Paper Programs back
up purposes. The average commitment fee on the facilities is 0.041% per annum.
The most significant existing funding programs include:
»
»
»
»
Revolving Credit Facility of USD 2 000 million, maturing 2008
Credit Facility of EUR 500 million, maturing 2011
Revolving Credit Facility of USD 2 000 million, maturing in 2012
Euro Medium Term Note (EMTN) program, totaling EUR 3 000 million
None of the above programs have been used to a significant degree in 2007.
Nokia’s international creditworthiness facilitates the efficient use of interna-
tional capital and loan markets. The ratings of Nokia from credit rating agencies
have not changed during the year. The ratings as at December 31, 2007, were:
Short-term
Long-term
Standard & Poor’s
Moody’s
Standard & Poor’s
Moody’s
A-1
P-1
A
A1
The following table below is an undiscounted cash flow analysis for both financial
liabilities and financial assets that are presented on the balance sheet, and off-
balance sheet instruments such as loan commitments according to their remaining
contractual maturity. Line-by-line reconciliation with the balance sheet as such is
not possible.
At December 31, 2007, EURm
Non-current financial assets
Long-term loans receivable
Other non-current assets
Loan commitments obtained
Current financial assets
Current portion of long-term loans receivable
Short-term loans receivable
Available-for-sale investments
Cash
Cash flows related to derivative financial assets net settled :
Derivative contracts-receipts
Cash flows related to derivative financial assets gross settled:
Derivative contracts-receipts
Derivative contracts-payments
Accounts receivable 1, 2
Non-current financial liabilities
Long-term liabilities
Loan commitments given
Current financial liabilities
Current portion of long-term loans
Short-term liabilities
Cash flows related to derivative financial liabilities net settled:
Derivative contracts-payments
Cash flows related to derivative financial liabilities gross settled:
Derivative contracts– receipts
Derivative contracts-payments
Accounts payable 1
44
Nokia in 2007
Due within
3
months
Due between
3 and 12
months
Due between
1 and 3
years
Due between
3 and 5
years
Due beyond
5
years
—
—
—
5
16
6 543
2 125
24
19 459
– 19 331
7 398
– 10
– 178
– 115
– 617
– 13
16 207
– 16 317
– 6 986
—
—
1 385
165
8
1 012
—
15
394
– 384
1 720
– 3
– 39
– 61
– 105
– 10
635
– 633
– 88
7
6
500
—
—
2 003
—
8
65
– 69
381
– 53
– 21
—
—
—
70
– 65
—
3
—
1 385
—
—
343
—
1
—
—
—
– 130
– 18
—
—
—
—
—
—
1
—
—
—
—
355
—
1
—
—
—
– 70
– 14
—
—
—
—
—
—
Notes to the consolidated financial statements
Due within
3
months
Due between
3 and 12
months
Due between
1 and 3
years
Due between
3 and 5
years
Due beyond
5
years
—
—
—
23
—
2 454
1 479
—
15 032
– 14 986
4 456
1
—
– 160
—
14 242
– 14 301
– 3 706
1
1
—
4
—
801
—
2
408
– 393
950
3
—
– 2
– 1
236
– 244
– 22
11
7
—
—
—
3 396
0
4
—
—
115
8
164
—
—
– 1
—
—
-4
14
—
—
—
—
547
—
1
—
—
—
8
—
—
—
—
—
—
—
—
1 524
—
—
374
—
—
—
—
—
69
—
—
—
—
—
—
At December 31, 2006, EURm
Non-current financial assets
Long-term loans receivables
Other non-current financial assets
Loan commitments obtained
Current financial assets
Short-term loans receivables
Current portion of long-term loans receivable
Available-for-sale investments
Cash
Cash flows related to derivative financial assets net settled :
Derivative contracts-receipts
Cash flows related to derivative financial assets gross settled:
Derivative contracts-receipts
Derivative contracts-payments
Accounts receivables 1, 2
Non-current financial liabilities
Long-term liabilities
Loan commitments given
Current financial liabilities
Current portion of long-term loans
Short-term liabilities
Cash flows related to derivative financial liabilities net settled:
Derivative contracts-payments
Cash flows related to derivative financial liabilities gross settled:
Derivative contracts-receipts
Derivative contracts-payments
Accounts payable
1 The fair values of trade receivables and payables are assumed to approximate their carrying values
due to their short term nature.
2 Accounts receivable maturity analysis does not include accrued receivables and receivables accounted
based on the percentage of completion method of EUR 1 700 million (2006: EUR 367 million).
Hazard risk
Nokia strives to ensure that all financial, reputation and other losses to the Group
and our customers are minimized through preventive risk management measures
or purchase of insurance. Insurance is purchased for risks, which cannot be inter-
nally managed. The objective is to ensure that Group’s hazard risks, whether related
to physical assets (e.g. buildings) or intellectual assets (e.g. Nokia) or potential
liabilities (e.g. product liability) are optimally insured taking into account both cost
as well as retention levels.
Nokia purchases both annual insurance policies for specific risks as well as
multi-line and/or multi-year insurance policies, where available.
Notes to the consolidated financial statements
45
Parent company financial statements
according to Finnish Accounting Standards
Profit and loss accounts, parent company, FAS
Balance sheets, parent company, FAS
Financial year ended December 31
Notes
2007
EURm
2006
EURm
Net sales
Cost of sales
Gross margin
Selling and marketing expenses
Research and development expenses
Administrative expenses
Other operating expenses
Other operating income
30 907
32 213
– 20 995
– 23 165
9 912
9 048
– 1 328
– 2 894
– 566
– 195
139
– 1 446
– 3 777
– 820
– 506
438
December 31
A S S E T S
Fixed assets and other non-current assets
Intangible assets
Capitalized development costs
Intangible rights
Other long-term expenses
Tangible assets
Operating profit
2, 3
5 068
2 937
Investments
Financial income and expenses
Income from long-term investments
Dividend income from Group companies
2 585
4 447
Dividend income from other companies
Interest income from Group companies
Other interest and financial income
Interest income from Group companies
Interest income from other companies
Other financial income from other companies
Exchange gains and losses
Interest expenses and other financial expenses
Interest expenses to Group companies
Interest expenses to other companies
Other financial expenses
Financial income and expenses, total
3
3
250
7
1
– 22
– 168
– 19
– 2
2 638
1
1
355
2
—
53
– 385
– 4
– 3
4 467
Profit before extraordinary items and taxes
7 706
7 404
Extraordinary items
Group contributions
Extraordinary items, total
—
—
33
33
Investments in subsidiaries
Investments in associated companies
Long-term loan receivables
from Group companies
Long-term loan receivables
from other companies
Other non-current assets
Current assets
Inventories and work in progress
Raw materials and supplies
Work in progress
Finished goods
Receivables
Trade debtors from Group companies
Trade debtors from other companies
Short-term loan receivables
from Group companies
Short-term loan receivables
from other companies
Prepaid expenses and accrued income
Profit before taxes
7 706
7 437
from Group companies
Income taxes
for the year
from previous years
Net profit
Prepaid expenses and accrued income
from other companies
– 1 314
– 34
6 358
– 759
5
6 683
Bank and cash
Total
See Notes to the financial statements of the parent company.
See Notes to the financial statements of the parent company.
Notes
2007
EURm
2006
EURm
4
5
6
6
6
106
48
4
158
—
250
61
5
316
—
6 564
3 682
9
9
—
4
6
35
12
5
6 586
3 740
72
294
72
438
149
141
251
541
958
1 405
1 369
1 885
8 219
4 897
40
7
1 942
2 495
1 372
965
13 936
11 618
212
21 330
204
16 419
46
Nokia in 2007
December 31
Notes
2007
EURm
2006
EURm
S H A R E H O L D E R S ’ E Q U I T Y A N D L I A B I L I T I E S
Shareholders’ equity
Share capital
Share issue premium
Treasury shares
Reserve for invested non-restricted equity
Retained earnings
Net profit for the year
7
7
7, 8
7, 8
7, 8
Provisions
Other provisions
Liabilities
Short-term liabilities
Current finance liabilities from Group companies
5 332
2 810
Current finance liabilities from other companies
Advance payments from other companies
Trade creditors to Group companies
Trade creditors to other companies
Accrued expenses and prepaid income
to Group companies
Accrued expenses and prepaid income
to other companies
24
7
1 222
881
2
72
1 127
1 154
122
94
2 632
10 220
1 762
7 021
Parent company
Cash flow statements, parent company, FAS
Financial year ended December 31
Cash flow from operating activities
Net profit
Adjustments, total
246
—
246
2 312
Net profit before change in net working capital
Change in net working capital
– 3 147
– 2 054
Cash generated from operations
3 299
4 354
6 358
11 110
—
2 090
6 683
9 277
—
121
Interest received
Interest paid
Other financial income and expenses
Income taxes paid
Cash flow before extraordinary items
Extraordinary income and expenses
Notes
2007
EURm
2006
EURm
12
12
6 358
– 925
5 433
150
5 583
256
– 182
– 40
– 822
4 795
33
6 683
– 3 293
3 390
32
3 422
359
– 388
22
– 628
2 787
– 16
Net cash from operating activities
4 828
2 771
Cash flow from investing activities
Investments in shares
Additions to capitalized development costs
Capital expenditures
Proceeds from sale of shares
Long-term loans made to customers
Proceeds from repayment and sale
of long-term loans receivable
Proceeds from other long-term receivables
Proceeds from short-term receivables
Dividends received
– 50
– 90
– 28
37
– 11
11
28
– 3 372
672
– 135
– 127
– 38
1
– 11
56
14
6 911
2 013
Net cash used in investing activities
– 2 803
8 684
Cash flow from financing activities
Proceeds from share issue
Proceeds from borrowings
Repayment of borrowings
Purchase of treasury shares
Dividends paid
987
2 508
—
– 3 826
– 1 686
46
—
– 6 451
– 3 366
– 1 512
Net cash used in financing activities
– 2 017
– 11 283
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
8
204
172
32
Total
21 330
16 419
Cash and cash equivalents at end of period
212
204
See Notes to the financial statements of the parent company.
See Notes to the financial statements of the parent company.
Parent company
47
Notes to the financial statements of the parent company
1. Accounting principles
2. Personnel expenses
The Parent company Financial Statements are prepared according to Finnish
Accounting Standards (FAS).
EURm
See Note 1 to Notes to the consolidated financial statements.
Wages and salaries
Pension expenses
Other social expenses
Personnel expenses as per
profit and loss account
2007
1 059
165
41
2006
1 395
218
97
1 265
1 710
Management compensation
The following table sets forth the salary and cash incentive information awarded
and paid or payable by the company to the Chief Executive Officer and President of
Nokia Corporation for fiscal years 2005–2007 as well as the share-based compensa-
tion expense relating to equity-based awards, expensed by the company.
2007
2006
2005
EUR
Olli-Pekka Kallasvuo
President and CEO 1
Base
salary
Cash
Share-based
incentive compensation
payments
expense
Base
salary
Cash
Share-based
incentive compensation
payments
expense
Base
salary
Cash
Share-based
incentive compensation
payments
expense
1 037 619
2 348 877
4 805 722
898 413
664 227
2 108 197
623 524
947 742
666 313
1 President and CEO as of June 1, 2006; and President and COO October 1, 2005–June 1, 2006; Executive
Vice President and General Manager and President of Mobile Phones January 1, 2004–October 1, 2005.
Total remuneration of the Group Executive Board awarded for the fiscal years
2005–2007 was EUR 13 634 791 in 2007 (EUR 8 574 443 in 2006 and EUR 14 684 602 in
2005), which consisted of base salaries and cash incentive payments. Total share-
based compensation expense relating to equity-based awards, expensed by the
company was EUR 19 837 583 in 2007 (EUR 15 349 337 in 2006 and EUR 8 295 227 in
2005).
Board of Directors
The following table depicts the annual remuneration structure paid to the members
of our Board of Directors, as resolved by the Annual General Meetings in the respec-
tive years.
2007
2006
2005
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
375 000
150 000
155 000
140 000
130 000
130 000
130 000
155 000
140 000
140 000
8 110
3 245
3 351
3 027
2 810
2 810
2 810
3 351
3 027
3 027
375 000
110 000
120 000
—
110 000
—
—
135 000
120 000
120 000
8 035
2 356
2 570
—
2 356
—
—
2 892
2 570
2 570
165 000
110 000
120 000
—
110 000
—
—
135 000
—
120 000
5 011
3 340
3 644
—
3 340
—
—
4 100
—
3 644
Board of Directors
Chairman
Jorma Ollila 2
Vice Chairman
Dame Marjorie Scardino 3
Georg Ehrnrooth 4
Lalita D. Gupte 5
Dr. Bengt Holmström 6
Dr. Henning Kagermann
Olli-Pekka Kallasvuo 7
Per Karlsson 8
Keijo Suila 9
Vesa Vainio 10
11
1 Approximately 60% of the gross annual fee is paid in cash and the remaining 40% is paid in Nokia
5 The 2007 fee of Ms. Gupte amounted to a total of EUR 140 000, consisting of fee of 130 000 for services
shares purchased from the market and included in the table under “Shares Received.”
as a member of the Board and EUR 10 000 for services as a member of the Audit Committee.
2 This table includes fees paid for Mr. Ollila, Chairman, for his services as Chairman of the Board, only.
6 The 2007 fee of Mr. Holmström amounted to EUR 130 000 for services as a member of the Board. The
3 The 2007 fee of Ms. Scardino amounted to a total of EUR 150 000 for services as Vice Chairman. The
2005 and 2006 fees of Mr. Holmström amounted to EUR 110 000 for services as a member of the Board.
2006 and 2005 fees of Ms. Scardino amounted to EUR 110 000 for services as a member of the Board.
7 This table includes fees paid for Mr. Kallasvuo for his services as a member of the Board, only.
4 The 2007 fee of Mr. Ehrnrooth amounted to a total of EUR 155 000, consisting of a fee of EUR 130 000
8 The 2007 fee of Mr. Karlsson amounted to a total of EUR 155 000, consisting of a fee of EUR 130 000
for services as a member of the Board and EUR 25 000 for services as Chairman of the Audit Committee.
The 2006 and 2005 fees of Mr. Ehrnrooth consisted of a fee of EUR 110 000 for services as a member of
the Board and EUR 10 000 for services as a member of the Audit Committee.
for services as a member of the Board and EUR 25 000 for services as Chairman of the Personnel Com-
mittee. The 2006 and 2005 fees of Mr. Karlsson amounted to a total of EUR 135 000, consisting of a fee
of EUR 110 000 for services as a member of the Board and EUR 25 000 for services as Chairman of the
Audit Committee.
48
Nokia in 2007
9 The 2007 fee of Mr. Suila amounted to a total of EUR 140 000, consisting of a fee of EUR 130 000 for
services as a member of the Board and EUR 10 000 for services as a member of the Audit Committee.
The 2006 fee of Mr. Suila amounted to a total of EUR 120 000, consisting of a fee of EUR 110 000 for
services as a member of the Board and EUR 10 000 for services as a member of the Audit Committee.
10 The 2007 fee of Mr. Vainio amounted to a total of EUR 140 000 consisting of a fee of EUR 130 000 for
services as a member of the Board and EUR 10 000 for services as a member of the Audit Committee.
The 2006 and 2005 fees of Mr. Vainio amounted to a total of EUR 120 000, consisting of a fee of EUR
110 000 for services as a member of the Board and EUR 10 000 for services as a member of the Audit
Committee.
11 Daniel R. Hesse, who was re-elected as a Nokia Board member in the Annual General Meeting on May 3,
2007, was paid the annual fee of EUR 130 000 for services as a member of the Board, prior to his resig-
nation announced on December 28, 2007. This amount included 2 810 shares. The 2006 and 2005 fees
of Mr. Hesse amounted to EUR 110 000 for services as a member of the Board, which amounts included
2 356 shares in 2006 and 2 340 shares in 2005.
Retirement benefits of certain Group Executive Board Members
Olli-Pekka Kallasvuo can, as part of his service contract, retire at the age of 60
with full retirement benefit should he be employed by Nokia at the time. The full
retirement benefit is calculated as if Mr. Kallasvuo had continued his service with
Nokia through the statutory retirement age of 65. Hallstein Moerk, following his
arrangement with a previous employer, has also in his current position at Nokia a
retirement benefit of 65% of his pensionable salary beginning at the age of 62. Early
retirement is possible at the age of 55 with reduced benefits. Simon Beresford-Wylie
participates in the Nokia International Employee Benefit Plan (NIEBP). The NIEBP is
a defined contribution retirement arrangement provided to some Nokia employees
on international assignments. The contributions to NIEBP are funded two-thirds by
Nokia and one-third by the employee. Because Mr. Beresford-Wylie also participates
in the Finnish TEL system, the company contribution to NIEBP is 1.3% of annual
earnings.
Personnel average
Production
Marketing
R&D
Administration
2007
2006
3 965
1 187
9 732
2 580
17 464
6 194
1 444
13 544
3 121
24 303
Personnel, December 31
15 070
24 333
Notes to the financial statements of the parent company
4. Intangible assets
EURm
2007
2006
Capitalized development costs
Acquisition cost January 1
Additions
Accumulated amortization relating to
additions December 31
Disposals
Accumulated amortization relating to
deductions December 31
Accumulated amortiza tion December 31
Net carrying amount December 31
Intangible rights
Acquisition cost January 1
Additions
Accumulated amortization relating to
additions December 31
Disposals
Accumulated amortization relating to
deductions December 31
Accumulated amortization December 31
Net carrying amount December 31
Other intangible assets
Acquisition cost January 1
Additions
Accumulated amortization relating to
additions December 31
Disposals
Accumulated amortization relating to
deductions December 31
Accumulated amortization December 31
Net carrying amount December 31
5. Tangible assets
1 605
90
– 1
– 1 336
1 158
– 1 410
106
310
25
– 4
– 75
66
– 274
48
8
4
– 2
– 6
3
– 3
4
1 517
127
– 5
– 39
39
– 1 389
250
311
37
– 5
– 38
38
– 282
61
7
3
—
– 2
—
– 3
5
At the end of 2007 and 2006 the parent company had no tangible assets. These
assets were leased from Nokia Asset Management Oy, a company wholly owned by
Nokia Corporation.
3. Depreciation and amortization
6. Investments
EURm
2007
2006
EURm
Depreciation and amortization by asset class category
Intangible assets
Capitalized development costs
Intangible rights
Tangible assets
Total
Depreciation and amortization by function
R&D
Production
Selling, marketing and administration
Total
55
28
2
85
67
1
17
85
137
31
—
168
149
2
17
168
Investments in subsidiaries
Acquisition cost January 1
Additions
Disposals
Net carrying amount December 31
Investments in associated companies
Acquisition cost January 1
Additions
Disposals
Net carrying amount December 31
Investments in other shares
Acquisition cost January 1
Additions
Disposals
Net carrying amount December 31
2007
2006
3 682
5 454
– 2 572
6 564
3 565
148
– 31
3 682
6
3
—
9
5
—
– 1
4
7
4
– 5
6
5
—
—
5
Notes to the financial statements of the parent company
49
Notes to the financial statements of the parent company
7. Shareholders' equity
Parent company, EURm
Balance at January 1, 2005
Share issue
Cancellation of treasury shares
Acquisitions of treasury shares
Dividend
Adoption of IAS 39(R)
Net profit
Balance at December 31, 2005
Share issue
Cancellation of treasury shares
Acquisitions of treasury shares
Settlement of performance shares
Dividend
Net profit
Balance at December 31, 2006
Share issue
Cancellation of treasury shares
Acquisitions of treasury shares
Settlement of performance shares
Share
capital
Share
issue
premium
Treasury
shares
Reserve
for invested
non-
restricted
equity
Retained
earnings
Total
280
2 230
– 2 012
—
10 163
10 661
– 14
2
14
2 664
– 4 266
266
2 246
– 3 614
—
– 20
246
46
20
2 312
46
4 927
– 3 404
37
– 2 054
—
2 733
– 3 884
58
– 2 664
– 1 463
71
2 422
8 529
– 4 927
– 1 512
6 683
8 773
– 2 733
– 1 686
6 358
10 712
2
—
– 4 266
– 1 463
71
2 422
7 427
46
—
– 3 404
37
– 1 512
6 683
9 277
46
—
– 3 884
58
941
– 1 686
6 358
11 110
Reserve for invested non-restricted equity
– 2 358
3 299
Dividend
Net profit
Balance at December 31, 2007
246
—
– 3 147
3 299
8. Distributable earnings
10. Leasing contracts
EURm
Reserve for invested non-restricted equity
Retained earnings from previous years
Net profit for the year
Retained earnings, total
Treasury shares
Distributable earnings, December 31
2007
2006
3 299
4 354
6 358
14 011
– 3 147
10 864
—
2 090
6 683
8 773
– 2 054
6 719
At December 31, 2007 the leasing contracts of the Parent Company amounted to
EUR 25 million (EUR 428 million in 2006). EUR 12 million will expire in 2008 (EUR 408
million in 2006).
11. Loans granted to the management of the company
There were no loans granted to the members of the Group Executive Board and
Board of Directors at December 31, 2007.
9. Commitments and contingencies
EURm
2007
2006
Contingent liabilities on behalf of Group companies
Guarantees for loans
Leasing guarantees
Other guarantees
Contingent liabilities on behalf of other companies
Guarantees for loans
Other guarantees
104
213
89
3
—
151
291
343
23
1
50
Nokia in 2007
12. Notes to cash flow statements
17. Income tax
EURm
2007
2006
EURm
Adjustments for:
Depreciation
Income taxes
Financial income and expenses
Impairment of intangible assets
Impairment of non-current
available-for-sale investments
Other operating income and expenses
Adjustments, total
Change in net working capital
Short-term trade receivables,
increase (–), decrease (+)
Inventories, increase (–), decrease (+)
Interest-free short-term liabilities,
increase (+), decrease (–)
Change in net working capital
85
1 348
– 2 638
177
1
102
– 925
2 856
102
– 2 808
150
168
754
– 4 467
—
34
218
– 3 293
– 361
143
250
32
13. Principal Nokia Group companies
on December 31, 2007
See Note 34 to Notes to the consolidated financial statements.
14. Nokia Shares and Shareholders
See Nokia Shares and Shareholders p. 52–55.
15. Accrued income
EURm
Taxes
Other
Total
16. Accrued expenses
EURm
Personnel expenses
Taxes
Other
Total
2007
2006
—
3 314
3 314
188
3 272
3 460
2007
2006
207
338
2 209
2 754
297
—
1 680
1 977
Notes to the financial statements of the parent company
Income tax from operations
Other income tax
Total
2007
2006
1 314
—
1 314
750
9
759
Income taxes are shown separately in the Notes to the financial statements as they
have been shown as a one-line item on the face of the profit and loss statement.
Notes to the financial statements of the parent company
51
Nokia shares and shareholders
Shares and share capital
number of shares issued was 3 982 811 957.
On December 31, 2007, the total number of shares
Nokia has one class of shares. Each Nokia share entitles
the holder to one vote at General Meetings of Nokia.
On December 31, 2007, the share capital of Nokia
included 136 862 005 shares owned by Group com-
panies representing approximately 3.4% of the share
capital and the total voting rights.
Corporation was EUR 245 896 461.96 and the total
To align the Articles of Association of Nokia
with the new Finnish Companies Act, effective as of
September 1, 2006, the Annual General Meeting held
on May 3, 2007, amended the Articles of Association
to the effect that the provisions on minimum and
maximum share capital as well as on the par value of a
share were removed.
Share capital and shares December 31, 2007
Share capital, EURm
Shares (1 000, par value EUR 0.06)
Shares owned by the Group (1 000)
2007
246
2006
246
2005
266
2004
280
2003
288
3 982 811
4 095 043
4 433 887
4 663 761
4 796 292
136 862
129 312
261 511
176 820
96 024
Number of shares excluding shares owned by the Group (1 000)
3 845 949
3 965 730
4 172 376
4 486 941
4 700 268
Average number of shares excluding shares
owned by the Group during the year (1 000), basic
Average number of shares excluding shares
owned by the Group during the year (1 000), diluted
Number of registered shareholders 1
1 Each account operator is included in the figure as only one registered shareholder.
3 885 408
4 062 833
4 365 547
4 593 196
4 761 121
3 932 008
4 086 529
4 371 239
4 600 337
4 761 160
103 226
119 143
126 352
142 095
133 991
Key ratios December 31, 2007 IFRS (calculation see page 58)
2007
2006
2005
2004
2003
Earnings per share from net profit, EUR
Earnings per share, basic
Earnings per share, diluted
P/E ratio
(Nominal) dividend per share, EUR
Total dividends paid, EURm 1
Payout ratio
Dividend yield, %
Shareholders’ equity per share, EUR
Market capitalization, EURm 2
* Board’s proposal.
1 Calculated for all the shares of the company as of the applicable year-end.
2 Shares owned by the Group companies are not included.
1.85
1.83
14.34
0.53 *
2 111 *
0.29 *
2.00
3.84
1.06
1.05
14.60
0.43
1 761
0.41
2.80
3.02
0.83
0.83
18.61
0.37
1 641
0.45
2.4
2.95
0.69
0.69
16.84
0.33
1 539
0.48
2.8
3.21
0.74
0.74
18.53
0.30
1 439
0.41
2.2
3.26
101 995
61 390
64 463
52 138
65 757
Authorizations
Authorization to increase the share capital
The Board of Directors had been authorized by Nokia
shareholders at the Annual General Meeting held on
March 30, 2006, to decide on an increase of the share
capital by a maximum of EUR 48 540 000 offering a
maximum of 809 000 000 new shares. In 2007, the
Board of Directors did not increase the share capital
on the basis of this authorization. The authorization
expired on March 30, 2007.
At the Annual General Meeting held on May 3,
2007, Nokia shareholders authorized the Board of Di-
rectors to issue a maximum of 800 000 000 new shares
through one or more issues of shares or special rights
entitling to shares, including stock options. The Board
of Directors may issue either new shares or shares
held by the Company. The authorization includes the
right for the Board to resolve on all the terms and
conditions of such issuances of shares and special
rights, including to whom the shares and the special
rights may be issued. In 2007, the Board of Directors
did not increase the share capital on the basis of this
authorization. The authorization is effective until
June 30, 2010.
At the end of 2007, the Board of Directors had
no other authorizations to issue shares, convertible
bonds, warrants or stock options.
Other authorizations
At the Annual General Meeting held on March 30,
2006, Nokia shareholders authorized the Board of
Directors to repurchase a maximum of 405 000 000
Nokia shares. In 2007, Nokia repurchased 45 220 000
Nokia shares on the basis of this authorization. The
authorization expired on March 30, 2007.
At the Annual General Meeting held on May 3,
2007, Nokia shareholders authorized the Board of
Directors to repurchase a maximum of 380 000 000
Nokia shares by using funds in the unrestricted share-
holders’ equity. The amount of shares corresponds to
less than 10% of all shares of the company. In 2007,
Nokia repurchased a total of 135 370 000 shares under
this buy-back authorization, as a result of which the
unused authorization amounted to 244 630 000 shares
on December 31, 2007. The shares may be repurchased
under the buy-back authorization in order to carry
out the company’s stock repurchase plan. In addition,
shares may be repurchased in order to develop the
capital structure of the company, to finance or carry
out acquisitions or other arrangements, to settle
the company’s equity-based incentive plans, to be
transferred for other purposes, or to be cancelled. This
authorization is effective until June 30, 2008.
Authorizations proposed to the Annual
General Meeting 2008
The Board of Directors will propose to the Annual
General Meeting that the Annual General Meeting
authorize the Board of Directors to repurchase a
maximum of 370 000 000 Nokia shares by using funds
in the unrestricted shareholders’ equity. The proposed
amount of shares corresponds to less than 10% of all
shares of the company. It is proposed that the authori-
zation be effective until June 30, 2009.
52
Nokia in 2007
Share and bonus issues 2003–2007
Year
2003
Type of Issue
Nokia Stock Option Plan 1997
Share issue to stockholders of Eizel Technologies Inc.
Total
2004
Nokia Stock Option Plan 1999 (A)
Total
2005
Nokia Stock Option Plan 2003 2Q
Nokia Stock Option Plan 2003 3Q
Nokia Stock Option Plan 2004 2Q
Nokia Stock Option Plan 2004 3Q
Total
2006
Nokia Stock Option Plan 2003 2Q
Nokia Stock Option Plan 2003 3Q
Nokia Stock Option Plan 2003 4Q
Nokia Stock Option Plan 2004 2Q
Nokia Stock Option Plan 2004 3Q
Nokia Stock Option Plan 2004 4Q
Nokia Stock Option Plan 2005 2Q
Nokia Stock Option Plan 2005 3Q
Total
2007
Nokia Stock Option Plan 2002 A/B
Nokia Stock Option Plan 2001C 1Q/02
Nokia Stock Option Plan 2001C 3Q/02
Nokia Stock Option Plan 2001C 4Q/02
Nokia Stock Option Plan 2003 2Q
Nokia Stock Option Plan 2003 3Q
Nokia Stock Option Plan 2003 4Q
Nokia Stock Option Plan 2004 2Q
Nokia Stock Option Plan 2004 3Q
Nokia Stock Option Plan 2004 4Q
Nokia Stock Option Plan 2005 2Q
Nokia Stock Option Plan 2005 3Q
Nokia Stock Option Plan 2005 4Q
Nokia Stock Option Plan 2006 1Q
Nokia Stock Option Plan 2006 2Q
Nokia Stock Option Plan 2006 3Q
Total
Nokia shares and shareholders
Subscription
price or amount
of bonus issue
EUR
Number of
new shares
(1 000)
Date of
payment
Net
proceeds
EURm
New share
capital
EURm
3.23
14.76
16.89
14.95
12.71
11.79
9.44
14.95
12.71
15.05
11.79
9.44
12.35
12.79
13.09
17.89
26.06
12.99
16.86
14.95
12.71
15.05
11.79
9.44
12.35
12.79
13.09
14.48
14.99
18.02
15.37
7 160
1 225
8 385
5
5
61
6
55
3
125
2 287
32
3
523
9
17
174
2
3 047
43 513
17
243
49
9 683
53
48
1 569
30
25
1 350
4
13
13
631
7
2003
2003
2004
2005
2005
2005
2005
2006
2006
2006
2006
2006
2006
2006
2006
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
23.11
18.08
41.19
0.09
0.09
0.91
0.08
0.65
0.02
1.66
34.19
0.41
0.05
6.16
0.08
0.21
2.22
0.03
43.34
778
0.44
3
0.83
145
0.67
0.72
18
0.29
0.30
17
0.06
0.19
0.19
11
0.12
0.43
0.07
0.50
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.14
0.00
0.00
0.03
0.00
0.00
0.01
0.00
0.18
0.15
0.03
0.02
57 248
975.81
0.20
Nokia shares and shareholders
53
Nokia shares and shareholders
Reductions of share capital
Type of reduction
Cancellation of shares
Cancellation of shares
Cancellation of shares
Cancellation of shares
Share turnover (all stock exchanges)
Number of
shares
(1 000, par value
EUR 0.06)
Amount of
reduction of the
share capital
EURm
Amount of
reduction of the
restricted capital
EURm
Amount of
reduction of the
retained earnings
EURm
132 536
230 000
341 890
169 500
7.95
13.80
20.51
—
—
—
—
—
—
Year
2004
2005
2006
2007
Share turnover (1 000)
Total number of shares (1 000)
% of total number of shares
2007
12 695 999
3 982 812
319
2006
2005
12 480 730
4 095 043
305
12 977 232
4 433 887
293
2004
14 091 430
4 663 761
302
2003
11 788 172
4 796 282
246
Share prices, EUR (Helsinki Stock Exchange)
2007
2006
2005
2004
2003
Low/high
Average 1
Year-end
14.63/28.60
14.61/18.65
10.75/15.75
8.97/18.79
11.44/16.16
20.82
26.52
15.97
15.48
13.20
15.45
12.84
11.62
14.12
13.71
1 Calculated by weighting average price with daily volumes.
Share prices, USD (New York Stock Exchange)
ADS
Low/high
Average 1
Year-end
2007
2006
2005
2004
2003
19.08/41.10
17.72/23.10
13.92/18.62
11.03/23.22
12.67/18.45
29.28
38.39
19.98
20.32
16.39
18.30
15.96
15.67
15.99
17.00
1 Calculated by weighting average price with daily volumes.
Nokia share prices on the Helsinki Stock Exchange
EUR
Nokia ADS prices on the New York Stock Exchange
USD
30
25
20
15
10
5
0
45
40
35
30
25
20
15
10
5
0
01/03
01/04
01/05
01/06
01/07
01/07
01/07
01/03
01/04
01/05
01/06
01/07
01/07
01/07
54
Nokia in 2007
Nokia shares and shareholders
Total number
of shares
% of all
shares
% of all
voting rights 2
15 807 989
14 220 000
11 257 946
10 000 000
8 074 889
5 700 000
4 288 896
3 850 000
3 551 100
2 785 424
0.40
0.36
0.28
0.25
0.20
0.14
0.11
0.10
0.09
0.07
0.41
0.37
0.29
0.26
0.21
0.15
0.11
0.10
0.09
0.07
Shareholders, December 31, 2007
Shareholders registered in Finland represented
11.05% and shareholders registered in the name of a
nominee represented 88.95% of the total number of
shares of Nokia Corporation. The number of registered
shareholders was 103 226 on December 31, 2007. Each
account operator (26) is included in this figure as only
one registered shareholder.
Nominee registered shareholders include holders
of American Depositary Receipts (ADR). As of Decem-
ber 31, 2007, ADRs represented 25.44% of the total
number of shares in Nokia.
Largest shareholders registered in Finland, December 31, 2007
(excluding nominee registered shares
and shares owned by Nokia Corporation) 1
Ilmarinen Mutual Pension Insurance Company
Svenska Litteratursällskapet i Finland rf
Varma Mutual Pension Insurance Company
Sigrid Jusélius Foundation
BNP Arbitrage
The State Pension Fund
The Social Insurance Institution of Finland
Mutual Insurance Company Pension Fennia
The Finnish Cultural Foundation
The Finnish Innovation Fund (Sitra)
1 Nokia Corporation owned 136 687 253 shares as of December 31, 2007.
2 174 752 shares owned by the Group companies as of December 31, 2006 do not carry voting rights.
Breakdown of share ownership, December 31, 2007 1
By number of shares owned
Number of
shareholders
% of
shareholders
Total number
of shares
% of
share capital
1–100
101–1 000
1 001–10 000
10 001–100 000
100 001–500 000
500 001–1 000 000
1 000 001–5 000 000
Over 5 000 000
Total
36 873
47 395
15 683
2 989
229
22
22
13
35.72
45.91
15.19
2.90
0.22
0.02
0.02
0.01
103 226
100.00
2 191 042
18 046 785
50 129 126
77 120 899
47 717 133
15 025 177
44 884 766
3 727 697 029
3 982 811 957
0.06
0.45
1.26
1.94
1.20
0.38
1.13
93.59
100.00
By nationality, %
Non-Finnish shareholders
Finnish shareholders
Total
Shares
88.95
11.05
100.00
By shareholder category
(Finnish shareholders), %
Corporations
Households
Financial and insurance institutions
Non-profit organizations
General government
Total
Shares
3.85
3.73
0.54
1.58
1.35
11.05
1 Please note that the breakdown covers only shareholders registered in Finland, and each
account operator (26) is included in the number of shareholders as only one registered share-
holder. Due to this, the breakdown is not illustrative to the entire shareholder base of Nokia.
Shares and stock options owned by
the members of the Board of Directors
and the Group Executive Board
Members of the Board of Directors and the Group
Executive Board owned on December 31, 2007, an
aggregate of 1 452 167 shares which represented ap-
proximately 0.04% of the aggregate number of shares
and voting rights. They also owned stock options
which, if exercised in full, including both exercisable
and unexercisable stock options, would be exercisable
for additional 4 493 844 shares representing approxi-
mately 0.11% of the total number of shares and voting
rights on December 31, 2007.
Nokia shares and shareholders
55
Nokia Group 2003 – 2007, IFRS *
Profit and loss account, EURm
Net sales
Cost and expenses
Operating profit
Share of results of associated companies
Financial income and expenses
Profit before tax
Tax
Profit before minority interests
Minority interests
Profit attributable to equity holders of the parent
Balance sheet items, EURm
Fixed assets and other non-current assets
Current assets
Inventories
Accounts receivable and prepaid expenses
Available-for-sale investments
Total cash and other liquid assets
Total equity
Capital and reserves attributable to
the Company’s equity holders
Minority interests
Long-term liabilities
Long-term interest-bearing liabilities
Deferred tax liabilities
Other long-term liabilities
Current liabilities
Short-term borrowings
Current portion of long-term loans
Accounts payable
Accrued expenses
Provisions
Total assets
2007
2006
2005
2004
2003
51 058
– 43 073
7 985
44
239
8 268
– 1 522
6 746
459
7 205
8 305
29 294
2 876
14 665
—
11 753
17 338
14 773
2 565
1 285
203
963
119
18 976
898
173
7 074
7 114
3 717
37 599
41 121
– 35 633
5 488
28
207
5 723
– 1 357
4 366
– 60
4 306
4 031
18 586
1 554
8 495
—
8 537
12 060
11 968
92
396
69
205
122
10 161
247
—
3 732
3 796
2 386
22 617
34 191
– 29 552
4 639
10
322
4 971
– 1 281
3 690
– 74
3 616
3 501
18 951
1 668
7 373
—
9 910
12 514
12 309
205
268
21
151
96
9 670
377
—
3 494
3 320
2 479
29 371
– 25 045
4 326
– 26
405
4 705
– 1 446
3 259
– 67
3 192
3 315
19 508
1 305
6 406
255
11 542
14 553
14 385
168
294
19
179
96
7 976
215
—
2 669
2 604
2 488
22 452
22 823
29 533
– 24 573
4 960
– 18
352
5 294
– 1 697
3 597
– 54
3 543
3 991
20 083
1 169
6 802
816
11 296
15 466
15 302
164
328
20
241
67
8 280
387
84
2 919
2 468
2 422
24 074
* As of April 1, 2007, Nokia results include those of Nokia Siemens Networks on a fully consolidated
basis. Nokia Siemens Networks, a company jointly owned by Nokia and Siemens, is comprised of
Nokia’s former Networks business group and Siemens’ carrier-related operations for fixed and mobile
networks. Accordingly, the results of the Nokia Group and Nokia Siemens Networks for the year ended
December 31, 2007 are not directly comparable to the results for the year ended December 31, 2006.
Nokia’s 2003-2006 results included Nokia’s former Networks business group only.
56
Nokia in 2007
Key ratios and economic indicators 1
Net sales, EURm
Change, %
Exports and foreign subsidiaries, EURm
Salaries and social expenses, EURm
Operating profit, EURm
% of net sales
Financial income and expenses, EURm
% of net sales
Profit before tax, EURm
% of net sales
Profit from continuing operations, EURm
% of net sales
Taxes, EURm
Dividends, EURm
Capital expenditure, EURm
% of net sales
Gross investments 3, EURm
% of net sales
R&D expenditure, EURm
% of net sales
Average personnel
Non-interest bearing liabilities, EURm
Interest-bearing liabilities, EURm
Return on capital employed, %
Return on equity, %
Equity ratio, %
Net debt to equity, %
2007
51 058
24.2
50 736
5 702
7 985
15.6
239
0.5
8 268
16.2
7 205
14.1
1 522
2 111 2
715
1.4
1 017
2.0
5 647
11.1
100 534
18 024
1 274
54.3
53.9
45.5
– 61
2006
41 121
20.3
40 734
4 206
5 488
13.3
207
0.5
5 723
13.9
4 306
10.5
1 357
1 761
650
1.6
897
2.2
3 897
9.5
65 324
10 036
316
45.8
35.5
52.6
– 68
1 As of April 1, 2007, Nokia results include those of Nokia Siemens Networks on a fully consolidated
basis. Nokia Siemens Networks, a company jointly owned by Nokia and Siemens, is comprised of
Nokia’s former Networks business group and Siemens’ carrier-related operations for fixed and mobile
networks. Accordingly, the results of the Nokia Group and Nokia Siemens Networks for the year ended
December 31, 2007 are not directly comparable to the results for the year ended December 31, 2006.
Nokia’s 2003-2006 results included Nokia’s former Networks business group only.
2 Board’s proposal
3
Includes acquisitions, investments in shares and capitalized development costs.
Calculation of Key Ratios, see page 58.
Nokia Group 2003 – 2007, IFRS
2004
29 371
– 0.5
29 020
3 430
4 326
14.7
405
1.4
4 705
16.0
3 192
10.9
1 446
1 539
548
1.9
1 197
4.1
3 776
12.9
53 511
7 857
234
31.2
21.5
64.6
– 78
2003
29 533
– 1.6
29 186
3 026
4 960
16.8
352
1.2
5 294
17.9
3 543
12.0
1 699
1 439
432
1.5
1 013
3.4
3 788
12.8
51 605
8 117
491
34.0
23.8
65.0
– 70
2005
34 191
16.4
33 860
3 773
4 639
13.6
322
0.9
4 971
14.5
3 616
10.6
1 281
1 641
607
1.8
870
3.1
3 825
11.2
56 896
9 389
398
36.3
27.1
56.4
– 76
Nokia Group 2003 – 2007, IFRS
57
Equity ratio, %
Capital and reserves attributable to the Company’s equity holders
+ minority shareholders’ interests
Total assets – advance payments received
Net debt to equity (gearing), %
Long-term interest-bearing liabilities (including the current portion thereof) +
short-term borrowings – cash and other liquid assets
Capital and reserves attributable to the equity holders of the parent
+ minority shareholders’ interests
Year-end currency rates 2007
USD
GBP
SEK
JPY
1 EUR =
1.4439
0.7148
9.4397
163.52
Calculation of key ratios
Key ratios under IFRS
Operating profit
Profit after depreciation
Shareholders’ equity
Share capital + reserves attfibutable to the Company’s equity holders
Earnings per share (basic)
Profit attributable to equity holders of the parent
Average of adjusted number of shares during the year
P/E ratio
Adjusted share price, December 31
Earnings per share
Dividend per share
Nominal dividend per share
The adjustment coefficients of the share issues that have
taken place during or after the year in question
Payout ratio
Dividend per share
Earnings per share
Dividend yield, %
Nominal dividend per share
Share price
Shareholders’ equity per share
Capital and reserves attributable to the Company’s equity holders
Adjusted number of shares at year end
Market capitalization
Number of shares x share price per share class
Adjusted average share price
Amount traded, in EUR, during the period
Adjusted number of shares traded during the period
Share turnover, %
Number of shares traded during the period
Average number of shares during the period
Return on capital employed, %
Profit before taxes + interest and other net financial expenses
Average capital and reserves attributable to the Company’s equity holders
+ short-term borrowings
+ long-term interest-bearing liabilities (including the current portion thereof)
+ minority shareholders’ interests
Return on shareholders’ equity, %
Profit attributable to the equity holders of the parent
Average capital and reserves attributable to the Company’s equity holders
during the year
58
Nokia in 2007
Proposal by the Board of Directors
for distribution of profit
The distributable funds in the balance sheet of the Company as per December 31, 2007 amount
to EUR 10 864 million.
The Board proposes that from the retained earnings a dividend of EUR 0.53 per share is to be
paid out on the shares of the Company. As per December 31, 2007 the number of shares of the
Company amounted to 3 982 811 957, based on which the maximum amount to be distributed
as dividend is EUR 2 111 million.
The proposed dividend is in line with the Company’s distribution policy, considering also the
distribution of funds through share repurchases, and it significantly exceeds the minimum
dividend required by law. The proposed dividend is 23 per cent higher than the dividend re-
solved to be distributed by the Annual General Meeting in 2007, which was EUR 0.43 per share.
Espoo, March 19, 2008
Jorma Ollila
Chairman
Marjorie Scardino
Georg Ehrnrooth
Lalita D. Gupte
Bengt Holmström
Henning Kagermann
Per Karlsson
Keijo Suila
Vesa Vainio
Olli-Pekka Kallasvuo
President and CEO
Proposal by the Board of Directors for distribution of profit
59
Auditors’ report
Translation from the Finnish original
To the shareholders of Nokia Oyj
We have audited the accounting records, the report of the Board of Directors,
the financial statements and the administration of Nokia Oyj for the period
1. 1.–31. 12. 2007. The Board of Directors and the Managing Director have prepared
the consolidated financial statements, prepared in accordance with International
Financial Reporting Standards as adopted by the EU, as well as the report of the
Board of Directors and the parent company’s financial statements, prepared in
accordance with prevailing regulations in Finland, containing the parent company’s
balance sheet, income statement, cash flow statement and notes to the finan-
cial statements. Based on our audit, we express an opinion on the consolidated
financial statements, as well as on the report of the Board of Directors, the parent
company’s financial statements and the administration.
We conducted our audit in accordance with the Finnish Standards on Auditing.
Those standards require that we perform the audit to obtain reasonable assurance
about whether the report of the Board of Directors and the financial statements are
free of material misstatement. An audit includes examining on a test basis evidence
supporting the amounts and disclosures in the report of the Board of Directors
and in the financial statements, assessing the accounting principles used and
significant estimates made by the management, as well as evaluating the overall
financial statement presentation. The purpose of our audit of the administration is
to examine whether the members of the Board of Directors and the Managing Direc-
tor of the parent company have complied with the rules of the Companies’ Act.
Consolidated financial statements
In our opinion the consolidated financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU, give a true and
fair view, as defined in those standards and in the Finnish Accounting Act, of the
consolidated results of operations as well as of the financial position.
Parent company’s financial statements, report of
the Board of Directors and administration
In our opinion the parent company’s financial statements have been prepared in
accordance with the Finnish Accounting Act and other applicable Finnish rules and
regulations. The parent company’s financial statements give a true and fair view of
the parent company’s result of operations and of the financial position.
In our opinion the report of the Board of Directors has been prepared in accordance
with the Finnish Accounting Act and other applicable Finnish rules and regulations.
The report of the Board of Directors is consistent with the consolidated financial
statements and the parent company’s financial statements and gives a true and fair
view, as defined in the Finnish Accounting Act, of the result of operations and of the
financial position.
The consolidated financial statements and the parent company’s financial state-
ments can be adopted and the members of the Board of Directors and the Managing
Director of the parent company can be discharged from liability for the period
audited by us. The proposal by the Board of Directors regarding the disposal of
distributable funds is in compliance with the Companies’ Act.
Helsinki, 19 March 2008
PricewaterhouseCoopers Oy
Authorised Public Accountants
Eero Suomela
Authorised Public Account
60
Nokia in 2007
Additional information
Critical accounting policies ................................................................................................................ 62
Group Executive Board ........................................................................................................................ 66
Board of Directors ................................................................................................................................. 68
Corporate governance ......................................................................................................................... 70
Investor information ............................................................................................................................ 86
Contact information ............................................................................................................................. 87
Critical accounting policies
Our accounting policies affecting our financial condi-
tion and results of operations are more fully described
in Note 1 to our consolidated financial statements.
Certain of Nokia’s accounting policies require the
application of judgment by management in selecting
appropriate assumptions for calculating financial
estimates, which inherently contain some degree
of uncertainty. Management bases its estimates on
historical experience and various other assump-
tions that are believed to be reasonable under the
circumstances, the results of which form the basis for
making judgments about the reported carrying values
of assets and liabilities and the reported amounts
of revenues and expenses that may not be readily
apparent from other sources. Actual results may differ
from these estimates under different assumptions or
conditions.
We believe the following are the critical account-
ing policies and related judgments and estimates
used in the preparation of our consolidated financial
statements. We have discussed the application of
these critical accounting estimates with our Board of
Directors and Audit Committee.
Revenue recognition
Sales from the majority of the Group are recognized
when the significant risks and rewards of ownership
have transferred to the buyer, continuing managerial
involvement usually associated with ownership and
effective control have ceased, the amount of revenue
can be measured reliably, it is probable that economic
benefits associated with the transaction will flow to
the Group and the costs incurred or to be incurred in
respect of the transaction can be measured reliably.
The remainder of revenue is recorded under the
percentage of completion method.
Mobile Phones, Multimedia and certain Enterprise
Solutions and Nokia Siemens Networks revenue is
generally recognized when the significant risks and
rewards of ownership have transferred to the buyer,
continuing managerial involvement usually associated
with ownership and effective control have ceased,
the amount of revenue can be measured reliably, it
is probable that economic benefits associated with
the transaction will flow to the Group and the costs
incurred or to be incurred in respect of the transaction
can be measured reliably. This requires us to assess at
the point of delivery whether these criteria have been
met. When management determines that such criteria
have been met, revenue is recognized. We record
estimated reductions to revenue for special pricing
agreements, price protection and other volume based
discounts at the time of sale, mainly in the mobile
device business. Sales adjustments for volume based
discount programs are estimated based largely on
historical activity under similar programs. Price
protection adjustments are based on estimates of
future price reductions and certain agreed customer
inventories at the date of the price adjustment. An
immaterial part of the revenue from products sold
through distribution channels is recognized when
the reseller or distributor sells the product to the
end-user. Mobile Phones, Multimedia and certain
Enterprise Solutions and Nokia Siemens Networks ser-
vice revenue is generally recognized on a straight line
basis over the service period unless there is evidence
that some other method better represents the stage
of completion.
Multimedia, Enterprise Solutions and Nokia
Siemens Networks may enter into multiple compo-
nent transactions consisting of any combination of
hardware, services and software. The commercial
effect of each separately identifiable element of
the transaction is evaluated in order to reflect the
substance of the transaction. The consideration from
these transactions is allocated to each separately
identifiable component based on the relative fair
value of each component. The consideration allocated
to each component is recognized as revenue when
the revenue recognition criteria for that element have
been met. If the Group is unable to reliably determine
the fair value attributable to the separately identifi-
able components, the Group defers revenue until all
components are delivered and services have been per-
formed. The Group determines the fair value of each
component by taking into consideration factors such
as the price when the component is sold separately by
the Group, the price when a similar component is sold
separately by the Group or a third party and cost plus
a reasonable margin.
Nokia Siemens Networks revenue and cost of
sales from contracts involving solutions achieved
through modification of complex telecommunica-
tions equipment is recognized on the percentage of
completion basis when the outcome of the contract
can be estimated reliably. This occurs when total con-
tract revenue and the cost to complete the contract
can be estimated reliably, it is probable that economic
benefits associated with the contract will flow to the
Group, and the stage of contract completion can be
measured. When we are not able to meet those condi-
tions, the policy is to recognize revenues only equal
to costs incurred to date, to the extent that such costs
are expected to be recovered. Completion is measured
by reference to costs incurred to date as a percentage
of estimated total project costs using the cost-to-cost
method.
The percentage of completion method relies on
estimates of total expected contract revenue and
costs, as well as the dependable measurement of the
progress made towards completing the particular
project. Recognized revenues and profit are subject
to revisions during the project in the event that the
assumptions regarding the overall project outcome
are revised. The cumulative impact of a revision in
estimates is recorded in the period such revisions
become likely and estimable. Losses on projects in
progress are recognized in the period they become
likely and estimable.
Nokia Siemens Networks’ current sales and profit
estimates for projects may change due to the early
stage of a long-term project, new technology, changes
in the project scope, changes in costs, changes in
timing, changes in customers’ plans, realization of
penalties, and other corresponding factors.
Customer financing
We have provided a limited amount of customer fi-
nancing and agreed extended payment terms with se-
lected customers. In establishing credit arrangements,
management must assess the creditworthiness of the
customer and the timing of cash flows expected to be
received under the arrangement. However, should the
actual financial position of our customers or general
62
Nokia in 2007
Critical accounting policies
economic conditions differ from our assumptions, we
may be required to re-assess the ultimate collectibil-
ity of such financings and trade credits, which could
result in a write-off of these balances in future periods
and thus negatively impact our profits in future
periods. Our assessment of the net recoverable value
considers the collateral and security arrangements of
the receivable as well as the likelihood and timing of
estimated collections. See also Note 35(b) to our con-
solidated financial statements for a further discussion
of long-term loans to customers and other parties.
Allowances for doubtful accounts
We maintain allowances for doubtful accounts for
estimated losses resulting from the subsequent in-
ability of our customers to make required payments.
If the financial conditions of our customers were to
deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be
required in future periods. Management specifically
analyzes accounts receivables and historical bad debt,
customer concentrations, customer creditworthiness,
current economic trends and changes in our customer
payment terms when evaluating the adequacy of the
allowance for doubtful accounts.
Inventory-related allowances
We periodically review our inventory for excess, obso-
lescence and declines in market value below cost and
record an allowance against the inventory balance for
any such declines. These reviews require management
to estimate future demand for our products. Possible
changes in these estimates could result in revisions to
the valuation of inventory in future periods.
Warranty provisions
We provide for the estimated cost of product warran-
ties at the time revenue is recognized. Our products
are covered by product warranty plans of varying
periods, depending on local practices and regula-
tions. While we engage in extensive product quality
programs and processes, including actively monitor-
ing and evaluating the quality of our component
suppliers, our warranty obligations are affected by
actual product failure rates (field failure rates) and by
material usage and service delivery costs incurred in
correcting a product failure. Our warranty provi-
sion is established based upon our best estimates of
the amounts necessary to settle future and existing
claims on products sold as of the balance sheet date.
As we continuously introduce new products which
incorporate complex technology, and as local laws,
regulations and practices may change, it will be in-
creasingly difficult to anticipate our failure rates, the
length of warranty periods and repair costs. While we
believe that our warranty provisions are adequate and
that the judgments applied are appropriate, the ulti-
mate cost of product warranty could differ materially
from our estimates. When the actual cost of quality of
our products is lower than we originally anticipated,
we release an appropriate proportion of the provision,
and if the cost of quality is higher than anticipated, we
increase the provision.
Provision for intellectual property rights,
or IPR, infringements
We provide for the estimated future settlements
related to asserted and unasserted past IPR infringe-
ments based on the probable outcome of each
potential infringement.
Our products and solutions include increasingly
complex technologies involving numerous patented
and other proprietary technologies. Although we
proactively try to ensure that we are aware of any
patents and other intellectual property rights related
to our products and solutions under development and
thereby avoid inadvertent infringement of proprietary
technologies, the nature of our business is such that
patent and other intellectual property right infringe-
ments may and do occur. Through contact with
parties claiming infringement of their patented or
otherwise exclusive technology, or through our own
monitoring of developments in patent and other intel-
lectual property right cases involving our competitors,
we identify potential IPR infringements.
We estimate the outcome of all potential IPR
infringements made known to us through assertion
by third parties, or through our own monitoring of
patent- and other IPR-related cases in the relevant
legal systems. To the extent that we determine that an
identified potential infringement will result in a prob-
able outflow of resources, we record a liability based
on our best estimate of the expenditure required to
settle infringement proceedings.
Our experience with claims of IPR infringement
is that there is typically a discussion period with the
accusing party, which can last from several months to
years. In cases where a settlement is not reached, the
discovery and ensuing legal process typically lasts a
minimum of one year. For this reason, IPR infringe-
ment claims can last for varying periods of time,
resulting in irregular movements in the IPR infringe-
ment provision. In addition, the ultimate outcome or
actual cost of settling an individual infringement may
materially vary from our estimates.
Legal contingencies
As discussed in Note 29 to the consolidated financial
statements, legal proceedings covering a wide range
of matters are pending or threatened in various
jurisdictions against the Group. We record provisions
for pending litigation when we determine that an
unfavorable outcome is probable and the amount of
loss can be reasonably estimated. Due to the inherent
uncertain nature of litigation, the ultimate outcome
or actual cost of settlement may materially vary from
estimates.
Capitalized development costs
We capitalize certain development costs when it is
probable that a development project will be a success
and certain criteria, including commercial and techni-
cal feasibility, have been met. These costs are then
amortized on a systematic basis over their expected
useful lives, which due to the constant development of
new technologies is between two to five years. During
the development stage, management must estimate
Critical accounting policies
63
Critical accounting policies
the commercial and technical feasibility of these
projects as well as their expected useful lives. Should
a product fail to substantiate its estimated feasibility
or life cycle, we may be required to write off excess
development costs in future periods.
Whenever there is an indicator that develop-
ment costs capitalized for a specific project may be
impaired, the recoverable amount of the asset is
estimated. An asset is impaired when the carrying
amount of the asset exceeds its recoverable amount.
The recoverable amount is defined as the higher of an
asset’s net selling price and value in use. Value in use
is the present value of discounted estimated future
cash flows expected to arise from the continuing
use of an asset and from its disposal at the end of its
useful life. For projects still in development, these
estimates include the future cash outflows that are
expected to occur before the asset is ready for use. See
Note 7 to our consolidated financial statements.
Impairment reviews are based upon our projec-
tions of anticipated discounted future cash flows. The
most significant variables in determining cash flows
are discount rates, terminal values, the number of
years on which to base the cash flow projections, as
well as the assumptions and estimates used to de-
termine the cash inflows and outflows. Management
determines discount rates to be used based on the
risk inherent in the related activity’s current business
model and industry comparisons. Terminal values are
based on the expected life of products and forecasted
life cycle and forecasted cash flows over that period.
While we believe that our assumptions are appropri-
ate, such amounts estimated could differ materially
from what will actually occur in the future.
Business combinations
We apply the purchase method of accounting to
account for acquisitions of separate entities or busi-
nesses. The cost of an acquisition is measured as the
aggregate of the fair values at the date of exchange
of the assets given, liabilities assumed or incurred,
equity instruments issued and costs directly attribut-
able to the acquisition. Identifiable assets, liabilities
and contingent liabilities acquired or assumed are
64
Nokia in 2007
measured separately at their fair value as of the acqui-
sition date. The excess of the cost of the acquisition
over our interest in the fair value of the identifiable
net assets acquired is recorded as goodwill.
The determination and allocation of fair values
to the identifiable assets acquired and liabilities as-
sumed is based on various assumptions and valuation
methodologies requiring considerable management
judgment. Although we believe that the assumptions
applied in the determination are reasonable based on
information available at the date of acquisition, actual
results may differ from the forecasted amounts and
the difference could be material.
cash inflows and outflows. Management determines
discount rates to be used based on the risk inherent
in the related activity’s current business model and
industry comparisons. Terminal values are based on
the expected life of products and forecasted life cycle
and forecasted cash flows over that period. While we
believe that our assumptions are appropriate, such
amounts estimated could differ materially from what
will actually occur in the future. In assessing goodwill,
these discounted cash flows are prepared at a cash
generating unit level. Amounts estimated could differ
materially from what will actually occur in the future.
»
»
»
Valuation of long-lived and intangible assets
and goodwill
We assess the carrying value of identifiable intangible
assets, long-lived assets and goodwill annually, or
more frequently if events or changes in circumstances
indicate that such carrying value may not be recover-
able. Factors we consider important, which could
trigger an impairment review, include the following:
significant underperformance relative to
historical or projected future results;
Fair value of derivatives and other financial
instruments
The fair value of financial instruments that are not
traded in an active market (for example, unlisted equi-
ties, currency options and embedded derivatives) are
determined using valuation techniques. We use judg-
ment to select an appropriate valuation methodology
and underlying assumptions based principally on
existing market conditions. Changes in these assump-
tions may cause the Group to recognize impairments
or losses in the future periods.
significant changes in the manner of our use of
the acquired assets or the strategy for our overall
business; and
Income taxes
significantly negative industry or economic
trends.
When we determine that the carrying value of intan-
gible assets, long-lived assets or goodwill may not be
recoverable based upon the existence of one or more
of the above indicators of impairment, we measure
any impairment based on discounted projected cash
flows.
This review is based upon our projections of
anticipated discounted future cash flows. The most
significant variables in determining cash flows are
discount rates, terminal values, the number of years
on which to base the cash flow projections, as well as
the assumptions and estimates used to determine the
The Group is subject to income taxes both in Finland
and in numerous foreign jurisdictions. Significant
judgment is required in determining the provision for
income taxes and deferred tax assets and liabilities
recognized in the consolidated financial statements.
We recognize deferred tax assets to the extent that
it is probable that sufficient taxable income will be
available in the future against which the temporary
differences and unused tax losses can be utilized.
We have considered future taxable income and tax
planning strategies in making this assessment. We
recognize tax provisions based on estimates and
assumptions when, despite our belief that tax return
positions are supportable, it is more likely than not
that certain positions will be challenged and may not
be fully sustained upon review by tax authorities.
Critical accounting policies
Critical accounting policies
65
include, among others, the dividend yield, expected
volatility and expected life of stock options. The ex-
pected life of stock options is estimated by observing
general option holder behavior and actual historical
terms of Nokia stock option programs, whereas the
assumption of the expected volatility has been set
by reference to the implied volatility of stock options
available on Nokia shares in the open market and in
light of historical patterns of volatility. These variables
make estimation of fair value of stock options difficult.
Non-market vesting conditions attached to the
performance shares are included in assumptions
about the number of shares that the employee will
ultimately receive relating to projections of sales and
earnings per share. On a regular basis we review the
assumptions made and revise the estimates of the
number of performance shares that are expected to
be settled, where necessary. At the date of grant the
number of performance shares granted to employ-
ees that are expected to be settled is assumed to
be the target amount. Any subsequent revisions to
the estimates of the number of performance shares
expected to be settled may increase or decrease total
compensation expense. Such increase or decrease
adjusts the prior period compensation expense in
the period of the review on a cumulative basis for
unvested performance shares for which compensation
expense has already been recognized in the profit and
loss account, and in subsequent periods for unvested
performance shares for which the expense has not
yet been recognized in the profit and loss account.
Significant differences in employee option activity,
equity market performance and our projected and
actual sales and earnings per share performance may
materially affect future expense. In addition, the
value, if any, an employee ultimately receives from
share-based payment awards may not correspond to
the expense amounts recorded by the Group.
If the final outcome of these matters differs from
the amounts initially recorded, differences will impact
the income tax and deferred tax provisions in the
period in which such determination is made.
Pensions
The determination of our pension benefit obligation
and expense for defined benefit pension plans is
dependent on our selection of certain assumptions
used by actuaries in calculating such amounts. Those
assumptions are described in Note 5 to our consolidat-
ed financial statements and include, among others,
the discount rate, expected long-term rate of return
on plan assets and annual rate of increase in future
compensation levels. A portion of our plan assets is
invested in equity securities. The equity markets have
experienced volatility, which has affected the value
of our pension plan assets. This volatility may make
it difficult to estimate the long-term rate of return
on plan assets. Actual results that differ from our as-
sumptions are accumulated and amortized over future
periods and therefore generally affect our recognized
expense and recorded obligation in such future peri-
ods. Our assumptions are based on actual historical
experience and external data regarding compensation
and discount rate trends. While we believe that our
assumptions are appropriate, significant differences
in our actual experience or significant changes in
our assumptions may materially affect our pension
obligation and our future expense.
Share-based compensation
We have various types of equity settled share-based
compensation schemes for employees. Employee
services received, and the corresponding increase in
equity, are measured by reference to the fair value of
the equity instruments as at the date of grant, exclud-
ing the impact of any non-market vesting conditions.
Fair value of stock options is estimated by using the
Black Scholes model on the date of grant based on cer-
tain assumptions. Those assumptions are described in
Note 22 to the consolidated financial statements and
Group Executive Board
March 31, 2008
The current members of Nokia’s Group Executive Board are set forth below.
According to Nokia’s articles of association, Nokia
has a Group Executive Board, which is responsible
for the operative management of the Group. The
Chairman and members of the Group Executive
Board are appointed by the Board of Directors.
Only the Chairman of the Group Executive Board
can be a member of both the Board of Directors
and the Group Executive Board.
Chairman Olli-Pekka Kallasvuo, b. 1953
President and CEO of Nokia Corporation.
Group Executive Board member since 1990,
Chairman since 2006.
With Nokia 1980–1981, rejoined 1982.
LL.M. (University of Helsinki).
President and COO of Nokia Corporation 2005–2006,
Executive Vice President and General Manager of Nokia
Mobile Phones 2004–2005, Executive Vice President,
CFO of Nokia 1999–2003, Executive Vice President of
Nokia Americas and President of Nokia Inc. 1997–1998,
Executive Vice President, CFO of Nokia 1992–1996,
Senior Vice President, Finance of Nokia 1990–1991.
Member of the Board of Directors of Nokia Corporation
and EMC Corporation. Chairman of the Board of Direc-
tors of Nokia Siemens Networks B.V.
Robert Andersson, b. 1960
Executive Vice President, Devices Finance,
Strategy and Strategic Sourcing.
Group Executive Board member since 2005.
Joined Nokia in 1985.
Master of Business Administration (George Washing-
ton University), Master of Science (Economics and
Business Administration) (Swedish School of Econom-
ics and Business Administration, Helsinki).
Executive Vice President of Customer and Market Op-
erations 2005–2007, Senior Vice President of Customer
and Market Operations, Europe, Middle East and Africa
2004–2005, Senior Vice President of Nokia Mobile
Phones in Asia-Pacific 2001–2004, Vice President of
Sales for Nokia Mobile Phones in Europe and Africa
1998–2001. Various managerial positions within Nokia
Mobile Phones, Nokia Consumer Electronics and Nokia
Data 1985–1998.
Simon Beresford-Wylie, b. 1958
Chief Executive Officer, Nokia Siemens Networks.
Group Executive Board member since 2005.
Joined Nokia 1998.
Bachelor of Arts (Economic Geography and History)
(Australian National University).
Executive Vice President and General Manager of
Networks 2005–2007. Senior Vice President of Nokia
Networks, Asia-Pacific 2003–2004, Senior Vice
President, Customer Operations of Nokia Networks
2002–2003, Vice President, Customer Operations of No-
kia Networks 2000–2002, Managing Director of Nokia
Networks in India and Area General Manager, South
Asia 1999–2000, Regional Director of Business Devel-
opment, Project and Trade Finance of Nokia Networks,
Asia-Pacific 1998–1999, Chief Executive Officer of Modi
Telstra, India 1995–1998, General Manager, Banking
and Finance, Corporate and Government business unit
of Telstra Corporation 1993–1995, holder of executive
positions in the Corporate and Government business
units of Telstra Corporation 1989–1993, holder of
executive, managerial and clerical positions in the
Australian Commonwealth Public Service 1982–1989.
Member of the Board of Directors of the Vitec Group.
Timo Ihamuotila, b. 1966
Executive Vice President, Sales.
Group Executive Board member since April 1, 2007.
With Nokia 1993–1996, rejoined 1999.
Master of Science (Economics) (Helsinki School of
Economics), Licentiate of Science (Finance) (Helsinki
School of Economics).
Executive Vice President, Sales and Portfolio Manage-
ment, Mobile Phones, 2007. Senior Vice President,
CDMA Business Unit, Mobile Phones 2004–2007, Vice
President, Finance, Corporate Treasurer of Nokia
Corporation 2000–2004, Director of Corporate Finance
1999–2000, Vice President of Nordic Derivates Sales,
Citibank plc 1996–1999, Manager of Dealing & Risk
Management of Nokia 1993–1996, Analyst, Assets and
Liability Management, Kansallis Bank 1990–1993.
66
Nokia in 2007
Mary T. McDowell, b. 1964
Executive Vice President, Chief Development Officer.
Group Executive Board member since 2004.
Joined Nokia 2004.
Niklas Savander, b. 1962
Executive Vice President, Services & Software.
Group Executive Board Member 2006.
Joined Nokia 1997.
Bachelor of Science (Computer Science) (College of
Engineering at the University of Illinois).
Executive Vice President and General Manager of
Enterprise Solutions 2004–2007. Senior Vice President,
Strategy and Corporate Development of Hewlett-Pack-
ard Company 2003, Senior Vice President & General
Manager, Industry-Standard Servers of Hewlett-
Packard Company 2002–2003, Senior Vice President
& General Manager, Industry-Standard Servers of
Compaq Computer Corporation 1998–2002, Vice Presi-
dent, Marketing, Server Products Division of Compaq
Computer Corporation 1996–1998. Holder of executive,
managerial and other positions at Compaq Computer
Corporation 1986–1996.
Hallstein Moerk, b. 1953
Executive Vice President, Human Resources.
Group Executive Board member since 2004.
Joined Nokia 1999.
Diplomøkonom (Econ.) (Norwegian School of Manage-
ment). Holder of various positions at Hewlett-Packard
Corporation 1977–1999.
Member of the Board of Advisors of Center for HR Strat-
egy, Rutgers University. Fellow of Academy of Human
Resources, Class of 2007.
Dr. Tero Ojanperä, b. 1966
Executive Vice President,
Entertainment and Communities.
Group Executive Board member since 2005.
Joined Nokia 1990.
Master of Science (University of Oulu), Ph.D. (Delft
University of Technology, The Netherlands).
Executive Vice President, Chief Technology Officer
2006–2007. Executive Vice President & Chief Strategy
Officer 2005–2006, Senior Vice President, Head of
Nokia Research Center 2003–2004. Vice President, Re-
search, Standardization and Technology of IP Mobility
Networks, Nokia Networks 1999–2002. Vice President,
Radio Access Systems Research and General Manager
of Nokia Networks in Korea, 1999. Head of Radio Ac-
cess Systems Research, Nokia Networks 1998–1999,
Principal Engineer, Nokia Research Center, 1997–1998.
A member of Young Global Leaders.
Master of Science (Eng.) (Helsinki University of Tech-
nology), Master of Science (Economics and Business
Administration) (Swedish School of Economics and
Business Administration, Helsinki).
Executive Vice President, Technology Platforms
2006–2007. Senior Vice President and General Manager
of Nokia Enterprise Solutions, Mobile Devices Business
Unit 2003–2006, Senior Vice President, Nokia Mobile
Software, Market Operations 2002–2003, Vice Presi-
dent, Nokia Mobile Software, Strategy, Marketing &
Sales 2001–2002, Vice President and General Manager
of Nokia Networks, Mobile Internet Applications
2000–2001, Vice President of Nokia Network Systems,
Marketing 1997–1998. Holder of executive and
managerial positions at Hewlett-Packard Company
1987–1997.
Member of the Board of Directors of Nokia Siemens
Networks B.V. Vice Chairman of the Board of Directors
of Tamfelt Oyj. Member of the Board of Directors and
secretary of Waldemar von Frenckells Stiftelse.
Richard A. Simonson, b. 1958
Executive Vice President, Chief Financial Officer.
Group Executive Board member since 2004.
Joined Nokia 2001.
Bachelor of Science (Mining Eng.)
(Colorado School of Mines), Master of Business
Administration (Finance) (Wharton School of Business
at University of Pennsylvania).
Vice President & Head of Customer Finance of Nokia
Corporation 2001–2003, Managing Director of Telecom
& Media Group of Barclays 2001, Head of Global
Project Finance and other various positions at Bank of
America Securities 1985–2001.
Member of the Board of Directors of Nokia Siemens
Networks B.V. Member of the Board of Directors of
Electronic Arts, Inc. Member of the Board of Trustees of
International House–New York. Member of US Treasury
Advisory Committee on the Auditing Profession.
Veli Sundbäck, b. 1946
Executive Vice President,
Corporate Relations and Responsibility.
Group Executive Board member since 1996.
Joined Nokia 1996.
LL.M. (University of Helsinki).
Secretary of State at the Ministry for Foreign Affairs
1993–1995, Under-Secretary of State for External
Economic Relations at the Ministry for Foreign Affairs
1990–1993.
Member of the Board of Directors of Finnair Oyj.
Member of the Board and its executive committee,
Confederation of Finnish Industries (EK), Vice Chairman
of the Board, Technology Industries of Finland, Vice
Chairman of the Board of the International Chamber of
Commerce, Finnish Section, Chairman of the Board of
the Finland-China Trade Association.
Anssi Vanjoki, b. 1956
Executive Vice President, Markets.
Group Executive Board member since 1998.
Joined Nokia 1991.
Master of Science (Econ.) (Helsinki School of Economics
and Business Administration).
Executive Vice President and General Manager of
Multi media 2004–2007. Executive Vice President of
Nokia Mobile Phones 1998–2003, Senior Vice President,
Europe & Africa of Nokia Mobile Phones 1994–1998,
Vice President, Sales of Nokia Mobile Phones
1991–1994, 3M Corporation 1980–1991. Chairman of
the Board of Directors of Amer Sports Corporation.
Dr. Kai Öistämö, b. 1964
Executive Vice President, Devices.
Group Executive Board Member since 2005.
Joined Nokia in 1991.
Doctor of Technology (Signal Processing),
Master of Science (Engineering) (Tampere University
of Technology).
Executive Vice President and General Manager of Mo-
bile Phones 2005–2007. Senior Vice President, Business
Line Management, Mobile Phones 2004–2005, Senior
Vice President, Mobile Phones Business Unit, Nokia
Mobile Phones 2002–2003, Vice President, TDMA/GSM
1900 Product Line, Nokia Mobile Phones 1999–2002,
Vice President, TDMA Product Line 1997–1999, various
technical and managerial positions in Nokia Consumer
Electronics and Nokia Mobile Phones 1991–1997.
Member of the Board of Directors of the Finnish Fund-
ing Agency for Technology and Innovation (Tekes).
Chairman of the Research and Technology Committee
of the Confederation of Finnish Industries (EK).
Group Executive Board
67
Board of Directors
March 31, 2008
The current members of the Board of Directors are set forth below.
Pursuant to the provisions of the Finnish Com-
panies Act and Nokia’s articles of association,
the control and management of Nokia is divided
among the shareholders at a general meeting,
the Board of Directors, the President and the
Group Executive Board chaired by the Chief Execu-
tive Officer. The current members of the Board
of Directors were elected at the Annual General
Meeting on May 3, 2007, in accordance with
the proposal of the Corporate Governance and
Nomination Committee of the Board of Directors.
On the same date, the Chair and Vice Chair of the
Board of Directors, as well as the Chairs and mem-
bers of the committees of the Board, were elected
by the members of the Board of Directors. The
members of the Board of Directors are annually
elected by a simple majority of the shareholders’
votes represented at the Annual General Meeting
for a one-year term ending at the next Annual
General Meeting.
Chairman Jorma Ollila, b. 1950
Chairman of the Board of Directors of Nokia
Corporation. Chairman of the Board of Directors of
Royal Dutch Shell Plc.
Board member since 1995. Chairman since 1999.
Master of Political Science (University of Helsinki),
Master of Science (Econ.) (London School of Econom-
ics), Master of Science (Eng.) (Helsinki University of
Technology).
Chairman and CEO, Chairman of the Group Executive
Board of Nokia Corporation 1999–2006, President and
CEO, Chairman of the Group Executive Board of Nokia
Corporation 1992–1999, President of Nokia Mobile
Phones 1990–1992, Senior Vice President, Finance of
Nokia 1986–1989. Holder of various managerial posi-
tions at Citibank within corporate banking 1978–1985.
Member of the Board of Directors of Ford Motor
Company, Vice Chairman of the Board of Directors of
Otava Books and Magazines Group Ltd and member
of the Board of Directors of Fruugo Inc. Chairman of
the Boards of Directors and the Supervisory Boards of
The Research Institute of the Finnish Economy ETLA
and Finnish Business and Policy Forum EVA. Chairman
of The European Round Table of Industrialists. Vice
Chairman of the Independent Reflection Group of the
Council of the European Union considering the future
of the European Union.
Vice Chair Dame Marjorie Scardino, b. 1947
Chief Executive and member of the Board of
Directors of Pearson plc.
Board member since 2001.
B.A. (Baylor University), J.D. (University of San
Francisco).
Chief Executive of The Economist Group 1993–1997,
President of the North American Operations of The
Economist Group 1985–1993, lawyer 1976–1985
and publisher of The Georgia Gazette newspaper
1978–1985.
Georg Ehrnrooth, b. 1940
Board member since 2000.
Master of Science (Eng.) (Helsinki University of
Technology).
President and CEO of Metra Corporation 1991–2000,
President and CEO of Lohja Corporation 1979–1991.
Holder of various executive positions at Wärtsilä
Corporation within production and management
1965–1979.
Chairman of the Board of Directors of Sampo Plc.,
member of the Board of Directors of Oy Karl Fazer Ab
and Sandvik AB (publ). Vice Chairman of the Boards
of Directors of The Research Institute of the Finn-
ish Economy ETLA and Finnish Business and Policy
Forum EVA.
Lalita D. Gupte, b. 1948
Non-executive Chairman of the ICICI Venture Funds
Management Co Ltd.
Board member since May 3, 2007.
B.A. in Economics (University of Delhi) and Master of
Management Studies (University of Bombay).
Joint Managing Director of ICICI Bank Limited
1999–2006, Deputy Managing Director of ICICI Bank
1996–1999, Executive Director on the Board of Direc-
tors of ICICI Limited 1994–1996. Various leadership po-
sitions in Corporate and Retail Banking, Strategy and
Resources, and International Banking in ICICI Limited
and subsequently in ICICI Bank Ltd since 1971.
Member of the Board of Directors of Bharat Forge Ltd,
Kirloskar Brothers Ltd, FirstSource Solutions Ltd,
Godrej Properties Ltd, HPCL-Mittal Energy Ltd. and
a-non-profit micro-finance institution. Member of the
Board of Management of SVKM’s NMIMS University.
Dr. Bengt Holmström, b. 1949
Paul A. Samuelson Professor of Economics at MIT,
joint appointment at the MIT Sloan School of
Management.
Board member since 1999.
Bachelor of Science (Helsinki University), Master of
Science (Stanford University), Doctor of Philosophy
(Stanford University).
Edwin J. Beinecke Professor of Management Studies
at Yale University 1985–1994.
Member of the Board of Directors of Kuusakoski Oy.
Member of the American Academy of Arts and Sci-
ences and Foreign Member of The Royal Swedish
Academy of Sciences.
68
Nokia in 2007
Keijo Suila, b. 1945
Board member since 2006.
Proposal of the Corporate Governance
and Nomination Committee of the Board
On January 24, 2008, the Corporate Governance and
Nomination Committee announced its proposal to
the Annual General Meeting convening on May 8,
2008 regarding the composition of the members of
the Board of Directors for a one-year term ending
at the next Annual General Meeting. The Corporate
Governance and Nomination Committee will propose
to the Annual General Meeting that the number
of Board members be ten and that the following
persons be re-elected for a one-year term until the
close of the Annual General Meeting in 2009: Georg
Ehrnrooth, Lalita D. Gupte, Dr. Bengt Holmström, Dr.
Henning Kagermann, Olli-Pekka Kallasvuo, Per Karls-
son, Jorma Ollila, Dame Marjorie Scardino and Keijo
Suila. Vesa Vainio, member of the Board since 1993,
will not stand for re-election to the Board of Direc-
tors. Moreover, the Committee will propose that Risto
Siilasmaa would be elected as a new member of the
Board for the term from the Annual General Meeting
in 2008 until the close of the Annual General Meeting
in 2009. Mr. Siilasmaa is a founder of F-Secure Corpo-
ration, which provides security services protecting
consumers and businesses against computer viruses
and other threats from the Internet and mobile net-
works. Mr. Siilasmaa is the Chairman of the Board of
Directors of F-Secure Corporation, a member of the
Board of Directors of Elisa Corporation and a Chair-
man or member of the Board of Directors of various
private companies. He is also Vice Chairman of the
Board of the Technology Industries of Finland.
B.Sc. (Economics and Business Administration)
(Helsinki University of Economics and Business
Administration).
President and CEO of Finnair Oyj 1999–2005. Chair-
man of oneworld airline alliance 2003–2004 and
member of various international aviation and air
transportation associations 1999–2005. Holder of
various executive positions, including Vice Chairman
and Executive Vice President, at Huhtamäki Oyj, Leaf
Group and Leaf Europe 1985–1998.
Vice Chairman of the Board of Directors of Kesko
Corporation. Member of the Board of Directors of The
Finnish Fair Corporation.
Vesa Vainio, b. 1942
Board member since 1993.
LL.M. (University of Helsinki).
Member 1996–2001 and 2001–2008 Chairman of the
Board of Directors of UPM-Kymmene Corporation.
Chairman 1998–1999 and 2000–2002 and Vice Chair-
man 1999–2000 of the Board of Directors of Nordea
AB (publ). Chairman of the Executive Board and CEO
of Union Bank of Finland 1992–1995 and Merita Bank
Ltd and CEO of Merita Ltd 1995–1997. President of
Kymmene Corporation 1991–1992. Holder of vari-
ous other executive positions in Finnish industry
1972–1991.
Daniel R. Hesse was re-elected as a Nokia Board
member in the Annual General Meeting on May 3,
2007. Due to his resignation from the Board of
Directors after being appointed as President and CEO
of Sprint Nextel Corporation, Nokia announced on
December 28, 2007 that its Board consisted of the
above-mentioned ten members.
Prof. Dr. Henning Kagermann, b. 1947
CEO and Chairman of the Executive Board of SAP AG.
Board member since May 3, 2007.
Ph.D. in Theoretical Physics (Technical University of
Brunswick).
Co-chairman of the Executive Board of SAP
1998–2003. A number of leadership positions in SAP
since 1982. Member of SAP Executive Board since
1991. Taught physics and computer science at the
Technical University of Brunswick and the University
of Mannheim 1980–1992, became professor in 1985.
Member of the Supervisory Boards of Deutsche
Bank AG and Münchener Rückversicherungs-Gesells-
chaft AG (Munich Re). Member of the Honorary Senate
of the Foundation Lindau Nobelprizewinners.
Olli-Pekka Kallasvuo, b. 1953
President and CEO of Nokia Corporation.
Board member since May 3, 2007.
LL.M. (University of Helsinki).
President and COO of Nokia Corporation 2005–2006,
Executive Vice President and General Manager of
Nokia Mobile Phones 2004–2005, Executive Vice
President, CFO of Nokia 1999–2003, Executive Vice
President of Nokia Americas and President of
Nokia Inc. 1997–1998, Executive Vice President, CFO
of Nokia 1992–1996, Senior Vice President, Finance of
Nokia 1990–1991.
Member of the Board of Directors of EMC Corporation.
Chairman of the Board of Directors of Nokia Siemens
Networks B.V.
Per Karlsson, b. 1955
Independent Corporate Advisor.
Board member since 2002.
Degree in Economics and Business Administration
(Stockholm School of Economics).
Executive Director, with mergers and acquisitions
advisory responsibilities, at Enskilda M&A, Enskilda
Securities (London) 1986–1992. Corporate strategy
consultant at the Boston Consulting Group (London)
1979–1986.
Member of the Board of Directors of IKANO
Holdings S.A.
Board of Directors
69
Corporate governance
70
Nokia in 2007
Pursuant to the provisions of the Finnish Companies
Act and Nokia’s Articles of Association, the control and
management of Nokia is divided among the share-
holders at a general meeting, the Board of Directors,
the President and the Group Executive Board chaired
by the Chief Executive Officer. Under the Articles of
Association, in addition to the Board of Directors,
Nokia has a Group Executive Board, which is respon-
sible for the operative management of the Group.
The Chairman and members of the Group Executive
Board are appointed by the Board of Directors. Only
the Chairman of the Group Executive Board can be a
member of both the Board of Directors and the Group
Executive Board.
The Board of Directors
The operations of the company are managed under
the direction of the Board of Directors, within the
framework set by the Finnish Companies Act and
Nokia’s Articles of Association and the complementary
Corporate Governance Guidelines and related charters
adopted by the Board.
The responsibilities of the Board of Directors
The Board represents and is accountable to the share-
holders of the company. The Board’s responsibilities
are active, not passive, and include the responsibility
regularly to evaluate the strategic direction of the
company, management policies and the effectiveness
with which management implements them, and as-
sesses the overall risk of the company. The Board’s re-
sponsibilities further include overseeing the structure
and composition of the company’s top management
and monitoring legal compliance and the manage-
ment of risks related to the company’s operations.
In doing so the Board may set annual ranges and/or
individual limits for capital expenditures, investments
and divestitures and financial commitments not to be
exceeded without Board approval.
The Board has the responsibility for appointing
and discharging the Chief Executive Officer and the
other members of the Group Executive Board. The
Chief Executive Officer also acts as President, and
his rights and responsibilities include those allotted
to the President under Finnish law. Subject to the
requirements of Finnish law, the independent direc-
tors of the Board confirm the compensation and the
employment conditions of the Chief Executive Officer
upon the recommendation of the Personnel Commit-
tee. The compensation and employment conditions
of the other members of the Group Executive Board
are approved by the Personnel Committee upon the
recommendation of the Chief Executive Officer.
The basic responsibility of the members of the
Board is to act in good faith and with due care so as to
exercise their business judgment on an informed basis
in what they reasonably and honestly believe to be the
best interests of the company and its shareholders. In
discharging that obligation, the directors must inform
themselves of all relevant information reasonably
available to them. The Board and each Committee also
have the power to hire independent legal, financial
or other advisors as they deem necessary. The Board
conducts annual performance self-evaluations, which
also include evaluations of the Committees’ work, the
results of which are discussed by the Board.
Election, composition and meetings
of the Board of Directors
Pursuant to the articles of association, Nokia Corpora-
tion has a Board of Directors composed of a minimum
of seven and a maximum of twelve members. The
members of the Board are elected for a term of one
year at each Annual General Meeting, i.e., from the
close of that Annual General Meeting until the close of
the following Annual General Meeting, which convenes
each year by June 30. The Annual General Meeting held
on May 3, 2007 elected eleven members to the Board
of Directors. One member, Daniel R. Hesse, resigned
from the Board in December 2007 as a result of which
the Board consisted of ten members on December 31,
2007.
The Board elects a Chair and a Vice Chair from
among its members for a one-year term. On May 3,
2007, the Board resolved that Jorma Ollila should con-
tinue to act as Chair and that Marjorie Scardino shall
act as Vice Chair of the Board. The Board also appoints
the members and the chairpersons for its Committees
from among its non-executive, independent members
for a one-year term. For information about the mem-
bers and the chairpersons for Board’s Committees, see
“Committees of the Board of Directors” on page 71.
The current members of the Board are all non-
executive, except the President and Chief Executive
Officer who is also a member of the Board. The
non-executive Board members are all independent as
defined under Finnish rules and regulations, except
the Chairman of the Board who acted as Chairman and
Chief Executive Officer until June 1, 2006. In January
2008, the Board determined that seven of the Board’s
ten members are independent, as defined in the New
York Stock Exchange’s corporate governance listing
standards, as amended in November 2004. In addi-
tion to the Chairman of the Board and the President
and Chief Executive Officer, Bengt Holmström was
determined not to be independent under the NYSE
standards due to a family relationship with an execu-
tive officer of a Nokia supplier of whose consolidated
gross revenue from Nokia accounts for an amount that
exceeds the limit provided in the NYSE listing stan-
dards, but that is less than 5%. Also in January 2008,
the Board determined that Georg Ehrnrooth, Chairman
of the Audit Committee, was a financial expert within
the meaning of the Sarbanes-Oxley Act of 2002 and
the subsequent regulations by the US Securities and
Exchange Commission.
The Board convened twelve times during 2007.
Six of the meetings were held through technical
equipment. The average ratio of attendance at the
meetings was 94%. The non-executive directors meet
without management at regularly scheduled sessions
twice a year and at such other times as they deem
appropriate, in practice in connection with each regu-
larly scheduled meeting in 2007. Such sessions were
chaired by the non-executive Chairman of the Board
or, in his absence, the non-executive Vice Chair of the
Board. In addition, the independent directors meet
separately at least once annually.
The Corporate Governance Guidelines concerning
the directors’ responsibilities, the composition and
selection of the Board, Board committees and certain
other matters relating to corporate governance are
available on Nokia’s website, www.nokia.com.
the Annual General Meeting. The Committee makes a
proposal to the shareholders in respect of the fees of
the external auditor, and approves the external audi-
tor’s annual audit fees under the guidance given by
the shareholders at the Annual General Meeting.
The Committee meets at least four times a year
based upon a schedule established at the first meet-
ing following the appointment of the Committee. The
Committee meets separately with the representatives
of Nokia’s management, head of the internal audit
function, and the external auditor in connection with
each regularly scheduled meeting. The head of the
internal audit function has at all times direct access
to the Audit Committee, without involvement of
management. The Audit Committee convened seven
times in 2007. One of the meetings was held through
technical equipment.
Committees of the Board of Directors
The Audit Committee consists of a minimum of three
members of the Board who meet all applicable inde-
pendence, financial literacy and other requirements
of Finnish law and the rules of the stock exchanges
where Nokia shares are listed, including the Helsinki
Stock Exchange and the New York Stock Exchange.
Since May 3, 2007, the Committee has consisted of the
following four members of the Board: Georg Ehrnrooth
(Chair), Lalita D. Gupte, Keijo Suila and Vesa Vainio.
The Audit Committee is established by the
Board primarily for the purpose of overseeing the
accounting and financial reporting processes of the
company and audits of the financial statements of the
company. The Committee is responsible for assisting
the Board’s oversight of (1) the quality and integrity
of the company’s financial statements and related
disclosure, (2) the external auditor’s qualifications and
independence, (3) the performance of the external
auditor subject to the requirements of Finnish law, (4)
the performance of the company’s internal controls
and risk management and assurance function, (5) the
performance of the internal audit function, and (6)
the company’s compliance with legal and regula-
tory requirements. The Committee also maintains
procedures for the receipt, retention and treatment
of complaints received by the company regarding
accounting, internal controls, or auditing matters
and for the confidential, anonymous submission by
employees of the company of concerns regarding ac-
counting or auditing matters.
Under Finnish law, Nokia’s external auditor is
elected by Nokia’s shareholders by a simple majority
vote at the Annual General Meeting for one fiscal
year at a time. The Committee makes a proposal to
the shareholders in respect of the appointment of
the external auditor based upon its evaluation of the
qualifications and independence of the auditor to be
proposed for election or re-election. Also under Finn-
ish law, the fees of the external auditor are approved
by Nokia’s shareholders by a simple majority vote at
The Personnel Committee consists of a minimum of
three members of the Board who meet all applicable
independence requirements of Finnish law and the
rules of the stock exchanges where Nokia shares are
listed, including the Helsinki Stock Exchange and
the New York Stock Exchange. Since May 3, 2007, the
Personnel Committee has consisted of the following
members of the Board: Per Karlsson (Chair), Daniel R.
Hesse (until December 2007), Henning Kagermann and
Marjorie Scardino.
The primary purpose of the Personnel Committee
is to oversee the personnel policies and practices of
the company. It assists the Board in discharging its
responsibilities relating to all compensation, including
equity compensation, of the company’s executives
and the terms of employment of the same. The
Committee has overall responsibility for evaluating,
resolving and making recommendations to the Board
regarding (1) compensation of the company’s top
executives and their employment conditions, (2) all
equity-based plans, (3) incentive compensation plans,
policies and programs of the company affecting ex-
ecutives and (4) other significant incentive plans. The
Committee is responsible for overseeing compensa-
tion philosophy and principles and ensuring the above
compensation programs are performance-based,
properly motivate management, support overall cor-
porate strategies and are aligned with shareholders’
interests. The Committee is responsible for the review
of senior management development and succession
plans.
The Personnel Committee convened three times
in 2007.
The Corporate Governance and Nomination Com-
mittee consists of three to five members of the Board
who meet all applicable independence requirements
of Finnish law and the rules of the stock exchanges
where Nokia shares are listed, including the Helsinki
Stock Exchange and the New York Stock Exchange.
Since May 3, 2007, the Corporate Governance and
Nomination Committee has consisted of the following
Corporate governance
three members of the Board: Marjorie Scardino (Chair),
Georg Ehrnrooth and Per Karlsson.
The Corporate Governance and Nomination Com-
mittee’s purpose is (1) to prepare the proposals for
the general meetings in respect of the composition
of the Board and the director remuneration to be ap-
proved by the shareholders, and (2) to monitor issues
and practices related to corporate governance and to
propose necessary actions in respect thereof.
The Committee fulfills its responsibilities by (i)
actively identifying individuals qualified to become
members of the Board, (ii) recommending to the
shareholders the director nominees for election at the
Annual General Meetings, (iii) monitoring significant
developments in the law and practice of corporate
governance and of the duties and responsibilities of
directors of public companies, (iv) assisting the Board
and each committee of the Board in its annual perfor-
mance self-evaluations, including establishing criteria
to be used in connection with such evaluations,
and (v) developing and recommending to the Board
and administering Nokia’s Corporate Governance
Guidelines.
The Corporate Governance and Nomination
Committee convened four times in 2007. One of the
meetings was held through technical equipment.
The charters of each of the committees are available
on Nokia’s website, www.nokia.com.
Management and corporate
governance practices
Nokia has a company Code of Conduct which is equally
applicable to all of Nokia’s employees, directors and
management and is accessible on Nokia’s website,
www.nokia.com. As well, Nokia has a Code of Ethics
for the Principal Executive Officers and the Senior Fi-
nancial Officers. For more information about Nokia’s
Code of Ethics, please see www.nokia.com.
Nokia’s corporate governance practices comply
with the Corporate Governance Recommendation for
Listed Companies approved by the Helsinki Stock Ex-
change in December 2003 effective as of July 1, 2004.
Internal audit function
Nokia has an internal audit function that acts as an
independent appraisal function by examining and
evaluating the adequacy and effectiveness of the
company’s system of internal control.
Internal audit resides within the CFO’s organiza-
tion and also reports to the Audit Committee of the
Board of Directors. The head of internal audit function
has at all times direct access to the Audit Committee,
without involvement of the management.
Corporate governance
71
Corporate governance
Compensation of the members of the Board of Directors and the Group Executive Board
Board of Directors
The following table sets forth the annual remunera-
tion of the members of the Board of Directors based
on their positions on the Board and its committees,
including the remuneration paid to the President and
CEO for his duties as the member of the Board of Direc-
tors only, as resolved by the respective Annual General
Meetings, in 2007, 2006 and 2005.
Position, EUR
Chair
Vice Chair
Member
Chair of Audit Committee
Member of Audit Committee
Chair of Personnel Committee
Total
2007
375 000
150 000
130 000
25 000
10 000
25 000
1 775 000
2006
2005
375 000
137 500
110 000
25 000
10 000
25 000
1 472 500
165 000
137 500
110 000
25 000
10 000
25 000
1 262 500
Non-executive members of the Board of Directors
do not receive stock options, performance shares,
restricted shares or other variable compensation for
their duties as Board members. In addition, no meet-
ing fees are payable. However, it is Nokia policy that a
significant portion of director remuneration is paid in
the form of Nokia shares. Since 1999, approximately
40% of the annual remuneration payable to the
members of Board of Directors has been paid in Nokia
shares purchased from the market. The President and
CEO receives variable compensation for his executive
duties, but not for his duties as a member of the Board
of Directors, see “Actual Executive Compensation for
2007” on page 75.
When preparing the Board of Directors’ remu-
neration proposal, it is the policy of the Corporate
Governance and Nomination Committee of the Board
to review and compare the level of board remunera-
tion paid in other global companies with net sales and
business complexity comparable to that of Nokia. The
Committee’s aim is that Nokia has an effective Board
consisting of world-class professionals representing
an appropriate and diverse mix of skills and experi-
ence. A competitive Board remuneration contributes
to Nokia’s achievement of this target.
The remuneration of the Board of Directors is
resolved annually by Nokia’s Annual General Meet-
ing by a simple majority of the shareholders’ votes
represented at the meeting, upon proposal by the
Corporate Governance and Nomination Committee of
the Board. The remuneration is resolved for the period
from the respective Annual General Meeting until the
next Annual General Meeting.
Remuneration of the Board of Directors
For the year ended December 31, 2007, the aggregate
renumeration paid to the members of the Board of Di-
rectors for their services as the members of the Board
and its committees was EUR 1 775 000.
The following table depicts the annual remunera-
tion structure paid to the members of Nokia’s Board of
Directors, as resolved by the Annual General Meetings
in the respective years.
Board of Directors
Chairman
Jorma Ollila 2
Vice Chairman
Dame Marjorie Scardino 3
Georg Ehrnrooth 4
Lalita D.Gupte 5
Dr. Bengt Holmström 6
Dr. Henning Kagermann
Olli-Pekka Kallasvuo 7
Per Karlsson 8
Keijo Suila 9
Vesa Vainio 10
11
1 Approximately 60% of the gross annual fee is paid in cash and
the remaining 40% in Nokia shares purchased from the market
and included in the table under “Shares Received.”
2 This table includes fees paid for Mr. Ollila, Chairman, for his
2007
2006
2005
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
375 000
8 110
375 000
8 035
165 000
5 011
150 000
155 000
140 000
130 000
130 000
130 000
155 000
140 000
140 000
3 245
3 351
3 027
2 810
2 810
2 810
3 351
3 027
3 027
110 000
120 000
—
110 000
—
—
135 000
120 000
120 000
2 356
2 570
—
2 356
—
—
2 892
2 570
2 570
110 000
120 000
—
110 000
—
—
135 000
—
120 000
3 340
3 644
—
3 340
—
—
4 100
—
3 644
6 The 2007 fee of Mr. Holmström amounted to EUR 130 000 for
10 The 2007 fee of Mr. Vainio amounted to a total of EUR 140 000
services as a member of the Board. The 2006 and 2005 fees of Mr.
Holmström amounted to EUR 110 000 for services as a member of
the Board.
consisting of a fee of EUR 130 000 for services as a member of the
Board and EUR 10 000 for services as a member of the Audit Com-
mittee. The 2006 and 2005 fees of Mr. Vainio amounted to a total
of EUR 120 000, consisting of a fee of EUR 110 000 for services as
a member of the Board and EUR 10 000 for services as a member
of the Audit Committee.
11 Daniel R. Hesse, who was re-elected as a Nokia Board member in
the Annual General Meeting on May 3, 2007, was paid the annual
fee of EUR 130 000 for services as a member of the Board, prior to
his resignation announced on December 28, 2007. This amount
included 2 810 shares. The 2006 and 2005 fees of Mr. Hesse
amounted to EUR 110 000 for services as a member of the Board,
which amounts included 2 356 shares in 2006 and 3 340 in 2005.
services as Chairman of the Board, only.
7 This table includes fees paid for Mr. Kallasvuo for his services as a
3 The 2007 fee of Ms. Scardino amounted to a total of EUR 150 000
for services as Vice Chairman. The 2006 and 2005 fees of Ms.
Scardino amounted to EUR 110 000 for services as a member of
the Board.
4 The 2007 fee of Mr. Ehrnrooth amounted to a total of EUR
155 000, consisting of a fee of EUR 130 000 for services as a
member of the Board and EUR 25 000 for services as Chairman of
the Audit Committee. The 2006 and 2005 fees of Mr. Ehrnrooth
consisted of a fee of EUR 110 000 for services as a member of
the Board and EUR 10 000 for services as a member of the Audit
Committee.
5 The 2007 fee of Ms. Gupte amounted to a total of EUR 140 000,
consisting of a fee of 130 000 for services as a member of the
Board and EUR 10 000 for services as a member of the Audit Com-
mittee.
member of the Board, only.
8 The 2007 fee of Mr. Karlsson amounted to a total of EUR 155 000,
consisting of a fee of EUR 130 000 for services as a member of the
Board and EUR 25 000 for services as Chairman of the Personnel
Committee. The 2006 and 2005 fees of Mr. Karlsson amounted
to a total of EUR 135 000, consisting of a fee of EUR 110 000 for
services as a member of the Board and EUR 25 000 for services as
Chairman of the Audit Committee.
9 The 2007 fee of Mr. Suila amounted to a total of EUR 140 000,
consisting of a fee of EUR 130 000 for services as a member of
the Board and EUR 10 000 for services as a member of the Audit
Committee. The 2006 fee of Mr. Suila amounted to a total of
EUR 120 000, consisting of a fee of EUR 110 000 for services as a
member of the Board and EUR 10 000 for services as a member of
the Audit Committee.
72
Nokia in 2007
Proposal of the Corporate Governance and
Nomination Committee of the Board
On January 24, 2008, the Corporate Governance and
Nomination Committee of the Board announced that it
will propose to the Annual General Meeting to be held
on May 8, 2008 that the annual remuneration payable
to the Board members to be elected at the same
meeting for the term until the close of the Annual
General Meeting in 2009 be as follows: EUR 440 000 for
the Chairman, EUR 150 000 for the Vice Chairman and
EUR 130 000 for each member. In addition, the Corpo-
rate Governance and Nomination Committee will pro-
pose that the Chairman of the Audit Committee and
the Chairman of the Personnel Committee will each
receive an additional annual fee of EUR 25 000 and
each member of the Audit Committee an additional
annual fee of EUR 10 000. Further, the Committee will
propose that approximately 40% of the remunera-
tion be paid in Nokia Corporation shares purchased
from the market. The proposed remuneration is at the
same level as in 2007 except for the Chairman’s fee,
which would increase to EUR 440 000 from the fee of
EUR 375 000 paid in both 2006 and 2007.
Group Executive Board
Executive Compensation Philosophy, Programs
and Decision-making Process
Our executive compensation philosophy and programs
have been developed to enable Nokia to effectively
compete in an extremely complex and rapidly evolv-
ing mobile communications industry. Nokia is a
leading company in its industry and conduct business
globally. Nokia’s executive compensation programs
have been designed to attract, retain and motivate
talented executive officers that drive Nokia’s success
and industry leadership worldwide.
Our compensation program for executive officers
includes:
»
»
competitive base pay rates; and
short- and long-term incentives that are intended
to result in competitive total compensation pack-
age.
The objectives of Nokia’s executive compensation
programs are to:
»
»
»
»
attract and retain outstanding executive talent;
deliver a significant amount of performance-
related variable compensation for the achieve-
ment of both short- and long-term stretch goals;
appropriately balance rewards between both
Nokia’s and an individual’s performance; and
align the interests of the executive officers with
those of the shareholders through long-term
incentives in the form of equity-based awards.
The competitiveness of Nokia’s executive compensa-
tion levels and practices is one of several key factors
the Personnel Committee of the Board (the “Person-
nel Committee”) considers in its determination of
compensation for Nokia executives. The Personnel
Committee compares, on an annual basis, Nokia’s
compensation practices, base salaries and total com-
pensation, including short- and long-term incentives
against those of other relevant companies in the same
or similar industries and of the same or similar size
that Nokia believes it competes against for executive
talent. The relevant companies include high technol-
ogy and telecommunications companies that are
headquartered in Europe and the United States.
The Personnel Committee retains and uses exter-
nal consultants, Mercer Human Resources, to obtain
benchmark data and information on current market
trends. Mercer Human Resources works directly for
the Chairman of the Personnel Committee and meets
annually with the Personnel Committee, without
management present, to provide an assessment of
the competitiveness and appropriateness of Nokia’s
executive pay levels and programs. Management pro-
vides Mercer Human Resources with information with
regard to Nokia’s programs and compensation levels
for their preparation in meeting with the Committee.
The consultant of Mercer Human Resources that works
for the Personnel Committee is independent of Nokia
and does not have any other business relationships
with Nokia.
The Personnel Committee reviews the executive
officers’ compensation on an annual basis and from
time to time during the year, when special needs
arise. Without management present, the Committee
reviews and recommends to the Board the corporate
goals and objectives relevant to the compensation
of the President and CEO, evaluates the performance
of the President and CEO in light of those goals and
objectives, and proposes to the Board the compensa-
tion level of the President and CEO, which is confirmed
by the independent members of the Board. Manage-
ment’s role is to provide any information requested by
the Personnel Committee to assist in their delibera-
tions.
In addition, upon initial recommendation of the
President and CEO, the Personnel Committee approves
all compensation for all the members of the Group Ex-
ecutive Board (excluding that of the President and CEO
of Nokia and Simon Beresford-Wylie, Chief Executive
Officer of Nokia Siemens Networks) and other direct
reports to the President and CEO, including long-term
equity incentives and goals and objectives relevant to
compensation. The Personnel Committee also reviews
the results of the evaluation of the performance of
the Group Executive Board members (excluding the
President and CEO and Mr. Beresford-Wylie) and other
direct reports to the President and CEO and approves
their incentive compensation based on such evalu-
ation. Mr. Beresford-Wylie’s compensation as CEO of
Nokia Siemens Networks is evaluated and approved
by the Board of Directors of Nokia Siemens Networks.
The Personnel Committee is apprised annually on
Corporate governance
actions taken with respect to Mr. Beresford-Wylie’s
compensation.
The Personnel Committee considers the following
factors, among others, in its review when determining
the compensation of Nokia’s executive officers:
»
»
»
»
The compensation levels for similar positions (in
terms of scope of position, revenues, number of
employees, global responsibility and reporting
relationships) in relevant comparison companies;
The performance demonstrated by the executive
officer during the last year;
The size and impact of the role on Nokia’s overall
performance and strategic direction;
The internal comparison to the compensation
levels of the other executive officers of Nokia; and
»
Past experience and tenure in role.
The above factors are assessed in totality.
The compensation for Mr. Beresford-Wylie is deter-
mined by the Board of Directors of Nokia Siemens
Networks based on the same factors as for the other
members of the Group Executive Board of Nokia and
determined in a similar process.
Components of Executive Compensation
Our compensation program for executive officers
includes annual cash compensation in the form of a
base salary, short-term cash incentives and long-term
equity-based incentive awards in the form of perfor-
mance shares, stock options and restricted shares.
Annual Cash Compensation
Base salaries are targeted at globally competitive
market levels.
Short-term cash incentives are tied directly to
performance and represent a significant portion of
an executive officer’s total annual cash compensa-
tion. The short-term cash incentive opportunity is
expressed as a percentage of the executive officer’s
annual base salary. These award opportunities and
measurement criteria are presented in the table on
page 74.
Measurement criteria for the short-term cash
incentive plan include those financial objectives
that are considered important measures of Nokia’s
success in driving increased shareholder value.
Financial objectives are established which are based
on a number of factors and are intended to be stretch
targets that, when achieved, Nokia believes, will result
in performance that will exceed that of Nokia’s key
competitors in the high technology and telecom-
munications industries. The target setting, as well
as the weighting of each measure, also requires the
Personnel Committee’s approval. The following table
reflects the measurement criteria that are established
for the President and CEO and members of the Group
Executive Board and the relative weighting of each
objective for the year 2007.
Corporate governance
73
Corporate governance
Incentive as a % of Annual Base Salary in 2007
Position
President and CEO
Total
Group Executive Board
Total
Minimum
performance, %
Target
performance, %
Maximum
performance, %
Measurement criteria
0
0
0
0
0
0
0
100
25
25
150
75
25
100
225
37.5
37.5
300
168.75
37.5
206.25
(a) Financial Objectives (includes targets for net sales,
operating profit and operating cash flow measures)
(c) Total Shareholder Return 1 (comparison made with key
competitors in the high technology and telecommunications
industries over one, three and five year periods)
(d) Strategic Objectives
(a) Financial Objectives (includes targets for net sales,
operating profit and operating cash flow); and
(b) Individual Strategic Objectives (as described below)
(c) Total Shareholder Return 1, 2
1 Total shareholder return reflects the change in Nokia’s share
price during a respective time period added with the value of
dividends per share paid during the said period, divided by
Nokia’s share price at the beginning of the period. The calcula-
tion is the same also for each company in the said peer group.
2 Only some members of the Group Executive Board are eligible for
the additional 25% total shareholder return element.
The incentive payout is based on performance relative
to targets set for each measurement criteria listed in
the table above: (a) a comparison of Nokia’s actual
performance to pre-established targets for net sales,
operating profit and operating cash flow and (b) a
comparison of each executive officer’s individual per-
formance to his/her predefined individual strategic
objectives and targets. Individual strategic objectives
include market share, quality, technology innova-
tion, new product revenue, customer retention rates,
environmental achievements and other objectives of
key strategic importance which require a discretion-
ary assessment of performance by the Personnel
Committee.
When determining the final incentive pay-out,
the Personnel Committee determines an overall score
for each executive based on the degree to which
(a) Nokia’s financial objectives have been achieved
together with (b) qualitative scores assigned to the
individual strategic objectives. The final incentive
payout is determined by multiplying each executive’s
eligible salary by: (i) his/her incentive target percent;
and (ii) the score resulting from the above-mentioned
factors (a) and (b). The resulting score for each execu-
tive is then multiplied by an “affordability factor,”
which is determined based on overall sales, profitabil-
ity and cash flow of Nokia. The Personnel Committee
may apply discretion when evaluating actual results
against targets and the resulting incentive payouts. In
certain exceptional situations, the actual short-term
cash incentive awarded to the executive officer could
be zero. The maximum payout is only possible with
maximum performance on all measures.
The portion of the short-term cash incentives
that is tied to (a) Nokia’s financial objectives and
(b) individual strategic objectives and targets is paid
twice each year based on the performance for each of
Nokia’s short-term plans that end on June 30 and De-
cember 31 of each year. Another portion of the short-
term cash incentives is paid annually at the end of the
year, based on the Personnel Committee’s assessment
of (c) Nokia’s total shareholder return compared to key
competitors in the high technology and telecom-
munications industries and relevant market indices
over one-, three- and five-year periods. In the case
of the President and CEO, the annual incentive award
is also partly based on his performance compared
against (d) strategic leadership objectives, including
entry into new markets and services and executive
development.
Instead of Nokia’s short-term cash incentive plan,
Simon Beresford-Wylie participates in a short-term
cash incentive plan sponsored by Nokia Siemens
Networks, which is similar to Nokia’s plan.
Fore more information on the actual cash com-
pensation paid in 2007 to Nokia’s executive officers,
see “Actual Executive Compensation for 2007” on
page 75.
Long-term equity-based incentives
Long-term equity-based incentive awards in the form
of performance shares, stock options and restricted
shares are used to align executive officers interests
with shareholders’ interests, reward performance and
encourage retention. These awards are determined on
the basis of the factors discussed above in “Execu-
tive Compensation Philosophy and Decision-making
Process”, including a comparison of the executive
officer’s overall compensation with that of other
executives in the relevant market and the impact on
the competitiveness of the executive’s compensa-
tion package in that market. Performance shares
are Nokia’s main vehicle for long-term equity-based
incentives and reward the achievement of both
Nokia’s long-term financial results and an increase in
share price. Performance shares vest as shares, if at
least one of the pre-determined threshold perfor-
mance levels, tied to Nokia’s financial performance,
is achieved by the end of the performance period and
their value increases with Nokia’s share price. Stock
options are granted to fewer employees that are in
more senior and executive positions. Stock options
create value for the executive officer, once vested, if
the Nokia share price is higher than the exercise price
of the stock option established at grant, thereby align-
ing the interests of the executives with those of the
shareholders. Restricted shares are used primarily for
retention purposes and they vest fully after the close
of a pre-determined restriction period. These equity-
based incentive awards are generally forfeited, if the
executive leaves Nokia prior to vesting.
Instead of the long-term equity-based incentive
plans of Nokia, Simon Beresford-Wylie participates in
a long-term cash incentive plan sponsored by Nokia
Siemens Networks. The long-term cash incentive
plan of Nokia Siemens Networks is designed to align
the interests of Nokia Siemens Networks executives
with increased shareholder value of Nokia Siemens
Networks and, ultimately, with increased shareholder
value for that of its owners, including Nokia and
its shareholders. The plan provides Nokia Siemens
Networks executives an opportunity to earn cash in-
centives based on the achievement of pre-determined
financial goals, including net sales and operating
margin. These long-term cash incentive awards of
Nokia Siemens Networks are generally forfeited if the
executive leaves employment prior to the end of the
plan period.
Information on the actual equity-based incentives
granted to the members of Nokia’s Group Executive
Board is included in “Share Ownership” on page 78.
74
Nokia in 2007
Corporate governance
Actual Executive Compensation for 2007
At December 31, 2007, Nokia had a Group Executive
Board consisting of 12 members. The only change in
the membership of Nokia’s Group Executive Board
during 2007 was the appointment of Timo Ihamuotila
as a new member of the Group Executive Board, effec-
tive April 1, 2007.
The following tables summarize the aggregate
cash compensation paid and the long-term equity-
based incentives granted to the members of the Group
Executive Board under Nokia’s equity plans in 2007.
Gains realized upon exercise of stock options and
share-based incentive grants vested for the members
of the Group Executive Board during 2007 are included
in “Stock option exercise and settlement of shares”
on page 84.
Aggregate cash compensation to the Group Executive Board for 2007
Year
2007
Number of
members
December 31,
2007
Base
salaries 3
EUR
Cash
incentive
payments 1, 2, 3
EUR
12
5 354 176
8 280 615
1
Includes payments pursuant to cash incentive arrangements for
the 2007 calendar year paid or payable by Nokia for the respec-
tive fiscal year. The cash incentives are paid as a percentage of
annual base salary based on Nokia’s short-term cash incentives.
2 Excluding any gains realized upon exercise of stock options,
which are described in “Stock option exercises and settlement of
shares” on page 84.
Long-Term Equity-Based Incentives Granted in 2007 1
3
Includes base salary and bonuses to Simon Beresford-Wylie,
EVP and General Manager Networks of Nokia for the period until
March 31, 2007 and Chief Executive Officer of Nokia Siemens
Networks for the remainder of 2007 and to Timo Ihamuotila from
April 1, 2007.
Group Executive
Board 3
Performance shares at threshold 2
Stock options
Restricted shares
286 000
572 000
390 000
Total
2 163 901
3 211 965
1 749 433
Total number
of participants
5 300
2 800
300
1 The equity-based incentive grants are generally forfeited if the
2 At maximum performance, the settlement amounts to four
employment relationship terminates with Nokia prior to vesting.
The settlement is conditional upon performance and service con-
ditions, as determined in the relevant plan rules. For a description
of Nokia’s equity plans, see Note 22 “Share-based payment” to
Nokia’s consolidated financial statements on page 30.
times the number of performance shares originally granted at
threshold.
3
Including Timo Ihamuotila from April 1, 2007.
Summary compensation table 2007
Name and
principal
position 1
Olli-Pekka Kallasvuo
President and CEO
Richard Simonson
EVP and Chief Financial
Officer 7
Anssi Vanjoki
EVP, Markets
Mary McDowell
EVP, Chief Development Officer 7
Kai Öistämö
EVP, Devices
Year *
Salary
EUR
Bonus 2
EUR
Stock
awards 3
EUR
Option
awards 4
EUR
2007
2006
2005
2007
2006
2005
2007
2006
2005
2007
2006
1 037 619
898 413
623 524
2 348 877
664 227
947 742
4 112 581
1 529 732
693 141
578 465
488 422
460 070
461 526
556 381
505 343
476 000
444 139
466 676
827 333
292 673
634 516
900 499
353 674
718 896
1 576 376
958 993
234 310
194 119
1 602 605
938 582
239 829
222 213
769 773
249 625
1 551 482
786 783
396 169
213 412
2007
382 667
605 520
1 412 371
223 284
Non-equity
incentive plan
compen-
Change in
pension
value and
nonqualified
deferred
compensation
earnings
EUR
All other
compen-
sation
EUR
Total
EUR
956 333 4, 5
1 496 883 4
183 603 6
38 960
9 332 153
5 206 680
46 699 8
84 652
3 173 141
1 990 507
18 521 4
215 143 4
49 244 9
29 394
3 367 078
2 264 349
32 463 10
45 806
3 194 027
1 762 302
41 465 4
32 086 11
2 697 393
sation **
EUR
—
—
—
—
—
—
—
—
—
1 The positions set forth in this table are the current positions of
3 Amounts shown represent share-based compensation expense
the named executives. Mr. Kallasvuo was President and COO until
June 1, 2006. Until December 31, 2007, Mr. Vanjoki was Executive
Vice President and General Manager of Multimedia; Ms. McDowell,
Executive Vice President and General Manager of Enterprise
Solutions; and Mr. Öistämö, Executive Vice President and General
Manager of Mobile Phones.
2 Bonus payments are part of Nokia’s short-term cash incentives.
The amount consists of the bonus awarded and paid or payable
by Nokia for the respective fiscal year.
recognized in the respective fiscal year for all outstanding equity
grants in accordance with IFRS 2, Share-based payment.
4 The change in pension value represents the proportionate
change in Nokia’s liability related to the individual executive.
These executives participate in the Finnish TyEL pension system
that provides for a retirement benefit based on years of service
and earnings according to the prescribed statutory system. The
TyEL system is a partly funded and a partly pooled “pay as you
go” system. The figures shown represent only the change in
liability for the funded portion. The method used to derive the
actuarial IFRS valuation is based upon salary information at the
respective year-end. Actuarial assumptions including salary
increases and inflation have been determined to arrive at the
valuation at the respective year end
5 The change in pension value for Mr. Kallasvuo includes EUR
148 333 for the proportionate change in the company’s liability
related to the individual under the funded part of the Finnish
TyEL pension (see footnote 4 above). In addition, it includes EUR
808 000 for the change in liability in the early retirement benefit
at the age of 60 provided under his service contract.
Corporate governance
75
Corporate governance
6 All other compensation for Mr. Kallasvuo in 2007 includes: EUR
8 All other compensation for Mr. Simonson in 2007 includes: EUR
11 All other compensation for Mr. Öistämö in 2007 includes: EUR
130 000 for his services as member of the Board of Directors, see
also “Board of Directors” above; EUR 21 300 for car allowance;
EUR 10 000 for financial counseling; EUR 17 383 for a taxable
benefit concerning payment of the Finnish transfer tax and
related gross-up in respect of settlements under performance
and restricted share plans made to all participants of those plans
who were Finnish tax residents; and EUR 4 920 for driver and for
mobile phone.
7 Salaries, benefits and perquisites of Ms. McDowell and Mr. Simon-
son are paid and denominated in USD. Amounts were converted
to EUR using year-end 2007 USD/EUR exchange rate of 1.47. For
year 2006, amounts were converted to EUR using year-end 2006
USD/EUR exchange rate of 1.31.
10 544 company contributions to the 401(k) plan, EUR 11 565
for car allowance, EUR 10 548 for financial counseling, EUR 9 691
provided as benefit under Nokia’s relocation policy and EUR
4 351 Employee Stock Purchase Plan benefit.
9 All other compensation for Mr. Vanjoki in 2007 includes: EUR
22 020 for car allowance, EUR 16 984 taxable benefit concerning
payment of the Finnish transfer tax and related gross-up in
respect of settlements under performance and restricted share
plans made to all participants of those plans who were Finnish
tax residents; EUR 10 000 for financial counseling and the
remainder for mobile phone.
10 All other compensation for Ms. McDowell in 2007 includes: EUR
9 184 company contributions to the 401(k) plan, EUR 11 565
for car allowance, EUR 10 531 for financial counseling and the
remainder for benefit provided under Nokia’s relocation policy.
Equity grants in 2007 1
13 777 for car allowance, EUR 8 069 taxable benefit concerning
payment of the Finnish transfer tax and related gross-up in
respect of settlements under performance and restricted share
plans made to all participants of those plans who were Finnish
tax residents; EUR 10 000 for financial counseling and the
remainder for mobile phone.
* History has been provided for those data elements previously
disclosed.
** None of the named executive officers participated in a formulat-
ed, non-discretionary incentive plan. Annual incentive payments
are included under the “Bonus” column.
Option awards
Stock awards
Name and principal position
Olli-Pekka Kallasvuo
President and CEO
Richard Simonson
EVP and Chief Financial Officer
Anssi Vanjoki
EVP, Markets
Mary McDowell
EVP, Chief Development Officer
Kai Öistämö
EVP, Devices
Number of
shares
underlying
options
Grant
date
Grant
price
(EUR)
Grant date
fair value 2
(EUR)
Performance
shares at
threshold
(number)
Performance
shares at
maximum
(number)
Restricted
shares
(number)
Grant date
fair value 3
(EUR)
May 11
160 000
18.39
581 690
80 000
320 000
100 000
5 709 382
May 11
55 000
18.39
199 956
27 500
110 000
35 000
1 978 385
May 11
55 000
18.39
199 956
27 500
110 000
35 000
1 978 385
May 11
55 000
18.39
199 956
27 500
110 000
35 000
1 978 385
May 11
55 000
18.39
199 956
27 500
110 000
35 000
1 978 385
1
Including all grants made during 2007. Grants were made under
the Nokia Stock Option Plan 2007, the Nokia Performance Share
Plan 2007 and the Nokia Restricted Share Plan 2007, respectively.
2 The fair values of stock options equal the estimated fair value
on the grant date, calculated using the Black-Scholes model.
The stock option exercise price is EUR 18.39. The Helsinki Stock
Exchange closing market price at the grant date was EUR 18.42.
For information with respect to the Nokia shares and
equity awards held by the members of the Group
Executive Board, please see “Share Ownership” on
page 78.
Pension arrangements for the members of the
Group Executive Board
The members of the Group Executive Board partici-
pated in the local retirement programs applicable to
employees in the country where they reside. Execu-
tives in Finland participate in the Finnish TyEL pension
system, which provides for a retirement benefit
based on years of service and earnings according to a
prescribed statutory system. Under the Finnish TyEL
pension system, base pay, incentives and other tax-
able fringe benefits are included in the definition of
earnings, although gains realized from equity are not.
The Finnish TyEL pension scheme provides for early
retirement benefits at age 62 with a reduction in the
amount of retirement benefits. Standard retirement
benefits are available from age 63 to 68, according to
an increasing scale.
Executives in the United States participate in
Nokia’s Retirement Savings and Investment Plan.
Under this 401(k) plan, participants elect to make vol-
untary pre-tax contributions that are 100% matched
by Nokia up to 8% of eligible earnings. 25% of the em-
ployer match vests for the participants for each year
of their employment. Participants earning in excess
of the Internal Revenue Service (IRS) eligible earning
limits may participate in the Nokia Restoration and
Deferral Plan which allows employees to defer up to
50% of their salary and 100% of their bonus into this
non-qualified plan. Contributions to the Restoration
and Deferral Plan in excess of IRS deferral limits will
be matched 100% up to 8% of eligible earnings less
contributions made to the 401(k) plan.
Olli-Pekka Kallasvuo can, as part of his service
contract, retire at the age of 60 with full retirement
benefits should he be employed by Nokia at the time.
The full retirement benefit is calculated as if Mr. Kallas-
vuo had continued his service with Nokia through the
retirement age of 65.
Simon Beresford-Wylie participates in the Nokia
International Employee Benefit Plan (NIEBP). The NIEBP
is a defined contribution retirement arrangement
provided to some Nokia employees on international
assignments. The contributions to NIEBP are funded
3 The fair value of performance shares and restricted shares equals
the estimated fair value on grant date. The estimated fair value
is based on the grant date market price of the Nokia share less
the present value of dividends expected to be paid during the
vesting period. The value of performance shares is presented on
the basis of a number of shares which is two times the number at
threshold.
two-thirds by Nokia and one-third by the employee.
Because Mr. Beresford-Wylie also participates in the
Finnish TyEL system, the company contribution to
NIEBP is 1.3% of annual earnings.
Hallstein Moerk, following his arrangement with
a previous employer, has also in his current position at
Nokia a retirement benefit of 65% of his pensionable
salary beginning at the age of 62. Early retirement is
possible at the age of 55 with reduced benefits.
Service contracts
Olli-Pekka Kallasvuo’s service contract covers his
current position as President and CEO and Chairman of
the Group Executive Board. As of December 31, 2007,
Mr. Kallasvuo’s annual total gross base salary, which is
subject to an annual review by the Board of Directors
and confirmation by the independent members of the
Board, is EUR 1 050 000. His incentive targets under the
Nokia short-term cash incentive plan are 150% of an-
nual gross base salary. In case of termination by Nokia
for reasons other than cause, including a change
of control, Mr. Kallasvuo is entitled to a severance
payment of up to 18 months of compensation (both
annual total gross base salary and target incentive). In
76
Nokia in 2007
Corporate governance
case of termination by Mr. Kallasvuo, the notice period
is 6 months and he is entitled to a payment for such
notice period (both annual total gross base salary
and target incentive for 6 months). Mr. Kallasvuo is
subject to a 12-month non-competition obligation
after termination of the contract. Unless the contract
is terminated for cause, Mr. Kallasvuo may be entitled
to compensation during the non-competition period
or a part of it. Such compensation amounts to the
annual total gross base salary and target incentive
for the respective period during which no severance
payment is paid.
Equity-Based Compensation Programs
General
During the year ended December 31, 2007, Nokia
sponsored four global stock option plans, four global
performance share plans and four global restricted
share plans. Both executives and employees partici-
pate in these plans. In 2004, Nokia introduced perfor-
mance shares as the main element to the company’s
broad-based equity compensation program to further
emphasize the performance element in employees’
long-term incentives. Thereafter, the number of stock
options granted has been significantly reduced. The
rationale for using both performance shares and
stock options for employees in higher job grades is
to build an optimal and balanced combination of
long-term equity-based incentives. The equity-based
compensation programs intend to align the potential
value received by participants directly with the
performance of Nokia. Since 2003, Nokia also have
granted restricted shares to a small selected number
of employees each year.
The equity-based incentive grants are generally
conditioned upon continued employment with Nokia,
as well as the fulfillment of performance and other
conditions, as determined in the relevant plan rules.
The broad-based equity compensation program
for 2007, which was approved by the Board of Direc-
tors, followed the structure of the program in 2006.
The participant group for the 2007 equity-based
incentive program continued to be broad, with a
wide number of employees in many levels of the or-
ganization eligible to participate. As at December 31,
2007, the aggregate number of participants in all of
Nokia’s equity-based programs was approximately
22 000 compared with approximately 30 000 as at
December 31, 2006 reflecting changes in Nokia’s grant
guidelines.
The employees of Nokia Siemens Networks have
not participated in any new Nokia equity-based
incentive plans since the formation of Nokia Siemens
Networks on April 1, 2007.
For a more detailed description of all of Nokia’s
equity-based incentive plans, see Note 22 “Share-
based payment” to Nokia’s consolidated financial
statements on page 30.
Performance Shares
We have granted performance shares under the global
2004, 2005, 2006 and 2007 plans, each of which,
including its terms and conditions, has been approved
by the Board of Directors.
The performance shares represent a commitment
by Nokia to deliver Nokia shares to employees at a
future point in time, subject to Nokia’s fulfillment of
pre-defined performance criteria. No performance
shares will vest unless Nokia’s performance reaches at
least one of the threshold levels measured by two in-
dependent, pre-defined performance criteria: Nokia’s
average annual net sales growth for the performance
period of the plan and earnings per share (EPS) at the
end of the performance period.
The 2004 and 2005 Performance Share Plans
have a four-year performance period and a two-year
interim measurement period. The 2006 and 2007
Performance Share Plans have a three-year perfor-
mance period with no interim measurement period.
The below table summarizes the relevant periods and
settlements under the plans.
a term of five years.
The exercise prices of the stock options are deter-
mined at the time of their grant on a quarterly basis.
The exercise prices are determined in accordance with
a pre-agreed schedule after the release of Nokia’s
periodic financial results and are based on the trade
volume weighted average price of a Nokia share
on the Helsinki Stock Exchange during the trading
days of the first whole week of the second month of
the respective calendar quarter (i.e., February, May,
August or November). Exercise prices are determined
on a one-week weighted average to mitigate any
short-term fluctuations in Nokia’s share price. The
determination of exercise price is defined in the terms
and conditions of the stock option plan, which are
approved by the shareholders at the respective Annual
General Meeting. The Board of Directors does not have
the right to amend the above-described determina-
tion of the exercise price.
Stock option grants are approved by the CEO at
the time of stock option pricing on the basis of an
authorization given by the Board of Directors. Ap-
Performance
Share Plan
2004
2005
2006
2007
Performance
period
2004–2007
2005–2008
2006–2008
2007–2009
Interim
measurement
period
2004–2005
2005–2006
N/A
N/A
1st (interim)
settlement
2nd (final)
settlement
2006
2007
N/A
N/A
2008
2009
2009
2010
Until the Nokia shares are delivered, the par-
ticipants will not have any shareholder rights, such
as voting or dividend rights, associated with the
performance shares. The performance share grants
are generally forfeited if the employment relationship
terminates with Nokia prior to vesting.
Performance share grants are approved by the
CEO at the end of the respective calendar quarter on
the basis of an authorization given by the Board of
Directors. Approvals for performance share grants to
the CEO are made by the independent members of the
Board of Directors. Approvals for performance share
grants to the other Group Executive Board members
and other direct reports of the CEO are made by the
Personnel Committee.
Stock Options
Nokia’s global stock option plans in effect for 2007,
including their terms and conditions, were approved
by the Annual General Meetings in the year when each
plan was launched, i.e., in 2001, 2003, 2005 and 2007.
Each stock option entitles the holder to subscribe
for one new Nokia share. Under the 2001 stock op-
tion plan, the stock options were transferable by the
participants. Under the 2003, 2005 and 2007 plans, the
stock options are non-transferable. All of the stock op-
tions have a vesting schedule with a 25% vesting one
year after grant, and quarterly vesting thereafter. The
stock options granted under the plans generally have
provals for stock option grants to the CEO are made by
the independent members of the Board of Directors.
Approvals for stock option grants to the other Group
Executive Board members and for other direct reports
of the CEO are made by the Personnel Committee.
Restricted Shares
Since 2003, Nokia has granted restricted shares to
recruit, retain, reward and motivate selected high
potential employees, who are critical to the future
success of Nokia. It is Nokia’s philosophy that re-
stricted shares will be used only for key management
positions and other critical resources. The outstand-
ing global restricted share plans, including their terms
and conditions, have been approved by the Board of
Directors.
All of Nokia’s restricted share plans have a
restriction period of three years after grant. Once the
shares vest, they are transferred and delivered to the
participants. The restricted share grants are generally
forfeited if the employment relationship terminates
with Nokia prior to vesting. Until the Nokia shares are
delivered, the participants do not have any sharehold-
er rights, such as voting or dividend rights, associated
with the restricted shares. Restricted share grants
are approved by the CEO at the end of the respective
calendar quarter on the basis of an authorization
given by the Board of Directors. Approvals of restricted
share grants to the CEO are made by the independent
Corporate governance
77
Corporate governance
members of the Board of Directors. Approvals for
restricted share grants to the other Group Executive
Board members and other direct reports of the CEO are
made by the Personnel Committee.
Other equity plans for employees
In addition to Nokia’s global equity plans described
above, Nokia has equity plans for Nokia-acquired busi-
nesses or employees in the United States and Canada
under which participants can receive Nokia ADSs or
ordinary shares. These equity plans do not result in an
increase in the share capital of Nokia.
We have also an Employee Share Purchase Plan
in the United States, which permits all full-time Nokia
employees located in the United States to acquire
Nokia ADSs at a 15% discount. The purchase of the
ADSs is funded through monthly payroll deductions
from the salary of the participants, and the ADSs are
purchased on a monthly basis. As at December 31,
2007, a total of 11 339 333 ADSs had been purchased
under this plan since its inception, and there were a
total of approximately 600 participants.
For more information on these plans, see Note 22
“Share-based payment” to Nokia’s consolidated finan-
cial statements on page 30.
Equity-based compensation program 2008
The Board of Directors announced the proposed
scope and design for the Equity Program 2008 on
January 24, 2008. The main equity instrument will be
performance shares. In addition, stock options will
be used on a limited basis for senior managers, and
restricted shares will be used for a small number of
high potential and critical employees. These equity-
based incentive awards are generally forfeited, if the
employee leaves Nokia prior to vesting.
Performance shares
The Performance Share Plan 2008 approved by the
Board of Directors will cover a performance period of
three years (2008–2010) with no interim measurement
period. No performance shares will vest unless Nokia’s
performance reaches at least one of the threshold
levels measured by two independent, pre-defined
performance criteria:
Achievement of the maximum performance for
both criteria would result in the vesting of a maximum
of 12 million Nokia shares. Performance exceeding the
maximum criteria does not increase the number of
performance shares that will vest. Achievement of the
threshold performance for both criteria will result in
the vesting of approximately 3 million shares. If only
one of the threshold levels of performance is achieved,
only approximately 1.5 million of the performance
shares will vest. If none of the threshold levels is
achieved, then none of the performance shares will
vest. For performance between the threshold and
maximum performance levels, the vesting follows a
linear scale. If the required performance levels are
achieved, the vesting will take place in 2010. Until
the Nokia shares are delivered, the participants will
not have any shareholder rights, such as voting or
dividend rights associated with these performance
shares.
Stock options
The stock options to be granted in 2008 are out of the
Stock Option Plan 2007 approved by the Annual Gen-
eral Meeting in 2007. For more information on Stock
Option Plan 2007, see “Equity Based Compensation
Programs” on page 77.
Restricted shares
The restricted shares to be granted under the
Restricted Share Plan 2008 will have a three-year
restriction period. The restricted shares will vest and
the payable Nokia shares will be delivered mainly in
2011, subject to fulfillment of the service period crite-
ria. Participants will not have any shareholder rights
or voting rights during the restriction period, until
the Nokia shares are transferred and delivered to plan
participants at the end of the restriction period.
Maximum planned grants in 2008
The maximum number of planned grants under the
2008 Equity Program (i.e., performance shares, stock
options and restricted shares) in 2008 are set forth in
the table below.
Average Annual Net Sales Growth: 4% (threshold)
and 16% (maximum) during the performance
period 2008–2010, and
Plan type
1
2
EPS (diluted, excluding special items): EUR 1.72
(threshold) and EUR 2.76 (maximum) at the end of
the performance period in 2010.
Stock options
Restricted shares
Performance shares at threshold 1
5 million
4 million
3 million
Maximum number
of planned grants
under the 2008
equityprogram in 2008
Average Annual Net Sales Growth is calculated as an
average of the net sales growth rates for the years
2007 through 2010. EPS is the diluted earnings per
share in 2010 excluding special items. Both the EPS
and Average Annual Net Sales Growth criteria are
equally weighted and performance under each of the
two performance criteria is calculated independent of
each other.
1 The maximum number of shares to be delivered at maximum
performance is four times the number at threshold, i.e., a total of
12 million Nokia shares.
As at December 31, 2007, the total dilutive effect
of Nokia’s stock options, performance shares and
restricted shares outstanding, assuming full dilution,
was approximately 2.3% in the aggregate. The poten-
tial maximum effect of the proposed equity program
2008 would be approximately another 0.6%.
78
Nokia in 2007
Share ownership
General
The following section describes the ownership or
potential ownership interest in the company of the
members of Nokia’s Board of Directors and the Group
Executive Board, either through share ownership or
through holding of equity based incentives, which
may lead to share ownership in the future.
Since 1999, approximately 40% of the remunera-
tion paid to the Board of Directors has been paid in
Nokia shares purchased from the market. Non-execu-
tive members of the Board of Directors do not receive
stock options, performance shares, restricted shares
or other variable pay compensation.
For a description of Nokia’s equity-based com-
pensation programs for employees and executives,
see “Equity-Based Compensation Programs” on
page 77.
Share ownership of the Board of Directors
At December 31, 2007, the members of Nokia’s Board
of Directors held the aggregate of 975 797 shares and
ADSs in Nokia which represented 0.03% of Nokia’s
outstanding share capital and total voting rights
excluding shares held by Nokia Group at that date.
The following table sets forth the number of
shares and ADSs held by members of the Board of
Directors as at December 31, 2007.
Shares 1
ADSs
Jorma Ollila 2
Marjorie Scardino
Georg Ehrnrooth 3
Lalita D. Gupte
Bengt Holmström
Henning Kagermann
Olli-Pekka Kallasvuo 4
Per Karlsson 3
Keijo Suila
Vesa Vainio
Total
389 578
—
318 347
—
19 416
2 810
166 059
22 889
5 597
30 811
955 507
—
17 263
—
3 027
—
—
—
—
—
—
20 290
1 The number of shares includes not only shares acquired as
compensation for services rendered as a member of the Board of
Directors, but also shares acquired by any other means.
2 For Mr. Ollila, this table includes his share ownership, only. Mr.
Ollila was entitled to retain all vested and unvested stock op-
tions, performance shares and restricted shares granted to him
in respect of his services as the CEO of Nokia prior to June 1, 2006
as approved by the Board of Directors. Therefore, in addition
to the above-presented share ownership, Mr. Ollila held, as of
December 31, 2007, a total of 1 800 000 stock options, 300 000
performance shares (at threshold) and 200 000 restricted shares.
The information relating to stock options held by Mr. Ollila as at
December 31, 2007 is represented in the table below.
Corporate governance
Number of stock options in the below table equals the number of
underlying shares represented by the option entitlement. Stock
options vest over four years: 25% after one year and 6.25% each
quarter thereafter. The intrinsic value of the stock options in the
above table is based on the difference between the exercise price
of the options and the closing market price of Nokia shares on the
Helsinki Stock Exchange as at December 28, 2007 of EUR 26.52.
3 Mr. Ehrnrooth’s and Mr. Karlsson’s holdings include both shares
held personally and shares held through a company.
4 For Mr. Kallasvuo, this table includes his share ownership only.
Mr. Kallasvuo’s holdings of long-term equity-based incentives are
outlined under “Stock Option Ownership of the Group Executive
Board” on page 80 and “Performance Shares and Restricted
Shares” on page 82.
Number of stock options
Total intrinsic value
of stock options,
December 31, 2007
EUR
Jorma Ollila
Stock option
category
Expiration
date
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2006 2Q
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
Exercise
price per
share EUR
17.89
14.95
11.79
12.79
18.02
Exercisable Unexercisable
Exercisable Unexercisable
—
600 000
325 000
225 000
125 000
—
—
75 000
175 000
275 000
—
6 942 000
4 787 250
3 089 250
1 062 500
—
—
1 104 750
2 402 750
2 337 500
Share Ownership of the Group Executive Board
The following table sets forth the share ownership, as
well as potential ownership interest through holding
of equity-based incentives, of the members of the
Group Executive Board as at December 31, 2007.
Shares
receivable
through stock
options
Shares
Shares
receivable
through
performance
shares at
threshold 3
Shares
receivable
through
performance
shares at
maximum 4
Shares
receivable
through
restricted
shares
Number of equity instruments held by Group Executive Board
642 429
2 693 844
569 600
2 835 637
1 087 500
% of the share capital 1
% of the total outstanding equity incentives (per instrument) 2
0.017
—
0.070
7.769
0.015
8.709
0.074
6.266
0.028
18.139
1 The percentage is calculated in relation to the outstanding share
capital and total voting rights of the company, excluding shares
held by Nokia Group.
2 The percentage is calculated in relation to the total outstanding
equity incentives per instrument, i.e., stock options, performance
shares and restricted shares, as applicable.
3 Performance shares at threshold represent the original grant.
Due to the interim payouts, the participants have already
received threshold number of Nokia shares under 2004 and 2005
plans. Therefore, the shares receivable under the 2004 and 2005
performance share plans equal to zero.
4 At maximum performance under the performance share plans
2006 and 2007, the number of Nokia shares deliverable equals
four times the number of performance shares originally granted
(at threshold). Due to the interim payout (at threshold) in 2006
and based on the actual level of the performance criteria for the
performance period, the number of Nokia shares deliverable
under the performance share plan 2004 equals 2.39 times the
number of performance shares originally granted (at threshold).
Due to the interim payout (at threshold) in 2007, the maximum
number of Nokia shares deliverable under the performance share
plan 2005 equals three times the number of performance shares
originally granted (at threshold).
The following table sets forth the number of shares
and ADSs in Nokia held by members of the Group
Executive Board as at December 31, 2007.
Shares
ADSs
Olli-Pekka Kallasvuo
Robert Andersson
Simon Beresford-Wylie
Timo Ihamuotila
Mary McDowell
Hallstein Moerk
Tero Ojanperä
Niklas Savander
Richard Simonson
Veli Sundbäck
Anssi Vanjoki
Kai Öistämö
Total
166 059
28 580
25 436
31 637
31 029
37 209
16 135
30 367
53 746
117 774
60 799
13 931
612 702
—
—
—
—
5 000
3 213
—
—
21 514
—
—
—
29 727
Corporate governance
79
Corporate governance
Stock Option Ownership of the Group
Executive Board
The following table provides certain information re-
lating to stock options held by members of the Group
Executive Board as at December 31, 2007. These stock
options were issued pursuant to Nokia Stock Option
Plans 2001, 2003, 2005 and 2007. For a description
of Nokia’s stock option plans, please see Note 22 to
Nokia’s consolidated financial statements on page 30.
Number of stock options 1
Total intrinsic value
of stock options,
December 31, 2007
EUR 2
Stock option
category
Expiration
date
Exercise
price per
share EUR
Exercisable
Unexercisable
Exercisable 3 Unexercisable
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2005 4Q
2006 2Q
2007 2Q
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2005 4Q
2006 2Q
2007 2Q
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2003 4Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
17.89
14.95
11.79
12.79
14.48
18.02
18.39
17.89
14.95
11.79
12.79
14.48
18.02
18.39
17.89
14.95
11.79
12.79
18.02
17.89
14.95
11.79
12.79
18.02
18.39
15.05
11.79
12.79
18.02
18.39
17.89
14.95
11.79
12.79
18.02
18.39
—
120 000
48 750
33 750
43 750
93 750
—
—
—
8 450
6 750
12 250
—
—
—
13 000
8 125
27 750
31 250
7
—
—
—
—
—
65 625
40 625
33 750
31 250
—
—
—
—
—
18 750
—
—
—
11 250
26 250
56 250
206 250
160 000
—
—
1 950
5 250
15 750
55 000
32 000
—
—
1 875
26 250
68 750
—
—
1 500
6 300
9 900
32 000
4 375
9 375
26 250
68 750
55 000
—
—
5 625
17 500
41 250
32 000
—
1 388 400
718 088
463 388
526 750
796 875
—
—
—
124 469
92 678
147 490
—
—
—
150 410
119 681
381 008
265 625
60
—
—
—
—
—
752 719
598 406
463 388
265 625
—
—
—
—
—
159 375
—
—
—
165 713
360 413
677 250
1 753 125
1 300 800
—
—
28 724
72 083
189 630
467 500
260 160
—
—
27 619
360 413
584 375
—
—
22 095
86 499
84 150
260 160
50 181
138 094
360 413
584 375
447 150
—
—
82 856
240 275
350 625
260 160
Olli-Pekka Kallasvuo
Robert Andersson
Simon Beresford-Wylie 4
Timo Ihamuotila
Mary McDowell
Hallstein Moerk
80
Nokia in 2007
Stock option ownership of the Group Executive Board, continued
Corporate governance
Tero Ojanperä
Niklas Savander
Richard Simonson
Veli Sundbäck
Anssi Vanjoki
Kai Öistämö
Number of stock options 1
Total intrinsic value
of stock options,
December 31, 2007
EUR 2
Stock option
category
Expiration
date
Exercise
price per
share EUR
Exercisable
Unexercisable
Exercisable 3 Unexercisable
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2002 A/B
2003 2Q
2004 2Q
2005 2Q
2005 4Q
2006 2Q
2007 2Q
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2007
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2010
December 31, 2011
December 31, 2012
17.89
14.95
11.79
12.79
18.02
18.39
17.89
14.95
11.79
12.79
18.02
18.39
17.89
14.95
11.79
12.79
18.02
18.39
17.89
14.95
11.79
12.79
18.02
18.39
17.89
14.95
11.79
12.79
18.02
18.39
17.89
14.95
11.79
12.79
14.48
18.02
18.39
—
16 000
8 125
22 500
18 750
—
—
—
640
875
3 750
—
—
11 500
40 625
33 750
31 250
—
—
50 000
24 375
22 500
18 750
—
—
—
—
—
—
—
—
727
1 250
1 600
3 500
31 250
—
—
—
1 875
17 500
41 250
32 000
—
—
1 920
6 125
41 250
32 000
—
—
9 375
26 250
68 750
55 000
—
—
5 625
17 500
41 250
32 000
—
—
11 250
26 250
68 750
55 000
—
—
1 875
5 600
15 750
68 750
55 000
—
185 120
119 681
308 925
159 375
—
—
—
9 427
12 014
31 875
—
—
133 055
598 406
463 388
265 625
—
—
578 500
359 044
308 925
159 375
—
—
—
—
—
—
—
—
8 411
18 413
21 968
42 140
265 625
—
—
—
27 619
240 275
350 625
260 160
—
—
28 282
84 096
350 625
260 160
—
—
138 094
360 413
584 375
447 150
—
—
82 856
240 275
350 625
260 160
—
—
165 713
360 413
584 375
447 150
—
—
27 619
76 888
189 630
584 375
447 150
Stock options held by the members
of the Group Executive Board on
December 31, 2007, Total
All outstanding stock option plans
(global plans), Total
979 299
1 714 545
11 463 724
16 163 936
20 869 758
13 803 554
248 800 175
139 926 235
1 Number of stock options equals the number of underlying shares
represented by the option entitlement. Stock options vest over
four years: 25% after one year and 6.25% each quarter thereaf-
ter.
2 The intrinsic value of the stock options is based on the differ-
ence between the exercise price of the options and the closing
market price of Nokia shares on the Helsinki Stock Exchange as at
December 28, 2007 of EUR 26.52.
3 For gains realized upon exercise of stock options for the mem-
bers of the Group Executive Board, see the table in “Stock Option
Exercises and Settlement of Shares” on page 84.
4 From April 1, 2007, Mr. Beresford-Wylie has participated in a
long-term cash incentive plan sponsored by Nokia Siemens
Networks instead of the long-term equity-based plans of Nokia.
Corporate governance
81
Corporate governance
Performance shares and restricted shares
The following table provides certain information
relating to performance shares and restricted shares
held by members of the Group Executive Board as at
December 31, 2007. These entitlements were granted
pursuant to Nokia’s performance share plans 2004,
2005, 2006 and 2007 and restricted share plans 2005,
2006 and 2007. For a description of Nokia’s perfor-
mance share and restricted share plans, please see
Note 22 to the consolidated financial statements on
page 30.
Performance shares
Restricted shares
Plan
name 1
Number of
performance
shares at
threshold 2
Number of
performance
shares at
maximum 2
Intrinsic
value 3
EUR
Plan
name 4
Number of
restricted
shares
Intrinsic
value 5
EUR
15 000
15 000
75 000
80 000
2 600
3 000
20 000
16 000
2 500
15 000
25 000
2 000
3 600
3 600
16 000
12 500
15 000
25 000
27 500
7 500
10 000
15 000
16 000
2 500
10 000
15 000
16 000
2 560
3 500
15 000
16 000
12 500
15 000
25 000
27 500
35 850
45 000
300 000
320 000
6 214
9 000
80 000
64 000
5 975
45 000
100 000
4 780
10 800
14 400
64 000
29 875
45 000
100 000
110 000
17 925
30 000
60 000
64 000
5 975
30 000
60 000
64 000
6 118
10 500
60 000
64 000
29 875
45 000
100 000
110 000
950 742
1 193 400
6 552 786
6 571 490
164 795
238 680
1 747 410
1 314 298
158 457
1 193 400
2 184 262
126 766
286 416
314 534
1 314 298
792 285
1 193 400
2 184 262
2 258 950
475 371
795 600
1 310 557
1 314 298
158 457
795 600
1 310 557
1 314 298
162 260
278 460
1 310 557
1 314 298
792 285
1 193 400
2 184 262
2 258 950
2005
2006
2007
2005
2006
2007
2005
2006
2005
2006
2007
2005
2006
2007
2005
2006
2007
2005
2006
2007
2005
2006
2007
2005
2006
2007
70 000
100 000
100 000
1 856 400
2 652 000
2 652 000
28 000
20 000
25 000
35 000
25 000
25 000
4 500
25 000
35 000
25 000
35 000
25 000
15 000
25 000
25 000
15 000
25 000
25 000
15 000
25 000
35 000
25 000
35 000
742 560
530 400
663 000
928 200
663 000
663 000
119 340
663 000
928 200
663 000
928 200
663 000
397 800
663 000
663 000
397 800
663 000
663 000
397 800
663 000
928 200
663 000
928 200
Olli-Pekka Kallasvuo
Robert Andersson
Simon Beresford-Wylie 6
Timo Ihamuotila
Mary McDowell
Hallstein Moerk
Tero Ojanperä
Niklas Savander
Richard Simonson
2004
2005
2006
2007
2004
2005
2006
2007
2004
2005
2006
2004
2005
2006
2007
2004
2005
2006
2007
2004
2005
2006
2007
2004
2005
2006
2007
2004
2005
2006
2007
2004
2005
2006
2007
82
Nokia in 2007
Corporate governance
Performance shares
Restricted shares
Plan
name 1
2004
2005
2006
2007
2004
2005
2006
2007
2004
2005
2006
2007
Number of
performance
shares at
threshold 2
Number of
performance
shares at
maximum 2
7 500
10 000
15 000
16 000
15 000
15 000
25 000
27 500
2 500
3 200
25 000
27 500
17 925
30 000
60 000
64 000
35 850
45 000
100 000
110 000
5 975
9 600
100 000
110 000
Intrinsic
value 3
EUR
475 371
795 600
1 310 557
1 314 298
950 742
1 193 400
2 184 262
2 258 950
158 457
254 592
2 184 262
2 258 950
Plan
name 4
Number of
restricted
shares
Intrinsic
value 5
EUR
2005
2006
2007
2005
2006
2007
2005
2006
2007
25 000
15 000
25 000
35 000
25 000
35 000
25 000
25 000
35 000
663 000
397 800
663 000
928 200
663 000
928 200
663 000
663 000
928 200
772 560
2 835 637
63 049 281
1 087 500
28 840 500
13 544 558
45 254 618
1 066 777 076
5 915 929
156 890 437
Veli Sundbäck
Anssi Vanjoki
Kai Öistämö
Performance shares and
restricted shares held
by the Group Executive
Board, Total
All outstanding
performance shares and
restricted shares
(global plans), Total
1 The performance period for the 2004 plan was 2004–2007, with
one interim measurement period for fiscal years 2004–2005.
The performance period for the 2005 plan is 2005–2008, with
one interim measurement period for fiscal years 2005–2006. The
performance period for the 2006 plan is 2006–2008, without
any interim measurement period. The performance period for
the 2007 plan is 2007–2009, without any interim measurement
period.
2 For the performance share plans 2004, 2005, 2006 and 2007,
the number of performance shares at threshold represents the
number of performance shares granted. This number will vest as
Nokia shares should the pre-determined threshold performance
levels of Nokia be met. The maximum number of Nokia shares
will vest should the predetermined maximum performance levels
be met. The maximum number of performance shares equals
four times the number originally granted at 2004–2007 thresh-
old. Due to the interim payout in 2006 and based on the actual
level of the performance criteria for the performance period, the
number of Nokia shares deliverable under the 2004 plan is equal
to 2.39 times the number at threshold.
3 The intrinsic value is based on the closing market price of a Nokia
share on the Helsinki Stock Exchange as at December 28, 2007 of
EUR 26.52. The value of performance shares is presented on the
basis of Nokia’s estimation of the number of shares expected to
vest. For performance share plan 2004 the value of performance
shares is presented on the basis of actual number of shares
expected to vest.
4 Under the restricted share plans 2004, 2005, 2006 and 2007
awards are granted quarterly. For the major part of the awards
made under these plans the restriction period ended for the
2004 plan on October 1, 2007; and will end for the 2005 plan, on
October 1, 2008; for the 2006 plan, on October 1, 2009; for the
2007 plan, on October 1, 2010.
5 The intrinsic value is based on the closing market price of a Nokia
share on the Helsinki Stock Exchange as at December 28, 2007 of
EUR 26.52.
6 From April 1, 2007, Mr. Beresford-Wylie has participated in a
long-term cash incentive plan sponsored by Nokia Siemens
Networks instead of the long-term equity-based plans of Nokia.
For gains realized upon exercise of stock options or
delivery of Nokia shares on the basis of performance
shares and restricted shares granted to the members
of the Group Executive Board, see the table in “Stock
Option Exercises and Settlement of Shares” on page 84.
Corporate governance
83
Corporate governance
Stock option exercises and settlement
of shares
The following table provides certain information
relating to stock option exercises and share deliveries
upon settlement during the year 2007 for Nokia’s
Group Executive Board members.
Name
Olli-Pekka Kallasvuo
Robert Andersson
Simon Beresford-Wylie
Timo Ihamuotila
Mary McDowell
Hallstein Moerk
Tero Ojanperä
Niklas Savander
Richard Simonson
Veli Sundbäck
Anssi Vanjoki
Kai Öistämö
Year
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
Stock option
awards 1
Performance shares
awards 2
Restricted shares
awards 3
Options
exercised
(number)
Value
realized
(EUR)
175 000
150 518
73 000
381 620
6 000
87 300
30 223
218 849
—
83 750
14 500
64 180
15 000
40 000
—
707 937
151 380
427 001
42 750
209 350
156 250
1 461 900
23 989
121 392
Shares
delivered
(number)
15 000
3 000
15 000
3 600
15 000
10 000
10 000
3 500
15 000
10 000
15 000
3 200
Value
realized
(EUR)
301 500
60 300
301 500
72 360
301 500
201 000
201 000
70 350
301 500
201 000
301 500
64 320
Shares
delivered
(number)
35 000
15 000
—
15 000
20 000
20 000
15 000
16 500
25 000
20 000
35 000
15 000
Value
realized
(EUR)
651 000
388 200
—
388 200
331 600
372 000
388 200
427 020
465 000
372 000
651 000
388 200
1 Value realized on exercise is based on the total gross value
received in 2007 in respect of stock options sold on the Helsinki
Stock Exchange (transferable stock options) and on the differ-
ence between the Nokia share price and exercise price of options
(non-transferable stock options).
2 Represents interim payout at threshold for the 2005 performance
share grant. Value is based on the market price of the Nokia share
on the Helsinki Stock Exchange as at May 21, 2007 of EUR 20.10.
3 Delivery of Nokia shares vested from the 2003 grant to Ms.
McDowell and from the 2004 grant to the other members of the
Group Executive Board. Value is based on the market price of
the Nokia share on the Helsinki Stock Exchange for the grant of
Ms. McDowell on January 29, 2007 of EUR 16.58; Mr. Kallasvuo,
Mr. Moerk, Mr. Simonson, Mr. Sundbäck and Mr. Vanjoki as at
May 7, 2007 of EUR 18.60; and Mr. Andersson, Mr. Ihamuotila,
Mr. Ojanperä, Mr. Savander and Mr. Öistämö on October 22, 2007
of EUR 25.88.
Stock ownership guidelines for executive
management
One of the goals of Nokia’s long-term equity-based
incentive program is to focus executives on building
value for shareholders. In addition to granting the
stock options, performance shares and restricted
shares, Nokia also encourages stock ownership by
Nokia’s top executives. Since January 2001, Nokia has
had stock ownership commitment guidelines with
minimum recommendations tied to annual base
salaries. For the President and CEO, the recommended
minimum investment in Nokia shares corresponds
to three times his annual base salary, for Simon
Beresford-Wylie, Chief Executive Officer of Nokia
Siemens Networks, one time his annual base salary
and for the other members of the Group Executive
Board, two times the member’s annual base salary,
respectively. To meet this requirement, all members
are expected to retain after-tax equity gains in shares
until the minimum investment level is met.
Insider trading in securities
The Board of Directors has established and regularly
updates a policy in respect of insiders’ trading in
Nokia securities. The members of the Board and the
Group Executive Board are considered as primary
insiders. Under the policy, the holdings of Nokia secu-
rities by the primary insiders are public information,
which is available in the Finnish Central Securities
Depositary and on Nokia’s website. Both primary
insiders and secondary insiders (as defined in the
policy) are subject to a number of trading restrictions
and rules, including, among other things, prohibitions
on trading in Nokia securities during the three-week
“closed-window” period immediately preceding the
release of Nokia’s quarterly results and the four-week
“closed-window” period immediately preceding the
release of Nokia’s annual results. In addition, Nokia
may set trading restrictions based on participation in
projects. Nokia updates its insider trading policy from
time to time and monitors Nokia’s insiders’ compli-
ance with the policy on a regular basis. Nokia’s insider
policy is in line with the Helsinki Stock Exchange
Guidelines for Insiders and also sets requirements
beyond those guidelines.
84
Nokia in 2007
Corporate governance
Auditor fees and services
PricewaterhouseCoopers Oy has served as Nokia’s
independent auditor for each of the fiscal years in
the three-year period ended December 31, 2007. The
independent auditor is elected annually by Nokia’s
shareholders at the Annual General Meeting for the
fiscal year in question. The Audit Committee of the
Board of Directors makes a proposal to the sharehold-
ers in respect of the appointment of the auditor based
upon its evaluation of the qualifications and indepen-
dence of the auditor to be proposed for election or
re-election on an annual basis.
The following table sets forth the aggregate fees
for professional services and other services rendered
by PricewaterhouseCoopers to Nokia in 2007 and 2006.
The aggregate fees for 2007 are set forth in total with
a separate presentation of those fees related to Nokia
and Nokia Siemens Networks.
EURm
Audit fees 1
Audit-related fees 2
Tax fees 3
All other fees 4
Total
2007
Nokia Siemens
Networks
12.7
24.3
2.3
—
39.3
Total
18.0
27.9
7.3
0.2
53.4
Nokia
5.3
3.6
5.0
0.2
14.1
2006
Total
5.2
7.1
6.8
0.4
19.5
1 Audit fees consist of fees billed for the annual audit of the
company’s consolidated financial statements and the statutory
financial statements of the company’s subsidiaries. They also in-
clude fees billed for other audit services, which are those services
that only the independent auditor reasonably can provide, and
include the provision of comfort letters and consents in con-
nection with statutory and regulatory filings and the review of
documents filed with the SEC and other capital markets or local
financial reporting regulatory bodies. The fees for 2007 include
EUR 2.9 million of accrued audit fees for the 2007 year-end audit
that were not billed until 2008. There were no unbilled audit fees
at year-end 2006.
2 Audit-related fees consist of fees billed for assurance and related
services that are reasonably related to the performance of the
audit or review of the company’s financial statements or that
are traditionally performed by the independent auditor, and
include consultations concerning financial accounting and
reporting standards; advice on tax accounting matters; advice
and assistance in connection with local statutory accounting
requirements; due diligence related to acquisitions; financial
due diligence in connection with provision of funding to
customers, reports in relation to covenants in loan agreements;
employee benefit plan audits and reviews; and audit procedures
in connection with investigations and the compliance program
implemented at Nokia Siemens Networks related to the Siemens’
carrier-related operations transferred to Nokia Siemens Net-
works. The fees for 2007 include EUR 1.0 million of accrued audit
related fees that were not billed until 2008. The fees for 2006
include EUR 1.5 million of accrued audit related fees that were
not billed until 2007. The amounts paid by Nokia to Pricewater-
houseCoopers include EUR 23.9 million and EUR 0.3 million that
Nokia has recovered or will be able to recover from a third party
for 2007 and 2006, respectively.
3 Tax fees include fees billed for (i) corporate and indirect compli-
ance including preparation and/or review of tax returns, prepa-
ration, review and/or filing of various certificates and forms and
consultation regarding tax returns and assistance with revenue
authority queries; (ii) transfer pricing advice and assistance
with tax clearances; (iii) customs duties reviews and advice;
(iv) consultations and tax audits (assistance with technical tax
queries and tax audits and appeals and advice on mergers,
acquisitions and restructurings) and (v) personal compliance
(preparation of individual tax returns and registrations for
employees (non-executives), assistance with applying for visa,
residency, work permits and tax status for expatriates) and (vi)
consultation and planning (advice on stock based remuneration,
local employer tax laws, social security laws, employment laws
and compensation programs, tax implications on short-term
international transfers). The tax fees for 2007 include EUR 2.1
million of accrued tax fees that were not billed until 2008. The
tax fees for 2006 include EUR 0.4 million of accrued tax fees that
were not billed until 2007.
4 All other fees include fees billed for company establishment,
forensic accounting, data security and occasional training or
reference materials and services.
Audit committee pre-approval policies
and procedures
The Audit Committee of Nokia’s Board of Directors is
responsible, among other matters, for the oversight
of the external auditor subject to the requirements of
Finnish law. The Audit Committee has adopted a policy
regarding pre-approval of audit and permissible
non-audit services provided by Nokia’s independent
auditors (the “Policy”).
Under the Policy, proposed services either
(i) may be pre-approved by the Audit Committee
without a specific case-by-case service approval
(“general pre-approval”); or (ii) require the specific
pre-approval of the Audit Committee (“specific pre-
approval”). The Audit Committee may delegate either
type of pre-approval authority to one or more of
its members. The appendices to the Policy set out
the audit, audit-related, tax and other services that
have received the general pre-approval of the Audit
Committee. All other audit, audit-related (including
services related to internal controls and significant
M&A projects), tax and other services are subject to a
specific pre-approval from the Audit Committee. All
service requests concerning generally pre-approved
services will be submitted to the Corporate Controller
who will determine whether the services are within
the services generally pre-approved. The Policy and its
appendices are subject to annual review by the Audit
Committee.
The Audit Committee establishes budgeted fee
levels annually for each of the four categories of audit
and non-audit services that are pre-approved under
the Policy, namely, audit, audit-related, tax and other
services. Requests or applications to provide services
that require specific approval by the Audit Committee
are submitted to the Audit Committee by both the
independent auditor and the Chief Financial Officer.
At each regular meeting of the Audit Committee, the
independent auditor provides a report in order for
the Audit Committee to review the services that the
auditor is providing, as well as the status and cost of
those services.
Corporate governance
85
Investor information
Information on the Internet
www.nokia.com/investors
Investor relations contacts
investor.relations@nokia.com
Available on the Internet: financial reports, Nokia
management’s presentations, conference call and
other investor related material, press releases as
well as environmental and social information.
Nokia Investor Relations
102 Corporate Park Drive
White Plains, NY 10604
USA
Tel. +1 914 368 0555
Fax +1 914 368 0600
Nokia Investor Relations
P.O. Box 226
FI-00045 NOKIA GROUP
Finland
Tel. +358 7180 34927
Fax +358 7180 38787
Annual General Meeting
Date: Thursday, May 8, 2008 at 3.00 pm
Address: Helsinki Fair Centre, Amfi-hall, Messuaukio 1,
Helsinki, Finland
Dividend
Dividend proposed by the Board of Directors for the
fiscal year 2007 is EUR 0.53.
The dividend record date is proposed to be May 13,
2008 and the pay date on or about May 27, 2008.
Financial reporting
Nokia’s quarterly reports in 2008 are planned for
April 17, July 17, and October 16. The 2008 results are
planned to be published in January 2009.
Information published in 2007
All Nokia’s press releases as well as quartely results
announcements and financial statements published in
2007 are available on the Internet at www.nokia.com.
Stock exchanges
The shares of Nokia Corporation are quoted on the following stock exchanges:
HEX, Helsinki (quoted since 1915)
Frankfurter Wertpapierbörse (1988)
New York Stock Exchange (1994)
List of indices
NOK1V
OMXN40 OMX Nordic 40
OMXH OMX Helsinki
OMXH25 OMX Helsinki 25
Symbol
NOK1V
NOA3
NOK
NOK
NYA NYSE Composite
NYL.ID NYSE World Leaders
NYYID NYSE TMT
HX45 OMX Helsinki Information Technology
CTN CSFB Technology
BE500 Bloomberg European 500
MLO Merrill Lynch 10
BETECH Bloomberg
Telecommunication Equipment
SX5E DJ Euro STOXX 50
SX5P DJ STOXX 50
E3X FTSE Eurofirst 300
Trading currency
EUR
EUR
USD
It should be noted that certain statements herein which are not his-
torical facts, including, without limitation, those regarding: A) the
timing of product, services and solution deliveries; B) our ability to
develop, implement and commercialize new products, services, so-
lutions and technologies; C) expectations regarding market growth,
developments and structural changes; D) expectations regarding our
mobile device volume growth, market share, prices and margins; E)
expectations and targets for our results of operations; F) the outcome
of pending and threatened litigation; G) expectations regarding the
successful completion of contemplated acquisitions on a timely basis
and our ability to achieve the set targets upon the completion of such
acquisitions; and H) statements preceded by “believe,” “expect,” “an-
ticipate,” “foresee,” “target,” “estimate,” “designed,” “plans,” “will”
or similar expressions are forward-looking statements. These state-
ments are based on management’s best assumptions and beliefs in
light of the information currently available to it. Because they involve
risks and uncertainties, actual results may differ materially from the
results that we currently expect. Factors that could cause these dif-
ferences include, but are not limited to: 1) competitiveness of our
product, service and solutions portfolio; 2) the extent of the growth
of the mobile communications industry and general economic con-
ditions globally; 3) the growth and profitability of the new market
segments that we target and our ability to successfully develop or
acquire and market products, services and solutions in those seg-
ments; 4) our ability to successfully manage costs; 5) the intensity of
competition in the mobile communications industry and our ability
to maintain or improve our market position or respond successfully
to changes in the competitive landscape; 6) the impact of changes in
technology and our ability to develop or otherwise acquire complex
technologies as required by the market, with full rights needed to
use; 7) timely and successful commercialization of complex technolo-
gies as new advanced products, services and solutions; 8) our ability
to protect the complex technologies, which we or others develop
or that we license, from claims that we have infringed third parties’
intellectual property rights, as well as our unrestricted use on com-
mercially acceptable terms of certain technologies in our products,
services and solution offerings; 9) our ability to protect numerous
Nokia and Nokia Siemens Networks patented, standardized or pro-
prietary technologies from third-party infringement or actions to
invalidate the intellectual property rights of these technologies; 10)
Nokia Siemens Networks’ ability to achieve the expected benefits and
synergies from its formation to the extent and within the time period
anticipated and to successfully integrate its operations, personnel
and supporting activities; 11) whether, as a result of investigations
into alleged violations of law by some current or former employees
of Siemens AG (“Siemens”), government authorities or others take
further actions against Siemens and/or its employees that may in-
volve and affect the carrier-related assets and employees transferred
by Siemens to Nokia Siemens Networks, or there may be undetected
additional violations that may have occurred prior to the transfer, or
ongoing violations that may have occurred after the transfer, of such
assets and employees that could result in additional actions by gov-
ernment authorities; 12) any impairment of Nokia Siemens Networks
customer relationships resulting from the ongoing government in-
vestigations involving the Siemens carrier-related operations trans-
ferred to Nokia Siemens Networks; 13) occurrence of any actual or
even alleged defects or other quality issues in our products, services
and solutions; 14) our ability to manage efficiently our manufactur-
ing and logistics, as well as to ensure the quality, safety, security and
timely delivery of our products, services and solutions; 15) inventory
management risks resulting from shifts in market demand; 16) our
ability to source sufficient amounts of fully functional components
and sub-assemblies without interruption and at acceptable prices;
17) any disruption to information technology systems and networks
that our operations rely on; 18) developments under large, multi-year
contracts or in relation to major customers; 19) economic or political
turmoil in emerging market countries where we do business; 20) our
success in collaboration arrangements relating to development of
technologies or new products, services and solutions; 21) the success,
financial condition and performance of our collaboration partners,
suppliers and customers; 22) exchange rate fluctuations, including,
in particular, fluctuations 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; 23) the
management of our customer financing exposure; 24) allegations of
possible health risks from electromagnetic fields generated by base
stations and mobile devices and lawsuits related to them, regardless
of merit; 25) unfavorable outcome of litigations; 26) our ability to
recruit, retain and develop appropriately skilled employees; 27) the
impact of changes in government policies, laws or regulations; and
28) our ability to effectively and smoothly implement our new organi-
zational structure; as well as the risk factors specified on pages 10-25
of Nokia’s annual report on Form 20-F for the year ended December
31, 2007 under “Item 3.D Risk Factors.” Other unknown or unpredict-
able factors or underlying assumptions subsequently proving to be
incorrect could cause actual results to differ materially from those
in the forward-looking statements. Nokia does not undertake any
obligation to update publicly or revise forward-looking statements,
whether as a result of new information, future events or otherwise,
except to the extent legally required.
86
Nokia in 2007
Contact information
Nokia Head Office
Keilalahdentie 2–4
02150 Espoo
P.O. Box 226, FI-00045 Nokia Group
FINLAND
Tel. +358 7180 08000
Fax +358 7180 38226
Nokia Corporate Office–New York
102 Corporate Park Drive
White Plains, New York 10604
USA
Tel. +1 914 368 0400
Fax +1 914 368 0501
Nokia Corporate Office–Texas
6000 Connection Drive
Irving, Texas 75039
USA
Tel. +1 972 894 5000
Fax +1 972 894 5106
Nokia Asia-Pacific
438B Alexandra Road
#07-00 Alexandra Technopark
SINGAPORE 119968
Tel. +65 6723 2323
Fax +65 6723 2324
Nokia Middle East & North Africa
Al Thuraya Tower II, 27th floor,
Dubai Internet City
Dubai, UAE
Tel. +971 4 3697600
Fax +971 4 3697606
Investor information
87
Paper: Munken Lynx 100 g/m2
Cover: Munken Lynx 240 g/m2
Design: HardWorkingHouse Oy, cover: Louise Boström Oy.
F.G. Lönnberg ISO 9001, 2008.
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