Nokia in 2008
Review by the Board of Directors and
Nokia Annual Accounts 2008
Key data ...................................................................................................................................................... 2
Review by the Board of Directors ...................................................................................................... 3
Annual Accounts 2008
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 ........................................ 11
Notes to the consolidated financial statements ........................................................................... 13
Profit and loss accounts, parent company, FAS ............................................................................. 48
Balance sheets, parent company, FAS .............................................................................................. 48
Cash flow statements, parent company, FAS ................................................................................. 49
Notes to the financial statements of the parent company ........................................................ 50
Nokia shares and shareholders ......................................................................................................... 54
Nokia Group 2004–2008, IFRS ............................................................................................................ 58
Calculation of key ratios ...................................................................................................................... 60
Proposal by the Board of Directors for distribution of profit .................................................... 61
Auditors’ report ..................................................................................................................................... 62
Additional information
Critical accounting policies ................................................................................................................ 64
Group Executive Board ........................................................................................................................ 68
Board of Directors ................................................................................................................................. 70
Corporate governance ......................................................................................................................... 72
Investor information ............................................................................................................................ 88
Contact information ............................................................................................................................. 89
Key data *
Nokia, EURm
Based on financial
statements according to
International Financial
Reporting Standards, IFRS
Net sales
Operating profit
Profit before tax
Profit attributable to equity holders of the parent
Research and development expenses
%
Return on capital employed
Net debt to equity (gearing)
EUR
2008
50 710
4 966
4 970
3 988
5 968
2008
27.2
– 14
2008
2007
Change, %
– 1
– 38
– 40
– 45
6
51 058
7 985
8 268
7 205
5 636
2007
54.8
– 62
2007
Change, %
Earnings per share, basic
Dividend per share
Average number of shares (1 000 shares)
1.07
0.40 **
3 743 622
1.85
0.53
3 885 408
– 42
– 25
** Board’s proposal
Reportable segments, EURm
2008
2007
Change, %
Devices & Services
Net sales
Operating profit
NAVTEQ
Net sales
Operating profit
Nokia Siemens Networks
Net sales
Operating profit
Personnel, December 31
Devices & Services
NAVTEQ
Nokia Siemens Networks
Corporate Common Functions
Nokia Group
10 major markets, net sales, EURm
China
India
UK
Germany
Russia
Indonesia
USA
Brazil
Italy
Spain
35 099
5 816
361
– 153
15 309
– 301
2008
61 130
4 049
60 295
355
125 829
2008
5 916
3 719
2 382
2 294
2 083
2 046
1 907
1 902
1 774
1 497
10 major countries, personnel, December 31
2008
Main currencies, exchange
rates at the end of 2008
1 EUR
USD 1.3917
GBP 0.9525
CNY 9.4956
INR 67.066
RUB 41.283
JPY 126.14
Finland
India
China
Germany
Brazil
USA
Hungary
UK
Mexico
Italy
23 320
15 562
14 505
12 309
8 557
8 060
7 541
4 313
3 559
2 007
37 705
7 584
—
—
13 393
– 1 308
– 7
– 23
14
2007
Change, %
14
3
12
12
53 523
—
58 423
316
112 262
2007
5 898
3 684
2 574
2 641
2 012
1 754
2 124
1 257
1 792
1 830
2007
23 015
11 491
12 856
13 926
8 527
5 269
6 601
2 618
3 056
2 129
* As of January 1, 2008, our three mobile device business groups, Mobile Phones, Multimedia and Enterprise Solutions, and the supporting horizontal groups were replaced
by an integrated business segment, Devices & Services. Prior period results for Nokia and its reportable segments have been regrouped for comparability purposes
according to the new reportable segments.
On July 10, 2008, Nokia completed the acquisition of NAVTEQ Corporation. NAVTEQ is a separate reportable segment of Nokia starting from the third quarter 2008.
Accordingly, the results of NAVTEQ are not available for the prior periods.
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 ear ended December 31, 2007 are not directly comparable the results for the year ended December 31, 2006. Nokia’s
2006 results included Nokia’s former Networks business group only.
2
Nokia in 2008
Review by the Board of Directors 2008 *
In 2008, Nokia’s net sales decreased 1% to EUR 50 710
million (EUR 51 058 million in 2007). Net sales of De-
vices & Services for 2008 decreased 7% to EUR 35 099
million (EUR 37 705 million). Net sales of NAVTEQ for
the six months ended December 31, 2008 were EUR
361 million. Net sales of Nokia Siemens Networks in-
creased 14% to EUR 15 309 million (EUR 13 393 million).
In 2008, Europe accounted for 37% (39% in 2007)
of Nokia’s net sales, Asia-Pacific 22% (22%), Greater
China 13% (12%), North America 4% (5%), Latin
America 10% (8%), and Middle East & Africa 14%
(14%). The 10 markets in which Nokia generated the
greatest net sales in 2008 were, in descending order
of magnitude, China, India, the UK, Germany, Russia,
Indonesia, the US, Brazil, Italy and Spain, together
representing approximately 50% of total net sales in
2008. In comparison, the 10 markets in which Nokia
generated the greatest net sales in 2007 were China,
India, Germany, the UK, the US, Russia, Spain, Italy,
Indonesia and Brazil, together representing approxi-
mately 50% of total net sales in 2007.
Nokia’s gross margin in 2008 was 34.3%, com-
pared to 33.8% in 2007. Nokia’s 2008 operating profit
decreased 38% to EUR 4 966 million, compared with
EUR 7 985 million in 2007. Nokia’s 2008 operating
margin was 9.8% (15.6%). Nokia’s operating profit in
2008 included purchase price accounting items and
other special items of net negative EUR 2 067 million
(net positive EUR 288 million). Devices & Services
operating profit decreased 23% to EUR 5 816 million,
compared with EUR 7 584 million in 2007, with an
operating margin of 16.6% (20.1%). Devices & Services
operating profit in 2008 included special items of net
negative EUR 557 million (net negative EUR 4 million).
NAVTEQ’s operating loss for the six months ended on
December 31, 2008 was EUR 153 million, representing
an operating margin of – 42.4%. NAVTEQ’s operating
loss included purchase price accounting items and
other special items of net negative EUR 235 million.
Nokia Siemens Networks had an operating loss of EUR
301 million, compared with a EUR 1 308 million operat-
ing loss in 2007, representing an operating margin of
– 2.0% (– 9.8%). Nokia Siemens Networks operating loss
in 2008 included purchase price accounting items and
other special items of net negative EUR 1 058 million
(net negative EUR 1 639 million).
The global economic slowdown, combined with
unprecedented currency volatility, resulted in a sharp
pull back in global consumer spending in the second
half of 2008, particularly in the fourth quarter. The
more limited availability of credit also reduced the
purchasing ability of some trade customers. In 2008,
Nokia’s net sales and profitability, in particular in
Devices & Services, were negatively impacted by these
factors.
Research and development expenses were EUR
5 968 million in 2008, up 6% from EUR 5 636 million in
2007. Research and development costs represented
11.8% of Nokia’s net sales in 2008, up from 11.0% in
2007. Research and development expenses included
purchase price accounting items and other special
items of EUR 550 million in 2008 (EUR 575 million in
2007). At December 31, 2008, Nokia employed 39 350
people in research and development, representing
approximately 31% of Nokia’s total workforce, and
had a strong research and development presence in
16 countries.
In 2008, Nokia’s selling and marketing expenses
were EUR 4 380 million, compared with EUR 4 379
million in 2007. Selling and marketing expenses for
Nokia represented 8.6% of its net sales in 2008 (8.6%
in 2007). Selling and marketing expenses included
purchase price accounting items and other special
items of EUR 341 million in 2008 (EUR 363 million).
Administrative and general expenses were EUR
1 284 million in 2008, compared to EUR 1 165 million in
2007. Administrative and general expenses were equal
to 2.5% of net sales in 2008 (2.3% in 2007). Adminis-
trative and general expenses included special items of
EUR 163 million in 2008 (EUR 146 million).
Corporate Common Functions expenses totaled
EUR 396 million in 2008, compared with an operating
profit of EUR 1 709 million in 2007. Expenses in 2008
included a EUR 217 million loss due to transfer of Finn-
ish pension liabilities.
Net financial expense was EUR 2 million in 2008
(income of EUR 239 million in 2007).
Profit before tax and minority interests was
EUR 4 970 million (EUR 8 268 million in 2007). Net profit
totaled EUR 3 988 million (EUR 7 205 million in 2007).
Earnings per share decreased to EUR 1.07 (basic) and
EUR 1.05 (diluted), compared to EUR 1.85 (basic) and
EUR 1.83 (diluted) in 2007.
Operating cash flow for the year ended December
31, 2008 was EUR 3 197 million (EUR 7 882 million for
the year ended December 31, 2007) and total com-
bined cash and other liquid assets were EUR 6 820 mil-
lion (EUR 11 753 million). As at December 31, 2008, our
net debt-to-equity ratio (gearing) was – 14% (– 62%
as at December 31, 2007). In 2008, capital expenditure
amounted to EUR 889 million (EUR 715 million).
The key financial data, including the calculation
of key ratios, for the years 2008, 2007 and 2006 may
be found in the Annual Accounts.
* As of January 1, 2008, our three mobile device business groups, Mobile Phones, Multimedia and Enterprise Solutions, and the supporting hori-
zontal groups were replaced by an integrated business segment, Devices & Services. Prior period results for Nokia and its reportable segments
have been regrouped for comparability purposes according to the new reportable segments.
On July 10, 2008, Nokia completed the acquisition of NAVTEQ Corporation. NAVTEQ is a separate reportable segment of Nokia starting from the
third quarter 2008. Accordingly, the results of NAVTEQ are not available for the prior periods.
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 the former Nokia Networks and Siemens’ carrier-related operations for fixed and mobile
networks. Accordingly, the results of Nokia Group and Nokia Siemens Networks for the full year 2008 are not directly comparable to the results
for the full years 2007 and 2006. Nokia’s first quarter 2007 and the full year 2006 results included Nokia’s former Networks business group only.
Main events in 2008
Nokia Group
» Nokia began operating under its new orga-
nizational structure, with its three former
mobile device business groups–Mobile Phones,
Multimedia and Enterprise Solutions–and the
supporting horizontal groups forming one
integrated business group, Devices & Services.
The new organizational structure is designed to
align Nokia with the opportunities Nokia sees
for future growth in devices and services and
increase efficient ways of working across the
company. Devices & Services has three business
units: Devices; Services (operated in 2008 under
the Services & Software name); and Markets. The
three units receive operational support from
our Corporate Development Office, which is also
responsible for exploring corporate strategic and
future growth opportunities.
» Nokia announced and completed the closure of
its mobile devices production facility in Bochum,
Germany, began production of mobile devices at
its new facility in Cluj, Romania, and made invest-
ments to upgrade its mobile device production
facilities in Chennai, India and Manaus, Brazil.
» Nokia and Qualcomm announced that they
entered into a new 15 year license agreement
covering various standards, including GSM, EDGE,
CDMA, WCDMA, HSDPA, OFDM, WiMAX, LTE and other
technologies. The agreement resulted in settle-
ment of all litigation between the two companies.
Devices
»
»
Further strengthening its Nokia Nseries range
of mobile devices, Nokia announced and began
shipments of the Nokia N78, Nokia N79, Nokia N85
and Nokia N96, and unveiled the flagship Nokia
N97 mobile computer.
Building out the Nokia Eseries range of mobile
devices, Nokia announced and began shipments
of the Nokia E63, Nokia E66 and Nokia E71.
» Nokia announced that Microsoft Exchange
ActiveSync will be available in all Nokia S60 3rd
Edition devices, as well as compatibility with IBM
Lotus Notes Traveler on all Nokia S60 3rd Edition
devices. These announcements enable access to
over 80% of the world’s corporate email accounts.
» Nokia announced and began shipments of eight
mobile devices with functions and features
specially designed for consumers in emerging
markets, starting with the Nokia 1202 and up to
the Nokia 7100 Supernova.
Review by the Board of Directors
3
Review by the Board of Directors
» Nokia announced and began shipments of
Nokia Siemens Networks
Acquisitions and divestments 2008
the Nokia 5800 XpressMusic, a mobile device
optimized for music and featuring a 3.2 inch
touch screen display with tactile feedback, a 3.2
megapixel camera and A-GPS functionality.
» Nokia announced and began shipments of the
Nokia 6210 Navigator, the first Nokia GPS-enabled
device with an integrated compass for pedestrian
guidance, and the Nokia 6220 classic.
Services & Software
» Nokia announced that it is focusing on develop-
ing services in five core areas: music, maps,
media, messaging and games.
» Nokia expanded Nokia Music Store, its digital mu-
sic store, to a cumulative total of 12 across three
continents in 2008, from one at the end of 2007.
» Nokia launched Comes With Music first in the
United Kingdom, with the support of all major
music labels–Universal Music Group International,
Warner Music Group, Sony BMG Music Entertain-
ment and EMI Group–numerous independent
labels as well as music publishing rights.
»
The number of titles available on the N-Gage
mobile games service grew to 27 by the end of
the year.
» Nokia updated Ovi.com with functionality for
syncing your calendar, contacts, notes and tasks
between a Nokia mobile device and www.ovi.com.
NAVTEQ
» NAVTEQ announced an industry strategy for
map-enhanced ADAS (advanced driver assistance
systems) using the Map-Enhanced Positioning
Engine (MPE).
»
At the Mobile World Congress 2008, Nokia Sie-
mens Networks launched its LTE solution for radio
and core networks, including the new Flexi Mul-
timode Base Station, and in October announced
that it had begun shipping LTE-compatible Flexi
base stations.
» Nokia Siemens Networks demonstrated its
technological leadership throughout the year
with a number of industry-leading events: the
launch of the industry’s first DWDM single optical
platform serving Metro to Core; the world’s first
demonstration of LTE-Advanced technology; a
record-breaking 100 Gbps. transmission on a
single wavelength for more than 1 040 kilometers
over deployed field fiber (with Verizon); and the
worlds fastest IHSPA data call using a mobile
device.
» Nokia Siemens Networks secured major 3G radio
access deals all over the world, from the UK to
Mexico and Brazil to Indonesia.
» Nokia Siemens Networks’ Services expanded its
global remote delivery capability, delivering more
than 200 projects across the world with successes
including major event support ensuring network
quality and performance, software upgrades and
maintenance, and network monitoring and plan-
ning services.
» Nokia Siemens Networks continued to win major
managed services deals including a breakthrough
network operations agreement with Embarq
Corporation in the United States.
» Demonstrating its ongoing commitment to devel-
oping innovative solutions for emerging markets,
Nokia Siemens Networks launched its eCommerce
rural trading platform with Fujian Mobile in China,
and added internet capability to its Village Con-
nection solution.
» NAVTEQ started providing both NAVTEQ Traffic RDS
»
In November 2008, Nokia Siemens Networks an-
nounced that it completed the preliminary plan-
ning process to identify the proposed remaining
headcount reductions necessary to reach its
previously announced synergy-related headcount
adjustment goal of 9 000 and began the process
of sharing those plans with employees and their
representatives.
»
Nokia Siemens Networks achieved substantially
all of the EUR 2.0 billion of targeted annual cost
synergies by the end of 2008.
delivery service and NAVTEQ interactive advertis-
ing services for multiple Garmin devices (the nuvi
755T and 775T and nuvi 2x5 family). Together
with Garmin, NAVTEQ is the first to bring an
advertising supported, real-time traffic service to
market in North America.
» NAVTEQ expanded its portfolio of dynamic
content –or real-time data–to include flight status
and fuel prices, leveraging leading dynamic
distribution capabilities from traffic and camera
alerts.
4
Nokia in 2008
» On December 22, 2008, Nokia announced that
it had signed an agreement to sell its security
appliance business to Check Point Software
Technologies. The disposal related to the renewal
of Nokia’s business mobility strategy and discon-
tinuance of developing and marketing its own
behind-the-firewall business mobility solutions.
» On December 2, 2008, Nokia announced the
completion of its acquisition of Symbian Limited,
the company that develops and licenses Symbian
OS, the market-leading operating system for
mobile devices. The acquisition is an important
step by Nokia and industry partners to develop
Symbian OS into an open and unified mobile
software platform, which will be licensed royalty-
free and eventually move towards ‘open source’.
Nokia and its partners plan to establish Symbian
Foundation, an independent entity, to manage
and unify the platform.
» On November 20, 2008, NAVTEQ announced an
agreement to acquire T-Traffic Systems GmbH, a
leading provider of traffic services in Germany.
The acquisition was completed in January 2009.
» On November 4, 2008, Nokia announced the
completion of its acquisition of OZ Communica-
tions Inc., the leading consumer mobile messag-
ing solution provider which delivers access to
popular instant messaging and email services on
consumer mobile devices.
» On July 15, 2008, Nokia announced the comple-
tion of its acquisition of Plazes AG, a context-
aware social activity service provider, to help
Nokia to accelerate its vision of bringing people
and places closer together, in line with Nokia’s
broader services strategy.
» On July 10, 2008, Nokia completed the acquisition
of NAVTEQ, a leading provider of comprehensive
digital map information. As part of Nokia, NAVTEQ
continues to develop its world-class expertise
in the navigation industry, service its strong
customer base, and invest in the further devel-
opment of its industry-leading map data and
technology platform.
» On June 17, 2008, Nokia announced the
completion of its acquisition of Trolltech ASA, a
recognized software provider with world-class
software development platforms and frameworks.
Trolltech now operates as Qt Software, taking its
new name from its Qt technology that forms the
basis for tens of thousands of commercial and
open source applications.
» On May 15, 2008, Nokia announced the comple-
tion of its disposal of Identity Systems to Infor-
matica Corporation.
Review by the Board of Directors
» On February 11, 2008, Nokia Siemens Networks
announced that it had completed the acquisition
of Apertio Ltd., a leading provider of open real-
time subscriber data platforms and applications.
» On January 7, 2008, Nokia Siemens Networks
announced the completion of the acquisition of
Carrier Ethernet specialist Atrica.
Personnel
The average number of employees for 2008 was
121 723, (100 534 for 2007 and 65 324 for 2006). At
December 31, 2008, Nokia employed a total of 125 829
people (112 262 at December 31, 2007, and 68 483 peo-
ple at December 31, 2006). The total amount of wages
and salaries paid in 2008 was EUR 5 615 million (EUR
4 664 million in 2007 and EUR 3 457 million in 2006).
Management and Board of Directors
Board of Directors, Group Executive Board
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 for a term of one year at each
Annual General Meeting, i.e. as from the close of that
Annual General Meeting until the close of the following
Annual General Meeting, which convenes each year by
June 30. A general meeting may also dismiss a member
of the Board of Directors. The Board has the responsi-
bility for appointing and discharging the President as
well as the CEO and the other members of the Group
Executive Board. The CEO also acts as the President.
The current members of the Board of Directors
were elected at the Annual General Meeting on May 8,
2008. On December 31, 2008, the Board consisted
of the following members: Jorma Ollila (Chairman),
Marjorie Scardino (Vice Chairman), Georg Ehrnrooth,
Lalita D. Gupte, Bengt Holmström, Henning Kagermann,
Per Karlsson, Olli-Pekka Kallasvuo, Risto Siilasmaa and
Keijo Suila.
Information on shares and stock options held by
the members of the Board of Directors and the Presi-
dent and CEO (and the other members of the Group
Executive Board) may be found in the Annual Accounts.
Changes in the Group Executive Board
Veli Sundbäck, Executive Vice President, Corporate
Relations and Responsibility, resigned from the
Group Executive Board as of December 31, 2008, but
Mr. Sundbäck will continue in Nokia as an executive
advisor until his retirement on May 31, 2009. Esko Aho,
Executive Vice President, Corporate Relations and Re-
sponsibility, was appointed as a member of the Group
Executive Board as of January 1, 2009.
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 at December 31, 2008,
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, was EUR 1 176 000. 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 six months and he is entitled to a payment for such
notice period (both annual total gross base salary and
target incentive for six months). Mr. Kallasvuo is subject
to a 12-month non-competition obligation after termi-
nation of the contract. Unless the contract is terminated
for cause, Mr. Kallasvuo may be entitled to compensa-
tion 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.
Provisions on the amendment
of Articles of Association
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 2008, Nokia issued 3 546 508 new shares
upon exercise of stock options issued to personnel
in 2003 and 2005. Effective March 27, 2008, a total
of 185 409 913 shares held by the company were
cancelled. The issuance of new shares and cancella-
tion of shares did not have an effect on the amount of
share capital of the company. Neither the issuance nor
the cancellation of shares had any significant effect on
the relative holdings of the other shareholders of the
company nor on their voting power.
Nokia repurchased through its share repurchase
plan a total of 157.4 million shares on NASDAQ OMX
Helsinki at an aggregate price of approximately EUR
3 123 million during the period from January 25, 2008,
to August 7, 2008. The price paid is based on the mar-
ket 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 Meet-
ings of 2007 and 2008 to the Board. The aggregate
amount of shares repurchased in 2008 represented
approximately 4.1% of the total number of shares of
the company and the total voting rights at the end of
2008. These new holdings did not have any significant
effect on the relative holdings of the other sharehold-
ers of the company nor on their voting power.
In 2008, Nokia transferred a total of 4.2 million
Nokia shares held by it under the Performance Share
Plans and 1.4 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 ap-
proximately 0.1% 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 holdings
of the other shareholders of the company nor on their
voting power.
On December 31, 2008, Nokia and its subsidiary
companies owned 103 076 379 Nokia shares. The
shares represented approximately 2.7 % 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 3 800 948 552. On December 31, 2008,
Nokia’s share capital was EUR 245 896 461.96.
Information on the authorizations held by
the Board of Directors in 2008 to issue shares and
special rights entitling to shares, transfer shares and
repurchase own shares as well as information on the
shareholders, stock options, shareholders’ equity per
share, 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 2009
» While noting the extremely limited visibility,
Nokia expects 2009 industry mobile device
volumes to decline approximately 10% from
2008 levels.
» Nokia targets an increase in its market share in
mobile devices in 2009.
» Nokia and Nokia Siemens Networks expect the
mobile infrastructure and fixed infrastructure and
related services market to decline 5% or more in
Euro terms in 2009, from 2008 levels.
» Nokia and Nokia Siemens Networks target for
Nokia Siemens Networks market share to remain
constant in 2009, compared to 2008.
Review by the Board of Directors
5
Review by the Board of Directors
Subsequent events
In February 2009, Nokia issued EUR 1 750 million of
Eurobonds with maturities of five and ten years under
our EUR 3 000 million Euro Medium Term Note, or
EMTN program, to repay part of its existing short-term
borrowings. Nokia voluntarily cancelled its USD 2 000
million committed credit facility maturing in 2009
due to this repayment. In February 2009 Nokia also
signed and fully drew down EUR 500 million loan from
the European Investment Bank to finance part of its
smartphone research and development expenses.
Risk factors
Set forth below is a description of risk factors that
could affect Nokia. There may be, however, additional
risks unknown to Nokia and other risks currently
believed to be immaterial that could turn out to be
material. These risks, either individually or together,
could adversely affect our business, sales, results of
operations, financial condition and share price from
time to time.
» We are a global company and have sales in most
countries of the world and, consequently, our
sales and profitability are dependent on general
economic conditions globally and locally. The
impact of the current global economic turmoil
and any further deterioration of global economic
conditions, as well as the related financial crisis,
on us, our customers and end-users of our
products, services and solutions, and suppliers
and collaborative partners may have a material
adverse effect on our business, results of opera-
tions and financial condition.
» Our sales and profitability depend materially on
the development of the mobile and fixed com-
munications industry as well as 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 solu-
tions in those segments. If the mobile and fixed
communications industry develop in an adverse
manner, or 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.
»
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.
6
Nokia in 2008
» 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 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.
» Our sales, costs and results of operations as well
as the US dollar value of our dividends and mar-
ket price of our ADSs are affected by exchange
rate fluctuations, particularly between the euro,
which is our reporting currency, and the US dollar,
the Japanese yen, the Chinese yuan and the UK
pound sterling, as well as certain other curren-
cies.
» We depend on a limited number of suppliers for
the timely delivery of sufficient amounts of fully
functional components, sub-assemblies, soft-
ware and content and for their compliance with
our supplier requirements, such as our own and
our customers’ product quality, safety, security
and other standards. Their failure to deliver or
meet those requirements could materially ad-
versely affect our ability to deliver our products,
services and solutions successfully and on time.
» We must timely and successfully develop or
otherwise acquire the appropriate technologies
to use in our business. If we fail to develop or oth-
erwise acquire these technologies as required by
the market, or to successfully commercialize such
technologies as new advanced products, services
and solutions that meet customer demand, or fail
to do so on a timely basis, this may have a mate-
rial adverse effect on our business and results of
operations.
»
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 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.
»
Changes in various types of regulation and trade
policies in countries around the world could have
a material adverse effect on our business and
results of operations.
» We are developing a number of 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
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 and results of operations could be ma-
terially adversely affected if we fail to efficiently
manage our manufacturing and logistics without
interruption or make timely and appropriate
adjustments, 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.
» 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, results of operations and financial
condition.
» Our products, services and solutions include
numerous new Nokia, NAVTEQ and Nokia Siemens
Networks patented, standardized or proprietary
technologies on which we depend. Third parties
may use without a license or unlawfully infringe
our intellectual property or commence actions
seeking to establish the invalidity of the intel-
lectual property rights of these technologies.
This may have a material adverse effect on our
business and results of operations.
» Our operations rely on the efficient and uninter-
rupted operation of complex and centralized
information technology systems and networks.
If a system or network inefficiency, malfunction
or disruption occurs, this could have a material
adverse effect on our business and results of
operations.
»
»
»
»
»
»
The networks infrastructure business relies on
a limited number of customers and large multi-
year contracts. 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 condition.
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.
If we are unable to retain, motivate, develop and
recruit appropriately skilled employees, our abil-
ity to implement our strategies may be hampered
and, consequently, that may have a material
adverse effect on our business and results of
operations.
Some of the Siemens carrier-related operations
transferred to Nokia Siemens Networks have
been and continue to be the subject of various
criminal and other governmental investigations
related to whether certain transactions and
payments arranged by some former employees
of Siemens were unlawful. As a result of those in-
vestigations, 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
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.
An unfavorable outcome of litigation could have
a material adverse effect on our business, results
of operations and financial condition.
Allegations of possible health risks from the elec-
tromagnetic fields generated by base stations
and mobile devices, and the lawsuits and public-
ity relating to this matter, regardless of merit,
could have a material adverse effect on our sales,
results of operations, share price, reputation and
brand value by leading consumers to reduce their
use of mobile devices, by increasing difficulty in
obtaining sites for base stations, 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.
Dividend
Nokia’s Board of Directors will propose a dividend of
EUR 0.40 per share for 2008.
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, 22
14, 31
10
11
2008
EURm
50 710
– 33 337
17 373
– 5 968
– 4 380
– 1 284
420
– 1 195
4 966
6
– 2
4 970
– 1 081
3 889
99
2007
EURm
51 058
– 33 781
17 277
– 5 636
– 4 379
– 1 165
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
Profit attributable to equity holders of the parent
3 988
7 205
4 306
Earnings per share
(for profit attributable to the equity holders of the parent)
28
Basic
Diluted
2008
EUR
1.07
1.05
2007
EUR
1.85
1.83
2006
EUR
1.06
1.05
Average number of shares (1 000 shares)
28
2008
2007
2006
Basic
Diluted
See Notes to consolidated financial statements.
3 743 622
3 780 363
3 885 408
3 932 008
4 062 833
4 086 529
8
Nokia in 2008
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
(2008: EUR 415 million, 2007: EUR 332 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
Other financial liabilities
Accounts payable
Accrued expenses
Provisions
Total shareholders’ equity and liabilities
See Notes to consolidated financial statements.
Notes
2008
EURm
2007
EURm
12
12
12
13
14
15
24
16, 35
17, 19
19, 35
18
35
35
15, 35
15, 32, 35
32, 35
21
20
23, 35
24
35
35
26, 35
35
25
27
244
6 257
3 913
2 090
96
512
1 963
27
10
15 112
378
1 384
2 358
1 912
325
341
1 553
10
44
8 305
2 533
2 876
9 444
4 538
101
1 034
1 272
3 842
1 706
24 470
39 582
246
442
– 1 881
341
62
3 306
11 692
14 208
2 302
16 510
861
1 787
69
2 717
13
3 578
924
5 225
7 023
3 592
20 355
39 582
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
714
184
7 074
7 114
3 717
18 976
37 599
Consolidated financial statements
9
2007
EURm
7 205
1 269
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
– 793
5 370
235
– 18
54
– 1 163
4 478
– 517
– 3 219
– 88
– 15
– 127
– 11
56
276
– 3
199
– 650
1
—
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
32
32
Adjustments, total
Change in net working capital
Cash generated from operations
Interest received
Interest paid
Other financial income and expenses, net received
Income taxes paid, net received
Net cash from operating activities
2008
EURm
3 988
3 469
– 2 546
4 911
416
– 155
– 195
– 1 780
3 197
Cash flow from investing activities
Acquisition of Group companies, net of acquired cash
– 5 962
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 associated companies
Proceeds from disposal of businesses
Proceeds from maturities and sale of current available-for-sale
investments, liquid assets
Proceeds from sale of non-current available-for-sale investments
Proceeds from sale of fixed assets
Dividends received
Net cash from (+)/used in (–) investing activities
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
– 669
– 121
– 24
– 131
—
129
—
– 1
– 15
– 889
3
41
10
54
6
– 2 905
53
– 3 121
714
– 34
2 891
– 2 048
– 1 545
– 49
– 1 302
6 850
5 548
50
72
12
– 710
987
– 3 819
115
– 16
661
– 1 760
– 3 832
– 15
3 325
3 525
6 850
Cash and cash equivalents comprise of:
Bank and cash
Current available-for-sale investments,
cash equivalents
1 706
2 125
15, 35
3 842
5 548
4 725
6 850
17
29
—
1 006
46
– 3 371
56
– 7
– 137
– 1 553
– 4 966
– 51
467
3 058
3 525
1 479
2 046
3 525
4 664
4 930
5 058
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 disposals of subsidiaries and net foreign exchange differences arising on consolidation.
See Notes to consolidated financial statements.
10
Nokia in 2008
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
Reserve for
Fair value
invested
Translation and other non-restricted
equity
reserves
differences
Before
Retained minority Minority
interests
interests
earnings
Total
Balance at December 31, 2005
4 172 376
266
2 458
– 3 616
69
– 176
—
13 308
12 309
205 12 514
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
3 046
Stock options exercised related to acquisitions
Share-based compensation 1
Settlement of performance shares
Acquisition of treasury shares
Reissuance of treasury shares
2 236
– 212 340
412
23
14
37
43
– 1
219
– 69
38
– 3 413
4
– 141
38
171
– 9
—
– 103
162
—
4 254
– 52
4 306
Cancellation of treasury shares
– 20
20
4 927
Dividend
Acquisition of minority interests
Total of other equity movements
Balance at December 31, 2006
3 965 730
– 20
246
212
1 556
2 707
– 2 060
Excess tax benefit on share-based compensation
128
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
—
– 34
– 167
38
—
– 14
– 11
48
Total recognized income and expense
—
Stock options exercised
57 269
Stock options exercised related to acquisitions
Share-based compensation
Settlement of performance shares
Acquisition of treasury shares
Reissuance of treasury shares
Cancellation of treasury shares
3 138
– 180 590
403
128
46
– 3
228
– 104
Share premium reduction and transfer
– 2 358
Dividend
Minority interest on formation
of Nokia Siemens Networks
—
– 129
37
58
– 3 884
7
2 733
23
14
23
14
– 141
– 13
– 154
38
171
– 9
– 52
4 306
4 350
43
– 1
219
– 31
– 1
60
46
38
171
– 9
– 53
4 366
4 396
43
– 1
219
– 31
– 3 413
– 3 413
– 4 927
4
—
4
—
– 1 512
– 1 512
– 40 – 1 552
—
– 119
– 119
—
—
– 6 439
– 4 691
– 159 – 4 850
11 123
11 968
92 12 060
128
– 167
38
– 11
48
– 40
128
16
– 151
38
– 11
48
– 40
7 205
– 459
6 746
7 201
– 443
6 758
978
– 3
228
– 37
978
– 3
228
– 37
– 40
7 205
7 165
—
932
9
– 3 884
– 3 884
– 2 733
2 358
7
—
—
7
—
—
– 1 685
– 1 685
– 75 – 1 760
—
2 991
2 991
Total of other equity movements
—
– 2 191
– 1 086
—
Balance at December 31, 2007
3 845 950
246
644
– 3 146
– 163
—
23
3 299
– 4 418
– 4 396
2 916 – 1 480
3 299
13 870
14 773
2 565 17 338
1
In 2006 share-based compensation is shown net of deferred compensation recorded related to social
security costs on share-based payments.
Consolidated financial statements
11
Nokia Corporation and Subsidiaries
Consolidated statements of changes in shareholders’ equity, IFRS (continued)
EURm
Number of
shares (1 000’s)
Share
capital premium
Share
issue Treasury
shares
Reserve for
invested
Fair value
Translation and other non-restricted
equity
reserves
differences
Before
Retained minority Minority
interests
interests
earnings
Total
Balance at December 31, 2007
3 845 950
246
644
– 3 146
– 163
23
3 299
13 870
14 773
2 565 17 338
Tax benefit on stock options exercised
Excess tax benefit on share-based
compsensation
Translation differences
Net investment hedge losses, net of tax
Cash flow hedges, net of tax
Available-for-sale investments, net of tax
Other increase, net
Profit
4
– 121
595
– 91
42
– 3
Total recognized income and expense
—
– 117
—
504
39
Stock options exercised
3 547
5 622
– 157 390
143
Stock options exercised related
to acquisitions
Share-based compensation
Settlement of performance shares
Acquisition of treasury shares
Reissuance of treasury shares
Cancellation of treasury shares
Dividend
Acquisitions and other changes
in minority interests
Vested portion of share-based
payment awards related to acquisitions
Acquisition of Symbian
1
74
– 179
154
– 3 123
2
4 232
19
4
– 121
595
– 91
42
– 3
46
3 988
4 460
51
1
74
– 69
—
4
– 121
595
– 91
42
– 3
46
– 99
3 889
– 99
4 361
51
1
74
– 69
46
3 988
4 034
—
51
– 44
– 3 123
– 3 123
– 4 232
2
—
2
—
– 1 992
– 1 992
– 35 – 2 027
—
– 129
– 129
19
12
12
19
12
Total of other equity movements
—
– 85
1 265
Balance at December 31, 2008
3 697 872
246
442 – 1 881
—
341
—
62
7
– 6 212
– 5 025
– 164 – 5 189
3 306
11 692
14 208
2 302 16 510
Dividends declared per share were EUR 0.40 for 2008 (EUR 0.53 for 2007 and EUR 0.43 for 2006), subject to
shareholders’ approval.
12
Nokia in 2008
Notes to the consolidated financial statements
Notes to the consolidated financial statements
1. Accounting principles
Basis of presentation
The consolidated financial statements of Nokia Corpo-
ration (“Nokia” or “the Group”), a Finnish public lim-
ited 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 (collectively “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 con-
solidated financial statements also conform to Finnish
Accounting legislation. On March 5, 2009, Nokia’s
Board of Directors authorized the financial statements
for issuance and filing.
As described in Note 8 the Group completed the
acquisition of all of the outstanding equity of NAVTEQ
Corporation (“NAVTEQ“) on July 10, 2008 and a transac-
tion to form Nokia Siemens Networks on April 1, 2007.
The NAVTEQ and the Nokia Siemens Networks business
combinations have had a material impact on the con-
solidated 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, 2008.
»
»
»
»
IFRS 8, Operating Segments requires the segment
information to be presented on the same basis as
that used for internal reporting purposes. Under
IFRS 8, segments are components of the entity
that are regularly reviewed by the chief operating
decision-maker in order to allocate resources to a
segment and to evaluate its performance.
IFRIC 11, IFRS 2–Group and Treasury Share Trans-
actions clarifies how IFRS 2 should be applied to
share-based payment arrangements involving
treasury shares, and arrangements involving
grant of the entity’s own equity instruments or
equity instruments of another entity within the
same group.
IFRIC 14 and IAS 19, The Limit on a Defined benefit
Asset, Minimum Funding Requirements and their
Interaction addresses when refunds or reductions
in future contributions should be regarded as
available when measuring a pension asset and
how a minimum funding requirement might
affect the availability of reductions in future
contributions.
IAS 39 and IFRS 7 (Amendments), Reclassification
of Financial Instruments allow an entity to reclas-
sify non-derivative financial assets out of the fair
value through profit or loss and available-for-
sale categories in particular circumstances and
require additional disclosures for the reclassifica-
tions.
of the identifiable net assets acquired is recorded as
goodwill.
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 as-
sociated 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 as a component of 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 compa-
nies 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 separate entities or 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 incurred,
equity instruments issued and costs directly attribut-
able to the acquisition. Identifiable assets, liabilities
and contingent liabilities acquired or assumed by the
Group are measured separately 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
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 accounting
period, the unsettled balances on foreign currency
receivables and liabilities are valued at the rates of ex-
change prevailing at the year-end. Foreign exchange
gains and losses arising from balance 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-
Notes to the consolidated financial statements
13
Notes to the consolidated financial statements
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
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. License
fees from usage are recognized in the period in which
the customer reports them to the Group.
The Group enters into transactions involving
multiple components consisting of any combination
of hardware, services and software. The commercial
effect of each separately identifiable component
of the transaction is evaluated in order to reflect
the substance 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 de-
termines the fair value of each component by taking
into consideration factors such as the price when the
component or a similar component is sold separately
by the Group or a third party. The consideration al-
located to each component is recognized as revenue
when the revenue recognition criteria for that compo-
nent have been met. If the Group is unable to reliably
determine the fair value attributable to the separately
identifiable undelivered components, the Group de-
fers revenue until the revenue recognition criteria for
the undelivered 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
14
Nokia in 2008
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
contract completion can be measured reliably. When
the Group is not able to meet those conditions, the
policy is to recognize revenues 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, 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.
In a defined contribution plan, the Group has
no legal or constructive obligation to make any
additional contributions if the party receiving the
contributions is unable to pay the pension obligations
in question. The Group’s contributions to defined con-
tribution plans, multi-employer and insured plans are
recognized in the profit and loss account in the period
to which the contributions relate.
All arrangements that do not fulfill these
conditions are considered defined benefit plans. If a
defined benefit plan is funded through an insurance
contract where the Group does not retain any legal or
constructive obligations, such a plan is treated as a
defined contribution plan.
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.
The liability (or asset) recognized in the balance
sheet is pension obligation at the closing date less the
fair value of plan assets, the share of unrecognized
actuarial gains and losses, and past service costs.
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 unless another
systematic approach is more representative of the
pattern of the user’s benefit.
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
include holdings in unlisted shares. Fair value 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 perfor-
mance of the target companies taking into consider-
ation the public market of comparable companies in
similar industry sectors. The remaining available-for-
sale investments are carried at cost less impairment,
which are technology related investments in private
equity shares and unlisted funds for which the fair
value cannot be measured reliably due to non-exis-
tence of public markets or reliable valuation methods
against which to value these assets. The investment
and disposal decisions on these investments are busi-
ness 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 including but not limited to counterparty
default and other factors causing a reduction in value
that can be considered permanent. 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
collectability 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
Notes to the consolidated financial statements
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
on 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
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
as uncollectible.
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 on 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 initially recognized at fair value
on the date a derivative contract is entered into and
are subsequently remeasured at their fair value. The
method of recognizing the resulting gain or loss varies
according to whether the derivatives are designated
and qualify under hedge accounting or not.
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 each balance
Notes to the consolidated financial statements
15
Notes to the consolidated financial statements
sheet date end quoted market rates. Changes in fair
value are recognized 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 fair valued 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 discounted 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.
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. 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, expressed either 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
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 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 foreign currency risk
of highly probable business acquisitions and other
transactions
The Group hedges the cash flow variability due to
foreign currency risk inherent in highly probable
business acquisitions and other future transactions
that result in the recognition of non-financial assets.
When those non-financial assets are recognized in the
balance sheet the gains and losses previously deferred
in equity are transferred from equity and included in
the initial acquisition cost of the asset. The deferred
amounts are ultimately recognized in the profit and
loss as a result of goodwill assessments in case of
business acquisitions and through depreciation in
case of other assets. In order to apply for hedge ac-
counting, the forecasted transactions must be highly
probable and the hedges must be highly 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.
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 deter-
mined, using the liability method, for all temporary
differences arising between the tax bases of assets
and liabilities and their carrying amounts in the con-
solidated financial statements. 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 or deductible temporary differences
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.
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 measurement of deferred tax
assets and liabilities.
Deferred taxes are recognized directly in equity,
when temporary differences arise on items that are
not recognized in the profit and loss.
Hedges of net investments in foreign operations
The Group also applies hedge accounting for its for-
eign currency hedging on net investments.
Provisions
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
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. The hedge must be
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
16
Nokia in 2008
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 preexisting 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 IPR infringe-
ments 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-
cancellable purchase commitments for inventory in
excess of forecasted requirements at each balance
sheet date.
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 prof-
it and loss account 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.
Notes to the consolidated financial statements
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
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 collectability
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. The Group endeavors to mitigate this
risk through the transfer of its rights to the cash col-
lected from these arrangements to third party finan-
cial institutions on a non-recourse basis in exchange
for an upfront cash payment.
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,
Notes to the consolidated financial statements
17
Notes to the consolidated financial statements
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
settlements related to asserted and unasserted IPR
infringements based on the probable outcome of
potential infringement. IPR infringement claims can
last for varying periods of time, resulting in irregular
movements in the IPR infringement provision. The ul-
timate outcome or actual cost of settling an individual
infringement may materially vary from estimates.
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 purchase method of accounting is used to account
for acquisitions of separate entities or 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 incurred,
equity instruments issued and costs directly attribut-
able to the acquisition. Identifiable assets, liabilities
and contingent liabilities acquired or assumed by the
Group are measured separately 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.
The allocation of fair values to the identifiable as-
sets acquired and liabilities assumed is based on vari-
ous assumptions requiring management judgment.
Actual results may differ from the forecasted amounts
and the difference could be material.
Assessment of the recoverability of long-lived
assets, intangible assets and goodwill
The recoverable amounts for long-lived assets,
intangible assets and goodwill have been determined
based on value in use calculations. Value in use is
calculated based on the expected future cash flows
attributable to the asset or cash-generating unit
discounted to present value. The key assumptions ap-
18
Nokia in 2008
plied in the determination of the value in use include
the discount rate, length of the explicit forecast period
and estimated growth rates, profit margins and level
of operational and capital investment. Amounts esti-
mated could differ materially from what will actually
occur in the future.
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.
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 may 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:
IAS 1 (Revised), Presentation of financial state-
ments, prompts entities to aggregate information
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 20, Accounting for govern-
ment grants and disclosure of government assistance,
requires that the benefit of a below-market rate gov-
ernment loan is measured as the difference between
the carrying amount in accordance with IAS 39 and
the proceeds received, with the benefit accounted for
in accordance with IAS 20.
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.
IFRIC 13, Customer Loyalty Programs addresses
the accounting surrounding customer loyalty pro-
grams and whether some consideration should be
allocated to free goods or services provided by a
company. Consideration should be allocated to award
credits based on their fair value, as they are a sepa-
rately identifiable component.
IFRIC 16, Hedges of a Net Investment in a Foreign
Operation clarifies the accounting treatment in
respect of net investment hedging. This includes the
fact that net investment hedging relates to differences
in functional currency not presentation currency, and
hedging instruments may be held anywhere in the
group.
IFRIC 18 Transfers of Assets from Customers
clarifies the requirements for agreements in which
an entity receives an item of property, plant and
equipment or cash it is required to use to construct or
acquire an item of property, plant and equipment that
must be used to provide access to a supply of goods
or services.
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.
IAS 27 (revised), “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 must be 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 interest in
the subsidiary’s equity, these losses shall be allocated
to the non-controlling interests even if this results in a
deficit balance.
In addition, there are a number of other amend-
ments that form part of the IASB’s annual improve-
ment project, which will be adopted by the Group on
January 1, 2009.
The Group will adopt the amendments to IFRS 2,
IAS 1, IAS 20, IAS 23, IAS 32, IFRIC 13, IFRIC 16 and
IFRIC 18 as well as the additional amendments that
form part of the IASB’s annual improvement project on
January 1, 2009. The Group does not expect that the
adoption of these revised standards, interpretations
and amendments will have a material impact on the
financial condition and results of operations.
The Group is required to adopt both IFRS 3
(revised) and IAS 27 (revised) on January 1, 2010 with
early adoption permitted. The Group is currently
evaluating the impact of these standards on the
Group’s accounts.
Notes to the consolidated financial statements
2. Segment information
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. Devices & Services
and Nokia Siemens Networks are each reportable
segments for financial reporting purposes. Com-
mencing with the third quarter 2008, NAVTEQ is also
a reportable segment. Prior period results for Nokia
and its reportable segments have been regrouped for
comparabality purposes according to the new report-
able segments effective in 2008.
Nokia is organized on a worldwide basis into
three reportable segments: Devices & Services,
NAVTEQ, and Networks. Nokia’s reportable segments
represent the strategic business units that offer
different products and services for which monthly
financial information is provided to the chief operat-
ing decision-maker.
Devices & Services segment is responsible for
developing and managing the Group’s portfolio of mo-
bile devices and consumer Internet services, as well as
the management of our supply chains, sales channels,
brand and marketing activities.
NAVTEQ is a leading provider of comprehensive
digital map information for automotive systems,
mobile navigation devices, Internet-based mapping
applications, and government and business solutions.
Nokia Siemens Networks provides mobile and
fixed network solutions and services to operators and
service providers.
Corporate Common Functions consists of com-
pany wide 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 revenues.
Notes to the consolidated financial statements
19
Notes to the consolidated financial statements
2008, EURm
Profit and loss information
Net sales to external customers
Net sales to other segments
Depreciation and amortization
Impairment
Operating profit/loss 1
Share of results of associated companies
Balance sheet information
Capital expenditures 2
Segment assets 3
of which:
Investments in associated companies
Segment liabilities 5
2007, EURm
Profit and loss information
Net sales to external customers
Net sales to other segments
Depreciation and amortization
Impairment
Operating profit/loss 1
Share of results of associated companies
Balance sheet information
Capital expenditures 2
Segment assets 3
of which:
Investments in associated companies
Segment liabilities 5
2006, EURm
Profit and loss information
Net sales to external customers
Net sales to other segments
Depreciation and amortization
Impairment and customer finance charges
Operating profit/loss
Share of results of associated companies
Devices &
Services
NAVTEQ
Nokia
Siemens
Networks 1
Total
reportable
segments
Corporate
Common
Functions and
Corporate
unallocated 4, 6 Eliminations
Group
35 084
15
484
58
5 816
—
578
10 300
—
8 425
37 682
23
489
—
7 584
—
533
9 316
—
9 512
33 668
16
509
—
4 865
—
318
43
238
—
– 153
—
18
7 177
4
2 726
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15 308
50 710
1
889
47
– 301
– 13
292
15 652
62
10 503
59
1 611
105
5 362
– 13
888
33 129
66
21 654
13 376
51 058
17
714
27
– 1 308
4
182
15 564
58
9 869
40
1 203
27
6 276
4
715
24 880
58
19 381
7 453
41 121
—
203
—
808
—
16
712
—
5 673
—
—
—
6
33
– 396
19
1
9 641
30
4 606
—
41
3
36
1 709
40
—
13 738
267
1 899
—
—
—
51
– 185
28
– 59
50 710
—
1 617
138
4 966
6
889
– 3 188
39 582
96
– 3 188
23 072
– 81
51 058
—
1 206
63
7 985
44
715
– 1 019
37 599
– 1 019
325
20 261
– 16
41 121
—
712
51
5 488
28
1 Corporate Common 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.
2
Including goodwill and capitalized development costs, capital
expenditures in 2008 amount to EUR 5 502 million (EUR
1 753 million in 2007). The goodwill and capitalized develop-
ment costs consist of EUR 752 million in 2008 (EUR 150 million
in 2007) for Devices & Services, EUR 3 673 million in 2008
(EUR 0 million in 2007) for NAVTEQ, EUR 188 million in 2008
(EUR 888 million in 2007) for Nokia Siemens Networks, and EUR
0 million in 2008 (EUR 0 million in 2007) for Corporate Common
Functions.
3 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 Devices & Services and Corporate Common
Functions. In addition, NAVTEQ’s and 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 NAVTEQ and
Nokia Siemens Networks as they are separate legal entities.
4 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 Devices & Services and Corpo-
rate Common Functions.
5 Comprises accounts payable, accrued expenses and provisions
except those related to interest and taxes for Devices & Services
and Corporate Common Functions. In addition, NAVTEQ’s
and Nokia Siemens Networks’ liabilities include non-current
liabilities and short-term borrowings as well as interest and tax
related prepaid income and accrued expenses and provisions.
These are directly attributable to NAVTEQ and Nokia Siemens
Networks as they are separate legal entities.
6 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 Devices &
Services and Corporate Common Functions.
20
Nokia in 2008
Net sales to external customers
by geographic area
by location of customer
Finland
China
India
UK
Germany
Russia
Indonesia
USA
Other
Total
Segment non-current assets
by geographic area 1
Finland
China
India
UK
Germany
USA
Other
Total
2008
EURm
362
5 916
3 719
2 382
2 294
2 083
2 046
1 907
30 001
50 710
2008
EURm
1 154
434
154
668
306
7 037
2 751
12 504
2007
EURm
322
5 898
3 684
2 574
2 641
2 012
1 754
2 124
30 049
51 058
2007
EURm
1 114
364
134
160
465
523
3 272
6 032
1 Comprises intangible assets and property, plant and equipment.
3. Percentage of completion
Contract sales recognized under percentage of completion accounting were
EUR 11 750 million in 2008 (EUR 10 171 million in 2007 and EUR 6 308 million in 2006).
Advances received related to construction contracts, included under accrued
expenses, were EUR 261 million at December 31, 2008 (EUR 303 million in 2007).
Contract revenues recorded prior to billings, included in accounts receivable, were
EUR 1 423 million at December 31, 2008 (EUR 1 587 million in 2007). Billing in excess
of costs incurred, included in contract revenues recorded prior to billings, were
EUR 677 million at December 31, 2008 (EUR 482 million in 2007).
The aggregate amount of costs incurred and recognized profits (net of
recognized losses) under open construction contracts in progress since inception
(for contracts acquired inception refers to April 1, 2007) was EUR 11 707 million at
December 31, 2008 (EUR 10 173 million at December 31, 2007).
Retentions related to construction contracts, included in accounts receivable,
were EUR 211 million at December 31, 2008 (EUR 166 million at December 31, 2007).
4. Personnel expenses
EURm
Wages and salaries
Share-based compensation expense, total
Pension expenses, net
Other social expenses
Personnel expenses as per profit
2008
5 615
67
478
754
2007
4 664
236
420
618
2006
3 457
192
310
439
and loss account
6 914
5 938
4 398
Share-based compensation expense includes pension and other social costs of EUR
–7 million in 2008 (EUR 8 million in 2007 and EUR –4 million in 2006) based upon the
Notes to the consolidated financial statements
related employee benefit charge recognized during the year. In 2006, a benefit was
recognized 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 394 million in 2008 (EUR 289 million in 2007 and EUR 198 million
in 2006). Expenses related to defined benefit plans comprise the remainder.
Average personnel
2008
2007
2006
Devices & Services
NAVTEQ
Nokia Siemens Networks
Corporate Common Functions
57 443
3 969
59 965
346
49 887
—
50 336
311
44 716
—
20 277
331
Nokia Group
121 723
100 534
65 324
2006
EURm
387
4 913
2 713
2 425
2 060
1 518
1 069
2 815
23 221
41 121
5. Pensions
The Finnish plan comprises of the Finnish state Employees’ Pension Act (TyEL) sys-
tem with benefits directly linked to employee earnings. These benefits are financed
in two distinct portions. The 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 prior to March 1, 2008
were pre-funded through a trustee-administered Nokia Pension Foundation and
accounted for as a defined benefit plan.
As of March 1, 2008 the Finnish statutory pension liability and plan related
assets of Nokia and Nokia Siemens Networks were transferred to two pension insur-
ance companies. The transfer did not affect the number of employees covered by
the plan nor did it affect the current employees’ entitlement to pension benefits.
At the transfer date, the Group has not retained any direct or indirect obligation
to pay employee benefits relating to employee service in current, prior or future
periods. Thus, the Group has treated the transfer of the Finnish statutory pension
liability and plan assets as a settlement of the Group’s TyEL defined benefit plan.
From the date of transfer onwards, the Group has accounted for the TYEL plans as a
defined contribution plan. The transfer resulted in a EUR 152 million loss consisting
of a EUR 217 million loss impacting Corporate Common Functions and a EUR 65 mil-
lion gain impacting Nokia Siemens Networks operating profit. These are included in
other operating income and expense, see Note 6.
Foreign plans include both defined contribution and defined benefit plans. Af-
ter the settlement of TyEL liabilities, the Group’s most significant pension plans are
in Germany and in the UK. 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 compensa-
tion levels, ranking within the Group and years of service. The majority of active
employees in Nokia UK participate in a pension scheme which is designed according
to the Scheme Trust Deeds and Rules and is compliant with the Guidelines of the UK
Pension Regulator. The funding vehicle for the pension scheme is the Nokia Group
(UK) Pension Scheme Ltd which is run on a Trust basis. In the UK, individual benefits
are generally dependent on eligible compensation levels and years of service for the
defined benefit section of the scheme and on individual investment choices for the
defined contribution section of the scheme.
In connection with the formation of Nokia Siemens Networks in 2007, the
Group assumed multiple pension plans reflected as acquisitions in the following
tables.
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.
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:
Notes to the consolidated financial statements
21
Notes to the consolidated financial statements
2008
2007
EURm
Present value of defined benefit
obligations at beginning of year
Foreign exchange
Current service cost
Interest cost
Plan participants’ contributions
Past service cost
Actuarial gain (+)/loss (–)
Acquisitions
Curtailment
Settlements
Benefits paid
Domestic Foreign Domestic Foreign
plans
plans
plans
plans
– 1 011 – 1 255
– 1 031
– 546
—
– 10
– 9
—
—
3
—
—
1 018
2
56
– 69
– 69
– 10
– 2
102
– 2
10
7
34
—
– 59
– 50
—
—
27
– 66
– 54
– 8
—
115
126
—
3
—
11
– 780
1
15
30
Present value of defined benefit
obligations at end of year
– 7 – 1 198
– 1 011 – 1 255
Plan assets at fair value at beginning of year 1 063
1 111
Foreign exchange
Expected return on plan assets
Actuarial gain (+)/loss (–) on plan assets
Employer contribution
Plan participants’ contributions
Benefits paid
Curtailments
Settlements
Acquisitions
Plan assets at fair value at end of year
Surplus (+)/deficit (–)
—
9
– 1
7
—
– 2
—
– 1 076
—
—
– 7
– 58
62
– 38
134
10
– 22
– 5
– 2
5
– 1
Unrecognized net actuarial gains (–)/losses (+) – 2
– 111
Unrecognized past service cost
—
1
985
—
49
– 33
73
—
424
– 27
46
– 2
90
8
– 11
– 30
—
—
—
—
– 3
605
Prepaid (+)/accrued (–) pension cost in
balance sheet
– 9
– 111
149
– 185
Present value of obligations include EUR 707 million (EUR 1 799 million in
2007) of wholly funded obligations, EUR 416 million of partly funded obligations
(EUR 333 million in 2007) and EUR 82 million (EUR 134 million in 2007) of unfunded
obligations.
The amounts recognized in the profit and loss account are as follows:
EURm
2008
2007
2006
Current service cost
Interest cost
Expected return on plan assets
Net actuarial losses recognized in year
Past service cost gain (–)/loss (+)
Curtailment
Settlement
Total, included in personnel expenses
79
78
– 71
—
2
– 12
152
228
125
104
– 95
10
—
– 1
– 12
131
101
66
– 62
8
3
– 4
—
112
22
Nokia in 2008
Movements in prepaid/accrued pension costs recognized in the balance sheet are
as follows:
EURm
Prepaid (+)/accrued ( –) pension costs at beginning of year
Net income (+)/expense (–) recognized in the profit
and loss account
Contributions paid
Benefits paid
Acquisitions
Foreign exchange
Prepaid (+)/accrued ( –) pension costs at end of year 1
2008
2007
– 36
108
– 228
141
12
3
– 12
– 120
– 131
163
—
– 175
– 1
– 36
1
Included within prepaid expenses and accrued income/accrued expenses.
The prepaid/accrued pension cost above is made up of a prepayment of EUR 55 mil-
lion (EUR 218 million in 2007) and an accrual of EUR 175 million (EUR 254 million in
2007).
EURm
2008
2007
2006
2005
2004
Present value of defined
benefit obligation
Plan assets at fair value
Surplus (+)/Deficit ( –)
– 1 205 – 2 266 – 1 577 – 1 385 – 1 125
1 071
1 409
– 54
– 168
1 197
– 8
1 276
– 109
2 174
– 92
Experience adjustments arising on plan obligations amount to a gain of EUR 50
million in 2008 (a loss of EUR 31 million in 2007 and EUR 25 million in 2006). Experi-
ence adjustments arising on plan assets amount to a loss of EUR 22 million in 2008
(EUR 3 million in 2007 and EUR 11 million in 2006).
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
2008
2007
Domestic Foreign Domestic Foreign
5.90
5.80
5.50
5.40
—
5.70
5.30
5.10
4.00
2.10
2.70
1.90
3.00
2.70
3.30
2.30
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 Groups’s pension plan weighted average asset allocation as a percentage
of Plan Assets at December 31, 2008, and 2007, by asset category are as follows:
%
Asset category:
Equity securities
Debt securities
Insurance contracts
Real estate
Short-term investments
Total
2008
2007
Domestic Foreign Domestic Foreign
—
—
—
—
—
—
12
72
8
1
7
12
78
—
1
9
100
100
11
85
3
1
—
100
1 197
1 063
1 111
The principal actuarial weighted average assumptions used were as follows:
52
97
—
– 144
– 41
—
%
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.
The Pension Committee of the Group, consisting of 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.
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 2007). See Note 31.
The actual return on plan assets was EUR 31 million in 2008 (EUR 61 million
in 2007).
In 2009, the Group expects to make contributions of EUR 64 million and
EUR 0 million to its foreign and domestic defined benefit pension plans,
respectively.
6. Other operating income and expenses
In 2008, other operating expenses include EUR 152 million net loss on transfer of
Finnish pension liabilities, of which a gain of EUR 65 million is included in Nokia Sie-
mens Networks’ operating profit and a loss of EUR 217 million in Corporate Common
expenses. Devices & Services recorded EUR 259 million of restructuring charges and
EUR 81 million of impairment and other charges related to closure of the Bochum
site in Germany. Other operating expenses also include a charge of EUR 52 million
related to other restructuring activities in Devices & Services and EUR 49 million in
charges related to restructuring and other costs in Nokia Siemens Networks.
Other operating income for 2007 includes a non-taxable gain of EUR 1 879 mil-
lion relating to the formation of Nokia Siemens Networks. Other operating income
also includes gain on sale of real estates in Finland of EUR 128 million, of which
EUR 75 million is included in Corporate Common functions’ operating profit and
EUR 53 million in Nokia Siemens Networks’ operating profit. In addition, a gain on
business transfer EUR 53 million impacting Corporate Common functions’ operating
profit. In 2007, other operating expenses includes EUR 58 million in charges related
to restructuring costs in Nokia Siemens Networks. Devices & Services recorded a
charge of EUR 17 million for personnel expenses and other costs as a result of more
focused R&D. Devices & Services also 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 intended 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, Devices
& Services recorded a charge of EUR 8 million for personnel expenses and other
costs as a result of more focused R&D.
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).
Notes to the consolidated financial statements
7. Impairment
EURm
2008
2007
2006
Property, plant and equipment
Inventories
Available-for-sale investments
Investments in associated companies
Capitalized development costs
Other intangible assets
Other non-current assets
Total, net
77
13
43
8
—
—
8
149
—
—
29
7
27
—
—
63
—
—
18
—
—
33
—
51
Property, plant and equipment and inventories
In conjunction with the Group’s decision to discontinue the production of mobile
devices in Germany, an impairment loss was recognized amounting to EUR 55 mil-
lion. The impairment loss related to the closure and sale of production facilities at
Bochum, Germany during 2008 and was included in Devices & Services segment.
In 2008, Nokia Siemens Networks recognized an impairment loss amounting to
EUR 35 million relating to the sale of its manufacturing site in Durach, Germany. The
impairment loss was determined as the excess of the book value of transferring as-
sets over the fair value less costs to sell for the transferring assets. The impairment
loss was allocated to property, plant and equipment and inventories.
Available-for-sale investments
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 43 million (EUR 29 million in 2007, EUR 18 million in 2006).
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 8 million
in 2008 (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 Devices & Services segment.
Goodwill
Goodwill is allocated to the Group’s cash-generating units (CGU) for the purpose of
impairment testing. The allocation is made to those cash-generating units that are
expected to benefit from the synergies of the business combination from which the
goodwill arose.
The recoverable amounts of each CGU are determined based on a value in use
calculation. The pre-tax cash flow projections employed in the value in use calcula-
tion are based on financial plans approved by management. These projections are
consistent with external sources of information, wherever available. 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 indus-
try and economies in which the CGU operates.
Rapid deterioration in the macroeconomic environment during 2008 has
negatively affected cash flow expectations for all of the Group’s CGUs. The global
slowdown in consumer spending, unprecedented currency volatility and reductions
Notes to the consolidated financial statements
23
Notes to the consolidated financial statements
in the availability of credit have dampened growth and profitability expectations
during the short to medium term.
Goodwill of EUR 1 106 million has been allocated to the Devices & Services CGU
for the purpose of impairment testing. The impairment testing has been carried out
based on Management’s expectation of moderate market share growth and stable
profit margins in the medium to long term.
Goodwill amounting to EUR 905 million has been allocated to the NSN CGU. The
impairment testing has been carried out based on Management’s expectation of a
constant market share, and a declining total market value in the shorter term, stabi-
lizing on the longer term. Tight focus on profitability and cash collection is expected
to improve operating cash flow.
Goodwill amounting to EUR 4 119 million has been allocated to the NAVTEQ CGU.
The impairment testing has been carried out based on Management’s expectation
of longer term strong growth in mobile device navigation services with increased
volumes driving profitability. The recoverable amount of the NAVTEQ CGU is less than
1% higher than its carrying amount. A reasonably possible change of 1% in the valu-
ation assumptions for long-term growth rate and pre-tax discount rate would give
rise to an impairment loss.
The aggregate carrying amount of goodwill allocated across multiple CGUs
amounts to EUR 127 million and the amount allocated to each individual CGU is not
individually significant.
The key assumptions applied in the value-in-use calculation for each CGU are
presented in the table below:
%
Terminal growth rate
Pre-tax discount rate
Cash-generating unit
Devices &
Services
NSN
NAVTEQ
2.28
12.35
1.00
14.86
5.00
10.92
The goodwill impairment testing analyses conducted for each of the Group’s CGUs
for the years ended December 31, 2008, 2007 and 2006 have not resulted in any
impairment charges.
8. Acquisitions
Acquisitions completed in 2008
NAVTEQ
On July 10, 2008, the Group completed its acquisition of all of the outstanding com-
mon stock of NAVTEQ. Based in Chicago, NAVTEQ is a leading provider of comprehen-
sive digital map information for automotive systems, mobile navigation devices,
Internet-based mapping applications, and government and business solutions. The
Group will use NAVTEQ’s industry leading maps data, to add context–time, place,
people–to web services optimized for mobility.
The total cost of the acquisition was EUR 5 342 million and consisted of cash
paid of EUR 2 772 million, debt issued of EUR 2 539 million, costs directly attributable
to the acquisition of EUR 12 million and consideration attributable to the vested
portion of replacement share-based payment awards of EUR 19 million.
The following table summarizes the estimated fair values of the assets ac-
quired and liabilities assumed at the date of acquisition.
24
Nokia in 2008
Carrying
amount
EURm
Fair
value
EURm
Useful
lives
Years
114
3 673
Goodwill
Intangible assets subject to amortization:
Map database
Customer relationships
Developed technology
License to use trade name and trademark
Capitalized development costs
Other intangible assets
Property, plant & equipment
Deferred tax assets
Available-for-sale investments
Other non-current assets
Non-current assets
Inventories
Accounts receivable
Prepaid expenses and accrued income
Available-for-sale investments, liquid assets
Available-for-sale investments, cash equivalents
Bank and cash
Current assets
Total assets acquired
Deferred tax liabilities
Other long-term liabilities
Non-current liabilities
Accounts payable
Accrued expenses
Provisions
Current liabilities
Total liabilities assumed
Net assets acquired
5
4
4
6
5
22
8
7
22
4
68
84
262
36
6
456
3
94
36
140
97
57
427
997
46
54
100
29
96
5
130
230
767
1 389
388
110
57
—
7
1 951
83
148
36
6
2 224
3
94
36
140
97
57
427
6 324
786
39
825
29
120
8
157
982
5 342
The goodwill of EUR 3 673 million has been allocated to the NAVTEQ segment. The
goodwill is attributable to assembled workforce and the synergies expected to arise
subsequent to the acquisition including acceleration of the Group’s Internet services
strategy. None of the goodwill acquired is expected to be deductible for income tax
purposes.
Symbian
On December 2, 2008, the Group completed its acquisition of 52.1% of the outstand-
ing common stock of Symbian Ltd. As a result of this acquisition, the Group’s total
ownership interest has increased from 47.9% to 100% of the outstanding common
stock of Symbian. A UK-based software licensing company, Symbian developed
and licensed Symbian OS, the market-leading open operating system for mobile
phones. The acquisition of Symbian is a fundamental step in the establishment of
the Symbian Foundation.
The Group will contribute the Symbian OS and S60 software to the Symbian
Foundation for the purpose of creating a unified mobile software platform with
a common UI framework. The goal of Symbian Foundation will be to extend the
appeal of the platform among all partners, including developers, mobile operators,
content and service providers and device manufacturers. The unified platform will
promote innovation and accelerate the availability of new services and experiences
for consumers and business users around the world. A full platform will be available
for all Foundation members under a royalty-free license, from the Foundation’s first
day of operations.
Notes to the consolidated financial statements
The acquisition of Symbian was achieved in stages through successive share
purchases at various times from the formation of the company. Thus, the amount
of goodwill arising from the acquisition has been determined via a step-by-step
comparison of the cost of the individual investments in Symbian with the acquired
interest in the fair values of Symbian’s identifiable net assets at each stage. Revalu-
ation of the Group’s previously held interests in Symbian’s identifiable net assets
is recognized as a revaluation surplus in equity. Application of the equity method
has been reversed such that the carrying amount of the Group’s previously held
interests in Symbian have been adjusted to cost. The Group’s share of changes in
Symbian’s equity balances after each stage is included in equity.
The total cost of the acquisition was EUR 641 million consisting of cash paid of
EUR 435 million, costs directly attributable to the acquisition of EUR 6 million and
investments in Symbian from previous share purchases of EUR 200 million.
The following table summarizes the estimated fair values of the assets ac-
quired and liabilities assumed at the date of acquisition.
Pro forma (unaudited), EURm
Net sales
Net profit
2008
51 063
4 080
During 2008, the Group completed five additional acquisitions. The total purchase
consideration paid and goodwill arising from the acquisitions amounted to EUR 514
million and EUR 339 million, respectively:
»
Trolltech ASA, based in Oslo, Norway, is a recognized software provider with
world-class software development platforms and frameworks. The Group
acquired a 100% ownership interest in Trolltech ASA on June 6, 2008.
» Oz Communications Inc., headquartered in Monteal, Canada, is a leading con-
sumer mobile messaging solution provider delivering access to popular instant
messaging and email services on consumer mobile devices. The Group acquired
a 100% ownership interest in Oz Communications Inc. on November 4, 2008.
EURm
Goodwill
Intangible assets subject to amortization:
Developed technology
Customer relationships
License to use trade name and trademark
Property, plant & equipment
Deferred tax assets
Non-current assets
Accounts receivable
Prepaid expenses and accrued income
Bank and cash
Current assets
Total assets acquired
Deferred tax liabilities
Financial liabilities
Accounts payable
Accrued expenses
Total liabilities assumed
Net assets acquired
Revaluation of previously held interests in Symbian
Nokia share of changes in Symbian’s equity
after each stage of the acquisition
Cost of the business combination
Carrying
amount
—
5
—
—
5
33
7
45
20
43
147
210
255
—
—
5
48
53
202
41
11
3
55
31
19
105
20
43
147
210
785
17
20
5
53
95
690
22
27
641
The goodwill of EUR 470 million has been allocated to the Devices & Services seg-
ment. The goodwill is attributable to assembled workforce and the significant
benefits that the Group expects to realise from the Symbian Foundation. None of
the goodwill acquired is expected to be deductible for income tax purposes.
The contribution of the Symbian OS and S60 software to the Symbian Founda-
tion has been accounted for as a retirement. Thus, the Group has recognized a loss
on retirement of EUR 165 million consisting of EUR 55 million of Symbian identifiable
intangible assets and EUR 110 million value of capitalized S60 development costs.
For NAVTEQ and Symbian, the Group has included net losses of EUR 155 million
and EUR 52 million, respectively, in the consolidated profit and loss. The following
table depicts pro forma net sales and net profit of the combined entity as though
the acquisition of NAVTEQ and Symbian had occurred on January 1, 2008:
Fair
value
470
»
»
Atrica, based in Santa Clara, California, is one of the leading providers of Carrier
Ethernet solutions for Metropolitan Area Networks. Nokia Siemens Networks
acquired a 100% ownership interest in Atrica on January 7, 2008.
Apertio Ltd, based in Bristol, England is the leading independent provider of
subscriber-centric networks for mobile, fixed and converged telecommunica-
tions operators. Nokia Siemens Networks acquired a 100% ownership interest
in Apertio Ltd on February 11, 2008.
» On January 1, 2008, Nokia Siemens Networks assumed control of Vivento Tech-
nical Services from Deutsche Telekom.
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
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 recog-
nized a non-taxable gain on the partial sale amounting to EUR 1 879 million. The
gain was determined as the Group’s ownership interest relinquished for the differ-
ence between the fair value contributed, representing the consideration received,
and book value of the net assets contributed by the Group to Nokia Siemens Net-
works. 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 addi-
tion, the Group incurred costs directly attributable to the acquisition of EUR 51 mil-
lion.
Notes to the consolidated financial statements
25
Notes to the consolidated financial statements
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.
EURm
Net sales
Nokia Networks
Nokia Siemens Networks
Total
Operating profit
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
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 acquisitions of the following three
companies. The purchase consideration paid and goodwill arising from these acqui-
sitions was not material to the Group.
»
»
»
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 optimise 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 organising and
sharing photos, videos and other personal media. The Group acquired substan-
tially all assets of Twango on July 25, 2007.
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 ap-
plications for mobile devices. The acquisition of Intellisync was to enhance Nokia’s
ability to respond to its customers and effectively put 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 summarises the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition. The carrying amount of Intellisync
net assets immediately before the acquisition amounted to EUR 50 million.
* 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 the 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
Current liabilities
Total liabilities assumed
Minority interest
Net assets acquired
—
—
—
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
3 577
3 782
110
2 385
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
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
26
Nokia in 2008
February 10, 2006, EURm
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 Device & Services seg-
ment. 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:
Notes to the consolidated financial statements
10. Financial income and expenses
EURm
2008
2007
2006
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 losses)
From foreign exchange derivatives designated
at fair value through profit and loss account
From balance sheet items revaluation
Net gains (net losses) on other derivatives
designated at fair value through
profit and loss account
Total
1
—
—
353
338
225
—
1
—
– 185
17
– 31
– 43
43
– 24
– 22
55
– 18
432
– 595
37
– 118
75
– 106
6
– 2
5
239
– 2
207
During 2008, Nokia’s interest expense increased significantly due to an increase in
interest-bearing liabilities mainly related to financing of the NAVTEQ acquisition.
Foreign exchange gains (or losses) increased due to a higher cost of hedging and
increased volatility on the foreign exchange market.
» 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.
11. Income taxes
»
»
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 Devices & Services 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
2008
2007
2006
Depreciation and amortization by function
Cost of sales
Research and development 1
Selling and marketing 2
Administrative and general
Other operating expenses
Total
297
778
368
174
—
1 617
303
523
232
148
—
1 206
279
312
9
111
1
712
In 2008, depreciation and amortization allocated to research and development included amortization
of acquired intangible assets of EUR 351 million (EUR 136 million in 2007).
1
2
EURm
Income tax expense
Current tax
Deferred tax
Total
Finland
Other countries
Total
2008
2007
2006
– 1 514
433
– 1 081
– 604
– 477
– 1 081
– 2 209
687
– 1 522
– 1 323
– 199
– 1 522
– 1 303
– 54
– 1 357
– 941
– 416
– 1 357
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, 2008:
EURm
Income tax expense at statutory rate
Items without tax benefit/expense
2008
2007
2006
1 292
– 65
2 150
61
1 488
12
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 tax provisions
Change in income tax rate 2
Deferred tax liability on undistributed earnings 3
Other
—
– 128
– 181
—
2
– 22
220
– 37
– 489
20
– 138
15
50
– 114
– 37
4
—
– 24
– 73
—
– 12
—
– 3
– 31
Income tax expense
1 081
1 522
1 357
In 2008, depreciation and amortization allocated to selling and marketing included amortization of
acquired intangible assets of EUR 343 million (EUR 214 million in 2007).
1 See Note 8.
2
In 2007, the change in income tax rate decreased Group tax expense primarily 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 relates to changes to tax rates
applicable to profit distributions.
Notes to the consolidated financial statements
27
Notes to the consolidated financial statements
Certain of the Group companies’ income tax returns for periods ranging from 2002
through 2008 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.
13. Property, plant and equipment
EURm
2008
2007
12. Intangible assets
EURm
2008
2007
1 817
131
—
—
– 124
– 13
1 811
– 1 439
14
11
– 153
– 1 567
378
244
1 384
431
4 482
– 35
– 5
6 257
1 384
6 257
3 218
265
95
2 189
– 55
– 214
5 498
– 860
– 32
48
– 741
– 1 585
2 358
3 913
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
Capitalized development costs
Acquisition cost January 1
Additions during the period
Acquisitions
Impairment losses
Retirements
Disposals during the period
Accumulated acquisition cost December 31
Accumulated amortization January 1
Retirements during the period
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
Disposals during the period
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
Retirements during the period
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
28
Nokia in 2008
Land and water areas
Acquisition cost January 1
Translation differences
Additions during the period
Acquisitions
Impairments during the period
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
Impairments during the period
Disposals during the period
Accumulated acquisition cost December 31
Accumulated depreciation January 1
Translation differences
Impairments during the period
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
Impairments during the period
Disposals during the period
Accumulated acquisition cost December 31
Accumulated depreciation January 1
Translation differences
Impairments during the period
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
73
– 4
3
—
– 4
– 8
60
73
60
1 008
– 9
382
28
– 90
– 45
1 274
– 239
1
30
17
– 159
– 350
769
924
4 012
10
613
68
– 21
– 499
4 183
– 3 107
– 8
8
466
– 556
– 3 197
905
986
20
2
8
—
30
– 9
—
—
– 6
– 15
11
15
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
Notes to the consolidated financial statements
EURm
2008
2007
16. Long-term loans receivable
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
14. Investments in associated companies
EURm
Net carrying amount January 1
Translation differences
Additions
Acquisitions
Deductions 1
Impairment
Share of results
Dividends
Other movements
Net carrying amount December 31
154
—
67
26
– 13
– 12
– 76
– 41
105
2 090
2008
325
– 19
24
—
– 239
– 8
6
– 6
13
96
73
—
123
17
– 2
– 7
– 29
– 21
154
1 912
2007
224
—
19
67
– 6
– 7
44
– 12
– 4
325
1 On December 2, 2008, the Group completed its acquisition of 52.1% of the outstanding common stock
of Symbian Ltd, a UK-based software licensing company. As a result of this acquisition, the Group’s
total ownership interest has increased from 47.9% to 100% of the outstanding common stock of
Symbian. See Note 8.
Shareholdings in associated companies are comprised of investments in unlisted
companies in all periods presented.
15. Available-for-sale investments
EURm
Long-term loans receivables
carried at amortized cost
2008
2007
Carrying
amount
Fair
value
Carrying
amount
Fair
value
27
24
10
10
The long-term loans receivable mainly consist of loans made to suppliers and to
customers principally to support their financing of network infrastructure and
services or working capital. Fair value is estimated based on the current market
values of similar instruments. 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
2008
2007
519
744
1 270
2 533
591
1 060
1 225
2 876
18. Prepaid expenses and accrued income
Prepaid expenses and accrued income totalled EUR 4 538 million in 2008 (EUR 3 070
million in 2007). In 2008, Nokia and Qualcomm entered into a new 15-year-agree-
ment, under the terms of which Nokia has been granted a license to all Qualcomm’s
patents for use in Nokia mobile devices and Nokia Siemens Networks infrastructure
equipment. The financial structure of the agreement included an up-front payment
of EUR 1.7 billion, which is to be amortized over the contract period and on-going
royalties payable to Qualcomm. The remaining balance of EUR 1.3 billion of the
up-front payment is included in Prepaid expenses. As part of the licence agree-
ment Nokia also assigned ownership of a number of patents to Qualcomm. These
patents were valued using the income approach based on projected cash flows, on
a discounted basis, over the assigned patents’ estimated useful life. Based on the
valuation and underlying assumptions Nokia determined that the fair value of these
patents was not material.
Available-for-sale investments included the following:
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.
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
2008
2007
Non-
Current current
Non-
Current current
5 114
38
9 628
—
8
—
—
10
—
225
—
184
—
5 114
241
512
—
9 628
147
341
The current fixed income and money-market investments, carried at fair value, in-
cluded available for sale liquid assets of EUR 1 272 million (EUR 4 903 million in 2007)
and cash equivalents of EUR 3 842 million (EUR 4 725 million in 2007). See Note 35 for
details of fixed income and money-market investments.
Notes to the consolidated financial statements
29
Notes to the consolidated financial statements
19. Valuation and qualifying accounts
Allowances on assets to which they apply:
2008
Allowance for doubtful accounts
Excess and obsolete inventory
2007
Allowance for doubtful accounts
Excess and obsolete inventory
2006
Allowance for doubtful accounts
Excess and obsolete inventory
1 Deductions include utilization and releases of the allowances.
20. Fair value and other reserves
Balance at
beginning
of year
EURm
Charged to
cost and
expenses
EURm
Deductions 1
EURm
Acquisitions
EURm
332
417
212
218
281
176
224
151
38
145
70
353
– 141
– 221
– 72
– 202
– 139
– 311
1
154
256
Balance
at end
of year
EURm
415
348
332
417
212
218
Balance at December 31, 2005
– 163
42
– 121
– 56
1
– 55
– 219
43
– 176
Hedging reserve, EURm
Available-for-sale
investments, EURm
Total, EURm
Gross
Tax
Net
Gross
Tax
Net
Gross
Tax
Net
Cash flow hedges:
Net fair value gains (+)/losses (–)
Transfer of gains (–)/losses (+) to profit and loss
account as adjustment to net sales
Transfer gains (–)/losses (+) 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 of gains (–)/losses (+) to profit and loss
account as adjustment to net sales
Transfer of gains (–)/losses (+) 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
Cash flow hedges:
Net fair value gains (+)/losses (–)
Transfer of gains (–)/losses (+) to profit and loss account
as adjustment to net sales
Transfer of gains (–)/losses (+) to profit and loss account
as adjustment to cost of sales
Transfer of gains (–)/losses (+) as a basis adjustment to assets and liabilities
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, 2008
30
Nokia in 2008
61
– 16
45
– 243
68
– 175
414
– 113
301
—
—
—
69
—
—
—
– 19
—
—
—
50
29
– 7
22
– 687
186
– 501
643
– 175
468
—
—
—
54
—
—
—
– 15
—
—
—
39
312
– 73
239
– 507
144
– 363
118
124
– 44
– 32
—
—
—
—
—
—
101
– 20
74
92
—
—
—
81
—
—
—
– 42
18
14
– 66
—
—
—
32
29
– 12
– 17
—
—
—
—
– 26
1
13
– 29
—
—
—
1
—
—
2
—
—
—
– 1
—
—
1
—
—
—
—
8
—
1
10
—
—
—
– 41
18
14
– 64
—
—
—
31
29
– 12
– 16
—
—
—
—
– 18
1
14
– 19
61
– 16
45
– 243
68
– 175
414
– 113
301
– 42
18
14
3
1
—
—
– 41
18
14
– 17
– 14
29
– 7
22
– 687
186
– 501
643
– 175
468
32
29
– 1
—
31
29
– 12
—
– 12
37
– 14
23
312
– 73
239
-507
144
– 363
118
124
– 26
1
13
72
– 44
– 32
8
—
1
– 10
74
92
– 18
1
14
62
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 to
ensure that the amounts transferred to the fair value reserves during the year end-
ed December 31, 2008 and 2007 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, 2008 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.
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 conditional upon continued
employment as well as fulfillment of such performance, service and other condi-
tions, as determined in the relevant plan rules.
The share-based compensation expense for all equity-based incentive awards
amounted to EUR 74 million in 2008 (EUR 228 million in 2007 and EUR 196 million in
2006).
Stock options
Nokia’s global stock option plans in effect for 2008, including their terms and condi-
tions, were approved by the Annual General Meeting in the year when each plan was
launched, i.e. in 2003, 2005 and 2007.
Each stock option entitles the holder to subscribe for one new Nokia share. The
stock options are non-transferable. All of the stock options have a vesting schedule
with 25% of the options vesting one year after grant and 6.25% each quarter there-
after. 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
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 NASDAQ OMX
Helsinki 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.
Notes to the consolidated financial statements
Pursuant to the stock options issued, an aggregate maximum number of
23 113 218 new Nokia shares may be subscribed for, representing 0.6% of the total
number of votes at December 31, 2008. During 2008 exercise of 3 546 508 options
resulted in issuance of 3 546 508 new shares. The exercises of stock options have
resulted in an increase of the share capital of the parent company until 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 subsctiption prices are recorded in the
fund for invested non-restricted equity as per a resolution by the Annual General
Meeting.
There were no stock options outstanding as of December 31, 2008, which upon
exercise would result in an increase of the share capital of the parent company.
Notes to the consolidated financial statements
31
Notes to the consolidated financial statements
The table below sets forth certain information relating to the stock options out-
standing at December 31, 2008.
Stock
Plan
(year of
options
launch) outstanding
Number of
participants
(approx.)
Option
(sub)category
Vesting status
(as percentage of
total number
of stock options
outstanding)
2003 1
3 217 206
3 000
2005 1
13 277 078
8 000
2007 1
6 618 934
6 000
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
2008 1Q
2008 2Q
2008 3Q
2008 4Q
Expired
Expired
Expired
100.00
100.00
93.75
81.25
75.00
68.75
62.50
56.25
50.00
43.75
37.50
31.25
25.00
—
—
—
—
—
Exercise period
First vest date
Last vest date
Expiry date
July 1, 2004
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
April 1, 2008
January 1, 2011
April 1, 2011
December 31, 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
April 1, 2009
April 1, 2012
December 31, 2013
July 1, 2009
July 1, 2012
December 31, 2013
October 1, 2009
October 1, 2012
December 31, 2013
January 1, 2010
January 1, 2013
December 31, 2013
Exercise
price/share
EUR
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
24.15
19.16
17.80
12.43
1 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.
Total stock options outstanding as at December 31, 2008 1
Shares under option at January 1, 2006
Granted
Exercised
Forfeited
Expired
Shares under option at December 31, 2006
Granted
Exercised
Forfeited
Expired
Shares under option at December 31, 2007
Granted
Exercised
Forfeited
Expired
Shares under option at December 31, 2008
Options exercisable at December 31, 2005 (shares)
Options exercisable at December 31, 2006 (shares)
Options exercisable at December 31, 2007 (shares)
Options exercisable at December 31, 2008 (shares)
Number of shares
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
3 767 163
3 657 985
783 557
11 078 983
23 813 865
112 095 407
69 721 916
21 535 000
12 895 057
1
Includes also stock options granted under other than global equity plans. For further information see
“Other equity plans for employees” below.
2 The weighted average exercise 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.
32
Nokia in 2008
Weighted average exercise price 2 Weighted average share price 2
EUR
16.70
21.75
22.15
EUR
22.97
16.79
13.71
15.11
33.44
16.28
18.48
16.99
15.13
17.83
15.28
17.44
14.21
16.31
14.96
15.89
25.33
16.65
14.66
14.77
The weighted average grant date fair value of stock options granted was EUR 3.92 in
2008, EUR 3.24 in 2007, and EUR 3.31 in 2006.
The options outstanding by range of exercise price at December 31, 2008 are as follows:
Options outstanding
Exercise prices , EUR
Number of shares
2.15–12.43
12.79–15.38
17.00–18.39
19.16–31.03
4 555 378
5 556 538
10 605 500
3 096 449
23 813 865
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:
Notes to the consolidated financial statements
Weighted average
remaining contractual
life in years
Weighted average
exercise price, EUR
1.78
2.06
3.28
4.43
11.50
13.00
18.11
19.93
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
2008
3.20%
39.92%
3.15%–4.58%
3.65%
3.55
16.97
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
Expected term of stock options is estimated by observing general option holder
behavior 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.
Performance shares
The Group has granted performance shares under the global 2004, 2005, 2006, 2007
and 2008 plans, 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 re-
quired, when the plans are settled by using the Nokia newly issued shares or treasury
shares. The Group may also settle the plans by using cash instead of shares.
The performance shares represent a commitment by the Group 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 the
Group’s performance reaches at least one of the threshold levels measured by two
independent, pre-defined performance criteria: the Group’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. The 2006, 2007 and 2008 plans have a three-year
performance period with no interim payout. The shares vest after the respective
interim measurement period and/or the performance period. The shares will be
delivered to the participants as soon as practicable after they vest. 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
2008
Performance
shares outstanding
at threshold 1, 2
Number of
participants
(approx.)
—
3 604 623
—
1 997 416
2 431 132
10 000
11 000
12 000
5 000
6 000
Interim
measurement
period
2004–2005
2005–2006
N/A
N/A
N/A
Performance
period
1st (interim)
settlement
2nd (final)
settlement
2004–2007
2005–2008
2006–2008
2007–2009
2008–2010
2006
2007
N/A
N/A
N/A
2008
2009
2009
2010
2011
1 Shares under performance share plan 2006 vested on December 31, 2008 and are therefore not
included in the outstanding numbers.
2 Does not include 2 048 outstanding performance shares with deferred delivery due to leave of
absence.
Notes to the consolidated financial statements
33
Notes to the consolidated financial statements
The following table sets forth the performance criteria of each global performance
share plan.
Threshold performance
Maximum performance
Plan
2004
Interim measurement
Performance period
2005
Interim measurement
2006
2007
2008
Performance period
Performance period
Performance period
Performance period
EPS 1
EUR
0.80
0.84
0.75
0.82
0.96
1.26
1.72
Average annual
net sales growth 1
4%
8%
3%
8%
11%
9.5%
4%
1 Both the EPS and average annual net sales growth criteria have an equal weight of 50%.
Performance shares outstanding as at December 31, 2008 1
EPS 1
EUR
0.94
1.18
0.96
1.33
1.41
1.86
2.76
Average annual
net sales growth 1
16%
20%
12%
17%
26%
20%
16%
Number of performance shares at threshold
Weighted average grant date fair value EUR 2
Performance shares at January 1, 2006
Granted
Forfeited
Performance shares at December 31, 2006 3
Granted
Forfeited
Vested 4
Performance shares at December 31, 2007 5
Granted
Forfeited
Vested 3, 4, 6
Performance shares at December 31, 2008
8 042 817
5 140 736
569 164
12 614 389
2 163 901
1 001 332
222 400
13 554 558
2 463 033
690 909
7 291 463
8 035 219
14.83
19.96
13.35
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
outstanding 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.
6
Includes performance shares under Performance Share Plan 2006 that vested on December 31, 2008.
1
Includes also performance shares granted under other than global equity plans. For further informa-
tion 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 were outstanding until the final settlement in 2008. The final payout, in 2008, was adjusted by
the shares delivered based on the Interim Measurement Period.
Based on the performance of the Group during the Performance Period 2005–2008,
under the 2005 Performance Share Plan and during the Performance Period
2006–2008 under the Performance Share Plan 2006, both threshold performance
criteria were exceeded. The shares under Performance Share Plan 2005 will vest as
of the date of the Annual General Meeting on April 23, 2009 and the shares under
Performance Share Plan 2006 have vested December 31, 2008. Hence 16 million
Nokia shares are expected to be delivered in 2009.
Restricted shares
The Group has granted restricted shares under global plans 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 management 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 treasury
shares. The Group may also settle the plans 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.
34
Nokia in 2008
Restricted shares outstanding as at December 31, 2008 1
Restricted shares at January 1, 2006
Granted
Forfeited
Vested
Restricted shares at December 31, 2006
Granted
Forfeited
Vested
Restricted shares at December 31, 2007
Granted 3
Forfeited
Vested
Restricted shares at December 31, 2008
Notes to the consolidated financial statements
Number of restricted shares
Weighted average grant date fair value EUR 2
5 185 676
1 669 050
455 100
334 750
6 064 876
1 749 433
297 900
1 521 080
5 995 329
4 799 543
358 747
2 386 728
8 049 397
14.71
24.37
13.89
1
Includes also 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.
3
Includes grants assumed under “NAVTEQ Plan” (as defined below).
Other equity plans for employees
24. Deferred taxes
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 market. When treasury
shares are issued on exercise of stock options any gain or loss is recognized in share
issue premium.
On basis of these plans the Group had 0.7 million stock options outstanding on
December 31, 2008. The average exercise price is USD 22.89.
In connection with our July 10, 2008 acquisition of NAVTEQ, the Group assumed
Navteq’s 2001 Stock Incentive Plan (“NAVTEQ Plan”). All unvested NAVTEQ restricted
stock units under the NAVTEQ Plan were converted to an equivalent number of
restricted stock units entitling their holders to Nokia shares. The maximum number
of Nokia shares to be delivered to NAVTEQ employees during the years 2008–2012 is
approximately 3 million. The Group does not intend to make further awards under
the NAVTEQ Plan.
23. Long-term interest-bearing liabilities
EURm
Long-term interest-bearing
liabilities carried at
amortized cost
2008
2007
Carrying
amount
Fair
value
Carrying
amount
Fair
value
861
855
203
203
Fair value is estimated based on the current market values of similar instruments.
EURm
2008
2007
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
144
293
117
371
691
68
279
1 963
– 286
– 62
– 242
– 1 197
– 1 787
176
87
314
132
292
367
227
134
1 553
– 165
– 40
– 31
– 727
– 963
590
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
– 106
133
1
In 2008, other temporary differences included a deferred tax liability of EUR 1 140 million arising from
purchase price allocation related to Nokia Siemens Networks and NAVTEQ. In 2007, other temporary
differences included a deferred tax liability of EUR 563 million arising from purchase price allocation
related to Nokia Siemens Networks.
At December 31, 2008 the Group had loss carry forwards, primarily attributable to
foreign subsidiaries of EUR 1 013 million (EUR 1 403 million in 2007), most of which
will expire within 20 years.
At December 31, 2008 the Group had loss carry forwards of EUR 102 million
(EUR 242 million in 2007) for which no deferred tax asset was recognized due to
uncertainty of utilization of these loss carry forwards. These loss carry forwards will
expire in years ranging from 2009 through 2013.
At December 31, 2008 the Group had undistributed earnings of EUR 274 million
(EUR 315 million in 2007), for which no deferred tax liability was recognized as these
earnings are considered permanently invested.
Notes to the consolidated financial statements
35
Notes to the consolidated financial statements
25. Accrued expenses
EURm
Social security, VAT and other taxes
Wages and salaries
Advance payments
Other
Total
2008
2007
1 700
665
532
4 126
7 023
2 024
865
503
3 722
7 114
Other operating expense accruals include dererred service revenue, accrued
discounts, royalties and marketing expenses as well as various amounts which are
individually insignificant.
26. Derivative financial instruments
2008
Assets
2008
Liabilities
Fair
Fair
EURm
value 1 Notional 2
value 1 Notional 2
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 80
30
Currency options bought
—
Currency options sold
1 045
724
—
Cash flow hedges:
Forward foreign exchange contracts 562
—
Currency options bought
—
Currency options sold
14 577
—
—
Derivatives not designated in hedge
accounting relationships carried at
fair value through profit and loss:
Forward foreign exchange contracts 322
6
Currency options bought
—
Currency options sold
6
Interest rate futures
7
Interest rate swaps
1
—
1 014
Cash settled equity options bought 3
Cash settled equity options sold 3
7 817
201
—
21
618
25
—
25 028
– 14
—
– 44
– 445
—
—
– 416
—
– 5
—
—
—
—
– 924
472
—
768
11 792
—
—
7 370
—
186
—
—
—
– 13
20 575
Hedges of net investment
in foreign subsidiaries:
Forward foreign exchange contracts 22
—
Currency options bought
—
Currency options sold
Cash flow hedges:
Forward foreign exchange contracts 89
20
Currency options bought
—
Currency options sold
Derivatives not designated in hedge
accounting relationships carried at
fair value through profit and loss:
Forward foreign exchange contracts 22
4
Currency options bought
—
Currency options sold
6
Interest rate futures
—
Interest rate swaps
41
—
204
Cash settled equity options bought 3
Cash settled equity options sold 3
1 264
51
—
15 718
7 618
—
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
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 Other financial liabilities.
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.
36
Nokia in 2008
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
At January 1, 2008
Exchange differences
Acquisitions
Additional provisions
Change in fair value
Changes in estimates
Charged to profit and loss account
Utilized during year
At December 31, 2008
Notes to the consolidated financial statements
Warranty
Restructuring
IPR
infringements
1 198
– 10
263
1 127
—
– 126
1 001
– 963
1 489
1 489
– 16
1
1 211
—
– 240
971
– 1 070
1 375
65
—
—
744
—
– 53
691
– 139
617
617
—
—
533
—
– 211
322
– 583
356
284
—
—
345
—
– 47
298
– 37
545
545
—
3
266
—
– 92
174
– 379
343
Tax
402
—
—
59
—
– 9
50
—
452
452
—
6
47
—
– 45
2
—
460
Other
437
—
134
548
16
– 216
348
– 305
614
614
—
2
1 136
– 7
– 185
944
– 502
1 058
Total
2 386
– 10
397
2 823
16
– 451
2 388
– 1 444
3 717
3 717
– 16
12
3 193
– 7
– 773
2 413
– 2 534
3 592
EURm
Analysis of total provisions at December 31:
Non-current
Current
2008
2007
978
2 614
1 323
2 394
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
Devices & Services and Nokia Siemens Networks segments. The majority of outflows
related to the restructuring is expected to occur during 2009.
In conjunction with the Group’s decision to discontinue the production of
mobile devices in Germany, a restructuring provision of EUR 259 million was recog-
nized. Devices & Services also recognized EUR 52 million charges related to other
restructuring activities.
mainly personnel related expenses as well as expenses arising from the elimina-
tion of overlapping functions, and the realignment of product portfolio and related
replacement of discontinued products in customer sites. These expenses included
EUR 402 million (EUR 318 million in 2007) impacting gross profit, EUR 46 million (EUR
439 million in 2007) research and development expenses, EUR 14 million of reversal
of provision (EUR 149 million expenses in 2007) in selling and marketing expenses,
EUR 163 million (EUR 146 million in 2007) administrative expenses and EUR 49 million
(EUR 58 million in 2007) other operating expenses. EUR 790 million was paid during
2008 (EUR 254 million during 2007).
The IPR provision is based on estimated future settlements for asserted and
unasserted past IPR infringements. Final resolution of IPR claims generally occurs
over several periods. In 2008, EUR 379 million usage of the provisions mainly relates
to the settlements with Qualcomm, Eastman Kodak, Intertrust Technologies and
ContentGuard.
Other provisions include provisions for non-cancelable purchase commitments,
Restructuring and other associated expenses incurred in Nokia Siemens
Networks in 2008 totaled EUR 646 million (EUR 1 110 million in 2007) including
provision for pension and other social costs on share-based awards and provision
for losses on projects in progress.
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:
Performance shares
Restricted shares
Stock options
Diluted:
Adjusted weighted average shares
and assumed conversions
2008
2007
2006
Under IAS 33, 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.
3 988
7 205
4 306
Performance shares, restricted shares and stock options equivalent to 11 mil-
3 743 622
3 885 408 4 062 833
25 997
6 543
4 201
36 741
26 304
3 693
16 603
46 600
17 264
3 601
2 831
23 696
3 780 363
3 932 008 4 086 529
lion shares were excluded from the calculation of diluted earnings per share in
2008 as they were determined to be anti-dilutive. In 2007 and 2006, no shares were
considered anti-dilutive.
Notes to the consolidated financial statements
37
Notes to the consolidated financial statements
29. Commitments and contingencies
EURm
Collateral for our own commitments
Property under mortgages
Assets pledged
2008
2007
18
11
18
29
Contingent liabilities on behalf of Group companies
Other guarantees
2 896
2 563
Contingent liabilities on behalf of other companies
Financial guarantees on behalf of third parties
Other guarantees
Financing commitments
Customer finance commitments 1
Venture fund commitments 2
1 See also note 35 b).
2 See also note 35 a).
2
1
197
467
130
1
270
251
Nokia’s payment obligations under the subscriber unit cross-license agree-
ments signed in 1992 and 2001 with Qualcomm Incorporated (Qualcomm) expired
on April 9, 2007. The parties entered into negotiations for a new license agreement
with the intention of reaching a mutually acceptable agreement on a timely basis.
Prior to the commencement of negotiations and as negotiations proceeded, Nokia
and Qualcomm were engaged in numerous legal disputes in the United States,
Europe and China. On July 24, 2008, Nokia and Qualcomm entered into a new license
agreement covering various current and future standards and other technologies,
and resulting in a settlement of all litigation between the companies. Under the
terms of the 15 year agreement covering various standards and other technologies,
Nokia has been granted a license under all Qualcomm’s patents for use in Nokia’s
mobile devices and Nokia Siemens Networks infrastructure equipment, and Nokia
has agreed not to use any of its patents directly against Qualcomm. The financial
terms included a one-time lump-sum cash payment of EUR 1.7 billion made by
Nokia to Qualcomm in the fourth quarter of 2008 and on-going royalty payments
to Qualcomm. The lump-sum payment made to Qualcomm will be expensed over
the term of the agreement. Nokia also agreed to assign ownership of a number of
patents to Qualcomm.
As of December 31, 2008, the Group had purchase commitments of EUR 2 351
million (EUR 2 610 million in 2007) relating to inventory purchase obligations, ser-
vice agreements and outsourcing arrangements, primarily for purchases in 2009.
The amounts above represent the maximum principal amount of commitments and
contingencies.
30. Leasing contracts
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 2008 (EUR 18 million in 2007).
The Group leases office, manufacturing and warehouse space under various non-
cancellable operating leases. Certain contracts contain renewal options for various
periods of time.
Assets pledged for the Group’s own commitments include available-for-sale
The future costs for non-cancellable leasing contracts are as follows:
Leasing payments, EURm
Operating leases
2009
2010
2011
2012
2013
Thereafter
Total
315
243
179
127
98
194
1 156
Rental expense amounted to EUR 418 million in 2008 (EUR 328 million in 2007 and
EUR 285 million in 2006).
investments of EUR 10 million in 2008 (EUR 10 million in 2007).
Other guarantees include guarantees of EUR 2 682 million in 2008 (EUR 2 429
million in 2007) provided to certain Nokia Siemens Networks’ customers 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 were EUR 2 million in 2008 (EUR 130 million in 2007). The amount of 2007
represents 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 197 million in 2008 (EUR 270 million in 2007) are
available under loan facilities negotiated mainly 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 467 million in 2008 (EUR 251 million in 2007)
are financing commitments to a number of funds making technology related invest-
ments. As a limited partner in these funds Nokia is committed to capital contribu-
tions and also entitled to cash distributions according to respective partnership
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 the outcome of and liabilities in excess of what has
been provided for relating to these or other proceedings, in aggregate, are not likely
to be material to the financial condition or result of operations.
38
Nokia in 2008
Notes to the consolidated financial statements
31. Related party transactions
Nokia Pension Foundation is a separate legal entity that managed and held in trust
the assets for the Group’s Finnish employee benefit plans before the assets were
transferred to two third-party insurance companies. Foundation’s assets do not
include Nokia shares. The Group recorded net rental expense of EUR 0 million in
2008 (EUR 0 million in 2007 and EUR 2 million in 2006) pertaining to a sale-leaseback
transaction with the Nokia Pension Foundation involving certain buildings and a
lease of the underlying land.
At December 31, 2008, the Group had borrowings amounting to EUR 69 million
(EUR 69 million in 2007) from Nokia Unterstützungskasse GmbH, the Group’s German
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, 2008, 2007 or 2006.
Transactions with associated companies
EURm
2008
2007
2006
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
6
6
21
59
162
29
8
44
12
158
82
125
61
69
28
1
61
—
—
—
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 2006–2008 as well as the share-based compensa-
tion expense relating to equity-based awards, expensed by the company.
2008
2007
2006
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
1 144 800
721 733
1 286 370
1 037 619
2 348 877
4 805 722
898 413
664 227
2 108 197
1 President and CEO as of June 1, 2006; and President and COO until June 1, 2006.
Total remuneration of the Group Executive Board awarded for the fiscal years
2006 –2008 was EUR 8 859 567 in 2008 (EUR 13 634 791 in 2007 and EUR 8 574 443 in
2006), 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 4 850 204 in 2008 (EUR 19 837 583 in 2007 and EUR 15 349 337
in 2006).
Notes to the consolidated financial statements
39
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.
Board of Directors
Chairman
Jorma Ollila 2
Vice Chairman
Dame Marjorie Scardino 3
Georg Ehrnrooth 4
Lalita D. Gupte 5
Dr. Bengt Holmström
Dr. Henning Kagermann
Olli-Pekka Kallasvuo 6
Per Karlsson 7
Risto Siilasmaa 8
Keijo Suila 9
Vesa Vainio 10
2008
2007
2006
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
440 000
150 000
155 000
140 000
130 000
130 000
130 000
155 000
140 000
140 000
—
9 499
3 238
3 346
3 022
2 806
2 806
2 806
3 346
3 022
3 022
—
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
1 Approximately 60% of the gross annual fee is paid in cash and the remaining 40% in Nokia shares
8 The 2008 fee of Mr. Siilasmaa amounted to a total of EUR 140 000, consisting of fee of 130 000 for
purchased from the market and included in the table under “Shares Received.”
services 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.
9 The 2008 and 2007 fees 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 Mr. Vainio was a member of the Board of Directors and the Audit Committee until the end of the
Annual General Meeting on May 8, 2008. Mr. Vainio received his fees for services as a member of the
Board and as a member of the Audit Committee, as resolved by the shareholders at the Annual General
Meeting on May 3, 2007, already in 2007 and thus no fees were paid to him for the services rendered
during 2008. 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 fee 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.
3 The 2008 and 2007 fees of Ms. Scardino amounted to EUR 150 000 for services as Vice Chairman. The
2006 fee amounted to EUR 110 000 for services as a member of the Board.
4 The 2008 and 2007 fees 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 fee 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 2008 and 2007 fees 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 Commit-
tee.
6 This table includes fees paid to Mr. Kallasvuo, President and CEO, for his services as a member of the
Board, only.
7 The 2008 and 2007 fees 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 Person-
nel Committee. The 2006 fee 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 retire-
ment benefit is calculated as if Mr. Kallasvuo had continued his service with Nokia
through the 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 inter-
national 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.
40
Nokia in 2008
Notes to the consolidated financial statements
32. Notes to cash flow statement
34. Principal Nokia Group companies
at December 31, 2008
EURm
Adjustments for:
2008
2007
2006
Depreciation and amortization (Note 9)
1 617
1 206
712
(Profit)/loss on sale of property,
plant and equipment and
available-for-sale investments
– 11
– 1 864
– 4
Income taxes (Note 11)
1 081
1 522
1 357
Share of results of associated companies
(Note 14)
Minority interest
Financial income and expenses (Note 10)
Impairment charges (Note 7)
Retirements (Note 8, 12)
Share-based compensation (Note 22)
Restructuring charges
Customer financing impairment charges
and reversals
Finnish pension settlement (Note 5)
Other income and expenses
Adjustments, total
Change in net working capital
Increase in short-term receivables
Decrease (+)/increase (–) in inventories
Decrease (–)/increase (+) in interest-free
– 6
– 99
2
149
186
74
448
—
152
– 124
3 469
– 534
321
– 44
– 459
– 239
63
—
228
856
—
—
—
– 28
60
– 207
51
—
192
—
– 276
—
—
1 269
1 857
– 2 146
– 1 770
– 245
84
%
US
DE
GB
KR
CN
NL
HU
IN
IT
ES
RO
BR
US
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.p.A
Nokia Spain S.A.U
Nokia Romania SRL
Nokia do Brasil Tecnologia Ltda
NAVTEQ Corporation
Nokia Siemens Networks B.V.
Nokia Siemens Networks Oy
Nokia Siemens Networks GmbH & Co KG
Nokia Siemens Networks Pvt. Ltd.
Parent
Group
holding majority
—
100.0
—
100.0
—
100.0
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
100.0
100.0
50.0 1
50.0
50.0
50.0
1 Nokia Siemens Networks B.V., the ultimate parent of the Nokia Siemens Network 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 consolidated Nokia Siemens Networks.
short-term liabilities
Change in net working capital
– 2 333
– 2 546
2 996
605
893
– 793
35. Risk management
The Group did not engage in any material non-cash investing activities in 2008 and
2006. In 2007 the formation of Nokia Siemens Networks was completed through the
contribution 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
Eurobond issuance under Euro Medium Term Note program
and European Investment Bank loan
In February 2009, the Group issued EUR 1 750 million of Eurobonds with maturities
of five and ten years under its EUR 3 000 million Euro Medium Term Note, or EMTN
program, to repay part of the Group’s existing short-term borrowings. The Group
voluntarily cancelled its USD 2 000 million committed credit facility maturing in
2009 due to this repayment. In February, the Group also signed and fully drew down
a EUR 500 million loan from the European Investment Bank to finance part of its
smartphone research and development expenses.
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 refers
to systematic and pro-active way to analyze, review and manage opportunities,
threats and risks related to Nokia’s objectives rather than being solely focused on
eliminating risks.
The principles documented in Nokia’s Risk Policy and accepted by the Audit
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 Group level management to create 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.
Financial risks
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. There is a strong focus in Nokia on creating shareholder value. Treasury activi-
ties support this aim by: i) minimizing the adverse effects caused by fluctuations
in the financial markets on the profitability of the underlying businesses; and ii)
managing the capital structure of the Group by prudently balancing the levels of
liquid assets and financial borrowings.
Treasury activities are governed by policies approved by the CEO. Treasury
Policy provides principles for overall financial risk management and determines
Notes to the consolidated financial statements
41
Notes to the consolidated financial statements
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
Foreign exchange risk
Nokia operates globally and is thus exposed to foreign exchange risk arising from
various currencies. Foreign currency denominated assets and liabilities together
with expected cash flows from highly probable purchases and sales contribute
to foreign exchange exposure. These transaction exposures are managed against
various local currencies because of Nokia’s substantial production and sales outside
the Eurozone.
According to the foreign exchange policy guidelines of the Group, which remain
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
value of the shareholders’ equity of Nokia is also exposed to fluctuations in ex-
change rates. Equity changes resulting from movements in foreign exchange rates
are shown as a translation difference in the Group consolidation.
1 The FX derivatives are used to hedge the foreign exchange risk from forecasted highly probably
cashflows 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 for which these hedges are entered into 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
for which these hedges are entered into 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 the profit and
loss statement, resulting in offsetting FX gains or losses in the financial income and expenses.
4 The INR amounts for 2007 have been revised as compared to previously published financial state-
ments due to a change in the way Nokia defines foreign exchange exposures.
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.
The objective of interest rate risk management is to optimize the balance
between minimizing uncertainty caused by fluctuations in interest rates and maxi-
mizing the consolidated net interest income and expense.
The interest rate exposure of the Group is monitored and managed centrally.
Nokia uses the Value-at-Risk (VaR) methodology to assess and measure the interest
rate risk of the net investments (cash and investments less outstanding debt) and
related derivatives.
As at the reporting date, the interest rate profile of the Group’s interest-bearing
Nokia uses, from time to time, foreign exchange contracts and foreign currency
assets and liabilities is presented in the table below:
denominated loans to hedge its equity exposure arising from foreign net invest-
ments.
At the end of year 2008 and 2007, following currencies represent significant
portion of the currency mix in the outstanding financial instruments:
2008, EURm
USD
JPY
CNY
INR
FX derivatives used as cashflow
hedges (net amount) 1
– 3 359
2 674
—
– 122
EURm
Fixed rate assets
Floating rate assets
Fixed rate liabilities
Floating rate liabilities
FX derivatives used as net
investment hedges (net amount) 2 – 232
—
– 699
– 179
Equity price risk
2008
2 946
4 007
3 604
785
2007
7 750
4 205
712
375
FX exposure from balance sheet
items (net amount) 3
FX derivatives not designated
in a hedge relationship and
carried at fair value through
the profit and loss statement
(net amount) 3
729
– 494
– 579
236
– 615
480
527
– 443
2007, EURm
USD
JPY
GBP
INR 4
FX derivatives used as cashflow
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
the profit and loss statement
(net amount) 3
803
1 274
– 656
– 83
—
—
2 204
– 739
—
89
– 216
320
– 2 361
847
– 127
– 399
Nokia is exposed to equity price risk as the result of market price fluctuations in the
listed equity instruments held mainly for strategic business reasons.
Nokia has certain strategic minority investments in publicly listed equity
shares. The fair value of the equity investments which are subject to equity price
risk at December 31, 2008 was EUR 8 million (EUR 10 million in 2007). In addition,
Nokia invests in private equity through venture funds, which, from time to time,
may 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 for
these equity investments.
Nokia is exposed to equity price risk on social security costs relating to its
equity compensation plans. Nokia mitigates this risk by entering into cash settled
equity option contracts.
Value-at-Risk
Nokia uses the Value-at-Risk (VaR) methodology to assess the Group exposures to
foreign exchange (FX), interest rate, and equity risks. The VaR gives estimates of
potential fair value losses in market risk sensitive instruments as a result of adverse
changes in specified market factors, at a specified confidence level over a defined
holding period.
42
Nokia in 2008
Notes to the consolidated financial statements
In Nokia the FX VaR is calculated with the Monte Carlo method which simulates
Equity price risk
random values for exchange rates in which the Group has exposures and takes the
non-linear price function of certain FX derivative instruments into account. The
variance-covariance methodology is used to assess and measure the interest rate
risk and equity price risk.
The VaR is determined by using volatilities and correlations of rates and prices
estimated from a one-year sample of historical market data, at 95% confidence
level, using a one-month holding period. To put more weight on recent market
conditions, an exponentially weighted moving average is performed on the data
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 possible outcomes. In the remaining 5% of pos-
sible outcomes, the potential loss will be at minimum equal to the VaR figure, and
on average substantially higher.
The VaR methodology relies on a number of assumptions, such as, a) risks are
measured under average market conditions, assuming that market risk factors
follow normal distributions; 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
at 95% confidence level are different and could be substantially higher than the
estimated VaR.
FX risk
The VaR for the Group equity investment in publicly traded companies is insignifi-
cant.
b) Credit risk
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 re-
ceivables, financial guarantees and committed transactions. Credit risk is managed
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 and other third parties
Loan commitments given but not used
2008
2
197
199
2007
130
270
400
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:
Business related credit risk
»
»
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 cashflow hedges and net investment
hedges. Most of the VaR is caused by these derivatives as forecasted cashflow
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
VaR from financial instruments
2008
442
337
191–730
2007
246
96
57–246
At December 31
Average for the year
Range for the year
Interest rate risk
The VaR for the Group interest rate exposure in the investment and debt portfolios
is presented in Table 2 below. Sensitivities to credit spreads are not reflected in the
below numbers.
Table 2 Fixed income investment and debt portfolios Value-at-Risk
At December 31
Average for the year
Range for the year
2008
6
10
4–25
2007
8
12
5–27
The Company aims to ensure highest possible quality in accounts receivable and
loans due from customers and other third parties. The Group Credit Policy, approved
by the Group Executive Board, lays out the framework for the management of the
business related credit risks in all Nokia group companies.
Credit exposure is measured as the total of accounts receivable and loans out-
standing due from customers and other third parties, plus committed credits.
The Group Credit Policy provides that credit decisions are based on credit
evaluation of third parties including credit rating for our customers. The Group Rat-
ing Policy defines the rating principles. Ratings are approved by the Group Rating
Committee. Credit risks are approved and monitored according to the credit policy
of each business segment. 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 receivables.
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.
Top three customers account for approximately 4.0%, 3.8% and 3.5% (2007:
4.9%, 2.9% and 2.5%) of Group accounts receivable and loans due from customers
and other third parties as at December 31, 2008 while the top three credit exposures
by country amounted to 8.5%, 7.2% and 7.2% (2007: 8.7%, 6.9% and 6.5%) respec-
tively.
As at December 31, 2008, the carrying amount before deducting any impair-
ment allowance of accounts receivable relating to customers for which an impair-
ment was provided amounted to EUR 3 042 million (2007: EUR 3 011 million). The
amount of provision taken against that portion of these receivables considered to
be impaired was EUR 415 million (2007: EUR 332 million) (see also note 19 Valuation
and qualifying accounts).
An amount of EUR 729 million (2007: EUR 478 million) relates to past due receiv-
ables from customers for which no impairment loss was recognized. The aging of
these receivables is as follows:
Notes to the consolidated financial statements
43
Notes to the consolidated financial statements
EURm
Past due 1–30 days
Past due 31–180 days
More than 180 days
2008
453
240
36
729
2007
411
66
1
478
As at December 31, 2008, the carrying amount before deducting any impairment
allowance of loans due from customers and other third parties for which impair-
ment was provided amounted to EUR 4 million (2007: EUR 161 million). The amount
of provision taken for these loans was EUR 4 million (2007: EUR 19 million).
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 manages financial credit risk actively by limiting its counterparties
to a sufficient number of major banks and financial institutions and monitoring the
credit worthiness and exposure sizes continuously as well as through entering into
netting arrangements (which gives Nokia the right to offset in the event that the
counterparty would not be able to fulfill the obligations) with all major counter-
parties and collateral agreements (which require counterparties to post collateral
against derivative receivables) with certain counterparties.
Nokia’s investment decisions are based on strict creditworthiness and maturity
criteria as defined in the Treasury Policy and Operating Procedure. Due to global
Fixed income and money-market investments 1, 2
EURm
8 000
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
banking crisis and the freezing of the credit markets in 2008, Nokia applied an even
more defensive approach than usual within Treasury Policy towards investments
and counterparty quality and maturities, focusing on capital preservation and
liquidity. As result of this investment policy approach and active management of
outstanding investments exposures, Nokia has not been subject to any material
credit losses in its financial investments.
The table below presents the breakdown of the outstanding available-for-sale
fixed income and money-market investments by sector and credit rating grades
ranked as per Moody’s rating categories.
Baa1–Baa3
P-1
A1–A3
Aa1–Aa3
Aaa
2007
2008
2007
2008
2007
2008
2007
2008
Banks
Corporates
Governments
ABS
1 Fixed income and money-market investments include term deposits, investments in liquidity funds and invest-
ments in fixed income instruments classified as Available-for-sale. Available-for-sale investments are carried at
fair value in 2008 and 2007. Liquidity funds invested solely in government securities are included under Govern-
ments. Other liquidity funds are included under Banks.
2
Included within fixed income and money-market investments is EUR 114 million of restricted investment at
December 31, 2008 (EUR 169 million at December 31, 2007). They are restricted financial assets under various
contractual or legal obligations.
78% of Nokia’s bank and cash is held with banks of credit rating A2 or above (76% for 2007).
44
Nokia in 2008
Notes to the consolidated financial statements
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 of December 31, 2008 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 cashflow 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 remain-
ing contractual maturity. Line-by-line reconciliation with the balance sheet is not
possible.
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.
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 liquid-
ity risk is minimized by only entering transactions where proper two-way quotes
can be obtained from the market. Due to the dynamic nature of the underlying busi-
ness, Nokia also aims at maintaining flexibility in funding by keeping committed
and uncommitted credit lines available. At the end of December 31, 2008 the com-
mitted facilities totaled EUR 3 369 million. The committed revolving credit facilities
are used primarily for US and Euro Commercial Paper Programs back-up purposes.
The credit facility of EUR 500 million has been utilized for general funding purposes.
The average commitment fee on the facilities is 0.082% per annum.
The most significant existing Committed Facilities include:
»
»
»
Revolving Credit Facility of USD 2 000 million, maturing in 2009
Credit Facility of EUR 500 million, maturing in 2011
Revolving Credit Facility of USD 1 923 million, maturing in 2012
The most significant existing funding programs include:
»
»
»
»
Euro Medium Term Note (EMTN) program, totaling EUR 3 000 million
Shelf registration statement for an indeterminate amount of debt securities
on file with the US Securities and Exchange Commission
Local commercial paper program in Finland, totaling EUR 750 million
Euro Commercial Paper (ECP) program, totaling USD 4 000 million
» US Commercial Paper (USCP) program, totaling USD 4 000 million
Of the above funding programs, only the US Commercial Paper program has been
utilized to a significant degree in 2008. On December 31, 2008 a total of USD 3 419
million was outstanding under this program. The remaining four funding programs
have not been used to a significant degree in 2008.
Notes to the consolidated financial statements
45
Notes to the consolidated financial statements
At December 31, 2008, EURm
Non-current financial assets
Long-term loans receivable
Other non-current assets
Loan commitments obtained undrawn
Current financial assets
Current portion of long-term loans receivable
Short-term loans receivable
Available-for-sale investment
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 undrawn
Current financial liabilities
Currrent 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
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
—
1
—
5
8
3 932
1 706
5
19 180
– 18 322
6 702
– 1
– 16
—
– 3 207
—
15 729
– 16 599
– 5 152
—
1
—
101
2
483
—
3
5 184
– 5 090
1 144
– 46
– 151
– 14
– 388
—
4 859
– 4 931
– 67
19
3
50
—
—
583
—
1
—
—
70
– 741
—
—
—
—
—
—
– 5
6
—
362
—
—
120
—
—
—
—
—
– 64
– 30
—
—
—
—
—
—
8
1
—
—
—
254
—
—
—
—
—
– 159
—
—
—
—
—
—
—
46
Nokia in 2008
Notes to the consolidated financial statements
At December 31, 2007, EURm
Non-current financial assets
Long-term loans receivable
Other non-current assets
Loan commitments obtained undrawn
Current financial assets
Current portion of long-term loans receivable
Short-term loans receivable
Available-for-sale investment
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
Currrent 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
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
—
—
—
—
—
—
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 1 528 million (2007: EUR 1 700 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
and 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
47
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
Net sales
Cost of sales
Gross margin
Selling and marketing expenses
Research and development expenses
Administrative expenses
Other operating expenses
Other operating income
2008
EURm
2007
EURm
26 940
30 907
– 18 712
– 20 995
8 228
9 912
– 1 393
– 3 147
– 769
– 340
120
– 1 328
– 2 894
– 566
– 195
139
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
2 699
5 068
Investments
Financial income and expenses
Income from long-term investments
Dividend income from Group companies
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
31
3
4
398
12
—
– 478
– 338
– 63
– 6
– 437
2 585
3
3
250
7
1
– 22
– 168
– 19
– 2
2 638
Profit before extraordinary items and taxes
2 262
7 706
Extraordinary items
Group contributions
Extraordinary items, total
40
40
—
—
Investments in subsidiaries
Investments in associated companies
Long-term loan receivables
from Group 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
from Group companies
Prepaid expenses and accrued income
Profit before taxes
2 302
7 706
from other companies
Income taxes
for the year
from previous years
Net profit
– 539
– 1 314
– 14
1 749
– 34
6 358
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
2008
EURm
2007
EURm
4
5
6
6
6
21
52
155
228
—
106
48
4
158
—
12 084
6 564
10
8
41
9
9
4
12 143
6 586
84
100
70
254
899
913
72
294
72
438
958
1 405
12 039
8 219
1
40
65
1 942
2 181
16 098
1 372
13 936
197
28 920
212
21 330
48
Nokia in 2008
Parent company
Cash flow statements, parent company, FAS
December 31
Notes
2008
EURm
2007
EURm
Financial year ended December 31
Notes
2008
EURm
2007
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
Liabilities
Short-term liabilities
Cash flow from operating activities
Net profit
Adjustments, total
246
—
246
—
Net profit before change in net working capital
Change in net working capital
– 1 885
– 3 147
Cash generated from operations
3 291
4 489
1 749
7 890
3 299
4 354
6 358
11 110
Interest received
Interest paid
Other financial income and expenses
Income taxes paid
Cash flow before extraordinary items
Extraordinary income and expenses
12
12
1 749
1 357
3 106
543
3 649
418
– 399
– 469
– 1 020
2 179
—
6 358
– 925
5 433
150
5 583
256
– 182
– 40
– 822
4 795
33
Net cash from operating activities
2 179
4 828
Current finance liabilities from Group companies
13 345
5 332
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
2 598
182
2 377
695
24
7
1 222
881
217
122
1 616
2 632
21 030
10 220
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
– 4 026
– 53
– 211
106
—
—
—
– 50
– 90
– 28
37
– 11
11
28
– 3 750
– 3 372
34
672
Net cash used in investing activities
– 7 900
– 2 803
Cash flow from financing activities
Proceeds from stock option excercises
Proceeds from borrowings
Repayment of borrowings
Purchase of treasury shares
Dividends paid
51
10 777
– 5
– 3 123
– 1 992
987
2 508
—
– 3 826
– 1 686
Net cash used in financing activities
5 708
– 2 017
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
– 13
212
8
204
Total
28 920
21 330
Cash and cash equivalents at end of period
199
212
See Notes to the financial statements of the parent company.
See Notes to the financial statements of the parent company.
Parent company
49
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
2008
1 115
160
63
1 338
2007
1 059
165
41
1 265
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 2006–2008 as well as the share-based compensa-
tion expense relating to equity-based awards, expensed by the company.
2008
2007
2006
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
1 144 800
721 733
1 286 370
1 037 619
2 348 877
4 805 722
898 413
664 227
2 108 197
1 President and CEO as of June 1, 2006; and President and COO until June 1, 2006.
Total remuneration of the Group Executive Board awarded for the fiscal years
2006 –2008 was EUR 8 859 567 in 2008 (EUR 13 634 791 in 2007 and EUR 8 574 443 in
2006), 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 4 850 204 in 2008 (EUR 19 837 583 in 2007 and EUR 15 349 337
in 2006).
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.
Board of Directors
Chairman
Jorma Ollila 2
Vice Chairman
Dame Marjorie Scardino 3
Georg Ehrnrooth 4
Lalita D. Gupte 5
Dr. Bengt Holmström
Dr. Henning Kagermann
Olli-Pekka Kallasvuo 6
Per Karlsson 7
Risto Siilasmaa 8
Keijo Suila 9
Vesa Vainio 10
2008
2007
2006
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
Gross
annual fee
EUR 1
Shares
received
440 000
150 000
155 000
140 000
130 000
130 000
130 000
155 000
140 000
140 000
—
9 499
3 238
3 346
3 022
2 806
2 806
2 806
3 346
3 022
3 022
—
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
1 Approximately 60% of the gross annual fee is paid in cash and the remaining 40% in Nokia shares
5 The 2008 and 2007 fees of Ms. Gupte amounted to a total of EUR 140 000, consisting of fee of
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 2008 and 2007 fees of Ms. Scardino amounted to EUR 150 000 for services as Vice Chairman.
The 2006 fee amounted to EUR 110 000 for services as a member of the Board.
4 The 2008 and 2007 fees 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 fee 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.
130 000 for services as a member of the Board and EUR 10 000 for services as a member of the Audit
Committee.
6 This table includes fees paid to Mr. Kallasvuo, President and CEO, for his services as a member of the
Board, only.
7 The 2008 and 2007 fees 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 Person-
nel Committee. The 2006 fee 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.
50
Nokia in 2008
8 The 2008 fee of Mr. Siilasmaa 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.
4. Intangible assets
Notes to the financial statements of the parent company
EURm
2008
2007
9 The 2008 and 2007 fees 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 Mr. Vainio was a member of the Board of Directors and the Audit Committee until the end of the
Annual General Meeting on May 8, 2008. Mr. Vainio received his fees for services as a member of the
Board and as a member of the Audit Committee, as resolved by the shareholders at the Annual General
Meeting on May 3, 2007, already in 2007 and thus no fees were paid to him for the services rendered
during 2008. 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 fee 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.
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 retire-
ment benefit is calculated as if Mr. Kallasvuo had continued his service with Nokia
through the 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 inter-
national 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
2008
2007
3 481
1 226
8 717
2 552
15 976
3 965
1 187
9 732
2 580
17 464
Personnel, December 31
16 262
15 070
3. Depreciation and amortization
Capitalized development costs
Acquisition cost January 1
Additions during the period
Disposals during the period
Accumulated acquisition cost December 31
Accumulated amortization January 1
Disposals during the period
Amortization during the period
Accumulated amortization December 31
Net book value January 1
Net book value December 31
Intangible rights
Acquisition cost January 1
Additions during the period
Disposals during the period
Accumulated acquisition cost December 31
Accumulated amortization January 1
Disposals during the period
Amortization during the period
Accumulated amortization December 31
Net book value January 1
Net book value December 31
Other intangible assets
Acquisition cost January 1
Additions during the period
Disposals during the period
Accumulated acquisition cost December 31
Accumulated amortization January 1
Disposals during the period
Amortization during the period
Accumulated amortization December 31
358
53
– 124
287
– 252
14
– 28
– 266
106
21
259
32
– 5
286
– 211
5
– 28
– 234
48
52
6
179
—
185
– 2
—
– 28
– 30
4
155
1 605
90
– 1 337
358
– 1 355
1 158
– 55
– 252
250
106
310
25
– 76
259
– 249
67
– 29
– 211
61
48
8
4
– 6
6
– 3
3
– 2
– 2
5
4
EURm
Depreciation and amortization by asset class category
Intangible assets
2008
2007
Net book value January 1
Net book value December 31
5. Tangible assets
Capitalized development costs
Intangible rights
Tangible assets
Total
Depreciation and amortization by function
R&D
Production
Selling, marketing and administration
Total
28
28
28
84
54
1
29
84
55
28
2
85
67
1
17
85
At the end of 2008 and 2007 the parent company had no tangible assets. These
assets were leased from Nokia Asset Management Oy, a company wholly owned by
Nokia Corporation.
Notes to the financial statements of the parent company
51
Notes to the financial statements of the parent company
2008
2007
6 564
5 624
– 104
12 084
3 682
5 454
– 2 572
6 564
9
1
—
10
4
37
—
41
6
3
—
9
5
—
– 1
4
6. Investments
EURm
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
7. Shareholders' equity
Parent company, EURm
Balance at January 1, 2006
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
Reserve for invested non-restricted equity
Dividend
Net profit
Balance at December 31, 2007
Stock options exersiced
Cancellation of treasury shares
Acquisitions of treasury shares
Settlement of performance shares
Dividend
Net profit
Share
capital
Share
issue
premium
Treasury
shares
Reserve
for invested
non-
restricted
equity
Retained
earnings
266
2 246
– 3 614
—
8 529
– 20
246
46
20
2 312
46
– 2 358
246
—
– 3 147
4 231
– 3 123
154
4 927
– 3 404
37
– 2 054
—
2 733
– 3 884
58
3 299
3 299
51
– 59
Total
7 427
46
—
– 3 404
37
– 1 512
6 683
9 277
46
—
– 3 884
58
941
– 1 686
6 358
11 110
51
—
– 3 123
95
– 1 992
1 749
7 890
– 4 927
– 1 512
6 683
8 773
– 2 733
– 1 686
6 358
10 712
– 4 231
– 1 992
1 749
6 238
Balance at December 31, 2008
246
—
– 1 885
3 291
52
Nokia in 2008
Notes to the financial statements of the parent company
8. Distributable earnings
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
2008
2007
3 291
4 489
1 749
9 529
– 1 885
7 644
3 299
4 354
6 358
14 011
– 3 147
10 864
13. Principal Nokia Group companies
on December 31, 2008
See note 34 to Notes to the consolidated financial statements.
14. Nokia shares and shareholders
See Nokia shares and shareholders p. 54– 57.
15. Accrued income
9. Commitments and contingencies
EURm
Contingent liabilities on behalf of Group companies
Guarantees for loans
Leasing guarantees
Other guarantees
Contingent liabilities on behalf of other companies
Guarantees for loans
2008
2007
8
171
128
2
104
213
89
3
10. Leasing contracts
At December 31, 2008 the leasing contracts of the Parent Company amounted to
EUR 106 million (EUR 25 million in 2007). EUR 29 million will expire in 2009 (EUR 12
million in 2008).
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, 2008.
12. Notes to cash flow statements
EURm
Taxes
Other
Total
16. Accrued expenses
EURm
Personnel expenses
Taxes
Other
Total
17. Income tax
EURm
Income tax from operations
Other income tax
Total
2008
129
2 117
2 246
2007
—
3 314
3 314
2008
2007
236
—
1 597
1 833
207
338
2 209
2 754
2008
528
11
539
2007
1 314
—
1 314
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
2008
2007
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.
84
553
437
109
—
174
1 357
85
1 348
– 2 638
177
1
102
–925
1 402
184
2 856
102
– 1 043
543
– 2 808
150
Notes to the financial statements of the parent company
53
Nokia shares and shareholders
Shares and share capital
Nokia has one class of shares. Each Nokia share entitles
the holder to one vote at General Meetings of Nokia.
On December 31, 2008, the share capital of Nokia
Corporation was EUR 245 896 461.96 and the total
number of shares issued was 3 800 948 552.
Share capital and shares December 31, 2008
Share capital, EURm
Shares (1 000)
On December 31, 2008, the total number of shares
included 103 076 379 shares owned by Group com-
panies representing approximately 2.7% of the share
capital and the total voting rights.
Under the the Articles of Association of Nokia,
Nokia Corporation does not have minimum or maxi-
mum share capital or a par value of a share.
2008
246
2007
246
2006
246
2005
266
2004
280
3 800 949
3 982 812
4 095 043
4 433 887
4 663 761
Shares owned by the Group (1 000)
103 076
136 862
129 312
261 511
176 820
Number of shares excluding shares owned by the Group (1 000)
3 697 872
3 845 950
3 965 730
4 172 376
4 486 941
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.
3 743 622
3 885 408
4 062 833
4 365 547
4 593 196
3 780 363
3 932 008
4 086 529
4 371 239
4 600 337
122 713
103 226
119 143
126 352
142 095
Key ratios December 31, 2008 IFRS (calculation see page 60 )
2008
2007
2006
2005
2004
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.
1.07
1.05
10.37
0.40 *
1 520 *
0.37 *
3.6 *
3.84
1.85
1.83
14.34
0.53
2 111
0.29
2.0
3.84
1.06
1.05
14.60
0.43
1 761
0.41
2.8
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
41 046
101 995
61 390
64 463
52 138
Authorizations
Authorization to increase the share capital
At the Annual General Meeting held on May 3, 2007,
Nokia shareholders authorized the Board of Direc-
tors to issue a maximum of 800 million 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. The authorization is effective
until June 30, 2010.
At the end of 2008, 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 May 3, 2007,
Nokia shareholders authorized the Board of Directors
to repurchase a maximum of 380 million Nokia shares.
In 2008, Nokia repurchased 86 300 000 Nokia shares
on the basis of this authorization. The authorization
expired on May 8, 2008.
At the Annual General Meeting held on May 8,
2008, Nokia shareholders authorized the Board of
Directors to repurchase a maximum of 370 million
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 71 090 000 shares under
this buy-back authorization, as a result of which the
unused authorization amounted to 298 910 000 shares
on December 31, 2008. The shares may be repurchased
under the buy-back authorization in order to develop
the capital structure of the company, which includes
carrying out the company’s stock repurchase plan.
In addition, shares may be repurchased in order, to
finance or carry out acquisitions or other arrange-
ments, 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,
2009.
Authorizations proposed to the Annual
General Meeting 2009
The Board of Directors will propose to the Annual
General Meeting to be held on on April 23, 2009 that
the Annual General Meeting would authorize the
Board of Directors to repurchase a maximum of 360
million Nokia shares by using funds in the unre-
stricted shareholders’ equity. The proposed amount
of shares corresponds to less than 10% of all shares
of the company. It is proposed that the authorization
be effective until June 30, 2010 and it is proposed to
terminate the corresponding authorization resolved
by the Annual General Meeting on May 8, 2008.
54
Nokia in 2008
Share and bonus issues 2004–2008
Year
2004
Type of Issue
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
2008
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
Nokia Stock Option Plan 2006 4Q
Nokia Stock Option Plan 2007 1Q
Nokia Stock Option Plan 2007 2Q
Nokia Stock Option Plan 2007 3Q
Total
Subscription price or
amount of bonus issue
EUR
Number of
new shares
(1 000)
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
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
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
57 248
2 444
11
82
415
5
13
361
5
0
1
192
11
6
0
0
0
3 546
Nokia shares and shareholders
Date of
payment
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
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
Net
proceeds
EURm
New share
capital
EURm
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
0.09
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
778.00
0.44
3.00
0.83
145.00
0.15
0.03
0.02
0.20
0.67
0.72
18.00
0.29
0.30
17.00
0.06
0.19
0.19
11.00
0.12
975.81
36.53
0.15
1.24
4.90
0.05
0.16
4.62
0.07
0.00
0.01
3.46
0.17
0.09
0.00
0.00
0.00
51.45
Nokia shares and shareholders
55
Nokia shares and shareholders
Reductions of share capital
Type of reduction
Cancellation of shares
Cancellation of shares
Cancellation of shares
Cancellation of shares
Cancellation of shares
Share turnover (all stock exchanges)
Share turnover (1 000)
Total number of shares (1 000)
% of total number of shares
Share prices, EUR (NASDAQ OMX Helsinki)
Year
2004
2005
2006
2007
2008
2008
12 962 489
3 800 949
341
Number of
shares
(1 000)
132 536
230 000
341 890
169 500
185 410
Amount of
reduction of the
share capital
EURm
Amount of
reduction of the
restricted capital
EURm
Amount of
reduction of the
retained earnings
EURm
7.95
13.80
20.51
—
—
—
—
—
—
—
—
—
—
—
—
2007
2006
2005
2004
12 695 999
3 982 812
319
12 480 730
4 095 043
305
12 977 232
4 433 887
293
14 091 430
4 663 761
302
2008
2007
2006
2005
2004
Low/high
Average 1
Year-end
9.95/25.78
14.63/28.60
14.61/18.65
10.75/15.75
8.97/18.79
17.35
11.10
20.82
26.52
15.97
15.48
13.20
15.45
12.84
11.62
1 Calculated by weighting average price with daily volumes.
Share prices, USD (New York Stock Exchange)
ADS
Low/high
Average 1
Year-end
2008
2007
2006
2005
2004
12.35/38.25
19.08/41.10
17.72/23.10
13.92/18.62
11.03/23.22
24.88
15.60
29.28
38.39
19.98
20.32
16.39
18.30
15.96
15.67
1 Calculated by weighting average price with daily volumes.
Nokia share prices on NASDAQ OMX Helsinki
(EUR)
Nokia ADS prices on the New York Stock Exchange
(USD)
35
30
25
20
15
10
5
0
|
01/04
|
01/05
|
01/06
|
01/07
|
01/08
|
56
Nokia in 2008
45
40
35
30
25
20
15
10
5
0
|
01/04
|
01/05
|
01/06
|
01/07
|
01/08
|
Nokia shares and shareholders
Shareholders, December 31, 2008
Shareholders registered in Finland represented
10.98% and shareholders registered in the name of a
nominee represented 89.02% of the total number of
shares of Nokia Corporation. The number of registered
shareholders was 122 713 on December 31, 2008. 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 at Decem-
ber 31, 2008, ADRs represented 26.41% of the total
number of shares in Nokia.
Largest shareholders registered in Finland, December 31, 2008
(excluding nominee registered shares
and shares owned by Nokia Corporation) 1
Svenska Litteratursällskapet i Finland rf
Ilmarinen Mutual Pension Insurance Company
Folketrygfondet
Sigrid Jusélius Foundation
Varma Mutual Pension Insurance Company
The State Pension Fund
BNP Arbitrage
The Social Insurance Institution of Finland
Kuntien Eläkevakuutus
The Finnish Cultural Foundation
1 Nokia Corporation owned 103 045 440 shares as at December 31, 2008.
2 30 939 shares owned by the Group companies as at December 31, 2008 do not carry voting rights.
Breakdown of share ownership, December 31, 2008 1
Total number of shares
(1 000)
% of all
shares
% of all
voting rights 2
14 226
13 298
10 684
10 000
9 500
6 200
4 926
4 289
3 413
3 364
0.37
0.35
0.28
0.26
0.25
0.16
0.13
0.11
0.09
0.09
0.38
0.36
0.29
0.27
0.26
0.17
0.13
0.12
0.09
0.09
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
42 115
58 674
18 528
3 102
224
30
27
13
122 713
34.32
47.82
15.10
2.53
0.18
0.02
0.02
0.01
100
2 513 857
23 354 049
57 062 564
79 866 469
45 950 766
20 574 575
56 183 828
3 515 442 444
3 800 948 552
0.07
0.61
1.50
2.10
1.21
0.54
1.48
92.49
100.00
By nationality, %
Non-Finnish shareholders
Finnish shareholders
Total
Shares
89.02
10.98
100.00
By shareholder category
(Finnish shareholders), %
Corporations
Households
Financial and insurance institutions
Non-profit organizations
General government
Total
Shares
3.17
4.18
0.75
1.64
1.25
10.98
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, 2008 an
aggregate of 1 929 451 shares which represented ap-
proximately 0.05% 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 4 651 337 shares representing approxi-
mately 0.13% of the total number of shares and voting
rights on December 31, 2008.
Nokia shares and shareholders
57
Nokia Group 2004 – 2008, 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
Current portion of long-term loans
Short-term borrowings
Other financial liabilities
Accounts payable
Accrued expenses
Provisions
Total assets
2008
2007
2006
2005
2004
50 710
– 45 744
4 966
6
– 2
4 970
– 1 081
3 889
99
3 988
15 112
24 470
2 533
15 117
—
6 820
16 510
14 208
2 302
2 717
861
1 787
69
20 355
13
3 578
924
5 225
7 023
3 592
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
173
714
184
7 074
7 114
3 717
39 582
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
—
180
67
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
—
279
98
3 494
3 320
2 479
22 452
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
—
113
102
2 669
2 604
2 488
22 823
* 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 full year
2008 are not directly comparable to the results for the full years 2004 –2007. Nokia’s first quarter 2007
and full years 2004–2006 results included Nokia’s former Networks business group only.
On July 10, 2008, Nokia completed the acquisition of NAVTEQ Corporation. NAVTEQ is a separate report-
able segment of Nokia starting from the third quarter 2008. Accordingly, the results of NAVTEQ are not
available for the prior periods.
58
Nokia in 2008
Nokia Group 2004 – 2008, IFRS
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
9 487
300
36.5
27.1
56.4
– 77
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
7 959
132
31.5
21.5
64.6
– 78
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
10 103
249
46.1
35.5
52.6
– 69
2008
50 710
– 0.7
50 348
6 847
4 966
9.8
– 2
—
4 970
9.8
3 988
7.9
1 081
1 520 2
889
1.8
1 166
2.3
5 968
11.8
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
715
1.4
1 017
2.0
5 647
11.1
121 723
100 534
16 833
4 452
27.2
27.5
41.2
– 14
18 208
1 090
54.8
53.9
45.5
– 62
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, %
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 full year
2008 are not directly comparable to the results for the full years 2004 –2007. Nokia’s first quarter 2007
and full years 2004–2006 results included Nokia’s former Networks business group only.
On July 10, 2008, Nokia completed the acquisition of NAVTEQ Corporation. NAVTEQ is a separate report-
able segment of Nokia starting from the third quarter 2008. Accordingly, the results of NAVTEQ are not
available for the prior periods.
2 Board’s proposal.
3
Includes acquisitions, investments in shares and capitalized development costs.
Calculation of key ratios, see page 60.
Nokia Group 2004 – 2008, IFRS
59
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 exchange rates 2008
USD
GBP
JPY
CNY
INR
1 EUR =
1.3917
0.9525
126.14
9.4956
67.066
Calculation of key ratios
Key ratios under IFRS
Operating profit
Profit after depreciation
Shareholders’ equity
Share capital + reserves attributable 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
60
Nokia in 2008
Proposal by the Board of Directors
for distribution of profit
The distributable funds in the balance sheet of the Company as per December 31, 2008 amount
to EUR 7 644 million.
The Board proposes that from the retained earnings a dividend of EUR 0.40 per share is to be
paid out on the shares of the Company. As per December 31, 2008, the number of shares of the
Company amounted to 3 800 948 552, based on which the maximum amount to be distributed
as dividend is EUR 1 520 million.
The proposed dividend is in line with the Company’s distribution policy and it significantly
exceeds the minority dividend required by law.
Espoo, March 5, 2009
Jorma Ollila
Chairman
Marjorie Scardino
Georg Ehrnrooth
Lalita D. Gupte
Bengt Holmström
Henning Kagermann
Per Karlsson
Risto Siilasmaa
Keijo Suila
Olli-Pekka Kallasvuo
President and CEO
Proposal by the Board of Directors for distribution of profit
61
Auditors’ report
To the Annual General Meeting of Nokia Corporation
We have audited the accounting records, the financial statements, the review by the Board of Directors and the
administration of Nokia Corporation for the year ended 31 December 2008. The financial statements comprise the
consolidated balance sheet, profit and loss accounts, cash flow statement, statement of changes in shareholders’
equity and notes to the consolidated financial statements, as well as the parent company’s balance sheet, profit and
loss accounts, cash flow statement and notes to the financial statements.
Responsibility of the Board of Directors and the Managing Director
The Board of Directors and the Managing Director are responsible for the preparation of the financial statements and
the review by the Board of Directors and for the fair presentation of the consolidated financial statements in accor-
dance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the fair presenta-
tion of the financial statements and the review by the Board of Directors in accordance with laws and regulations
governing the preparation of the financial statements and the review by the Board of Directors in Finland. The Board
of Directors is responsible for the appropriate arrangement of the control of the company’s accounts and finances,
and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its
financial affairs have been arranged in a reliable manner.
Auditor’s responsibility
Our responsibility is to perform an audit in accordance with good auditing practice in Finland, and to express an opin-
ion on the parent company’s financial statements, on the consolidated financial statements and on the review by the
Board of Directors based on our audit. Good auditing practice requires that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the financial statements and the review by
the Board of Directors are free from material misstatement and whether the members of the Board of Directors of the
parent company and the Managing Director have complied with the Limited Liability Companies Act.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements and the review by the Board of Directors. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s prepara-
tion and fair presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonable-
ness of accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements and the review by the Board of Directors.
The audit was performed in accordance with good auditing practice in Finland. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion on the consolidated financial statements
In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial
performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as
adopted by the EU.
Opinions on the company’s financial statements, the review
by the Board of Directors and administration
In our opinion, the financial statements and the review by the Board of Directors give a true and fair view of both the
consolidated and the parent company’s financial performance and financial position in accordance with the laws and
regulations governing the preparation of the financial statements and the review by the Board of Directors in Finland.
The information in the review by the Board of Directors is consistent with the information in the financial statements.
We support that the financial statements should be adopted. The proposal by the Board of Directors regarding the
distribution of the profit shown in the balance sheet is in compliance with the Limited Liability Companies Act. We
support that the Members of the Board of Directors and the Managing Director should be discharged from liability for
the financial period audited by us.
Helsinki, March 5, 2009
PricewaterhouseCoopers Oy
Authorised Public Accountants
Merja Lindh
Authorised Public Account
62
Nokia in 2008
Additional information
Critical accounting policies ................................................................................................................ 64
Group Executive Board ........................................................................................................................ 68
Board of Directors ................................................................................................................................. 70
Corporate governance ......................................................................................................................... 72
Investor information ............................................................................................................................ 88
Contact information ............................................................................................................................. 89
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 our accounting policies require the applica-
tion of judgment by management in selecting appro-
priate assumptions for calculating financial estimates,
which inherently contain some degree of uncertainty.
Management bases its estimates on historical experi-
ence 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.
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.
Devices & Services and certain NAVTEQ and Nokia
Siemens Networks revenues are 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 man-
agement 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 busi-
ness. 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 distribu-
tion channels is recognized when the reseller or
distributor sells the product to the end-user. Devices &
Services and certain Nokia Siemens Networks service
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. Devices & Services and NAVTEQ license
fees from usage are recognized in the period in which
the customer reports them to the Group.
Devices & Services, NAVTEQ and Nokia Siemens
Networks may enter into multiple component transac-
tions 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 transac-
tions is allocated to each separately identifiable
component based on the relative fair value of each
component. The consideration allocated to each com-
ponent 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 identifiable compo-
nents, the Group defers revenue until all components
are delivered and services have been performed. 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 reason-
able margin.
Nokia Siemens Networks revenue and cost of sales
from contracts involving solutions achieved through
modification of complex telecommunications equip-
ment is recognized on the percentage of completion
basis when the outcome of the contract can be esti-
mated reliably. This occurs when total contract revenue
and the cost to complete the contract can be estimated
reliably, it is probable that economic benefits associ-
ated 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 conditions, 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
economic conditions differ from our assumptions, we
may be required to re-assess the ultimate collectabil-
ity of such financings and trade credits, which could
result in a write-off of these balances in future periods
64
Nokia in 2008
Critical accounting policies
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. The Group endeavors to
mitigate this risk through the transfer of its rights to
the cash collected from these arrangements to third-
party financial institutions on a non-recourse basis in
exchange for an upfront cash payment. See also Note
35(b) to our consolidated 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 alleged IPR
infringements 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
the commercial and technical feasibility of these
Critical accounting policies
65
Critical accounting policies
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 8 to our consolidated financial statements
included in Item 18 of this annual report.
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 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 incurred, equity instruments issued, 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 considerable management
judgment. The most significant variables in these
valuations 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 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. Although we believe that the
assumptions applied in the determination are reason-
able based on information available at the date of ac-
quisition, actual results may differ from the forecasted
amounts and the difference could be material.
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;
significant changes in the manner of our use of
the acquired assets or the strategy for our overall
business; and
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
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.
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
equities, currency options and embedded derivatives)
are determined using valuation techniques. We use
judgment to select an appropriate valuation method-
ology and underlying assumptions based principally
on existing market conditions. If quoted market
prices are not available for unlisted shares, fair value
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 compa-
nies, (3) analysis of market prospects and operating
performance of the target companies taking into
consideration of public market comparable companies
in similar industry sectors. Changes in these assump-
tions may cause the Group to recognize impairments
or losses in the future periods.
Income taxes
The Group is subject to income taxes both in Finland
and in numerous other jurisdictions. Significant
66
Nokia in 2008
Critical accounting policies
value, if any, an employee ultimately receives from
share-based payment awards may not correspond to
the expense amounts recorded by the Group.
Critical accounting policies
67
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.
If the final outcome of these matters differs
from the amounts initially recorded, differences may
positively or negatively 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 our consolidated financial statements and
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 that are
expected to be settled is assumed to be two times
the amount at threshold. 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 net sales and earnings per share performance
may materially affect future expense. In addition, the
Group Executive Board
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 that 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,
the Chief Executive Officer, can be a member
of both the Board of Directors and the Group
Executive Board. The Chief Executive Officer acts
as President, and his rights and responsibilities
include those allotted to the President under
Finnish law.
68
Nokia in 2008
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 Net-
works 2005–2007. Senior Vice President of Nokia Net-
works, Asia-Pacific 2003–2004, Senior Vice President,
Customer Operations of Nokia Networks 2002–2003,
Vice President, Customer Operations of Nokia
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 2007.
With Nokia 1993–1996, rejoined 1999.
Master of Science (Economics) (Helsinki School
of Economics), Licentiate of Science (Finance)
(Helsinki School of Economics and Business
Administration).
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.
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.
Chairman of the Board of Directors of Nokia Siemens
Networks B.V. Member of the Board of Directors of
Confederation of Finnish Industries EK.
Esko Aho, b. 1954
Executive Vice President,
Corporate Relations and Responsibility.
Group Executive Board member since
January 1, 2009.
Joined Nokia November 1, 2008.
Master of Social Sciences (University of Helsinki).
President of the Finnish Innovation Fund, Sitra 2004–
2008. Private consultant 2003–2004. Lecturer, Harvard
University 2000–2001. Prime Minister of Finland
1991–1995. Chairman of the Centre Party 1990–2002.
Member of the Finnish Parliament 1983–2003. Elector
in the presidential elections of 1978, 1982 and 1988.
Member of the Board of Directors of Fortum Corpora-
tion. Member of the Board of Directors of Russian Ven-
ture Company. Member of the Club de Madrid. Member
of the Science and Technology in Society Forum (STS).
Member of the InterAction Council. Vice Chairman of
the Board, Technology Industries of Finland.
Robert Andersson, b. 1960
Executive Vice President, Devices Finance,
Strategy and Strategic Sourcing.
Group Executive Board member since 2005.
Joined Nokia 1985.
Master of Business Administration (George Washing-
ton University, Washington D.C.), Master of Science
(Economics and Business Administration) (Swedish
School of Economics 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 and executive posi-
tions within Nokia Mobile Phones, Nokia Consumer
Electronics and Nokia Data 1985–1998.
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.
Group Executive Board member since 2006.
Joined Nokia 1997.
Anssi Vanjoki, b. 1956
Executive Vice President, Markets.
Group Executive Board member since 1998.
Joined Nokia 1991.
Master of Science (Eng.) (Helsinki University of
Technology), 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 Busi-
ness Unit 2003–2006, Senior Vice President, Nokia
Mobile Software, Market Operations 2002–2003, Vice
President, Nokia Mobile Software, Strategy, Market-
ing & Sales 2001–2002, Vice President and General
Manager of Nokia Networks, Mobile Internet Applica-
tions 2000–2001, Vice President of Nokia Networks,
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 Corp. 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.
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 Boards of Directors of Amer Sports
Corporation and Koskitukki Oy.
Dr. Kai Öistämö, b. 1964
Executive Vice President, Devices.
Group Executive Board member since 2005.
Joined Nokia 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 Board of Directors of Nokian Tyres plc.
Chairman of the Research and Technology Committee
of the Confederation of Finnish Industries EK.
Veli Sundbäck, Executive Vice President, Corporate
Relations and Responsibility resigned from the
Group Executive Board as of December 31, 2008 and
Mr. Sundbäck will continue in Nokia as an executive
advisor until his retirement on May 31, 2009. Esko Aho,
Executive Vice President, Corporate Relations and Re-
sponsibility, was appointed as a member of the Group
Executive Board as of January 1, 2009.
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
Management).
Holder of various positions at Hewlett-Packard
Corporation 1977–1999.
Member of the Board of Advisors of Center for
HR Strategy, Rutgers University. Fellow of Academy of
Human Resources, Class of 2007.
Dr. Tero Ojanperä, b. 1966
Executive Vice President, Services.
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 Access
Systems Research, Nokia Networks 1998–1999, Princi-
pal Engineer, Nokia Research Center 1997–1998.
Member of Young Global Leaders. Member of the Board
of Directors of MusiCares.
Group Executive Board
69
Board of Directors
The current members of the Board of Directors and its committees
are set forth below.
The current members of the Board of Directors
were elected at the Annual General Meeting on
May 8, 2008, based on the proposal of the Cor-
porate Governance and Nomination Committee
of the Board of Directors. On the same date, the
Chairman and Vice Chairman of the Board of Di-
rectors, as well as the Chairmen and members of
the committees of the Board, were elected among
the Board members and among the independent
directors of the Board, respectively.
The members of the Board of Directors are an-
nually elected by a simple majority of the share-
holders’ votes represented at the Annual General
Meeting for a one-year term ending at close of
the next Annual General Meeting.
70
Nokia in 2008
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.
Georg Ehrnrooth, b. 1940
Board member since 2000.
Chairman of the Audit Committee and member
of the Corporate Governance and Nomination
Committee.
Master of Political Science (University of Helsinki),
Master of Science (Econ.) (London School of
Economics), 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.
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 Chairman Dame Marjorie Scardino, b. 1947
Chief Executive and member of the Board of
Directors of Pearson plc.
Board member since 2001. Vice Chairman since 2007.
Chairman of the Corporate Governance and
Nomination Committee and member of the
Personnel Committee.
Bachelor of Arts (Baylor University), Juris Doctor
(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.
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, mem-
ber of the Boards of Directors of Oy Karl Fazer Ab and
Sandvik AB (publ). Vice Chairman of the Boards of Direc-
tors of The Research Institute of the Finnish 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 2007.
Member of the Audit Committee.
B.A. in Economics (University of Delhi) and Master of
Management Studies (University of Bombay).
Joint Managing Director member of the Board of
Directors of ICICI Bank Limited (formerly ICICI Ltd)
1999–2006, Deputy Managing Director of ICICI Ltd
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 Boards of Directors of ICICI Venture
Funds Management Co Ltd (non-executive Chairman),
Bharat Forge Ltd, Kirloskar Brothers Ltd, FirstSource
Solutions Ltd, Godrej Properties Ltd, HPCL-Mittal En-
ergy Ltd and Swadhaar FinServe Pvt Ltd. Also member
of Board of Governors of educational institutions.
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 American Academy of Arts and Sciences
and Foreign Member of The Royal Swedish Academy
of Sciences. Member of the Boards of Directors of The
Research Institute of the Finnish Economy ETLA and
Finnish Business and Policy Forum EVA. Member of
Aalto University Foundation Board.
Risto Siilasmaa, b. 1966
Board member since May 8, 2008.
Member of the Audit Committee.
Proposal of the Corporate Governance and
Nomination Committee for Composition of
the Board of Directors
Studies at Helsinki University of Technology, Depart-
ment of Industrial Engineering and Management.
President and CEO of F-Secure Corporation
1988–2006.
Chairman of the Boards of Directors of F-Secure Cor-
poration, Elisa Corporation, and Fruugo Inc. Member
of the Boards of Directors of Blyk Ltd, Ekahau Inc.,
Efecte Corp., Nexit Ventures Oy and Valimo Wire-
less Oy. Vice Chairman of the Boards of Directors of
The Federation of Finnish Technology Industries and
Finnish-American Chamber of Commerce, member
of the Board of Directors of Confederation of Finn-
ish Industries EK, member of the advisory boards
of Communications Administration at Ministry of
Transport and Communications in Finland, Helsinki
University of Economics and Helsinki University of
Technology.
Keijo Suila, b. 1945
Board member since 2006.
Member of the Audit Committee.
B.Sc. (Economics and Business Administration)
(Helsinki University of Economics and Business
Administration).
President and CEO of Finnair Plc 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.
Chairman of the Boards of Directors of Solidium Oy
and The Finnish Fair Corporation. Vice Chairman of
the Board of Directors of Kesko Corporation.
Vesa Vainio, member of the Board since 1993, served
as a member of the Board of Directors until the
Annual General Meeting on May 8, 2008, but did not
stand for re-election.
On January 22, 2009, the Corporate Governance and
Nomination Committee announced its proposal to
the Annual General Meeting convening on April 23,
2009 regarding the composition of the Board of
Directors for a one-year term as from the Annual
General Meeting in 2009 until the close of the Annual
General Meeting in 2010. The Committee will propose
to the Annual General Meeting that the number of
Board members be 11 and that all current Board
members be re-elected: Georg Ehrnrooth, Lalita D.
Gupte, Bengt Holmström, Henning Kagermann, Olli-
Pekka Kallasvuo, Per Karlsson, Jorma Ollila, Marjorie
Scardino, Risto Siilasmaa and Keijo Suila. Moreover,
the Committee will propose that Isabel Marey-Sem-
per be elected as a new member of the Board for the
same term as from the Annual General Meeting in
2009 until the close of the Annual General Meeting in
2010. Isabel Marey-Semper is Chief Financial Officer,
EVP responsible for Strategy at PSA Peugeot Citroën.
Subject to the requirements of Finnish law, the
independent directors of the new Board will elect
a Chairman and a Vice Chairman from among the
Board members upon the recommendation of the
Corporate Governance and Nomination Committee.
The independent directors of the new Board will also
confirm the election of the members and Chairmen
for the Board’s Committees from among the Board’s
independent directors upon the recommenda-
tion of the Corporate Governance and Nomination
Committee and based on each committee’s member
qualification standards. These elections will take
place at the Board’s assembly meeting following the
Annual General Meeting.
On January 22, 2009, the Corporate Governance
and Nomination Committee announced that it will
propose at the assembly meeting of the new Board
of Directors after the Annual General Meeting on
April 23, 2009 that Jorma Ollila be elected as Chair-
man of the Board and Dame Marjorie Scardino as
Vice Chairman of the Board.
Prof. Dr. Henning Kagermann, b. 1947
Co-CEO and Chairman of the Executive Board
of SAP AG.
Board member since 2007.
Member of the Personnel Committee.
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.
Chairman Olli-Pekka Kallasvuo, b. 1953
President and CEO of Nokia Corporation.
Board member since 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.
Chairman of the Board of Directors of Nokia Siemens
Networks B.V. Member of the Board of Directors of
Confederation of Finnish Industries EK.
Per Karlsson, b. 1955
Independent Corporate Advisor.
Board member since 2002.
Chairman of the Personnel Committee and member
of the Corporate Governance and Nomination
Committee.
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
71
Corporate governance
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
(or the “Board”), the President and the Group Execu-
tive Board chaired by the Chief Executive Officer.
Under its Articles of Association, in addition to
the Board of Directors, Nokia has a Group Executive
Board, which is responsible for the operative manage-
ment 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.
information reasonably available to them. The Board
and each Board 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
Board Committees’ work, the results of which are
discussed by the Board. In 2008, the self-evaluation
process consisted of a questionnaire and a one-to-one
discussion between the Chairman and each director,
followed by a discussion by the entire Board of the
outcome of the evaluation, possible measures to be
taken, as well as measures taken based on the Board’s
self-evaluation of the previous year.
The Board of Directors
Election, composition and meetings
of 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 as well as any comple-
mentary rules of procedure as defined by the Board,
such as the Corporate Governance Guidelines and
related Board Committee charters.
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 effective-
ness with which management implements them. The
Board’s responsibilities further include overseeing
the structure and composition of the company’s top
management and monitoring legal compliance and
the management of risks related to the company’s
operations. In doing so the Board may set annual
ranges and/or individual limits for capital expendi-
tures, investments and divestitures and financial com-
mitments 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. Subject
to the requirements of Finnish law, the independent
directors of the Board confirm the compensation and
the employment conditions of the Chief Executive
Officer upon the recommendation of the Personnel
Committee. The compensation and employment con-
ditions 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 in the best interests of the company and its
shareholders. In discharging that obligation, the
directors must inform themselves of all relevant
72
Nokia in 2008
Pursuant to the Articles of Association, Nokia Corpora-
tion has a Board of Directors composed of a minimum
of seven and a maximum of 12 members. The mem-
bers of the Board are elected for a term of one year at
each Annual General Meeting, i.e., as 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 8, 2008 elected ten members to the Board
of Directors. The members of the Board of Directors
elected by the Annual General Meeting in 2008 are
Georg Ehrnrooth, Lalita D. Gupte, Dr. Bengt Holmström,
Dr. Henning Kagermann, Olli-Pekka Kallasvuo, Per
Karlsson, Jorma Ollila, Dame Marjorie Scardino, Risto
Siilasmaa and Keijo Suila.
Subject to the requirements of Finnish law, the
independent directors of the Board elect the Chair-
man and the Vice Chairman from among the Board
members upon the recommendation of the Corporate
Governance and Nomination Committee. On May 8,
2008, the independent directors of the Board elected
that Jorma Ollila should continue to act as Chair-
man and that Marjorie Scardino should continue to
act as Vice Chairman of the Board. The independent
directors of the Board also confirm the election of the
members and Chairmen for the Board’s Committees
from among the Board’s independent directors upon
the recommendation of the Corporate Governance and
Nomination Committee and based on each commit-
tee’s member qualification standards.
The current members of the Board are all non-
executive, except the President and CEO who is also
a member of the Board. In January 2009, the Board
determined that the non-executive Board members
are all independent as defined under Finnish rules, ex-
cept the Chairman of the Board, Jorma Ollila. Also, the
Board determined that seven of the Board’s ten mem-
bers are “independent directors”, as defined in the
New York Stock Exchange’s Listed Company Manual. In
addition to the Chairman of the Board and the Presi-
dent and CEO, Bengt Holmström was determined not
to be independent under the NYSE standards due to a
family relationship with an executive officer of a Nokia
supplier of whose consolidated gross revenue from
Nokia accounts for an amount that exceeds the limit
provided in the NYSE standards, but that is less than
4%. The executive member of the Board, Olli-Pekka
Kallasvuo, President and CEO, was determined not
independent under both Finnish rules and the NYSE
standards. The Chairman of the Board, Jorma Ollila,
who was the Chairman and CEO until June 1, 2006, will
be independent as from June 1, 2009, in accordance
with both Finnish rules and the NYSE standards.
The Board has determined that the majority of
the members of the Audit Committee, including its
Chairman, Georg Ehrnrooth, are “audit committee
financial experts” as defined in Item 16A of Form 20-F.
The Board held 11 meetings during 2008. The
average ratio of attendance at the meetings was
98% and all directors attended more than 90% of the
meetings of the Board. 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
regularly scheduled meeting in 2008. Such sessions
were chaired by the non-executive Chairman of the
Board or, in his absence, the non-executive Vice
Chairman of the Board. In addition, the independent
directors meet separately at least once annually, and
did so in 2008.
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.
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 NASDAQ
OMX Helsinki and the New York Stock Exchange. Since
May 8, 2008, the Audit Committee consists of the fol-
lowing four members of the Board: Georg Ehrnrooth
(Chairman), Lalita D. Gupte, Risto Siilasmaa and Keijo
Suila.
The Audit Committee is established by the Board
primarily for the purpose of overseeing the account-
ing 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 com-
pany’s financial statements and related disclosure,
(2) the statutory audit of the company’s financial
statements, (3) the external auditor’s qualifications
and independence, (4) the performance of the exter-
nal auditor subject to the requirements of Finnish law,
(5) the performance of the company’s internal controls
and risk management and assurance function, (6) the
performance of the internal audit function, and (7) the
company’s compliance with legal and regulatory
requirements. The Committee also maintains proce-
dures for the receipt, retention and treatment of com-
plaints received by the company regarding account-
ing, internal controls, or auditing matters and for the
confidential, anonymous submission by employees
of the company of concerns regarding accounting or
auditing matters. Nokia’s disclosure controls and pro-
cedures, which are reviewed by the Audit Committee
and approved by the Chief Executive Officer and the
Chief Financial Officer, as well as Nokia’s internal con-
trols over financial reporting, are designed to provide
reasonable assurance regarding the quality and integ-
rity of the company’s financial statements and related
disclosures. The Disclosure Committee chaired by Chief
Financial Officer is responsible for preparation of the
quarterly and annual results announcements, and the
process includes involvement by business managers,
business controllers and other functions, like internal
audit, as well as a final review and confirmation by the
Audit Committee and the Board.
Under Finnish law, Nokia’s external auditor is
elected by its shareholders by a simple majority vote
at the Annual General Meeting for one fiscal year at
a time. The Audit 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 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. For
information about the fees paid to Nokia’s external
auditor, PricewaterhouseCoopers, during 2008 see
“Auditor fees and services” on page 87.
The Audit Committee meets at least four times
a year based upon a schedule established at the first
meeting following the appointment of the Committee.
The Committee meets separately with the representa-
tives 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 time direct ac-
cess to the Audit Committee, without involvement of
management.
The Audit Committee had seven meetings in
2008. The average ratio of attendance at the meetings
was 96%. Three members of the Committee attended
100% of the Committee meetings and one member
attended 85% of the meetings.
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 NASDAQ OMX Helsinki and the New
York Stock Exchange. Since May 8, 2008, the Personnel
Committee consists of the following three members
of the Board: Per Karlsson (Chairman), Henning Kager-
mann and Marjorie Scardino.
The primary purpose of the Personnel Commit-
tee 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 evaluat-
ing, 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 compensa-
tion plans, policies and programs of the company
affecting executives and (4) other significant incentive
plans. The Committee is responsible for overseeing
compensation philosophy and principles and ensuring
the above compensation programs are performance-
based, properly motivate management, support
overall corporate strategies and are aligned with
shareholders’ interests. The Committee is responsible
for the review of senior management development
and succession plans.
The Personnel Committee had three meetings
in 2008. The attendance ratio at the meetings was
100%. For further information on the activities of the
Personnel Committee, see “Executive compensation
philosophy, programs and decision-making process”
on page 75.
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 NASDAQ OMX
Helsinki and the New York Stock Exchange. Since May
8, 2008, the Corporate Governance and Nomination
Committee consists of the following three members
of the Board: Marjorie Scardino (Chairman), 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) proposing to the share-
holders 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, (v)
developing and recommending to the Board and ad-
ministering Nokia’s Corporate Governance Guidelines,
Corporate governance
and (vi) reviewing the company’s disclosure in the
Corporate Governance Statement.
The Corporate Governance and Nomination Com-
mittee had four meetings in 2008. The attendance
ratio at the meetings was 100%.
The charters of each of the committees are available
on Nokia’s website, www.nokia.com.
Management and corporate
governance practices
Nokia has a Code of Conduct which is equally ap-
plicable to all of Nokia’s employees, directors and
management and is accessible on Nokia’s website,
www.nokia.com. In addition, Nokia has a Code of
Ethics for the Principal Executive Officers and the
Senior Financial Officers. For more information about
Nokia’s Code of Ethics, please see www.nokia.com.
Nokia’s corporate governance practices comply
with the Finnish Corporate Governance Code approved
by the boards of the Finnish Securities Market Associa-
tion and NASDAQ OMX Helsinki effective as of Janu-
ary 1, 2009. The Finnish Corporate Governance Code is
accessible, among others, at www.cgfinland.fi.
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
73
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 a member of the Board of Direc-
tors only, as resolved at the respective Annual General
Meetings in 2008, 2007 and 2006.
Position, EUR
Chairman
Vice Chairman
Member
Chairman of Audit Committee
Member of Audit Committee
Chairman of Personnel Committee
Remuneration total
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, and in alignment therewith,
approximately 40% of the annual remuneration pay-
able 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. Total compensation
of the President and CEO is described in “Summary
compensation table 2008” on page 77.
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 remuneration levels and
their criteria paid in other global companies with net
sales and business complexity comparable to that of
Nokia. The Committee’s aim is to ensure that Nokia
has an efficient Board of world-class professionals
representing an appropriate and diverse mix of skills
and experience. 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.
The remuneration is resolved for the period as from
the respective Annual General Meeting until the close
of the next Annual General Meeting.
2008
440 000
150 000
130 000
25 000
10 000
25 000
1 710 000
2007
375 000
150 000
130 000
25 000
10 000
25 000
1 775 000
2006
375 000
137 500
110 000
25 000
10 000
25 000
1 472 500
Remuneration of the Board of Directors in 2008
For the year ended December 31, 2008, the aggregate
remuneration paid to the members of the Board of
Directors for their services as members of the Board
and its committees, was EUR 1 710 000.
The following table sets forth the total annual
remuneration paid to the members of the Board of
Directors in 2008, as resolved by the shareholders at
the Annual General Meeting on May 8, 2008. For infor-
mation with respect to the Nokia shares and equity
awards held by the members of the Board of Directors,
please see “Share ownership” on page 80.
Fees
earned
or paid
in cash 1
EUR
Year
Stock
awards 2
EUR
Option
awards 2
EUR
Change in
pension
value and
non-qualified
deferred
compensation
Non-equity
incentive
plan
compen-
sation 2
EUR
earnings 2
EUR
All other
compen-
sation 2
EUR
Jorma Ollila, Chairman 3
2008
440 000
Marjorie Scardino, Vice Chairman 4
2008
150 000
Georg Ehrnrooth 5
Lalita D. Gupte 6
Bengt Holmström
Olli-Pekka Kallasvuo 7
Henning Kagermann
Per Karlsson 8
Risto Siilasmaa 9
Keijo Suila 10
2008
2008
2008
2008
2008
2008
2008
2008
155 000
140 000
130 000
130 000
130 000
155 000
140 000
140 000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
EUR
440 000
150 000
155 000
140 000
130 000
130 000
130 000
155 000
140 000
140 000
1 Approximately 60% of each Board member’s annual remunera-
tion is paid in cash and the remaining 40% in Nokia shares
purchased from the market.
2 Not applicable to any non-executive member of the Board of
Directors.
3 The 2008 fee of Mr. Ollila was paid for his services as Chairman of
the Board.
4 The 2008 fee of Ms. Scardino was paid for her services as Vice
Chairman of the Board.
5 The 2008 fee paid to 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.
6 The 2008 fee paid to Ms. Gupte amounted to a total of
9 The 2008 fee paid to Mr. Siilasmaa 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.
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.
7 This table includes remuneration paid to Mr. Kallasvuo, President
and CEO, for his services as a member of the Board only. For the
compensation paid for his services as the President and CEO, see
“Summary compensation table 2008” on page 77.
10 The 2008 fee paid to 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.
8 The 2008 fee paid to 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.
74
Nokia in 2008
Proposal of the Corporate Governance
and Nomination Committee for remuneration
to the Board of Directors
On January 22, 2009, the Corporate Governance and
Nomination Committee of the Board announced that it
will propose to the Annual General Meeting to be held
on April 23, 2009 that the annual remuneration pay-
able to the Board members elected at the same meet-
ing for the term until the close of the Annual General
Meeting in 2010 be unchanged from 2008 as follows:
EUR 440 000 for the Chairman, EUR 150 000 for the Vice
Chairman and EUR 130 000 for each member; for the
Chairman of the Audit Committee and the Chairman of
the Personnel Committee an additional annual fee of
EUR 25 000; and for each member of the Audit Commit-
tee an additional annual fee of EUR 10 000. Further, the
Committee will propose that approximately 40% of
the remuneration be paid in Nokia shares purchased
from the market.
Executive compensation
Executive compensation philosophy, programs
and decision-making process
Our executive compensation philosophy and programs
have been developed to enable Nokia to effec-
tively compete in an extremely complex and rapidly
evolving mobile communications industry. Nokia
is a leading company in its industry and conducts
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.
Nokia’s compensation program for executive officers
includes:
»
»
competitive base pay rates; and
short- and long-term incentives that are intended
to result in a competitive total compensation
package.
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
compensation, including short- and long-term incen-
tives against those of other relevant companies with
the same or similar revenue size, global reach and
complexity that Nokia believes it competes against
for executive talent. The relevant companies include
high technology telecommunications companies,
Internet services companies, and companies from
other industries that are headquartered in Europe and
the United States.
The Personnel Committee retains and uses an
external consultant from Mercer Human Resources to
obtain benchmark data and information on current
market trends. The consultant 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 execu-
tive pay levels and programs. Management provides
the consultant with information with regard to Nokia’s
programs and compensation levels for preparation in
meeting with the Committee. The consultant of Mercer
Human Resources that works for the Personnel Com-
mittee 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 Personnel
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
compensation level of the President and CEO, which is
confirmed by the independent members of the Board.
Management’s role is to provide any information
requested by the Personnel Committee to assist in
their deliberations.
In addition, upon recommendation of the Presi-
dent and CEO, the Personnel Committee approves all
compensation for all the members of the Group Execu-
tive 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
actions taken with respect to Mr. Beresford-Wylie’s
compensation.
Corporate governance
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 by the Personnel Com-
mittee in totality.
The compensation for Mr. Beresford-Wylie is de-
termined 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 compensation.
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 below.
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 ob-
jectives 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 perfor-
mance that will exceed that of Nokia’s key competi-
tors in the high technology, telecommunications and
Internet services 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 2008.
Corporate governance
75
Minimum
performance, %
Target
performance, %
Maximum
performance, %
Measurement criteria
Corporate governance
Incentive as a % of annual base salary in 2008
Position
President and CEO
Total
Group Executive Board
Total
0
0
0
0
0
0
0
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.
The incentive payout is based on performance relative
to targets set for each measurement criteria listed
in the table above and includes: (1) a comparison of
Nokia’s actual performance to pre-established targets
for net sales, operating profit and operating cash flow
and (2) a comparison of each executive officer’s indi-
vidual performance to his/her predefined individual
strategic objectives and targets. Individual strategic
objectives include market share, quality, technology
innovation, new product revenue, customer reten-
tion rates, environmental achievements and other
objectives of key strategic importance which require
a discretionary assessment of performance by the
Personnel Committee.
When determining the final incentive payout,
the Personnel Committee determines an overall score
for each executive based on the degree to which (a)
Nokia’s financial objectives have been achieved to-
gether with (b) qualitative scores assigned to the indi-
vidual 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 executive is
then multiplied by an “affordability factor,” which is
determined based on overall sales, profita bility and
cash flow of Nokia. The Personnel Committee may ap-
ply discretion when evaluating actual results against
targets and the resulting incentive payouts. In certain
exceptional situations, the actual short-term cash in-
centive 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
76
Nokia in 2008
100
25
25
150
75
25
225
37.5
37.5
300
168.75
37.5
(a) Financial Objectives (includes targets for net sales,
operating profit and operating cash flow)
(c) Total Shareholder Return 1 (comparison made with key
competitors in the high technology, telecommunications
and Internet services 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 (comparison made
with key competitors in the high technology,
telecommunications and Internet services industries
over one, three and five year periods)
100
206.25
2 Only some members of the Group Executive Board are eligible for
the additional 25% total shareholder return element.
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.
For more information on the actual cash compen-
sation paid in 2008 to Nokia’s executive officers, see
“Summary compensation table 2008” on page 77.
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 in “Executive
compensation philosophy, programs and decision-
making process” on page 75, 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
compensation 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
the value is dependent on 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 incen-
tives granted to the members of Nokia’s Group
Executive Board is included in “Share ownership” on
page 80.
Corporate governance
Actual executive compensation for 2008
At December 31, 2008, Nokia had a Group Executive
Board consisting of 12 members. The only changes
in the membership of Nokia’s Group Executive Board
during 2008 were due to the retirement of Veli Sund-
bäck, Executive Vice President, Corporate Relations
and Responsibility, from the Group Executive Board
as of December 31, 2008 and the appointment of Esko
Aho as a new member of Nokia’s Group Executive
Board, effective January 1, 2009.
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 2008.
Gains realized upon exercise of stock options and
share-based incentive grants vested for the members
of the Group Executive Board during 2008 are included
in “Stock option exercises and settlement of shares”
on page 86.
Aggregate cash compensation to the Group Executive Board for 2008
Year
2008
Number of
members
December 31,
2008
Base
salaries
EUR
Cash
incentive
payments 1, 2
EUR
12
6 146 393
2 713 174
1
Includes base salary and cash incentives for the 2008 calendar
year paid or payable by Nokia for the respective 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 86.
Long-term equity-based incentives granted in 2008 1
Performance shares at threshold 2
Stock options
Restricted shares
Group Executive
Board
173 500
347 000
230 000
Total
2 463 033
3 767 163
1 746 500
Total number
of participants
6 300
3 500
300
1 The equity-based incentive grants are generally forfeited if the
2 At maximum performance, the settlement amounts to four times
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 31.
the number at threshold.
Summary compensation table 2008
Name and
principal
position 1
Olli-Pekka Kallasvuo
President and CEO
Richard Simonson
EVP and Chief Financial Officer
Simon Beresford-Wylie
CEO, Nokia Siemens Networks
Anssi Vanjoki
EVP, Head of Markets
Mary McDowell
EVP, Chief Development Officer
Year **
Salary
EUR
Bonus 2
EUR
Stock
awards 3
EUR
Option
awards 3
EUR
2008
2007
2006
1 144 800
1 037 619
898 413
721 733
2 348 877
664 227
644 805
4 112 581
1 529 732
2008 8
2007 8
2006 8
630 263
488 422
460 070
293 477
827 333
292 673
204 952
1 576 376
958 993
641 565
693 141
578 465
204 045
234 310
194 119
2008
600 000
462 871
221 407
74 500
2008
2007
2006
2008 8
2007 8
2006 8
615 143
556 381
505 343
493 798
444 139
466 676
260 314
900 499
353 674
196 138
769 773
249 625
208 880
1 602 605
938 582
203 123
1 551 482
786 783
204 343
239 829
222 213
197 726
396 169
213 412
Change in
pension
value and
non-qualified
deferred
compensation
earnings
EUR
Non-equity
incentive
plan
compen-
sation
EUR
469 060 4, 5
956 333
1 496 883
All other
compen-
sation
EUR
175 164 7
183 603
38 960
106 632 9
46 699
84 652
Total
EUR
3 797 126
9 332 153
5 206 680
1 439 369
3 173 141
1 990 507
108 658 4
728 778 10
2 196 215
6
18 521
215 143
33 552 11
49 244
29 394
1 322 232
3 367 078
2 264 349
33 462 12
32 463
45 806
1 124 247
3 194 027
1 762 302
*
*
*
*
*
*
*
*
*
*
*
*
1 The positions set forth in this table are the current positions
of the named executive. Mr. Kallasvuo was President and COO
until June 1, 2006. Until December 31, 2007, Mr. Vanjoki served
as Executive Vice President and General Manager of Multimedia;
Ms. McDowell, Executive Vice President and General Manager of
Enterprise Solutions. Mr. Beresford-Wylie served as Executive
Vice President and General Manager Networks until April 1, 2007.
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 and in the case of Mr.
Beresford-Wylie payable by Nokia Siemens Networks on the basis
of Nokia Siemens Networks’ short-term cash incentive program.
3 Amounts shown represent share-based compensation expense
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 the liability related to the individual executive. These
executives are covered by the Finnish State employees’ pen-
sion act (“TyEL”) 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. Effective March 1, 2008, Nokia
transferred its TyEL pension liability and assets to an external
Finnish insurance company and no longer carries the liability on
its financial statements. 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 informa-
tion 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
4 811 for the proportionate change in the liability related to the
individual under the funded part of the Finnish TyEL pension
(see footnote 4 above). In addition, it includes EUR 464 249 for
the change in liability in the early retirement benefit at the age
of 60 provided under his service contract. Nokia still carries the
liability on its books for the early retirement benefit.
Corporate governance
77
Corporate governance
6 Mr. Vanjoki’s proportionate change in the liability related to the
9 All other compensation for Mr. Simonson in 2008 includes: EUR
12 All other compensation for Ms. McDowell in 2008 includes:
individual under the funded part of the Finnish TyEL pension (see
footnote 4) was negative.
7 All other compensation for Mr. Kallasvuo in 2008 includes: EUR
130 000 for his services as member of the Board or Directors, see
“Remuneration of the Board of Directors in 2008” on page 74;
EUR 20 645 for car allowance, EUR 10 000 for financial counsel-
ing, EUR 11 103 for taxable benefit for premiums paid under
supplemental medical and disability insurance, EUR 3 416 for
driver and for mobile phone.
8 Salaries, benefits and perquisites of Ms. McDowell and Mr. Simon-
son are paid and denominated in USD. Amounts were converted
to euro using year-end 2008 USD/EUR exchange rate of 1.40. For
year 2007 disclosure, amounts were converted to euro using
year-end 2007 USD/EUR exchange rate of 1.47.
64 405 company contributions to the Restoration & Deferral plan,
EUR 11 083 company contributions to the 401(k) plan, EUR 12 156
for car allowance, EUR 11 621 for financial counseling, EUR 7 365
imputed income under the Employee Stock Purchase Plan.
10 All other compensation for Mr. Beresford-Wylie in 2008 includes:
EUR 600 000 for a special one-time bonus for the successful re-
tention and integration of Nokia Siemens Networks, EUR 105 158
provided as a benefit under Nokia Siemens Networks relocation
policy, EUR 13 380 for car allowance, EUR 10 000 for financial
counseling, and the remainder for mobile phone.
11 All other compensation for Mr. Vanjoki in 2008 includes:
EUR 22 200 for car allowance, EUR 10 000 for financial counsel-
ing, EUR 1 112 taxable benefit for premiums paid under supple-
mental medical and disability insurance and the remainder for
mobile phone.
Equity grants in 2008 1
EUR 12 156 for car allowance, EUR 11 438 for financial counseling
and EUR 9 868 company contributions to the 401(k) plan.
* None of the named executive officers participated in a for-
mulated, non-discretionary, incentive plan. Annual incentive
payments are included under the “Bonus” column.
** History has been provided for those data elements previously
disclosed.
Name and principal position
Year
Option awards
Stock awards
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)
Olli-Pekka Kallasvuo
President and CEO
Richard Simonson
EVP and Chief Financial Officer
Simon Beresford-Wylie 4
CEO, Nokia Siemens Networks
Anssi Vanjoki
EVP, Head of Markets
Mary McDowell
EVP, Chief Development Officer
2008
May 9
115 000
19.16
548 153
57 500
230 000
75 000
2 470 858
2008
May 9
32 000
19.16
152 529
16 000
64 000
22 000
699 952
2008
—
—
—
—
—
—
—
—
2008
May 9
32 000
19.16
152 529
16 000
64 000
22 000
699 952
2008
May 9
28 000
19.16
133 463
14 000
56 000
20 000
620 690
1
Including all equity awards made during 2008. Awards were
made under the Nokia Stock Option Plan 2007, the Nokia Per-
formance Share Plan 2008 and the Nokia Restricted Share Plan
2008, 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 19.16. NASDAQ OMX Helsinki
closing market price at the grant date was EUR 18.69.
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 80.
Pension arrangements for the members
of the Group Executive Board
The members of the Group Executive Board partici-
pate 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.
78
Nokia in 2008
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.
4 Mr. Beresford-Wylie does not participate in the equity plans
of Nokia. Mr. Beresford-Wylie participates in a long-term cash
incentive plan sponsored by Nokia Siemens Networks. His target
incentive covering 2008–2010 is EUR 1.5 million.
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 arrange-
ment provided to some Nokia and Nokia Siemens
Networks 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 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 at December 31, 2008,
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 1 176 000. 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
Corporate governance
annual total gross base salary and target incentive). In
case of termination by Mr. Kallasvuo, the notice period
is six months and he is entitled to a payment for such
notice period (both annual total gross base salary
and target incentive for six 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, 2008, Nokia
sponsored three global stock option plans, five 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 eq-
uity-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 has 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 2008, which was approved by the Board of Direc-
tors, followed the structure of the program in 2007.
The participant group for the 2008 equity-based
incentive program continued to be broad, with a wide
number of employees in many levels of the organiza-
tion eligible to participate. As at December 31, 2008,
the aggregate number of participants in all of Nokia’s
equity-based programs was approximately 18 000
compared with approximately 22 000 as at December
31, 2007 reflecting changes in its 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 31.
Performance shares
We have granted performance shares under the global
2004, 2005, 2006, 2007 and 2008 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 had
a four-year performance period and a two-year in-
terim measurement period. The 2006, 2007 and 2008
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.
periodic financial results and are based on the trade
volume weighted average price of a Nokia share on
NASDAQ OMX Helsinki during the trading days of the
first whole week of the second month of the respec-
tive 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 Meet-
ing. The Board of Directors does not have the right
to amend the above-described determination of the
exercise price.
Stock option grants are approved by the CEO at
the time of stock option pricing on the basis of an au-
thorization given by the Board of Directors. Approvals
for stock option grants to the CEO are confirmed by the
independent members of the Board subject to the re-
Performance
share plan
2004
2005
2006
2007
2008
Performance
period
2004–2007
2005–2008
2006–2008
2007–2009
2008–2010
Interim
measurement
period
2004–2005
2005–2006
N/A
N/A
N/A
1st (interim)
settlement
2nd (final)
settlement
2006
2007
N/A
N/A
N/A
2008
2009
2009
2010
2011
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 confirmed by the independent members
of the Board subject to the requirements of Finnish
law. 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 2008,
including their terms and conditions, were approved
by the Annual General Meetings in the year when each
plan was launched, i.e., in 2003, 2005 and 2007.
Each stock option entitles the holder to subscribe
for one new Nokia share. 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 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
quirements of Finnish law. 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 cal-
endar quarter on the basis of an authorization given
by the Board of Directors. Approvals of restricted share
grants to the CEO are confirmed by the independent
directors of the Board subject to the requirements of
Finnish law. 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.
Corporate governance
79
Corporate governance
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.
In connection with Nokia’s July 10, 2008 acquisi-
tion of NAVTEQ, Nokia assumed NAVTEQ’s 2001 Stock
Incentive Plan (“NAVTEQ Plan”). All unvested NAVTEQ
restricted stock units under the NAVTEQ Plan were
converted to an equivalent number of restricted stock
units entitling their holders to Nokia shares. The
maximum number of Nokia shares to be delivered
to NAVTEQ employees during the years 2008–2012 in
connection with the NAVTEQ restricted stock units that
were converted into Nokia restricted stock units upon
closing of the acquisition is approximately 3 million.
Nokia does not intend to make further awards under
the NAVTEQ Plan.
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,
2008, a total of 11 700 044 ADSs had been purchased
under this plan since its inception, and there were a
total of approximately 1 000 participants.
For more information on these plans, see Note
22 “Share-based payment” to Nokia’s consolidated
financial statements on page 31.
Equity-based compensation program 2009
The Board of Directors announced the proposed scope
and design for the Equity Program 2009 on January 22,
2009. The main equity instrument continues to 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 2009 approved by the
Board of Directors will cover a performance period of
three years (2009–2011) 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:
1
2
Average Annual Net Sales Growth: –5% (thresh-
old) and 10% (maximum) during the performance
period 2009–2011, and
EPS (diluted, non-IFRS): EUR 1.01 (threshold) and
EUR 1.53 (maximum) at the end of the perfor-
mance period in 2011.
Average Annual Net Sales Growth is calculated as an
average of the net sales growth rates for the years
2009 through 2011. EPS is the diluted, non-IFRS
earnings per share in 2011. 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.
Achievement of the maximum performance for
both criteria would result in the vesting of a maximum
of 18 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 4.5 million shares. If only
one of the threshold levels of performance is achieved,
only approximately 2.25 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 max-
imum performance levels, the vesting follows a linear
scale. If the required performance levels are achieved,
the vesting will occur December 31, 2011. 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 2009 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 79.
Restricted shares
The restricted shares to be granted under the Restrict-
ed Share Plan 2009 will have a three-year restriction
period. The restricted shares will vest and the payable
Nokia shares be delivered mainly in 2012, subject to
fulfillment of the service period criteria. 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 2009
The maximum number of planned grants under the
2009 Equity Program (i.e., performance shares, stock
options and restricted shares) in 2009 are set forth in
the table below.
Maximum number
of planned grants
under the 2009
equity program in 2009
Plan type
Stock options
Restricted shares
Performance shares at threshold 1
7 million
5 million
4.5 million
As at December 31, 2008, the total dilutive effect
of Nokia’s stock options, performance shares and
restricted shares outstanding, assuming full dilution,
was approximately 2% in the aggregate. The potential
maximum effect of the proposed equity program 2009
would be approximately another 0.6%.
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.
In line with the Company policy, approximately
40% of the remuneration paid to the Board of Directors
has been paid in Nokia shares purchased from the
market. Non-executive members of the Board of Direc-
tors do not receive stock options, performance shares,
restricted shares or other variable compensation.
For a description of Nokia’s equity-based com-
pensation programs for employees and executives, see
“Equity-based compensation programs” on page 79.
Share ownership of the Board of Directors
At December 31, 2008, the members of Nokia’s Board
of Directors held the aggregate of 1 235 024 shares
and ADSs in Nokia (not including stock options or other
equity awards that are deemed as being beneficially
owned under applicable SEC rules), 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, 2008.
Jorma Ollila 2
Marjorie Scardino
Georg Ehrnrooth 3
Lalita D. Gupte
Bengt Holmström
Henning Kagermann
Olli-Pekka Kallasvuo 4
Per Karlsson 3
Risto Siilasmaa
Keijo Suila
Shares 1
558 043
—
321 693
—
22 222
5 616
223 024
26 235
43 022
8 619
ADSs
—
20 501
—
6 049
—
—
—
—
—
—
1 The maximum number of Nokia shares to be delivered at maxi-
mum performance is four times the number at threshold, i.e.,
a total of 18 million Nokia shares.
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.
80
Nokia in 2008
Corporate governance
2 For Mr. Ollila, this table includes his share ownership only. Mr.
Ollila was entitled to retain all vested and unvested stock options,
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 at December
31, 2008, a total of 1 700 000 stock options, 200 000 performance
shares (at threshold), and 100 000 restricted shares. The informa-
tion relating to stock options held by Mr. Ollila as at December 31,
2008 is represented in the table below.
The number of stock options in the table below 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
table below is based on the difference between the exercise price of
the options and the closing market price of Nokia shares on NASDAQ
OMX Helsinki as at December 31, 2008 of EUR 11.10.
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 in “Stock option ownership of the Group Executive
Board” on page 82 and “Performance shares and restricted
shares” on page 84.
Number of stock options
Total intrinsic value
of stock options,
December 31, 2008
EUR
Jorma Ollila
Stock option
category
Expiration
date
2003 2Q
2004 2Q
2005 2Q
2006 2Q
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
Exercise
price per
share EUR
14.95
11.79
12.79
18.02
Exercisable Unexercisable
Exercisable Unexercisable
500 000
400 000
325 000
225 000
—
—
75 000
175 000
—
—
—
—
—
—
—
—
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, 2008.
Shares
receivable
through stock
Shares
options 3
Shares
receivable
through
performance
shares at
threshold 4
Shares
receivable
through
performance
shares at
maximum 5
Number of equity instruments held by Group Executive Board
% of the share capital 1
% of the total outstanding equity incentives (per instrument) 2
917 451
0.0248
—
2 951 337
743 100
2 650 324
0.0798
12.769
0.0201
8.644
0.0717
7.886
Shares
receivable
through
restricted
shares
964 500
0.0261
11.982
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
Includes unexercised 2003 2Q stock options which expired
December 31, 2008.
4 Due to the interim payout, the participants have already received
the threshold number of shares under the 2005 performance
share plan. Therefore, the shares receivable at threshold under
the 2005 performance share plan equals to zero.
5 Due to the interim payout (at threshold) in 2007 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 2005 equals 2.12 times the number of
performance shares at threshold. The number of Nokia shares
deliverable under the performance share plan 2006 equals 1.98
times the number of performance shares at threshold, based on
the actual level of performance criteria for the relevant perfor-
mance period. At maximum performance under the performance
share plans 2007 and 2008, the number of Nokia shares deliver-
able equals four times the number of performance shares at
threshold.
The following table sets forth the number of shares
and ADSs in Nokia (not including stock options or
other equity awards that are deemed as being
beneficially owned under the applicable SEC rules)
held by members of the Group Executive Board as at
December 31, 2008.
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
Shares
223 024
47 244
45 685
41 445
63 325
38 400
33 665
45 523
90 760
148 047
74 262
28 560
ADSs
—
—
—
—
5 000
4 315
—
—
28 196
—
—
—
Corporate governance
81
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, 2008. These stock
options were issued pursuant to Nokia Stock Option
Plans 2003, 2005 and 2007. For a description of Nokia’s
stock option plans, see Note 22 “Share-based pay-
ment” to Nokia’s consolidated financial statements
on page 31.
Number of stock options 1
Total intrinsic value
of stock options,
December 31, 2008
EUR 2
Stock option
category
Expiration
date
Exercise
price per
share EUR
Exercisable
Unexercisable
Exercisable 3 Unexercisable
2003 2Q
2004 2Q
2005 2Q
2005 4Q
2006 2Q
2007 2Q
2008 2Q
2004 2Q
2005 2Q
2005 4Q
2006 2Q
2007 2Q
2008 2Q
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2008 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2008 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2008 2Q
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2009
December 31, 2010
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
14.95
11.79
12.79
14.48
18.02
18.39
19.16
11.79
12.79
14.48
18.02
18.39
19.16
14.95
11.79
12.79
18.02
11.79
12.79
18.02
18.39
19.16
11.79
12.79
18.02
18.39
19.16
11.79
12.79
18.02
18.39
19.16
120 000
60 000
48 750
68 750
168 750
50 000
—
10 400
9 750
19 250
20 000
10 000
—
13 000
10 000
42 750
56 250
1 500
3 600
3 600
10 000
—
50 000
48 750
56 250
17 187
—
5 625
10 000
33 750
10 000
—
—
—
11 250
31 250
131 250
110 000
115 000
—
2 250
8 750
35 000
22 000
20 000
—
—
11 250
43 750
—
2 700
6 300
22 000
20 000
—
11 250
43 750
37 813
28 000
—
7 500
26 250
22 000
20 000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Olli-Pekka Kallasvuo
Robert Andersson
Simon Beresford-Wylie 4
Timo Ihamuotila
Mary McDowell
Hallstein Moerk
82
Nokia in 2008
Corporate governance
Stock option ownership of the Group Executive Board, continued
Number of stock options 1
Total intrinsic value
of stock options,
December 31, 2008
EUR 2
Stock option
category
Expiration
date
Exercise
price per
share EUR
Exercisable
Unexercisable
Exercisable 3 Unexercisable
Tero Ojanperä
Niklas Savander
Richard Simonson
Veli Sundbäck
Anssi Vanjoki
Kai Öistämö
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2008 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2008 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2008 2Q
2003 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2004 2Q
2005 2Q
2006 2Q
2007 2Q
2008 2Q
2003 2Q
2004 2Q
2005 2Q
2005 4Q
2006 2Q
2007 2Q
2008 2Q
Stock options held by the members
of the Group Executive Board on
December 31, 2008, Total
All outstanding stock option plans
(global plans), Total
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2008
December 31, 2009
December 31, 2010
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
14.95
11.79
12.79
18.02
18.39
19.16
11.79
12.79
18.02
18.39
19.16
11.79
12.79
18.02
18.39
19.16
14.95
11.79
12.79
18.02
18.39
11.79
12.79
18.02
18.39
19.16
14.95
11.79
12.79
14.48
18.02
18.39
19.16
8 000
10 000
32 500
33 750
10 000
—
2 560
4 375
18 750
10 000
—
50 000
48 750
56 250
17 187
—
50 000
30 000
32 500
33 750
10 000
11 250
15 000
25 000
17 187
—
727
3 125
4 800
10 500
56 250
17 187
—
—
—
7 500
26 250
22 000
20 000
—
2 625
26 250
22 000
28 000
—
11 250
43 750
37 813
32 000
—
—
7 500
26 250
22 000
—
11 250
43 750
37 813
32 000
—
—
2 400
8 750
43 750
37 813
32 000
1 577 310
1 374 027
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12 244 569
10 868 649
66 760
4 851
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 there-
after.
2 The intrinsic value of the stock options is based on the difference
between the exercise price of the options and the closing market
price of Nokia shares on NASDAQ OMX Helsinki as at December 31,
2008 of EUR 11.10.
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 86.
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
83
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, 2008. These entitlements were granted
pursuant to Nokia’s performance share plans 2005,
2006, 2007 and 2008 and restricted share plans 2005,
2006, 2007 and 2008. For a description of Nokia’s per-
formance share and restricted share plans, please see
Note 22 “Share-based payment” to the consolidated
financial statements on page 31.
Performance shares
Restricted shares
Plan
name 1
Number of
performance
shares at
threshold 2
Number of
performance
shares at
maximum 2
15 000
75 000
80 000
57 500
3 000
20 000
16 000
10 000
15 000
25 000
3 600
3 600
16 000
10 000
15 000
25 000
27 500
14 000
10 000
15 000
16 000
10 000
10 000
15 000
16 000
10 000
3 500
15 000
16 000
14 000
15 000
25 000
27 500
16 000
31 800
148 500
320 000
230 000
6 360
39 600
64 000
40 000
31 800
49 500
7 632
7 128
64 000
40 000
31 800
49 500
110 000
56 000
21 200
29 700
64 000
40 000
21 200
29 700
64 000
40 000
7 420
29 700
64 000
56 000
31 800
49 500
110 000
64 000
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2007
2008
Olli-Pekka Kallasvuo
Robert Andersson
Simon Beresford-Wylie
Timo Ihamuotila
Mary McDowell
Hallstein Moerk
Tero Ojanperä
Niklas Savander
Richard Simonson
84
Nokia in 2008
Intrinsic
value 3
December 31,
2008
EUR
352 980
1 648 350
—
—
70 596
439 560
—
—
352 980
549 450
84 715
79 121
—
—
352 980
549 450
—
—
235 320
329 670
—
—
235 320
329 670
—
—
82 362
329 670
—
—
352 980
549 450
—
—
Plan
name 4
Number of
restricted
shares
Intrinsic
value 5
December 31,
2008
EUR
388 500
1 110 000
1 110 000
832 500
222 000
277 500
77 700
35 000
100 000
100 000
75 000
20 000
25 000
7 000
25 000
277 500
4 500
25 000
14 000
25 000
35 000
20 000
15 000
25 000
14 000
15 000
25 000
14 000
15 000
25 000
20 000
25 000
35 000
22 000
49 950
277 500
155 400
277 500
388 500
222 000
166 500
277 500
155 400
166 500
277 500
155 400
166 500
277 500
222 000
277 500
388 500
244 200
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2007
2008
2005
2006
2007
2008
Corporate governance
Plan
name 1
2005
2006
2007
2005
2006
2007
2008
2005
2006
2007
2008
Veli Sundbäck
Anssi Vanjoki
Kai Öistämö
Performance shares and
restricted shares held by
the Group Executive Board,
Total 6
All outstanding
performance shares and
restricted shares
(global plans), Total
Performance shares
Restricted shares
Number of
performance
shares at
threshold 2
Number of
performance
shares at
maximum 2
Intrinsic
value 3
December 31,
2008
EUR
Plan
name 4
Number of
restricted
shares
Intrinsic
value 5
December 31,
2008
EUR
10 000
15 000
16 000
15 000
25 000
27 500
16 000
3 200
25 000
27 500
16 000
21 200
29 700
64 000
31 800
49 500
110 000
64 000
6 784
49 500
110 000
64 000
235 320
329 670
—
352 980
549 450
—
—
75 302
549 450
—
—
2005
2006
2007
2005
2006
2007
2008
2005
2006
2007
2008
15 000
25 000
25 000
35 000
22 000
25 000
35 000
22 000
166 500
277 500
277 500
388 500
244 200
277 500
388 500
244 200
861 400
2 650 324
9 016 796
964 500
10 705 950
8 596 496
33 607 752
176 418 521
8 049 397
89 348 307
1 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, 2007 plan
2007–2009 and 2008 plan 2008–2010, respectively.
2 The threshold number will vest as Nokia shares should the pre-
determined threshold performance levels of Nokia be met. Under
the 2005 performance share plan, the participants have already
received the threshold number of Nokia shares in connection
with the interim payout. The maximum number of Nokia shares
will vest should the pre-determined maximum performance lev-
els be met. The maximum number of performance shares equals
four times the number at threshold. The number of Nokia shares
deliverable under the performance share plan 2005 equals 2.12
times the number of performance shares at threshold due to the
interim payout (at threshold) in 2007 and based on the actual
level of the performance criteria for the performance period.
Under the performance share plan 2006 the maximum number
of Nokia shares deliverable equals 1.98 times the number of
performance shares at threshold.
4 Under the restricted share plans 2005, 2006, 2007 and 2008,
awards have been granted quarterly. For the major part of the
awards made under these plans, the restriction period ended for
the 2005 plan on October 1, 2008; and will end for the 2006 plan
on October 1, 2009; for the 2007 plan, on October 1, 2010; and for
the 2008 plan, on October 1, 2011.
3 The intrinsic value is based on the closing market price of a Nokia
share on NASDAQ OMX Helsinki as at December 31, 2008 of EUR
11.10. For performance share plans 2007 and 2008, the value of
performance shares is presented on the basis of Nokia’s estima-
tion of the number of shares expected to vest. For performance
share plans 2005 and 2006, the value of performance shares is
presented on the basis of actual number of shares to vest.
5 The intrinsic value is based on the closing market price of a Nokia
share on NASDAQ OMX Helsinki as at December 31, 2008 of
EUR 11.10.
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
86.
Corporate governance
85
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 2008 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
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
Stock option
awards 1
Number
of shares
acquired
on exercise
Value
realized
on exercise
(EUR)
—
—
—
—
—
—
—
—
70 000
679 000
—
8 000
—
—
55 120
—
11 500
110 170
—
—
—
—
—
—
Performance shares
awards 2
Number
of shares
delivered
on vesting
Value
realized
on vesting
(EUR)
35 850
648 885
6 214
5 975
4 780
29 875
17 925
5 975
6 118
29 875
17 925
35 850
5 975
112 473
108 148
86 518
540 738
324 443
108 148
110 736
540 738
324 443
648 885
108 148
Restricted shares
awards 3
Number
of shares
delivered
on vesting
Value
realized
on vesting
(EUR)
35 000
28 000
35 000
25 000
35 000
25 000
25 000
25 000
35 000
25 000
35 000
25 000
434 700
347 760
434 700
310 500
434 700
310 500
310 500
310 500
434 700
310 500
434 700
310 500
1 Value realized on exercise is based on the difference between the
Nokia share price and exercise price of options (non-transferable
stock options).
2 Represents the final payout in gross shares for the 2004 per-
formance share grant. Value is based on the market price of the
Nokia share on NASDAQ OMX Helsinki as at June 2, 2008 of EUR
18.10.
3 Delivery of Nokia shares vested from the 2005 restricted share
grant to all members of the Group Executive Board. Value is
based on the market price of the Nokia share on NASDAQ OMX
Helsinki on October 22, 2008 of EUR 12.42.
Stock ownership guidelines
for executive management
One of the goals of Nokia’s long-term equity-based in-
centive program is to focus executives on building val-
ue for shareholders. In addition to granting the stock
options, performance shares and restricted shares,
Nokia also encourages stock ownership by its 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
86
Nokia in 2008
50% of any after-tax gains from equity programs in
shares until the minimum investment level is met.
Insider trading in securities
The Board of Directors has established a policy in
respect of insiders’ trading in Nokia securities. The
members of the Board and the Group Executive Board
as well as the auditor with principal responsibility
are considered as primary insiders. The holdings of
Nokia securities by the primary insiders, their closely
associated persons and organizations and founda-
tions under their control are public information which
is available at Euroclear Finland Ltd 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 im-
mediately 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.
The insider policy is updated from time to
time and the insiders’ compliance with the policy is
monitored on a regular basis. Nokia’s insider policy
is in line with the NASDAQ OMX Helsinki Guidelines for
Insiders and also sets requirements beyond those
guidelines.
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, 2008. 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 2008 and 2007
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
Nokia
6.4
2.4
3.8
0.7
13.3
2008
Nokia
Siemens
Networks
13.1
5.0
3.0
—
21.1
Total
19.5
7.4
6.8
0.7
34.4
2007
Nokia
Siemens
Networks
12.7
24.3
2.3
—
39.3
Nokia
5.3
3.6
5.0
0.2
14.1
Total
18.0
27.9
7.3
0.2
53.4
1 Audit fees consist of fees billed for the annual audit of the
3 Tax fees include fees billed for (i) corporate and indirect
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.
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 amounts paid by Nokia to PricewaterhouseCoopers
include EUR 2.5 million and EUR 23.9 million that Nokia has
recovered or will be able to recover from a third party for 2008
and 2007, respectively.
compliance including preparation and/or review of tax returns,
preparation, 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 advise; (iv) consultations and tax audits (assistance with
technical tax queries and tax audits and appeals and advise on
mergers, acquisitions and restructurings); (v) personal compli-
ance (preparation of individual tax returns and registrations
for employees (non-executives), assistance with applying 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).
4 All other fees include fees billed for company establishment,
forensic accounting, data security, investigations and reviews of
licensing arrangements with customers 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 services approvals
(“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 Corporate Controller.
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
87
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 materials, 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 38329
Annual General Meeting
Date: Thursday, April 23, 2009 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 2008 is EUR 0.40.
The dividend record date is proposed to be April 28,
2009 and the pay date on or about May 13, 2009.
Financial reporting
Nokia’s quarterly reports in 2009 are planned for
April 16, July 16, and October 15. The 2009 results are
planned to be published in January 2010.
Information published in 2008
All Nokia’s press releases published in 2008 are
available on the Internet at investors.nokia.com.
Stock exchanges
The shares of Nokia Corporation are quoted on the following stock exchanges:
Symbol
Trading currency
NASDAQ OMX Helsinki (quoted since 1915)
NOK1V
Frankfurter Wertpapierbörse (1988)
New York Stock Exchange (1994)
NOA3
NOK
EUR
EUR
USD
List of indices
NOK1V
OMXN40 OMX Nordic 40
OMXH OMX Helsinki
OMXH25 OMX Helsinki 25
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
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, solu-
tions and technologies; C) our ability to develop and grow our con-
sumer Internet services business; D) expectations regarding market
developments and structural changes; E) expectations regarding our
mobile device volumes, market share, prices and margins; F) expec-
tations and targets for our results of operations; G) the outcome of
pending and threatened litigation; H) 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 I) 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) the deteriorating global
economic conditions and related financial crisis and their impact on
us, our customers and end-users of our products, services and solu-
tions, our suppliers and collaborative partners; 2) the development of
the mobile and fixed communications industry, as well as the growth
and profitability of the new market segments that we target and our
ability to successfully develop or acquire and market products, ser-
vices and solutions in those segments; 3) the intensity of competi-
tion in the mobile and fixed communications industry and our ability
to maintain or improve our market position or respond successfully
to changes in the competitive landscape; 4) competitiveness of our
product, services and solutions portfolio; 5) our ability to successfully
manage costs; 6) exchange rate fluctuations, including, in particular,
fluctuations between the euro, which is our reporting currency, and
the US dollar, the Japanese yen, the Chinese yuan and the UK pound
sterling, as well as certain other currencies; 7) the success, financial
condition and performance of our suppliers, collaboration partners
and customers; 8) our ability to source sufficient amounts of fully
functional components, sub-assemblies, software and content with-
out interruption and at acceptable prices; 9) the impact of changes
in technology and our ability to develop or otherwise acquire and
timely and successfully commercialize complex technologies as re-
quired by the market; 10) the occurrence of any actual or even alleged
defects or other quality, safety or security issues in our products, ser-
vices and solutions; 11) the impact of changes in government policies,
trade policies, laws or regulations or political turmoil in countries
where we do business; 12) our success in collaboration arrangements
with others relating to development of technologies or new products,
services and solutions; 13) our ability to manage efficiently our man-
ufacturing and logistics, as well as to ensure the quality, safety, se-
curity and timely delivery of our products, services and solutions; 14)
inventory management risks resulting from shifts in market demand;
15) our ability to protect the complex technologies, which we or oth-
ers develop or that we license, from claims that we have infringed
third parties’ intellectual property rights, as well as our unrestricted
use on commercially acceptable terms of certain technologies in our
products, services and solutions; 16) our ability to protect numerous
Nokia, NAVTEQ and Nokia Siemens Networks patented, standardized
or proprietary technologies from third-party infringement or actions
to invalidate the intellectual property rights of these technologies;
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) the management of
our customer financing exposure; 20) our ability to retain, motivate,
develop and recruit appropriately skilled employees; 21) whether, as
a result of investigations into alleged violations of law by some for-
mer employees of Siemens AG (“Siemens”), government authorities
or others take further actions against Siemens and/or its employees
that may involve 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 violations that may have occurred after the transfer, of
such assets and employees that could result in additional actions
by government authorities; 22) any impairment of Nokia Siemens
Networks customer relationships resulting from the ongoing govern-
ment investigations involving the Siemens carrier-related operations
transferred to Nokia Siemens Networks; 23) unfavorable outcome of
litigations; 24) allegations of possible health risks from electromag-
netic fields generated by base stations and mobile devices and law-
suits related to them, regardless of merit; as well as the risk factors
specified on pages 11–28 of Nokia’s annual report on Form 20-F for
the year ended December 31, 2008 under Item 3D. “Risk Factors.” Oth-
er unknown or unpredictable factors or underlying assumptions sub-
sequently 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 publicly update or revise forward-
looking statements, whether as a result of new information, future
events or otherwise, except to the extent legally required.
88
Nokia in 2008
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 34003
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 Latin America
703 NW 62nd Av, Suite 100
Miami FL, 33126
USA
Tel. +1 786 388 4002
Fax +1 786 388 4030
Nokia Brazil
Av das Nacoes Unidas
12.901 Torre Norte 11o.
Andar Cep 04578-910
Sao Paulo 04578-910
BRAZIL
Tel. +55 11 5508 6350
Fax + 55 11 5508 0471
Nokia Greater China & Korea
Nokia China Campus
Beijing Economic and Technological Development Area
No.5 Donghuan Zhonglu
Beijing, PRC 100176
Tel. +86 10 8711 8888
Nokia South East Asia & Pacific
438B Alexandra Road
#07-00 Alexandra Technopark
SINGAPORE 119968
Tel. +65 6723 2323
Fax +65 6723 2324
Nokia India
2nd Floor, Commercial Plaza
Radisson Complex, National Highway no. 8
Mahipalpur, New Delhi – 110037
INDIA
Tel. +91 11 427 99 050
Fax +91 11 427 99 032
Nokia Middle East & Africa
Al Thuraya Tower II, 27th floor, Dubai Internet City
Dubai, UAE
Tel. +971 4 3697600
Fax +971 4 3697604
Nokia Eurasia
Stoleshnikov Per 14
103031 Moscow
RUSSIA
Tel. +7495 795 0500
Fax +7495 795 0509
Contact information
89
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Design: HardWorkingHouse Oy, cover: Louise Boström Oy.
F.G. Lönnberg ISO 9001, 2009.
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