NOKIA IN 2017

Creating the technology to connect the world

 Overview

Contents
Overview01
This is Nokia 02
Key data 04

Business overview 06
Letter from our President and CEO 08
Our role as a global technology leader 12
Our values 13
Our strategy 14
Our leadership 20
Our businesses 22
Principal industry trends affecting
operations40

Board review 44
Board review 46
Results of operations 47
Results of segments 54
Liquidity and capital resources 64
Material subsequent events 67
Sustainability and corporate
responsibility68
Employees74
Dividend75
Risk factors 76
Shares and share capital 78
Board of Directors and management 79
Articles of Association 79

Corporate governance 80
Corporate governance statement 82
Compensation96

General facts on Nokia 112

Our history 114
Memorandum and Articles
of Association 115
Selected financial data 117
Shares and shareholders 119
Related party transactions 127
Production of infrastructure
equipment and products 127
Key ratios 128

Financial statements 129

Consolidated primary statements 130
Notes to consolidated financial
statements136
Parent company primary statements 196
Notes to the parent company
primary statements 200
Signing of the Annual Accounts 2017
and proposal by the Board
of Directors for distribution
of profit 211
Auditor’s report 212

Other information 217

Forward-looking statements 218
Glossary of terms 220
Investor information 223
Contact information 224

NOKIA IN 2017 01
This is Nokia

We create the technology to connect the world.

Powered by the research and innovation of Nokia Bell
Labs, we serve communications service providers,
governments, large enterprises and consumers,
with the industry’s most complete, end-to-end
portfolio of products, services and licensing.

Nokia is enabling the infrastructure for 5G and

the Internet of Things, and shaping the future of
technology to transform the human experience.

We have combined global leadership in mobile Through our six business groups, we have a Countries of operation
and fixed network infrastructure with the global presence with operations in Europe,

~130
software, services and advanced technologies the Middle East & Africa, Greater China, North
to serve customers in approximately 130 America, Asia-Pacific, India, and Latin America.
countries around the world. We are driving We also have research and development
the transition to smart, virtual networks and (“R&D”) facilities in Europe, North America and
connectivity by creating one single network Asia, and at the end of 2017, we employed
for all services, converging mobile and fixed approximately 103 000 people. Number of employees as of
broadband, IP routing and optical networks, December 31, 2017
We closed 2017 delivering net sales of

~103 000
with the software and services to manage
them. Our research scientists and engineers EUR 23.1 billion. We continued to make
continue to invent new technologies that will significant targeted R&D investments, a
increasingly transform the way people and bedrock of our success in innovation, with
things communicate and connect including R&D expenditures equaling EUR 4.9 billion
5G, ultra broadband access, IP and in 2017.
Software Defined Networking (“SDN”), R&D investment in 2017

EUR 4.9bn
cloud applications, Internet of Things (“IoT”),
as well as security platforms, data analytics,
and sensors.

02 NOKIA IN 2017
 Overview

Organizational structure and We have four reportable segments: Additionally, we report the results of other
(i) Ultra Broadband Networks, comprised business activities that are not reportable
reportable segments of the Mobile Networks and the Fixed segments within Group Common and
We have organized our networks-oriented Networks business groups, (ii) Global Services, Other, such as our undersea cables business,
businesses into five business groups: Mobile comprised of the Global Services business Alcatel-Lucent Submarine Networks (“ASN”),
Networks, Fixed Networks, Global Services, group, (iii) IP Networks and Applications, and our antenna systems business, Radio
IP/Optical Networks, and Nokia Software comprised of the IP/Optical Networks and Frequency Systems (“RFS”), in aggregate. Both
(together the “Networks business”); and have Nokia Software business groups (all within our ASN and RFS are being managed as separate
kept our driver of future innovation and Networks business), and (iv) Nokia Technologies. businesses. We are continuing the strategic
licensing, Nokia Technologies, as a separate, reviews of both businesses. Refer to Note 4,
sixth business group. For descriptions of On February 1, 2018, we announced that we Segment information, of our consolidated
our business groups, refer to “Business would rename our Applications & Analytics financial statements included in this
overview—Networks business” and business group as Nokia Software, effective annual report.
“Business overview—Nokia Technologies”. immediately, to better reflect our strategy and
focus on building a strong, standalone software
business. In this annual report we refer to
Nokia Software throughout the document.

Our reportable segments and business groups

Ultra Broadband IP Networks and Global Nokia

Networks Applications Services Technologies

Mobile Networks IP/Optical Networks Global Services Nokia Technologies

Higher quality Massively scalable Helping customers Technology
and more reliable networks securely navigate through designed to bring
mobile broadband connecting everyone complexity to the human family
experiences and everything transform their closer together
to the cloud business

Fixed Networks Nokia Software*

Using intelligent Intelligent software
access to create platforms optimizing
networks that are and automating
faster, better, network performance
smarter

* As of February 1, 2018 the Applications & Analytics business group was renamed Nokia Software.

NOKIA IN 2017 03
Key data

Net sales 2017 Gross margin 2017

EUR 23.1bn 39.5%

Dividend per share 2017 Net cash as of December 31, 2017

EUR 0.19 EUR 4.5bn

The following table sets For the year ended December 31

2017
EURm
2016
EURm Change
forth summary financial and Net sales 23 147 23 641 (2)%
non-financial information for Nokia’s Networks business 20 523 21 830 (6)%
the years ended December 31, Ultra Broadband Networks 8 970 9 758 (8)%
Global Services 5 810 6 036 (4)%
2017 and December 31, 2016 IP Networks and Applications 5 743 6 036 (5)%
for our Continuing operations. Nokia Technologies 1 654 1 053 57%
This data has been derived Group Common and Other 1 114 1 142 (2)%
from our consolidated financial Gross margin 39.5% 36.1% 343bps
Operating profit/(loss) 16 (1 100) –
statements, which are included
Nokia’s Networks business 1 711 1 943 (12)%
in this annual report. Ultra Broadband Networks 781 922 (15)%
Global Services 411 406 1%
IP Networks and Applications 519 615 (16)%
Nokia Technologies 1 124 579 94%
Group Common and Other (248) (350) (29)%
Unallocated items(1) (2 571) (3 272) (21)%
Operating margin 0.1% (4.7)% 472bps
Financial income and expenses, net (537) (287) 87%
Income tax (expense)/benefit (927) 457 –
Loss for the year (1 437) (912) 58%
Earnings per share (“EPS”), EUR diluted (0.26) (0.13) 100%
Average number of employees 101 731 102 687 (1)%
Net sales by region
Asia-Pacific 4 228 4 223 –
Europe 6 833 6 410 7%
Greater China 2 516 2 654 (5)%
Latin America 1 279 1 458 (12)%
Middle East & Africa 1 907 1 872 2%
North America 6 384 7 024 (9)%
Total 23 147 23 641 (2)%
(1) Includes costs related to the acquisition of Alcatel Lucent and related integration, goodwill impairment charges, intangible asset
amortization and other purchase price fair value adjustments, restructuring and associated charges and certain other items.

04 NOKIA IN 2017
 Overview

Net sales (EURm) Gross profit (EURm) Dividend per share (EUR)
and gross margin (%)
23 641

0.19
9 139
23 147

8 524

0.17
0.16
5 597
12 560

44.6%
39.5%

36.1%

2015 2016 2017 2015 2016 2017 2015(1) 2016 2017

Gross profit
Gross margin

Net cash as of December 31 (EURm) Net sales 2017 by business Net sales 2017 by region

3
7 775

2 1
6

A
5 299

C
4 514

5 2

4
B
3
1

2015 2016 2017

1 Nokia’s Networks business EUR 20 523m (-6%) 1 Asia-Pacific EUR 4 228m (0%)
A Ultra Broadband 2 Europe(2) EUR 6 833m (+7%)
Networks EUR 8 970m (-8%) 3 Greater China EUR 2 516m (-5%)
B Global Services EUR 5 810m (-4%) 4 Latin America EUR 1 279m (-12%)
C IP Networks 5 Middle East & Africa EUR 1 907m (+2%)
and Applications EUR 5 743m (-5%) 6 North America EUR 6 384m (-9%)
2 Nokia Technologies EUR 1 654m (+57%)
3 Group Common and Other EUR 1 114m (-2%)

(1) We also paid a special dividend of EUR 0.10 per share in line with our capital structure optimization program announced on October 29, 2015.
(2) All Nokia Technologies IPR and Licensing net sales are allocated to Finland.
Year-on-year change is in parentheses.
Derived from our financial statements which were prepared in accordance with IFRS.

NOKIA IN 2017 05
Business
overview

06 NOKIA IN 2017
 Business overview

Contents
Letter from our President and CEO 08
Our role as a global technology leader 12
Our values 13
Our strategy 14
Our leadership 20
Our businesses 22
Networks business 23
Market overview 24
Competition 24
Mobile Networks 25
Fixed Networks 26
Global Services 28
IP/Optical Networks 29
Nokia Software 30
Sales and marketing 32
Research and development 33
Patents and licenses 33
Nokia Bell Labs 34
Nokia Technologies 36
Market overview 37
Business overview
and organization 37
Sales and marketing 37
Research and development 38
Patents and licenses 38
Competition 39
Principal industry trends
affecting operations 40
Business-specific trends 40
Networks business 40
Nokia Technologies 42
Trends affecting our businesses 43

NOKIA IN 2017 07
Letter from our
President and CEO

“We have a very talented and dedicated

team across our organization; employee
connectedness to our mission is strong;
and that puts Nokia in the driver’s seat
in the transition to 5G and in delivering
further shareholder value.”

2017 was a solid year of execution for Nokia, With our overall performance, Nokia’s Board
as we delivered on our financial commitments of Directors will propose a dividend of
and gained momentum in driving forward all EUR 0.19 per share for 2017, up 12%
four pillars of our strategy. from our 2016 dividend. And, the Board is
committed to proposing a growing dividend,
With that progress, Nokia is in an excellent including for 2018.
position for sharply improving its performance
towards 2020 and for leading the transition
Net sales in 2017
to 5G that is underway. Customers

EUR 23.1bn
Customer recognition of Nokia’s work in
Financial Highlights leading the way to 5G was reflected in our
healthy deal-win rate in 2017. This included
Our Networks business net sales declined our agreement with ALTÁN Redes in Mexico,
in line with our guidance and it posted an a truly end-to-end project, which underlined
operating margin of 8.3%, which also met our the strength of our complete product offering.
Proposed dividend per share guidance. Nokia Technologies had a strong

EUR 0.19
year, with net sales and operating margin up We saw customer support for the progress
57% and 13 percentage points, respectively, in our cross-selling capabilities, with the
compared to 2016, driven by higher licensing multi-business-group opportunity share
revenue that highlights the strength of our of Nokia’s deal pipeline standing at 36%.
patent portfolio. We also closed the year on That is up substantially from 2016 and
track to deliver EUR 1.2 billion in structural underlines how customers continue to
Proposed dividends cost savings in full-year 2018. respond favorably to the broad scope of

EUR 1.1bn
our portfolio in preparation for 5G.
Looking forward on the Networks side, we
expect our market to decline again in 2018, We also saw it in the market share we gained
although at a slightly lower rate than the in 2017 in 4G/LTE and small cells; that is
market decline in 2017, given early signs of relevant, as the 4G/LTE installed base needs
improved conditions in North America. For to be truly 5G ready. Now to the excellent
2019 and 2020, we expect market conditions execution in the four pillars of our strategy.
to improve markedly, driven by full-scale
rollouts of 5G networks; and, as those rollouts
occur, Nokia is remarkably well-positioned.

08 NOKIA IN 2017
 Business overview

Strategy Fixed Networks launched its Intelligent Access In our second pillar, expanding network
Vision, aimed at making access networks sales beyond CSPs to select vertical
In the first pillar, leading in high-performance faster, better and smarter. Faster is about markets, Nokia saw double-digit underlying
end-to-end networks with CSPs, or bringing the most complete network access sales growth compared to 2016. This
communication service providers, our 5G toolkit to the market, including copper, fiber, reflects our confidence that the need for
readiness progressed on several fronts. cable and fixed-wireless solutions; better, mission-critical, high-performance networks
Let me start by saying that CSPs increasingly about delivering a gigabit to the home and continues to grow as companies and public
realize that, unlike 4G and previous generations throughout the home, as users also expect sector organizations everywhere digitize
of technology, 5G is very different. It is not optimal connectivity in every corner of their operations.
just about radio but spans the full network: the home; and smarter, about removing
complexity and making the network simpler In the segments we are targeting—spanning
from mobile access, cloud core, and webscale companies, extra-large enterprises
software-defined networking to backhaul, and easier to manage. As part of that, we
introduced our Software-Defined Access that use technology as a competitive
front haul, IP routing, fixed networks, advantage, and large players in transportation,
and software. Network, or SDAN, solution to bring
customers a set of cloud-native software, energy and the public sector—we added
In the face of fast-rising bandwidth and other open hardware, automated operations and almost 100 new customers in 2017, including
performance demands, customers know integration services. And, we capped all of Amazon, Fujitsu, and Philips.
they need to take an architecture-driven, that by winning the world’s first major SDAN Our IP/Optical Networks, or ION, business
end-to-end approach that Nokia offers, project in December, and we see more group was a key driver in our momentum
with a coordinated, holistic view across all progress like that ahead. in new vertical markets, which represented
elements of the network. And, the work is roughly 5% of Nokia’s total sales in 2017.
well underway. In early 2018, we announced Global Services accelerated development of
its service offering and delivery capabilities And, with our FP4, silicon-based routing
an agreement to deliver 5G equipment to products starting to ship, ION is well-placed to
Japan’s NTT DOCOMO, kickstarting what we by integrating artificial intelligence, machine
learning and automation. It unveiled an fundamentally improve our IP routing position
think will be a year of 5G investment and trials with webscale companies in 2018 and beyond.
with operators around the globe; followed enhanced Analytics Services solution,
potentially by some deployments towards the powered by our cloud-based cognitive
end of 2018, with meaningful deployments services platform, AVA (Automation,
in 2019. Virtualized, Analytics). GS also announced our
Multi-purpose Intuitive Knowledge Assistant,
Mobile Networks broadened our focus into or MIKA, the world’s first digital assistant for
multiple areas of early 5G mobility use cases, CSPs that gives engineers faster access to
including enhanced mobile broadband and accurate answers through voice-dictated
ultra-reliable, ultra-low latency communications. automated assistance. Further, it launched
As part of this, we introduced the 5G NR the industry’s first global managed service for
(New Radio) air interface standard to support IoT, Nokia WING (worldwide IoT network grid),
5G devices and services. to help CSPs enter this market quickly.

NOKIA IN 2017 09
Letter from our
President and CEO continued

In our third pillar, building a strong, with HMD Global, which launched several Just after 2017 closed, we introduced our
standalone software business at scale, our Nokia-branded smartphones and feature end-to-end 5G Future X network architecture
Applications & Analytics (A&A) business group phones that have achieved outstanding net and ReefShark chipset for our radio portfolio.
built Nokia’s first dedicated software sales promoter scores. Together, these innovations provide
force and re-architected our software on a significant differentiation for Nokia against
common foundation. We introduced several We also took the decision to stop the competition and enable full-scale
new products and services, including Nokia development of the OZO virtual reality commercial deployments of standards-based
Smart Plan Suite, Nokia Session Border camera, as we focus Nokia Technologies’ 5G networks, which we see happening
Controller and Nokia NetGuard Security efforts on our licensing business and lowering towards the end of 2018 or early 2019.
Management Center, and we acquired costs. As part of that approach, in early 2018,
Comptel to enhance our software intelligence we initiated a strategic review of our Digital And, we launched the most powerful internet
and automation capabilities. In February Health business. We have a disciplined and routing platforms, powered by Nokia’s new
2018, we renamed A&A as Nokia Software, pragmatic approach towards investing in new FP4 silicon, the world’s first multi-terabit
highlighting our longer-term ambitions growth opportunities in Nokia Technologies. chipset that is many times faster and smarter
for this business and the opportunities we If we think a bet won’t meet our criteria for than anything on the market.
see in helping CSPs and our select vertical becoming a meaningful business, we will move
markets improve the digital customer on quickly, and you see that in the actions People
experience, implement innovative business we have taken.
In 2017, we strengthened awareness and
models, and unlock new revenue understanding of our core cultural principles,
opportunities. Innovation which are summarized in the “Drive, Dare
In our fourth pillar, creating new business An important dimension to our strategy and Care” behaviors we put into place during
and licensing opportunities in the consumer progress was the fact that 2017 was the year.
ecosystem, Nokia did not miss a beat. another year in which Nokia Bell Labs and
all our business groups lived up to Nokia’s It is especially pleasing to see Nokia
Nokia Technologies signed several new employees’ strong belief in our company’s
patent licensing agreements and won patent innovation prowess.
direction, as indicated by our internal
arbitration awards with companies that Among our important product launches were Culture Cohesion Tracker survey, along
included Apple, Blackberry, and Huawei. 5G FIRST, which enabled early 5G testing and with particularly good progress in reducing
We advanced plans to develop our licensing incorporates Nokia’s AirScale radio platform bureaucracy and hierarchies.
business in new areas like automotive, and in and AirFrame technology, including massive
geographies like China and India. We saw early MIMO Adaptive Antenna, Cloud Packet All of this progress is encouraging even as
progress in our brand licensing agreement Core and mobile transport, to bring new we continue to deepen our common culture
capabilities to operators. and ways of working in all six of our business
groups and in geographies across the world.

10 NOKIA IN 2017
 Business overview

Sustainability and Corporate Looking ahead

Responsibility With our 2017 performance, there is much
We also continued to do the right things the to look forward to at Nokia.
right way in delivering on our sustainability Our strategy is working well; our customer
commitments, which are an important relationships continue to grow and deepen;
dimension to everything we do at Nokia. and we are taking meaningful steps to further
Working with the Science Based Targets strengthen our disciplined execution,
initiative, we set a long term carbon emissions including in our customer operations.
reduction target of 75%; this target includes Our competitive advantages—from the
customer use of our products and forms the strength of our innovation capacity to the
largest portion of our carbon footprint. We scale and scope of our portfolio—give Nokia
also set a science-based emissions reduction the capabilities to continue to live up to the
target of 41% for our own operations. Both rich legacy of our 153-year old company. And,
targets are set for 2030 against a 2014 that is why we are confident about our market
baseline. We track these annually and are prospects as we move forward.
progressing against both targets.
We have a very talented and dedicated
Nokia was also again ranked in the top 1% team across our organization; employee
of  suppliers assessed in 2017 as part of connectedness to our mission is strong; and
the EcoVadis scorecards, which measure that puts Nokia in the driver’s seat in the
corporate sustainability performance. We transition to 5G and in delivering further
achieved excellent scores in environmental shareholder value.
performance, sustainable procurement, and
labor practices. And, we were again rated
an industry leader in the Communications
Equipment (“CMT”) sector of the Dow Jones
Sustainability Indices (“DJSI”) and were Rajeev Suri
awarded a “Gold” level by RobecoSAM in early President and CEO
2018 for our sustainability performance.

NOKIA IN 2017 11
Our role as a global
technology leader

We create the technology We optimize performance to We create disruptive solutions

to connect the world maximize value and customer enabling market differentiation
We are shaping a new revolution in satisfaction and competitive advantage
technology, where intelligent networks We enable our customers to move away We believe that innovation is the foundation
augment and aid our daily lives through from an economy-of-scale network operating of everything we do at Nokia. We force the
sensing the world around us and providing model to demand-driven operations by pace of change by pushing technology
the data and analytics needed to make providing the easy programmability and boundaries, challenging the status quo and
choices that help society thrive. We are flexible automation needed to support working in open collaboration with customers
creating effortless, simple and dependable dynamic operations, reduce complexity and and partners. Our research and development
technology for IoT, ultra-broadband, cloud, improve efficiency. As a result, our customers within Nokia Bell Labs creates a future path so
IP interconnectivity and digital health. can fulfill end-user demands by provisioning that our customers can successfully navigate
services in real time while automatically megatrends and challenges to expand and
making optimal use of networks assets. draw closer to their customers. It is through
these efforts that Nokia grows and enhances
its portfolio, introduces disruptive
technologies and identifies new market
opportunities for its customers.

12 NOKIA IN 2017
 Business overview

Our values

We foster a culture of high-performance and We pursue high performance, always under

high integrity, guided by our vision, brand and the guiding principles of our values: Our commitments
values. It is through our people and culture What we do to design and deploy
Respect
that we shape technology to serve human technology in the service of our
needs. Our pursuit of performance with Acting with uncompromising customers and people:
integrity and sustainability—a culture that integrity, we work openly and
stems from our Finnish roots—is key to why We create the most sophisticated
our customers and partners choose to work collaboratively, seeking to technology that is effortless and
with us. earn respect from others. intuitive to use
We lead the relentless quest for gains in
Common shared principles and focus on performance and agility, with technology
Drive, Dare and Care is the cultural platform Challenge that thinks for itself.
we use to shape our core common culture. We are never complacent. We solve your future needs
It means relentlessly driving for excellent
results, and being passionate about good We ask tough questions and We help customers shape their futures
customer experiences and the quality of push for higher performance based on a clear view of technology
our products. We have the attitude and opportunities and constraints. We work
Drive of entrepreneurs and do not celebrate
to deliver the right results. closely with customers and partners
hierarchies. We Dare to innovate, learn to anticipate their priorities and guide
and challenge outdated practices. We Care Achievement their choices.
about our colleagues, quality and putting We take responsibility, and are We obsess about integrity, quality,
the Nokia team first. and security
accountable for driving quality, We never compromise our values in
Our core culture empowers people and setting high standards, and the drive for business or technical
teams to deliver on our strategy. It guides our
quest for innovation, as we use our insatiable striving for continuous performance. We pursue quality in all
our products and processes, and design
curiosity and deep technical knowledge improvement. for security and privacy from the start.
to paint a picture of the future for our
customers. It also drives our pursuit of Renewal
continuous improvement, our ability to
outperform competitors and be a trusted We constantly refine our skills:
partner for our customers, partners, learning and embracing new
and suppliers.
ways of doing things, and
Our integrity is fundamental to how we adapting to the world around us.
internally work and provide for our customers.
Particularly in the standards-driven world
of network technologies, the choices that
customers make are often less between
different products, and more between
different relationships. Nokia stands out
as a trusted customer partner, sustaining
long-term relationships through our
commitment to deliver, and fostering a level
of trust we work relentlessly to earn and keep.

NOKIA IN 2017 13
Our
strategy

14 NOKIA IN 2017
 Business overview

We are rebalancing for growth, putting

Nokia at the heart of unprecedented
opportunities to create the technology
to connect the world.

We have identified six global megatrends. 5. S

 ocial and trust economics: Ubiquitous Simultaneously, driven by the megatrends
These megatrends create massive connectivity, compute and storage, as and the resulting increasing relevance of
technological requirements, impact our well as technologies such as blockchain, networks, we are seeing a shift in who is
current and potential customers, change the enabling new business models based investing in technology. Our primary market,
lives of people, impact business operations on sharing assets and distributed trust, comprised of communications service
on a global scale and provide opportunities allowing rapid scalability on a global level. providers (“CSPs”), in which we have a
for Nokia to diversify into new growth areas. leadership position, is very large in size, but
6. D
 igitization and ecosystems: Next level expected to remain challenging with a limited
The megatrends we have identified are: of digitization beyond content and estimated growth opportunity. However, the
information, digitizing atoms with megatrends are increasing the demand for
1. N
 etwork, compute and storage: Ever additive printing in an industrial,
present broadband capacity coupled large high-performance networks in other
consumer and medical context, key industries, which we define as our select
with a distributed cloud for ubiquitous fundamentally transforming entire
compute and near infinite storage, vertical markets. Webscale companies—such
supply chains and production processes as Google, Microsoft, and Alibaba—are
allowing limitless connectivity and by massive-scale automation.
imperceptible latency as well as investing in cloud technology and network
subscription-based and asset-less These megatrends are driving new technology infrastructure on an increasing scale. As other
business models. requirements. End-to-end networks are a vertical markets such as transportation,
central enabler, which create a multitude of energy, and public sector digitize their
2. I nternet of Things: In addition to people, opportunities for us. Nokia Bell Labs has operations, they will also need high-performing
trillions of things are connected to the developed a vision of a future network mission-critical networks. The same is true for
internet, collecting unprecedented architecture that fulfills these requirements TXLEs—technically sophisticated companies,
amounts of data in a private and in a holistic way—the Future X network vision. such as banks, that invest heavily in their
business context. This is our guide not just to how things will own network infrastructures to gain a key
change, but also to what we need to do to competitive advantage. Consequently, we have
Augmented Intelligence: Artificial
3. 
meet the future needs of our customers identified attractive growth opportunities
intelligence combined with human
and to address these megatrends and the in new verticals outside our primary market
intelligence transforms the collected data
inherent opportunities. The Future X vision with CSPs.
into actionable insights, fundamentally
changing the way decisions are made by encompasses the key domains of future We are addressing both our primary CSP
businesses, governments and individuals, networks: massive scale access, converged market and the newly identified growth
resulting in time savings, less waste, higher edge cloud, smart network fabric, universal opportunities in our adjacent market with
efficiency and new business models. adaptive core, programmable network our “Rebalancing for Growth” strategy.
operating systems, augmented cognition This strategy builds on our core strength of
4. H
 uman and machine interaction: A range systems, digital value platforms and dynamic delivering large high-performance networks
of new form factors that fundamentally data security. by expanding our business into targeted,
transform the way humans interact
higher-growth and higher-margin vertical
with each other and with machines, e.g.
markets. Our ambition is to grow the share
voice-based digital assistance, gesture
of our revenue that is derived from outside
control, smart clothes, implantable chips,
the CSPs.
robotics and Augmented and Virtual Reality.

NOKIA IN 2017 15
Our strategy continued
Our four pillars

Our strategy builds on our business

portfolio and continued drive to create
technology that serves people and
includes the following four key priorities:

1.Lead

Lead in high- Nokia is a leader in this area

today and we will use our main
■■ growing in managed services
and systems integration and
■■ using our unique capability
of offering optical and routing

performance, competitive advantage—a near

100% end-to-end portfolio that
innovating in augmented
intelligence, automation,
that work together, a capability
that is increasingly becoming

end-to-end we can deliver on a global scale—

to maintain our leadership while
and robotics to improve
our delivery services;
a customer requirement; and
■■ delivering cost savings and
networks managing for profitability. We are
focused on: ■■ maintaining our leading
market share in copper access,
productivity improvements by
realizing synergies and applying
with CSPs ■■ establishing leadership in 5G
by being first to market in the
accelerating momentum in
fiber access, successfully
best practices across our
entire portfolio to maintain
key advanced markets with expanding in the cable market, the industry’s most profitable
key customers and achieving and further developing new networks business.
global technology and smart home solutions;
quality leadership;
■■ leveraging our superior
products and the next
generation IP routing portfolio
based on our FP4 chipset to
grow in both edge and core
routing, where we have a fully
virtualized portfolio that is
differentiated by performance,
flexibility, security and quality;

16 NOKIA IN 2017
 Business overview

Over the next years, we intend to maintain our

leading position with CSPs, while establishing
ourselves as a credible and recognized player
in our target vertical markets among enterprises.
We strive to sustain and rebuild Nokia as a
value-adding consumer brand, earning returns
through licensing.

2.Expand
Expand network We expand into five select vertical
markets with carrier-grade needs:
■■ Webscale customers will
increasingly require
■■ For transportation, energy,
and public sector (“TEPS”)

sales to select webscales, TXLEs, transportation,

energy, and public sector. As the
high-performance networks to
improve customer experiences
customers, we offer
mission-critical networks,

vertical markets world becomes more digital, the

kind of massive, high-performance
and to expand their primary
business models. For webscale
solutions for digitization
and IoT, and industrial
networks once used almost companies we are focusing automation.
exclusively in telecommunications on an all-IP-led approach,
are now needed by other providing IP routing and optical
organizations. We have network infrastructure.
implemented a dedicated sales
organization, a customer ■■ For TXLE customers, we aspire
segmentation and a targeted to enter with technological
portfolio and entry strategy disruptions, like the SD-WAN,
to diversify our business and and then expand further
address this opportunity. with the remaining portfolio.

NOKIA IN 2017 17
Our strategy continued
Our four pillars

3.Build

Build a strong ■■ Transform our go-to-market:

We have established a
■■ Strengthen our portfolio
and R&D set-up: We have
■■ Diversify markets and business
models: We are first expanding

standalone dedicated software sales

organization in the Nokia
complemented our portfolio
with new products and the
our scope within our CSP
customers to address also the

software business Software business group to

work the specific sales cycles
Comptel acquisition and
structured it into four segments
IT, marketing, sales, customer
relationships domains besides
With our existing software and dynamics in enterprise reflecting our customers’ needs: the network domain. Gradually,
products, we are already today software and address more Digital Operations, Digital we will also address other
a strong player in the large and customers. On this basis, Experience, Digital Networks, sectors with our existing and
growing telecoms software we will execute a new, and Cognitive Intelligence. We upcoming products and
market. Our ambition is to build on differentiated go-to-market will expand in these areas based solutions. New business
this foundation, strengthen our strategy and leverage alliance on the Common Software models, particularly
position in telecoms software, partners for software selling. Foundation, a cloud-native Software-as-a-Service (“SaaS”)
and address new customer We are streamlining and middleware component library. offerings with subscription
segments, thereby creating a optimizing our services and With continuing investment, we revenues to address general
global software player that has delivery unit for a harmonized keep evolving this platform to enterprises, will be crucial to
a growth and margin profile like and efficient front to the enable effective and innovative the achieve this. A strong
leading software companies. We customer and setting them cutting-edge development and business play around open
continue to pursue this ambition up for growth. To strengthen accelerate our move towards source components will help
along three priorities: our reach, we are establishing DevOps and agile development. to improve our offering and
a new messaging for our In our Emerging Products unit, expand our reach as well.
software offering around we invest in new businesses
Connected Intelligence and and nurture them to scale.
digitizing our go-to-market.

18 NOKIA IN 2017
 Business overview

4.Create
Create new In addition to renewing existing
patent licenses on favorable
Our brand licensing efforts are
well underway—we see value

business and terms, our aim is to add new

licensees from the mobile
creation opportunities in the
mobile devices industry

licensing industry, and we continue to

expand patent licensing into new
leveraging our strong Nokia
brand. Our exclusive brand

opportunities segments, such as automotive

and consumer electronics.
licensee for mobile phones and
tablets, HMD Global, has already

in the consumer Besides this, we are exploring

opportunities to license our
launched a comprehensive
portfolio of new Nokia branded

ecosystem unique technological capabilities

in the domain of Virtual Reality.
feature phones and smartphones.

NOKIA IN 2017 19
Our leadership

Our diverse Group Leadership Team, spanning

several nationalities, reflects the scope of our
technological role—and our business ambition.

The Nokia Group Leadership Team is

responsible for the operative management
of Nokia, including decisions concerning our
strategy and the overall business portfolio.
The Chair and members of the Group
Leadership Team are appointed by the Board
of Directors. The Group Leadership Team is
chaired by the President and Chief Executive
Officer (the “President and CEO”).
Our Group Leadership Team comprises the
following 15 members:

Rajeev Suri Marc Rouanne Federico Guillén

President and CEO President of Mobile Networks President of Fixed Networks

Igor Leprince Basil Alwan Bhaskar Gorti

President of Global Services President of IP/Optical Networks President of Nokia Software
Igor Leprince will step down from the Group Leadership Team as As of February 1, 2018 the Applications & Analytics
of March 31, 2018. Sanjay Goel was appointed President of Global business group was renamed Nokia Software.
Services and member of the Group Leadership Team as of April 1, 2018.

20 NOKIA IN 2017
 Business overview

Gregory Lee Kristian Pullola Joerg Erlemeier

President of Nokia Technologies Chief Financial Officer Chief Operating Officer

Hans-Jürgen Bill Kathrin Buvac Ashish Chowdhary

Chief Human Resources Officer Chief Strategy Officer Chief Customer Operations Officer

Barry French Maria Varsellona Marcus Weldon

Chief Marketing Officer Chief Legal Officer Chief Technology Officer
and President of Nokia Bell Labs

NOKIA IN 2017 21
Our businesses

We have two businesses: Nokia’s Networks

business and Nokia Technologies.

Within these two businesses, we had six business

groups in 2017: Mobile Networks, Fixed Networks,
Global Services, IP/Optical Networks, and Nokia
Software* (all within our Networks business);
and Nokia Technologies. This section presents
an overview of Nokia’s Networks business and
Nokia Technologies.

Networks business Nokia Technologies

Mobile Networks Fixed Networks Nokia Technologies

Global Services IP/Optical Networks

Nokia Software*

* As of February 1, 2018 the Applications

& Analytics business group was
renamed Nokia Software.

22 NOKIA IN 2017
 Business overview

Networks
business

NOKIA IN 2017 23
Networks business

Market overview The adjacent market includes customer Competition

segments such as webscale companies,
Through our comprehensive end-to-end The competitors in our primary market are
energy, transport, public sector, and TXLEs.
portfolio of products and services, we are Huawei, Ericsson, and ZTE. We also compete
In the product dimension, this includes our
addressing a market that encompasses with technology experts in some of our other
traditional networking in addition to new
mobile and fixed network access market segments, such as Juniper Networks
solutions like Nuage Networks, SDN, Analytics,
infrastructure, IP routing and optical networks and Cisco in the IP networking and security
IoT, and Security. The adjacent market was
as well as software platforms and applications. segments, and Ciena, Adtran, and Calix in the
estimated at EUR 23 billion in 2017.
optical networks and fixed access segments.
We define our primary market as a network Both the optical networks and the applications
Demand for our portfolio is driven by
and IP infrastructure, software and CSP and analytics market segments are still
exponentially increasing growth in data
services market. We estimate that our highly fragmented.
traffic as people’s lives and enterprises
primary market was EUR 103 billion in 2017.
become ever more digitalized. This drives
In addition, we have an adjacent market,
the demand for highly reliable networks
including a vertical market that includes
for massive connectivity.
our Networks businesses expansion areas
in both a customer and a product dimension.

24 NOKIA IN 2017
 Business overview

Mobile
Networks

Market overview architecture blueprint. The capacity, latency,

The primary market for our Mobile Networks
agility, reliability and speed offered by this 2017 highlights
technology make it applicable to CSPs and ■■ In 2017, Mobile Networks established
business group includes technologies for
other industry verticals. a portfolio of enabling technologies
mobile access, core networks and microwave
transport. This encompasses access and core We believe that 5G will change the way in that are central to the infrastructure,
network technologies ranging from 2G to 5G which communications technology is used in operations, software and services
licensed and unlicensed spectrum for both virtually every sphere of life. As we move along required in a hyperconnected,
macro and small cell deployments. The primary the path towards making 5G a commercial digital world.
addressable market for Mobile Networks was reality, we aim to extend our leadership in LTE ■■ In February, Nokia launched its 5G
estimated at EUR 27 billion in 2017. with a smooth evolution path comprising FIRST, a commercial end-to-end
successive generations of 4.5G, 4.5G Pro and solution for early 5G deployments.
The adjacent market for Mobile Networks
4.9G offerings. Mobile Networks’ rationalized Later in the year, Nokia announced the
includes solutions for the public sector, TXLEs,
portfolio, featuring the 5G-ready AirScale 5G upgradeability of its existing radio
and webscales, and drives expansion into
radio access, is setting the standard for units as well as inclusion of the 3GPP
domains such as LTE for public safety, private
scalability, openness, energy efficiency and standards based 5GNR support of
LTE and unlicensed radio access. The adjacent
multitechnology support (“Single RAN”). 5G FIRST.
market, including verticals, was estimated
at EUR 4 billion in 2017. An important part of our focus is the ■■ For smoothening the evolution of 4G
transformation of service providers as they networks to 5G, Nokia demonstrated
Business overview adopt cloud computing technologies to commercial 1.2 Gbps speed with a
enable digitalization. Particularly on the Core
and organization networks side, there has been a continuous
commercial chipset device, cloud
radio access network (“RAN”) with
Providing connectivity is the core business evolution from traditional monolithic all technologies virtualized, and
of our Mobile Networks business group. products, passing through virtualization and eightfold radio cell capacity increase
Our Mobile Networks strategy focuses on now into a cloud-native network architecture. with massive MIMO technology jointly
maintaining the strong business that we To support this transition, in 2017 Nokia with Sprint.
have today, and prudently expanding it to launched the AirGile cloud-native core which
new customer segments and technologies. is a full portfolio of network functions built ■■ In September, Nokia launched the
To implement our strategy, and to become to execute on the demands brought by the AirGile cloud-native core—a full
fast and agile in our execution, Mobile future 5G and IoT networks. A proof point portfolio of network functions built
Networks introduced a new organizational of the maturity of the Telco Cloud market to execute on the demands brought
structure and new ways of working in October and of the leadership position that Nokia by the future 5G and IoT networks.
2017. We target to lead in high-performance has achieved is the strong deal momentum
mobile networks with communications service that we have achieved, with more than
providers. In practice, we define leading 120 commercial cloud references with
with two indicators: customer feedback operators and enterprises across the world.
and return on investment.
Practically, we aim at being perceived as a Competition
leader in 5G, as well as providing the best The mobile networks market is a highly
value to our customers as they evolve their consolidated market and our main
networks towards cloudification. As we move competitors are Huawei and Ericsson.
from 4G to 5G and transform our networks Additionally, there are two regional vendors,
into a cloud-native environment, we aim ZTE and Samsung, that operate with an
to become a champion of DevOps and estimated below 10% market share. As
continuous delivery. 5G is more than a mobile network infrastructure gets virtualized and
access technology: the full potential of 5G is cloudified, we expect IT companies, such
only achieved if every part of the network as HP Enterprise and Cisco, to emerge
can perform to the same level, and for this in this field.
we have developed our Future X network

NOKIA IN 2017 25
Networks business continued

Fixed
Networks

Market overview Business overview and Delivering a gigabit to the home is no longer
enough, when in-home network, especially
The primary market for our Fixed Network organization Wi-Fi capabilities, is often the pain point. To
business group includes technologies for fixed Our Fixed Networks business group creates ensure carrier-grade in-home connectivity,
access and related services in addition to fixed Intelligent Access networks that are more Nokia has expanded its smart home portfolio
network transformation services with a focus advanced, bringing connectivity to more with its carrier-grade Nokia Wi-Fi solution,
on transformation of legacy fixed switching people sooner to deliver the best providing coverage in every corner of the
networks. The primary market for Fixed broadband experience. home, supporting communications service
Networks was estimated at EUR 8.4 billion providers to offer enriched customer
in 2017. In this market, we see a shift The Fixed Networks business group provides experience and diversify their services.
from copper to fiber technologies, and the broadest access networks toolkit including
networks increasingly use a combination copper, fiber, coax and fixed-wireless access Virtualization will have a key role in keeping
of multiple technologies, such as copper, technologies to deliver more bandwidth to operational costs low as the network gets
fiber and wireless. more people, faster and in a cost-efficient more complex. Moving functions to the cloud
way. The portfolio allows for a customized makes networks easier to manage and scale.
The adjacent market, including verticals, combination of technologies that brings With its Software Defined Access solution,
for Fixed Networks includes virtualization fiber to the most economical point for Nokia takes a very pragmatic approach
solutions for cable access platforms, our customers. Nokia is a market leader in towards fixed access virtualization, working
Digital Home (IoT) and passive optical LAN. copper-based solutions to boost capacity on closely with service providers around
The adjacent market, including verticals, existing copper infrastructure, such as VDSL2 the world to define the use cases that
was estimated at EUR 0.2 billion in 2017. Vectoring, Vplus, and G.fast. Together with make the most sense for them. Nokia’s
Nokia Bell Labs, we continue the innovation Software-Defined Access Network (“SDAN”)
and development of even higher-capacity solution includes Altiplano cloud-native
technologies like XG-Fast, which allows software and Lightspan open programmable
10 Gb/s over copper. The Fixed Networks hardware, enabling scalable deployment
business group is also a market leader practices, automated operations and
in fiber-to-the-home solutions, with integration services. Nokia was awarded the
technologies such as GPON, EPON, Ethernet Broadband Award 2017 for Achievement
point-to-point, as well as the award-winning in Virtualization.
10 gigabit next generation fiber technologies
(XGS-PON and TWDM-PON). The Fixed Networks services portfolio is
based on our unparalleled expertise and
Following the acquisition of Gainspeed, experience and includes amongst others,
Nokia has been extending its cable operator Public Switched Telephone Network
portfolio, with a comprehensive Unified Cable transformation, ultra-broadband network
Access solution, including both fiber and coax design, deployment and operation, site
solutions, as well as its ground-breaking and implementation and outside plant, and
award-winning virtualized distributed access multivendor maintenance. With predictive
architecture solution (“vCMTS”). With this care, Nokia brings the powerful and proven
enhanced portfolio, Nokia provides cable intelligent analytics and automation
operators with the end-to-end technology capabilities of Nokia AVA cognitive services
capabilities needed to support growing capacity platform to fixed networks, providing
requirements today and into the future. near-real time monitoring capabilities to
identify network anomalies before they
impact service.

26 NOKIA IN 2017
 Business overview

Competition
The competitive landscape in fixed access
has similar characteristics to mobile access,
where the market is dominated by three
main vendors, Nokia, Huawei, and ZTE,
and a handful of other vendors with
estimated less than 10% market share.

2017 highlights
■■ Nokia continued to be the market
leader in copper access and one of
the market leaders in fiber access,
and is the only vendor with a leading
market share in all regions worldwide,
according to Dell’Oro.
■■ In October, Nokia launched its
Intelligent Access Vision on how to
build access networks that are faster,
better and smarter. This included a
series of new product launches for
the access network, the cloud and
the home. With this extended
portfolio, Nokia continues to
strengthen its innovation leadership.
■■ To complement our portfolio for
the cable operator market, Nokia
announced the virtualized Distributed
Access Architecture, based on its
Gainspeed portfolio, ending the industry
debate between remote PHY and remote
MACPHY, immediately followed by a first
customer announcement with Wide
Open West. Following the acquisition
of Gainspeed in 2016, we have now
built up a strong portfolio to address
cable operators’ needs.
■■ Other key launches included Nokia
Wi-Fi, a carrier-grade whole home Wi-Fi
solution; a cloud-native set of Software
Defined Access Network products; the
industry’s first wireless PON solution;
expansions to our existing copper and
fiber portfolio, and Nokia Predictive Care.

NOKIA IN 2017 27
Networks business continued

Global
Services

Market overview Network Implementation deploys, expands

The Global Services business group’s
and modernizes mobile networks of the 2017 highlights
communications service providers, enterprise
market includes network implementation, ■■ Global Services expanded its portfolio
and public sector customers in growth and
care and professional services for mobile with close to 20 new services, including
mature markets, thus optimizing customers’
networks in addition to managed services in 5G, IoT, public safety, and analytics.
total cost of ownership (both capital
for the fixed, mobile, applications, IP and
expenditure and operating expenditure) and ■■ The new Nokia WING—a managed
optical domains. The primary market for
deployment schedules while minimizing risks. service for IoT—provides
mobile networks services was estimated
communications service providers
at EUR 28 billion in 2017. The adjacent Systems Integration offers network
with a quick market entry.
market for Global Services, including services architecture, integration, customization, and
for Mobile Networks vertical segments, migration services. The portfolio focuses on ■■ Our new Analytics Services that draw
was estimated at EUR 5 billion. core and SDM, data center services, telco from machine learning, augmented
cloud, transformation and prime integration intelligence and the power of Nokia
Business overview and for communications service providers and AVA were recognized by several
other specific services for vertical customers. industry awards.
organization
Our services, solutions and multivendor Care assures optimal network availability ■■ Our analytics, artificial intelligence
capabilities help communications service by providing network operation support, and machine learning capabilities
providers navigate through the evolving maintenance, orchestration and expert were also recognized by several
technology landscape, network complexity services. With the power of Nokia AVA and its industry awards.
and data growth as well as improve end latest analytics and automation, our offering
includes proactive and predictive solutions ■■ We launched MIKA (Multi-purpose
user experience while supporting them Intuitive Knowledge Assistant), the
also in day-to-day network planning, that are fully customizable to local and
customer-specific requirements. first digital assistant to support
implementation, operations and maintenance. telecom services.
At the same time, we expand our offering in Managed Services provides tailored packages
select attractive verticals as well as for IoT for its communications service provider,
and cloud by leveraging our innovative public sector, transport and utility customers
portfolio and telco grade expertise. to help them transform their business and
We differentiate strategically through our excel in the fixed, mobile, applications, IP and
service delivery by driving speed, quality and optical domains. The full portfolio comprises
efficiency with the right combination of local of network and service management, a
expertise and globalized delivery centers, as build-operate-transfer model, hosting,
well as automation and advanced analytics advanced analytics, IoT, cloud and
powered by Nokia AVA, our cognitive service security operations.
delivery platform.
Competition
The Global Services business group consists
of five business units. In a market segment that combines products
and services, Nokia competes against Huawei,
Network Planning and Optimization Ericsson, ZTE, and Cisco, while for the
helps customers maximize their network service-led businesses like managed services
performance and quality of end users’ and systems integration we see other
experience, while also keeping capital competitors, such as TechMaindra, HPE
expenditure under tight control. and IBM, emerging in addition to Ericsson
Analytics-based services powered by and Huawei.
Nokia AVA are designed to satisfy the
surging need for a use-case driven approach
to addressing customer pain points.

28 NOKIA IN 2017
 Business overview

IP/Optical
Networks

Market overview restorative actions are automatically initiated

The primary market for our IP/Optical
when any parameter varies beyond set limits. 2017 highlights
These carrier-grade attributes also benefit— ■■ The IP/Optical Networks business
Networks business group includes routing and
and are valued by—the needs of webscales, group launched the world’s most
optical technologies and related services sold
energy, transport, public sector and TXLEs. powerful internet routing platforms
to CSPs. This market includes technologies
such as IP aggregation, edge and core routing, The IP/Optical Networks product portfolio powered by Nokia’s new FP4 silicon.
mobile packet core, Wave Division Multiplex, includes: Leading smartphone manufacturer
and packet optical transport networking Xiaomi signed a business collaboration
solutions. We also have analytics and ■■ comprehensive IP and optical Wide Area and multi-year patent agreement
end-to-end Software-Defined Network Networking (“WAN”) solutions that that includes the new FP4 silicon as
(“SDN”) solutions. The primary market dynamically, reliably and securely connect well as optical transport solutions
for IP/ Optical Networks was estimated at people and things from any universal for datacenter interconnect and
EUR 25 billion in 2017. broadband access modality to any clouds a datacenter fabric solution.
and edge clouds at the lowest cost-per-bit;
A growing portion of IP/Optical Networks ■■ The Nokia 100G optical portfolio was
revenue is derived from its adjacent market, ■■ advanced, cloud-optimized IP service chosen to support the massive growth
which includes customer segments like gateways for residential, business, mobile of Jio’s pan-India 4G network and
webscales and enterprise. In the enterprise and IoT services and unique hybrid solutions was integral to Nokia and Facebook
segment, we address verticals like energy, enabling a converged services future; breaking subsea spectral efficiency
transport, public sector, and TXLEs. We ■■ analytics and carrier SDN solutions for records in transatlantic field tests.
address this mission-critical market with insight-driven network automation that ■■ The Nuage Networks solution powered
our IP, Optical and Nuage Networks portfolios. dynamically provision, optimize and the launch of BT Agile Connect and
The adjacent market was estimated at assure network services and resources TELUS Network as a Service (“NaaS”).
EUR 6 billion in 2017. end-to-end, from access to the cloud, and These launches reinforced Nuage
spanning IP and optical technology layers; Networks’ SD-WAN leadership following
Business overview ■■ advanced datacenter automation and additional wins with major service
and organization software-defined WAN solutions that providers including Telefonica and
configure network connectivity among China Telecom.
The IP/Optical Networks business group
provides the high-performance and massively clouds and to any enterprise branch office ■■ AT&T teamed with Nokia to offer U.S.
scalable networks that underpin the digital with the ease and efficiency of cloud utilities a private LTE solution based on
world’s dynamic interconnectivity. IP/Optical compute using products from our the new Nokia wireless router, which
Networks’ portfolio of carrier-grade software, Nuage portfolio; will help utility customers modernize
systems and services play across multiple ■■ advanced IP video services offering the their grid distribution and build
domains, from programmable IP and optical utmost user experience streamed efficiently converged field area networks to reap
transport networks for the smart fabric to and flawlessly from the cloud; and the benefits of the smart grid.
analytics and software-defined capabilities
for the programmable network operating ■■ an extensive portfolio of professional
system and more. services to accelerate the benefits of
integrating new technologies to transform
The networks of CSPs are under tremendous networks and leverage the latest innovations
pressure from cloud-based applications, in SDN, virtualization, video and
ultra-broadband evolution and the IoT. programmable all-IP networks.
IP/ Optical Networks solutions reduce time-
to-market and risk in CSPs launching new
services, enabling rapid scaling to meet Competition
surging demands in the most optimized The competitive landscape includes Cisco,
configurations. Our insight-driven network Juniper Networks, Huawei, and Nokia
automation solutions further assure that in addition to various specialized players
network services are delivered with consistent in optical, such as Ciena.
quality, reliability and security and that

NOKIA IN 2017 29
Networks business continued

Nokia Software*

Market overview The adjacent market for Nokia Software work in digital time. Each solution is designed
includes emerging software and services for to provide intelligence, automation, security,
Nokia Software’s primary solution segments
Network Function Virtualization (“NFV”) and cloud readiness and multi-vendor capabilities
include software for 1) digital experience and
NFV Management Orchestration (“MANO”), over a common software foundation.
monetization (i.e., Business Support Systems),
Self-Organizing Networks, IoT platforms,
2) digital operations (i.e., Operational The Nokia Software portfolio contains:
and security. This market also includes digital
Support Systems), 3) digital networks (i.e.,
enterprises and IoT verticals. The adjacent ■■ Digital experience and monetization: helps
Session Border Controllers, Authentication,
market, including verticals, was estimated service providers identify and act upon the
Authorization, and Accounting (“AAA”), and
at EUR 8 billion in 2017. small windows of digital time where the
Diameter Routing), and 4) digital intelligence
(i.e., big data analytics, augmented and opportunities to enrich and monetize are
artificial intelligence, etc.). The primary Business overview the best. Our portfolio includes solutions
for omni-channel customer engagement,
addressable market for Nokia Software and organization autonomous customer care, fixed and
and associated professional services
The Nokia Software business group serves mobile device management, and policy
was estimated at EUR 14 billion in 2017.
communications service providers by helping and charging software that can be utilized
them harness the power of connected across all network types from any vendor.
intelligence to enrich and monetize Today, we have more than 300 digital
experiences. Nokia is helping customers experience and monetization customers,
move from the slow, siloed, and monolithic
systems they have today to agile, scalable * As of February 1, 2018 the Applications & Analytics business
and lightweight solutions that are built to group was renamed Nokia Software.

30 NOKIA IN 2017
 Business overview

we are the market leader in both fixed and

mobile device management, and we have 2017 highlights
one of the industry’s first 5G charging
As part of Nokia’s strategy to build a Operational and organizational highlights
solutions.
standalone software business at scale, include:
■■ Digital operations: helps service providers the Nokia Software business group has
been driving a major change agenda to ■■ Established a dedicated software
simplify, automate and optimize their
strengthen the business. salesforce with new leadership. The
service and network operations. Our portfolio
team invested in recruitment and
includes solutions for service fulfilment,
Product highlights include: enablement to ensure our team
assurance, orchestration, and network
provides high value customer
management. We have more than 500 ■■ Acquired Comptel Corporation and engagements.
digital operations customers globally, hold gained the ability to provide closed loop
leading market positions in NFV MANO and fulfillment and assurance along with ■■ Modernized software R&D with
service assurance and have been recognized catalogue driven orchestration which are improved portfolio management;
as the “one stop shop for Operations essential for fully automated operations. creating a Common Software
Support Systems” by Analysys Mason. The acquisition also bolstered our Foundation to make our software easier
monetization and analytics capabilities. for customers to use, rely on and
■■ Digital networks: software that creates
integrate; strengthening our DevOps
an elastic, programmable, and secure ■■ Continued to add machine learning, capabilities to get features to market
cloud-based foundation to address analytics and automation capabilities faster; and standardizing performance
performance and reliability requirements. with the launches of Autonomous and reliability testing to ensure our
Our products include one of the industry’s Customer Care, Nokia Cognitive products meet telco-grade standards.
first cloud-native session border Analytics for Crowd Insight, Nokia
controllers, a portfolio of active security Analytics Office Services, Nokia ■■ Increased the value of our service
solutions, and market-leading mobile NetGuard Security Management Center practice with a Common Delivery
network management solutions. solution, New Nokia evolved Service Framework, investment in key skills like
Operations Center, and Nokia IMPACT, data science, NFV on-boarding, security,
■■ Our digital intelligence portfolio provides
our IoT platform. and monetization.
a complete 360-degree view on the market.
We use artificial intelligence to provide ■■ Introduced 5G-ready Nokia Smart Plan
advanced summarization, correlation, Suite in a cloud-native lightweight solution.
and prediction to determine sentiment,
marketing targets, and the next best actions. ■■ Launched NetAct Archive Cloud, the first
We are the market leader in network automated real-time monitoring cloud
analytics and have over 350 customers. backup system and the industry’s first
cloud-native Session Border Controller.
Competition
Nokia is one of the leading providers of
telecom software products according to
Analysys Mason. As the market is highly
fragmented, the top six vendors all hold less
than 10% market share while the remaining
market is shared across several niche players.
Our competitors fall into two categories:
Independent Software Vendors (“ISVs”)
and Network Equipment Providers (“NEPs”).
The main ISV competitors are Amdocs,
Netcracker, and Oracle. The main NEP
competitors are Huawei and Ericsson, selling
software as part of large infrastructure deals.

NOKIA IN 2017 31
Networks business continued

Within our
Networks business

Sales and marketing ■■ In Greater China, we are the leading we also closed our biggest ever deal in
player among companies headquartered the market—the nationwide wholesale
The Customer Operations (“CO”) organization outside China, and work with all the major LTE network in Mexico known as ‘Red
is responsible for sales and account operators. We have also extended Compartida’, for Altán Redes, and the
management across the five network-oriented our market presence to the public and largest LTE 700 MHz deployment in Brazil
business groups. The CO teams are represented enterprise sectors, including energy, with TIM.
worldwide (in approximately 130 countries) to railways and public security. In 2017,
ensure that we are close to our customers and we worked with numerous China-based ■■ In Middle-East and Africa, we see strong
have a deep understanding of local markets. webscale companies, and all the major opportunities for Nokia, and we are closely
In this way, we strive to create and maintain operators in Taiwan. In China, we have six working with all key global and regional
deep customer intimacy across our Technology Centers, one regional Service operators. We have been laying the
customer base. Delivery Hub and more than 80 offices foundation for early 5G adoption and Smart
spread over megacities and provinces. A Cities deployments in the Middle-East
Geographically, the CO organization is divided region, and continue to see strong growth
into seven markets: major achievement in 2017 was the closing
of our agreement with our Chinese partner, in the number of mobile broadband users
■■ Asia-Pacific and Japan spans a varied which resulted in the formation of the joint in Africa, driven by increasing affordability
geographical scope, ranging from advanced venture—Nokia Shanghai Bell. This was the of smartphones and commercial LTE
telecommunications markets, such as last major organizational step in Nokia and deployments across the continent.
Japan and the Republic of South Korea, to Alcatel Lucent integration, bringing together ■■ In North America, we count all the
developing markets including Philippines, approximately 8 000 colleagues from both major operators as our key customers.
Bangladesh, Myanmar, Vietnam and others. companies into a single organization. We also deliver advanced IP networking,
In 2017, we worked with all the leading ultra-broadband access, and cloud
operators in the market, and collaborated ■■ In India, we are a strong supplier and
service provider to the leading public and technology solutions to a wide array of
on 5G, IoT and other leading network customers, including local service providers,
evolution topics with operators from Japan private operators. Collectively, our networks
for these operators serve 418 million cable operators, large enterprises, state
and the Republic of South Korea. We also and local governments, utilities, and many
run a major Service Delivery Hub in Japan. subscribers across some 459 000 sites
with Nokia managing networks supporting others. North America is also home to the
Furthermore, we work across a wide range our most important and thriving innovation
of vertical markets in Asia-Pacific and Japan 154 million subscribers. In addition, we are
a key telecom infrastructure supplier to practices―from the renowned Nokia Bell
including public sector, transportation and Labs headquarters in Murray Hill, New
energy enabling solutions through its non-operator segments, including large
enterprises, utilities companies, and the Jersey, to the development labs in
end-to-end portfolio. Silicon Valley.
Indian defense sector. We are also a
■■ In Europe, we engaged with all the major strategic telecommunications partner in
operators serving millions of customers. GSM-Railways technology in India. Nokia’s
We have extensive R&D expertise in Europe, operations in the country include a Global
and some of our largest Technology Delivery Center, a Service Delivery Hub
Centers, which are developing future and a Global Technology Center.
technologies, are based in this market.
We also have a Global Delivery Center ■■ In Latin America, an estimated 24% of
(across two locations: Portugal and mobile subscribers use LTE services, almost
Romania) and three regional Service double from a year ago, due to accelerated
Delivery Hubs in Europe (one in Russia and adoption in Brazil, Mexico and Argentina.
two in Poland). With our strong end-to-end High-speed fixed broadband, meanwhile,
portfolio, Nokia is well positioned in Europe is still in its early phase. With the aim
to help maximize the benefits of 5G, of providing broadband services to a
IoT and the digital transformation in population of over 600 million people in
the local digital ecosystems. the area, we supplied ultra-competitive
solutions to all major operators. In 2017,

32 NOKIA IN 2017
 Business overview

As Nokia executes its strategy to expand power generation. We also work with the the United Kingdom, and the United States.
beyond our traditional telecom operator world’s largest utility companies, including the We believe that the geographical diversity of
customer base, Customer Operations is world’s largest utility by production—EDF—the our R&D network is an important competitive
leading the way with a strong go-to-market world’s largest utility by customers—SGCC advantage for us. In addition, the ecosystem
strategy for our non-telco target segments. in China—Tata Power in India and the major around each R&D center helps us to connect
Our ambition is to drive the sale of business utilities for both generation and distribution with experts on a global scale and our R&D
and mission-critical communications networks across the United States, including Ameren. network is further complemented by
and services to organizations in several cooperation with universities and other
carefully chosen markets. Our Webscale / TXLE business saw significant research facilities.
progress during 2017. In Webscale, our
These efforts are led by two teams within business has grown steadily and we now All of our Networks business groups, and also
Customer Operations. These are Global count Facebook, Amazon Web Services Nokia Technologies, are committed to the
Enterprise TEPS (transportation, energy (“AWS”), Apple, Xiaomi Baidu, Alibaba and Future X network architecture defined by
and public sector) and Global Enterprise Tencent among our customers and we also Nokia Bell Labs. The Future X network is based
Webscale/TXLE. work with some of these as partners. We on a vision of a massively distributed,
announced a partnership with Amazon Web cognitive, continuously adaptive, learning and
Within TEPS, we focus on the needs of public Services, providing a full suite of services to optimizing network connecting humans,
sector customers for technology in public support service providers in their migration senses, things, systems, infrastructure, and
safety, government driven broadband to AWS, a patent agreement with Xiaomi and processes. The Future X network aims to
initiatives and smart city projects. For a business and patent license and business provide a 10-fold improvement across key
example, we work with Nedaa (the Dubai collaboration agreement with Apple. Among technology domains in response to the six
government security networks operator) in our TXLE customers, we include international megatrends identified by Nokia as driving new
both public safety and smart city; as a key banks—such as BBVA, Santander, and Crèdit technological requirements. For a more detailed
supplier to AT&T, Nokia will play a significant Andorrà—to which we supply software- description refer to “Our strategy” section.
part in building the FirstNet nationwide U.S. defined networking and / or software-defined
Public Safety broadband network; we supply
the Shanghai Oriental Pearl Group with
WAN solutions. Patents and licenses
technology for smart city services and work Intellectual property assets are fundamental
with the Digital Poland Operational Program, Research and development to Nokia, and we own a large patent portfolio
in which, together with Infracapital, we formed Our Networks business is one of the of approximately 20 000 patent families. The
a joint venture to design, deploy and operate industry’s largest R&D investors in Patent Business in Nokia Technologies is the
GPON fiber-optic networks to serve more information communication technology primary monetization entity for patent assets.
than 400 000 residences and 2 500 schools and we expect it to drive innovation across Refer to “Nokia Technologies—Patents and
in 13 regions in central and northern Poland. telecommunications and vertical industries to licenses” for a description of our patent
meet the needs of a digitally connected world. licensing activities.
In transportation, Nokia is the market Product development is continually underway
leader in GSM for railway customers (“GSMR”) to meet the highly programmable, agile Industry leading R&D in our Networks
world-wide. And in aviation, we are working and efficiency requirements of the next business including Nokia Bell Labs in fields such
with Skyguide on modernizing Switzerland’s generation software-defined networks as wireless, IP networking, ultra-broadband
nationwide mission-critical communications that will accommodate the IoT, intelligent access and cloud technologies and applications
network for air traffic control, managing both analytics, and automation used to forge continues to generate valuable new,
civil and military air traffic. We also supply new human possibilities. patentable innovations.
Air2Ground private LTE solutions for major
airline corporations, in cooperation with Our five networks-focused business groups Our Networks business has patent license
Deutsche Telekom and Inmarsat, among are responsible for product R&D within the agreements in place with a number of third
others. In energy, we are the global leader in Networks business. The Networks business parties as part of its ordinary course
Private LTE solutions for the mining industry. has a global network of R&D centers, each of business.
In 2017, we also added our first water utility with individual technology and competence
with Placer County Water Authority in the specialties. The main R&D centers are located
United States, where our technology is helping in Belgium, Canada, China, Finland, France,
to control water quality, prevent water loss Germany, Greece, Hungary, India, Italy, Japan,
and more effectively manage hydro-electric Poland, the Philippines, Portugal, Romania,

NOKIA IN 2017 33
Networks business continued

Nokia Bell Labs

34 NOKIA IN 2017
 Business overview

Nokia Bell Labs is the world-renowned industrial

research and innovation arm of Nokia.

Over its 90-year history, Nokia Research at Nokia Bell Labs is focused on
Nokia Bell Labs and Facebook achieved a
key scientific, technological, engineering
Bell Labs has invented many of or mathematical areas which require 10x record spectral efficiency of 7.46 b/s/Hz
the foundational technologies or more improvement in one or more and 2.5 times capacity breakthrough for
dimensions. It then combines these areas massive undersea cable transmission
that underpin information and of research into the Future X network during a submarine field trial using Bell
communications networks and architecture, which brings these disruptive Labs’ Probabilistic Constellation Shaping
(“PCS”) technology, a ground-breaking
all digital devices and systems. research elements together into
novel modulation technique that
industry-redefining solutions. These
This research has resulted in eight Nobel innovations are brought to market through maximizes the distance and capacity
Prizes, two Turing Awards, three Japan Prizes, our business groups or through technology of high-speed transmission in
a plethora of National Medals of Science and and patent licensing. Nokia Bell Labs also optical networks.
Engineering, as well as an Oscar, two engages directly with the market and
Grammys, and an Emmy award for technical customers through its consulting service to
innovation. Nokia Bell Labs continues to help define the path to the future network Nokia Bell Labs introduced “skim
conduct disruptive research focused on with business model innovation and the storage,” a unique innovation that
solving the challenges of the new digital era, optimum techno-economics. decreases storage needs by five times
defined by the contextual connection and using innovative advanced video
This model of defining future needs and
interaction of everything and everyone. transcoding technology allowing TV and
inventing game-changing solutions to critical
video providers to serve programming to
Nokia Bell Labs searches for the fundamental problems while advising the market on the
time-shifted viewers at a fraction of the
limits of what is possible, rather than being path forward has been the constant mission
storage and compute now required.
constrained by the current state of art. of Nokia Bell Labs.
It looks to the future to understand essential
Three functions create the Nokia Bell Labs’
human needs and the potential barriers to
foundation to disrupt and transform
enabling this new human existence. It then
the future:
uses its unique diversity of research intellects
and disciplines and perspectives to solve (1) Chief Technology Office which defines
the key complex problems by discovering or In a world’s first, Nokia Bell Labs
the technological and architectural vision
inventing disruptive innovations that have the demonstrated it is now possible to use
for the future of human needs.
power to enable new economic capabilities, a commercial next generation 10G PON
new societal behaviors, new business models (2) Nokia Bell Labs Research which understands to transport ultra-low latency Common
and new types of services―in other words, the key challenges in the future vision Public Radio Interfaces (“CPRI”) streams
to drive human and technological revolutions. and invents solutions that are 10x better showing how operators can re-use
than what is currently possible. existing fiber-to-the-home (“FTTH”)
massive-scale deployments to satisfy
(3) Bell Labs Consulting which advises the the strict latency constraints and capacity
industry on the economics of the vision needs for mobile transport in 4G and
and how to efficiently achieve this future future 5G networks.
goal from the current starting point.

NOKIA IN 2017 35
Nokia
Technologies

36 NOKIA IN 2017
 Business overview

Market overview With the acquisition of Withings in 2016, Sales and marketing
our Digital Health business entered the
Building on decades of innovation and R&D Our Patent Business manages intellectual
market with a portfolio of premium, intuitive
leadership in technologies used in virtually property as a technology asset and seeks
consumer products designed to inspire the
all mobile devices used today, Nokia a return on our investments by making
individual to take control of their own health.
Technologies is expanding our patent our innovations available to the markets
Since then, we expanded this business into
licensing business, reintroducing the Nokia through licensing activities and transactions.
corporate wellness and elder care and
brand to smartphones through brand Nokia Technologies currently has more than
developed an innovative patient care platform
licensing, and establishing a technology 100 licensees, mainly for our standards
focused on remote patient care monitoring.
licensing business. essential patents (“SEPs”).
In the future, we plan to reduce our focus on
Smartphones, feature phones, and tablets Nokia Technologies also continues to engage
consumer incubation in Nokia Technologies
had a global estimated wholesale market in global sales and marketing activities
to allow us to prioritize our core strengths in
of over EUR 360 billion in 2017. Global supporting the technology licensing solutions
business-to- business and licensing patents,
smartphone wholesale revenues alone are stemming from the OZO VR camera, as well
technologies and the Nokia brand. In February
forecasted to increase by 12% in 2018 and as our portfolio of connected health products
2018, Nokia announced a strategic review of
total over EUR 350 billion. In the automotive in both regulated and non-regulated markets.
options for the Digital Health consumer
industry, expectations are that around half
products business. Nokia Technologies sees further
of the approximately 100 million new cars
sold annually around the world will have opportunities in licensing its proprietary
Our Brand Partnerships business works with
connectivity in the next five years. technologies, intellectual property and
our exclusive licensee for the Nokia brand for
brand assets into telecommunications
phones and tablets, HMD Global, which has
and vertical industries.
Business overview launched six new Android smartphones
and five new feature phones during 2017.
and organization
Nokia Technologies is determined to explore, Our Patent Business continues to grow its
discover and develop the ways in which successful patent licensing and monetization
technology can transform our lives. activities, which drive most of Nokia
Nokia Technologies makes our vision for Technologies’ net sales today, giving us
a connected future today’s reality. Nokia the ability to invest in our new businesses
Technologies’ mission is to create effortless in a disciplined, venture capital-like manner.
and impactful technological products and We have launched a Technology Licensing
solutions that expand human possibilities. business, focused on innovative spatial audio
Nokia Technologies currently consists of and visual technologies stemming from
a portfolio of four businesses. our OZO VR camera, which is no longer in
production.

NOKIA IN 2017 37
Nokia Technologies continued

Breakdown of patent filings in 2017 Research and development With the acquisitions of Nokia Siemens
by technology Networks in 2013 and Alcatel Lucent in 2016,
The applied nature of our R&D in Nokia
we added the results of their sustained
Technologies has resulted in various relevant
innovation, including that of Bell Labs,
and valuable inventions in areas that we
creating a larger and more valuable IP
believe are important for emerging
4 portfolio than ever before. As part of our
consumer experiences, such as audio and
active portfolio management approach, we
video standardization, sensing technologies
are continuously evaluating our collective
and advanced machine learning-based
assets and taking actions to optimize the size
health analytics.
1 of our overall portfolio while preserving the
Nokia Technologies has R&D centers in high quality of our patents. Through a series
3 Finland and France.   of structured divestments in 2017, we have
enabled product companies to access Nokia
innovations. At the end of 2017, our portfolio
Patents and licenses stands at around 20 000 patent families, built
For more than 20 years, we have defined on combined R&D investments of more than
2
many of the fundamental technologies used EUR 123 billion over the last two decades.
in virtually all mobile devices and taken a
leadership role in standards setting. As a We continue to refresh our portfolio from R&D
1 Connectivity 610 (47%) result, we own a leading share of essential activities across all Nokia businesses, filing
2 Fixed & optical networks 159 (12%) patent applications on more than 1 300 new
patents for GSM, 3G radio and 4G LTE
3 Services, applications inventions in 2017. Continuing our focus on
& multimedia 320 (24%) technologies. These, together with others
4 Emerging technologies for Wi-Fi and video standards, form the core communications standards, we also expect to
& hardware 221 (17%) of our patent portfolio for monetization have a leading position in 5G. Through 2017,
purposes. As mentioned above, Nokia we continued to be a leading contributor to
Technologies currently has more than the development of emerging 5G standards.
100 licensees, mainly for our SEPs.

38 NOKIA IN 2017
 Business overview

Competition New patent filings in 2017

2017 highlights

1 300+
In the digital health market, our competitors
range from large multinationals to innovative ■■ At Mobile World Congress in February,
smaller specialist vendors. Until recently, Nokia Technologies launched its
our focus was on higher growth segments of Patient Care Platform to enable
the total market, including consumer health doctors to remotely monitor patients
and wellness products such as hybrid smart with their smart devices. The platform,
watches, blood pressure monitors, scales which is being used in a trial by the UK’s R&D investment over the last two decades

~EUR 123bn
and thermometers, as well as remote patient National Health Service, aims to better
monitoring. Fitbit, Garmin, Xiaomi, and Apple prevent and manage chronic health
compete in personal wellness products, along conditions and drive timely and
with players like Omron, Qardio, and iHealth. targeted patient care.
Philips, Honeywell Life Care Solutions,
■■ During the year, Nokia signed
Medtronic, and Vivify Health are active
a number of patent licensing Patent licensees
around remote patient monitoring.
agreements, including with Apple,

100+
Huawei, LG Electronics and Xiaomi.
Our agreements with Apple and
Xiaomi also include broader business
collaborations.
■■ Our exclusive brand licensee for
phones and tablets, HMD Global,
launched six new Nokia branded
Android smartphones and five new
Nokia branded feature phones during
its first year of operations. The new
products have achieved outstanding
net promoter (NPS) scores.

NOKIA IN 2017 39
Principal industry trends
affecting operations

Business-specific trends Industry trends

The network and IP infrastructure, software
Third, we see an increasing demand for large
high-performance networks in some key
and related services industry has witnessed areas outside the traditional communications
Networks business certain prominent trends in recent years, service provider space, which we define as
We are a leading vendor in the network which have also affected our Networks our adjacent markets. Webscale companies
and IP infrastructure, software, and the business. First, the increase in the use of and extra-large enterprises—such as Apple,
related services market. We provide a data services and the resulting exponential Facebook, Google, Alibaba and Amazon—are
broad range of different products, from increase in data traffic has resulted in an investing in cloud technology and network
the hardware components of networks used increased need for high-performance, infrastructure to build these high-performing,
by communications service providers and high-quality and highly reliable networks. secure networks. In addition, other target
increasingly by customers in other select The continuing increase in data traffic has, vertical markets such as energy, transportation
verticals, to software solutions supporting however, not been directly reflected in and the public sector are investing in their
the efficient interaction of networks, as well operators’ revenue. Consequently, there is own network infrastructure, to connect data
as services to plan, optimize, implement, an increased need to be efficient and cost centers and provide seamless IP interconnection
run and upgrade networks. Our Networks competitive for both communications service and digital services delivery.
business is conducted through five business providers and network infrastructure and
services vendors. Pricing and price erosion
groups: Mobile Networks, Fixed Networks, In 2017, while we did not witness a
Global Services, IP/Optical Networks and Nokia Second, we are witnessing continued widespread change in the overall pricing
Software. These business groups provide an consolidation among communications service environment, we saw robust competition
end-to-end portfolio of hardware, software providers, driven by their desire to provide a in China in the second half of the year,
and services to enable us to deliver the next wider scope of services, especially through where early positioning for 5G is underway.
generation of leading networks solutions and the convergence of disparate network
services to our customers. We aim for all five technologies across mobile, fixed, and IP Product mix
business groups to be innovation leaders, and optical networks. In order to improve The profitability of our Networks business
drawing on our frontline R&D capabilities to networks in terms of coverage, capacity and is affected by our product mix, including the
deliver leading products and services for our quality, communications service providers share of software in the sales mix. Products
customers, and ultimately ensure our long- are continuing their transition to all-IP and services also have varying profitability
term value creation. For more information architectures, with an emphasis on fast access profiles. For instance, our Ultra Broadband
on the Networks business refer to “Business to their networks through copper, fiber, LTE Networks and IP Networks and Applications
overview—Networks business” above. and new digital services delivery. We are also reportable segments offer a combination
seeing similar trends with cable operators, of hardware and software, which generally
who are investing in the deployment of have higher gross margins, but also require
high-speed networks. Our end-to-end significant R&D investment, whereas the
portfolio of products and services can be Global Services reportable segment has
utilized to address both the fixed mobile offerings that are typically labor-intensive,
convergence and the transition to all-IP while carrying low R&D investment, and have
architectures. relatively low gross margins compared to
the hardware and software products.

40 NOKIA IN 2017
 Business overview

Seasonality and cyclical nature of projects The next major technology cycle is expected Cost of components and raw materials
Our Networks business’ sales are affected to be the transition from 4G to 5G, with There are several important factors driving
by seasonality in the network operators’ trials beginning in 2018, commercial the profitability and competitiveness of
spending cycles, with generally higher sales in deployments in lead markets in 2019 our Networks business: scale, operational
the fourth quarter, followed by generally lower and large-scale deployments in 2020. efficiency and pricing, and cost discipline.
sales in the first quarter. In addition to normal The costs of our networks products comprise,
industry seasonality, there are normal peaks Continued operational efficiency among others, components, manufacturing,
and troughs in the deployment of large improvements labor and overheads, royalties and licensing
infrastructure projects. The timing of these In 2017, our Networks business continued fees, depreciation of product machinery,
projects depends on new radio spectrum to focus on operational improvements across logistics and warranty and other quality costs.
allocation, network upgrade cycles and the its business groups. In order to continue to
availability of new consumer devices and make our Networks business more efficient,
services, which in turn affects our Networks’ higher-performing and positioned for
business sales. As an example, during the long-term success, we aim to further
last couple of years some of the major LTE strengthen our productivity, efficiency and
deployments have been largely completed. competitive cost structure through strong
operational discipline.

NOKIA IN 2017 41
Principal industry trends
affecting operations continued

Nokia Technologies Monetization strategies of IPR Nokia announced on February 15, 2018 that
Success in the technology industry requires it had initiated a review of strategic options
Nokia Technologies pursues new business for this business. This strategic review of
significant R&D investment, with the resulting
opportunities building on our innovations and the Digital Health business may or may not
patents and other IPR utilized to protect and
the Nokia brand. Nokia Technologies develops result in any transaction or other changes.
generate a return on those investments and
and licenses cutting-edge innovations that In digital media, the slower-than-expected
related inventions. In recent years, we have
are powering the next revolution in computing development of the virtual reality market has
seen new entrants in the mobile device
and mobility. The Nokia Technologies strategy led Nokia Technologies to reduce investments
industry, many of which do not have licenses
consists of: 1) patent licensing, focused in this area and focus more on technology
to our patents. Our aim is to approach these
on licensing standard-essential and other licensing opportunities.
companies by potentially using one or more
patents in the Nokia portfolio to companies
means of monetization. We believe we are
in the mobile devices market and beyond; In patent licensing, the main opportunities
well-positioned to protect, and build on,
2) technology licensing, focused on licensing we are pursuing are: 1) renewing existing
our existing industry-leading patent
proprietary spatial audio and video license agreements, and negotiating new
portfolio, and consequently to increase
technologies to enable our customers to build license agreements with mobile device
our shareholders’ value.
better products; 3) brand licensing, to help manufacturers; and 2) expanding the scope
our customers leverage the value of the Nokia We see a number of means of monetizing of licensing activities to other industries,
brand in consumer devices; and 4) developing these opportunities: on the one hand, we in particular those that implement mobile
new products and technologies in digital seek to license our patent portfolio, and communication technologies such as
health. For more information on the Nokia new technological innovations that can be automotive and consumer electronics.
Technologies business, refer to “Business integrated into other companies’ products We no longer need patent licenses for our
overview—Nokia Technologies”. and services. We also engage in brand own mobile phone business, enabling the
licensing to leverage the Nokia brand possibility of improving the balance of
in consumer devices. In digital health, inbound and outbound patent licensing.

42 NOKIA IN 2017
 Business overview

In brand licensing, we will continue to seek Research, development and patent were denominated in euro. In 2017,
further opportunities to bring the Nokia brand portfolio development approximately 45% of Continuing operations
into consumer devices, by licensing our brand As the creation of new technology assets net sales were denominated in U.S. dollars
and other intellectual property. For example, and patented innovations is heavily focused and approximately 10% in Chinese yuan.
under a strategic agreement covering on R&D activities with long lead-times to
branding rights and intellectual property incremental revenues, we may from time to During 2017, the U.S. dollar depreciated
licensing, in 2016, Nokia Technologies granted time see investment opportunities that have against the euro and this had a slightly
HMD Global, a company based in Finland, strategic importance. This generally affects negative impact on our net sales expressed
an exclusive global license to create operating expenses before sales reflect in euros. However, the weaker U.S. dollar also
Nokia-branded phones and tablets for ten a return on those investments. contributed to slightly lower cost of sales and
years. During 2017, HMD Global launched operating expenses, as approximately 45% of
our total cost base was in U.S. dollars. In total,
11 new phones, including six Android Trends affecting our businesses before hedging, the depreciation of the U.S.
smartphones.
Exchange rates dollar had a slightly negative effect on our
In technology licensing, the opportunities We are a company with global operations operating profit in 2017.
are more long-term in our view, but we will and net sales derived from various countries,
look at opportunities to license technologies invoiced in various currencies. Therefore, During 2017, the Chinese yuan depreciated
developed by Nokia Technologies and our business and results from operations against the euro and this had a slightly
delivered to partners in consumer electronics are exposed to changes in exchange rates negative impact on our net sales expressed in
as solutions or technology packages that can between the euro, our reporting currency, and euros. However, the weaker Chinese yuan also
be integrated into their products and services other currencies, such as the U.S. dollar and contributed to slightly lower cost of sales and
to help enable the Programmable World. the Chinese yuan. The magnitude of foreign operating expenses, as approximately 10%
exchange exposures changes over time as a of Continuing operations total costs were
To grow each of the aforementioned business denominated in Chinese yuan. In total, before
function of our net sales and costs in different
programs, it is necessary to invest in hedging, the depreciation of the Chinese yuan
markets, as well as the prevalent currencies
commercial capabilities to support them. had a slightly negative effect on our operating
used for transactions in those markets. Refer
also to “General facts on Nokia—Selected profit in 2017.
General trends in IPR licensing
In general, there has been increased focus financial data—Exchange rate data” below. Significant changes in exchange rates may
on IPR protection and licensing, and this also impact our competitive position and
To mitigate the impact of changes in
trend is expected to continue. As such, related price pressures through their impact
exchange rates on our results, we hedge
new agreements are generally a product of on our competitors.
material net foreign exchange exposures
lengthy negotiations and potential litigation
(net sales less costs in a currency) typically For a discussion of the instruments used by
or arbitration, and therefore the timing and
with a hedging horizon of approximately us in connection with our hedging activities,
outcome may be difficult to forecast. Due to
12 months. For the majority of these hedges, refer to Note 36, Risk management of
the structure of patent license agreements,
hedge accounting is applied to reduce our consolidated financial statements
the payments may be very infrequent, at
income statement volatility. included in this annual report. Refer
times may be partly retrospective, and the
lengths of license agreements can vary. In 2017, approximately 25% of Continuing also to “Operating and financial review
operations net sales and approximately and prospects—Risk factors”.
Additionally, there are clear regional
30% of Continuing operations costs
differences in the ease of protecting and
licensing patented innovations. We have seen
some licensees actively avoiding making The average currency mix for net sales and total costs:
license payments, and some licensors using
aggressive methods to collect them; both 2017 2016
behaviors have attracted regulatory attention.
Currency Net sales Total costs Net sales Total costs
We expect discussion of the regulation of
licensing to continue at both global and EUR ~25% ~30% ~25% ~25%
regional level. Some of those regulatory USD ~45% ~45% ~50% ~45%
developments may be adverse to the CNY ~10% ~10% ~10% ~10%
interests of technology developers and Other ~20% ~15% ~15% ~20%
patent owners, including us. Total 100% 100% 100% 100%

NOKIA IN 2017 43
Board review

44 NOKIA IN 2017
 Operating and financial review
Board review
and prospects

Contents
Board review 46
Results of operations 47
Continuing operations 47
Discontinued operations 52
Results of segments 54
Networks business 54
Nokia Technologies 60
Group Common and Other 62
Liquidity and capital resources 64
Financial position 64
Cash flow 64
Financial assets and debt 65
Capital structure optimization
program 66
Structured finance 66
Venture fund investments
and commitments 67
Treasury policy 67
Material subsequent events 67
Sustainability and corporate
responsibility68
Materiality assessment and
sustainability performance 68
Improving people’s lives
through technology 69
Protecting the environment 70
Conducting our business
with integrity 71
Respecting our people 72
Making change happen together 73
Employees74
Dividend75
Risk factors 76
Shares and share capital 78
Board of Directors and management 79
Articles of Association 79

NOKIA IN 2017 45
Board review

After the successful integration of

Alcatel Lucent, 2017 was a year of
execution and taking our strategy forward.

Nokia continued the execution of its strategy The Board held 21 meetings in 2017 to,
during 2017 and delivered on its financial among other things, address the strategic
targets. The year was challenging in terms direction of the company, review the
of the decline in the addressable market for management succession planning, resolve
the Networks business, and we expect that on acquisitions and other transactions
market to decline again in 2018, compared introduced by the management, and execute
to 2017. However, for 2019 and 2020, we on our capital structure optimization program.
see market conditions improving, driven by
rollouts of 5G networks and we believe that During 2017, Nokia acquired Comptel
our end-to-end portfolio positions us well Corporation, a Finland-based
to deliver on our strategic targets. In terms telecommunications software company
of Nokia Technologies, the patent licensing and Deepfield Networks Inc., a United
business delivered excellent financial results States-based leader in real-time analytics
in 2017, and Nokia signed several new patent forInternet Protocol network performance
licensing agreements and also won patent management and security. Additionally,
arbitration awards with companies including Nokia completed in 2017 its capital structure
Apple, Blackberry, and Huawei. In Nokia optimization program announced in October
Licensing within Nokia Technologies, we see 2015. We believe that we have managed to
over the next few years opportunities for create a strong and efficient capital structure,
revenue and profitability expansions arising while delivering shareholder returns.
from new patent licensing agreements with The Board of Directors continues to be
smartphone vendors, automotive companies focused on creating shareholder value and is
and consumer electronics companies as well committed to proposing a growing dividend,
as brand and technology licensing. Given the including for 2018.
strong group level performance in 2017 and
continued momentum in the execution of our
strategy, the Board of Directors has decided
that it will propose a dividend of EUR 0.19
per share for 2017 (EUR 0.17 for 2016).

46 NOKIA IN 2017
 Board review

Results of operations

Nokia creates the technology to connect the world. We have global leadership in mobile and fixed network infrastructure with the software,
services and advanced technologies to serve customers in more than 100 countries around the world. We are driving the transition to smart,
virtual networks and connectivity by creating one single network for all services, converging mobile and fixed broadband, IP routing and optical
networks, with the software and services to manage them.
Nokia is enabling the infrastructure for 5G and the Internet of Things, and shaping the future of technology to transform the human experience.
Our comprehensive portfolio of products, services and licensing, and vast knowhow affords our customers the means and ability to optimally
deliver extraordinary customer services and experiences. Through our six business groups, we have a global presence with operations in Europe,
the Middle East & Africa, Greater China, North America, Asia-Pacific and Latin America.
The financial information included in this “Operating and financial review and prospects” section as of December 31, 2017 and 2016 and for
each of the three years ended December 31, 2017, 2016 and 2015 has been derived from our audited consolidated financial statements
included in this annual report. The financial information as of December 31, 2017 and 2016 and for each of the three years ended
December 31, 2017, 2016 and 2015 should be read in conjunction with, and is qualified in its entirety by reference to, our audited
consolidated financial statements.
On April 1, 2017 we revised our financial reporting structure. We have two businesses: Nokia’s Networks business and Nokia Technologies,
and four reportable segments for financial reporting purposes: Ultra Broadband Networks, Global Services and IP Networks and Applications
(within Nokia’s Networks business); and Nokia Technologies. We also present certain segment data for Group Common and Other as well as
for Discontinued operations. The comparative financial information presented below has been prepared to reflect the financial results of
our Continuing operations as if the new financial reporting structure had been in operation for the full years 2017, 2016 and 2015. Certain
adjustments and reclassifications have been necessary. Refer to Note 4, Segment information, of our consolidated financial statements
included in this annual report.

Continuing operations
For the year ended December 31, 2017 compared to the year ended December 31, 2016
The following table sets forth selective line items and the percentage of net sales for the years indicated.

2017 2016 Year-on-year

For the year ended December 31 EURm % of net sales EURm % of net sales change %
Net sales 23 147 100.0 23 641 100.0 (2)
Cost of sales (14 008) (60.5) (15 117) (63.9) (7)
Gross profit 9 139 39.5 8 524 36.1 7
Research and development expenses (4 916) (21.2) (4 997) (21.1) (2)
Selling, general and administrative expenses (3 615) (15.6) (3 767) (15.9) (4)
Other income and expenses (592) (2.6) (860) (3.6) (31)
Operating profit/(loss) 16 0.1 (1 100) (4.7) –
Share of results of associated companies and joint ventures 11 – 18 0.1 (39)
Financial income and expenses (537) (2.3) (287) (1.2) 87
Loss before tax (510) (2.2) (1 369) (5.8) (63)
Income tax (expense)/benefit (927) (4.0) 457 1.9 –
Loss for the year (1 437) (6.2) (912) (3.9) 58

Net sales The following table sets forth distribution of net sales by geographical
Continuing operations net sales in 2017 were EUR 23 147 million, a area for the years indicated.
decrease of EUR 494 million, or 2%, compared to EUR 23 641 million
in 2016. The decrease in Continuing operations net sales was primarily 2017 2016 Year-on-year
For the year ended December 31 EURm EURm change %
due to a decrease in Nokia’s Networks business net sales, partially
offset by an increase in Nokia Technologies net sales. Asia-Pacific 4 228 4 223 –
Europe(1) 6 833 6 410 7
Greater China 2 516 2 654 (5)
Latin America 1 279 1 458 (12)
Middle East & Africa 1 907 1 872 2
North America 6 384 7 024 (9)
Total 23 147 23 641 (2)
(1) All Nokia Technologies IPR and licensing net sales are allocated to Finland.

NOKIA IN 2017 47
Results of operations continued

Gross profit Other income and expenses for Continuing operations in 2017
Gross profit for Continuing operations in 2017 was EUR 9 139 million, was a net expense of EUR 592 million, a change of EUR 268 million,
an increase of EUR 615 million, or 7%, compared to EUR 8 524 million compared to a net expense of EUR 860 million in 2016. The net
in 2016. The increase in gross profit was primarily due to lower positive fluctuation in our other income and expenses was primarily
working capital-related purchase price allocation adjustments and due to lower restructuring and associated charges and a net positive
higher gross profit in Nokia Technologies, partially offset by lower fluctuation in Nokia’s Networks business and Group Common and
gross profit in Nokia’s Networks business and higher product portfolio Other other income and expenses, partially offset by impairment
integration-related costs. Gross margin for Continuing operations in charges. Other income and expenses included restructuring and
2017 was 39.5%, compared to 36.1% in 2016. In 2017, gross profit associated charges of EUR 576 million in 2017 compared to
included product portfolio integration-related costs of EUR 453 million EUR 759 million in 2016.
and working capital-related purchase price allocation adjustments of
EUR 55 million. In 2016, gross profit included working capital-related In 2017, as a result of challenging business conditions, we recorded
purchase price allocation adjustments of EUR 840 million, which a non-cash charge to other income and expenses of EUR 141 million,
resulted in higher cost of sales and lower gross profit when the due to the impairment of goodwill related to our Digital Health
inventory was sold; and product portfolio integration-related costs business, which is part of Nokia Technologies. The impairment charge
of EUR 274 million. was allocated to the carrying amount of goodwill held within the digital
health cash generating unit, which was reduced to zero. In 2017, we
Operating expenses also recorded a non-cash impairment charge to other income and
Our R&D expenses for Continuing operations in 2017 were expenses of EUR 32 million related to acquired intangible assets in
EUR 4 916 million, a decrease of EUR 81 million, or 2%, compared to Nokia’s Networks business.
EUR 4 997 million in 2016. R&D expenses represented 21.2% of our
net sales in 2017 compared to 21.1% in 2016. The decrease in R&D Operating profit/loss
expenses were due to decreases in Nokia’s Networks business, Our operating profit for Continuing operations in 2017 was
Group Common and Other and Nokia Technologies R&D expenses. EUR 16 million, a change of EUR 1 116 million, compared to an
In 2017, R&D expenses included amortization and depreciation operating loss of EUR 1 100 million in 2016. The change in operating
of acquired intangible assets and property, plant and equipment result was primarily due to a higher gross profit and, to a lesser extent,
of EUR 633 million, compared to EUR 619 million in 2016, as well a net positive fluctuation in other income and expenses and lower
as product portfolio integration-related costs of EUR 57 million, selling, general and administrative and R&D expenses. Our operating
compared to EUR 62 million in 2016. margin in 2017 was approximately break even compared to negative
4.7% in 2016.
Our selling, general and administrative expenses for Continuing
operations in 2017 were EUR 3 615 million, a decrease of The following table sets forth the impact of unallocated items on
EUR 152 million, or 4%, compared to EUR 3 767 million in 2016. operating profit/loss:
Selling, general and administrative expenses represented 15.6% of
EURm 2017 2016
our net sales in 2017 compared to 15.9% in 2016. The decrease in
selling, general and administrative expenses was primarily due to Total segment operating profit(1) 2 587 2 172
lower transaction and integration-related costs, a decrease in Nokia’s Amortization and depreciation of acquired
Networks business selling, general and administrative expenses and, intangible assets and property, plant
to a lesser extent, Group Common and Other selling, general and and equipment (1 033) (1 026)
administrative expenses, partially offset by an increase in Nokia Restructuring and associated charges (579) (774)
Technologies selling, general and administrative expenses. Selling, Product portfolio strategy costs (536) (348)
general and administrative expenses included amortization and
Transaction and related costs, including
depreciation of acquired intangible assets, and property, plant and
integration costs relating to the acquisition
equipment of EUR 394 million in 2017 compared to EUR 386 million
of Alcatel Lucent (206) (295)
in 2016, as well as transaction and integration-related costs of
EUR 194 million, compared to EUR 294 million in 2016. Impairment of intangible assets (173) –
Release of acquisition-related fair value
adjustments to deferred revenue and
inventory (55) (840)
Other 11 11
Total operating profit/(loss) 16 (1 100)
(1) Excludes costs related to the acquisition of Alcatel Lucent and related integration, goodwill
impairment charges, intangible asset amortization and other purchase price fair value
adjustments, restructuring and associated charges and certain other items.

48 NOKIA IN 2017
 Board review

Financial income and expenses On December 22, 2017, the United States passed a comprehensive
Financial income and expenses for Continuing operations was a net set of tax reforms into law. The new law, known as the Tax Cuts and
expense of EUR 537 million in 2017 compared to a net expense of Jobs Act, includes numerous changes to prior tax law, including a
EUR 287 million in 2016, an increase of EUR 250 million, or 87%. permanent reduction in the federal corporate income tax rate from
The net negative fluctuation in financial income and expenses was 35% to 21%. Our deferred tax assets and liabilities are measured
primarily due to costs of EUR 220 million related to the offer to using enacted tax rates expected to apply to taxable income in the
purchase the 6.50% notes due January 15, 2028, the 6.45% notes years in which those temporary differences are expected to be
due March 15, 2029, the 6.75% notes due February 4, 2019 and recovered or settled. The effect on deferred tax assets and liabilities
the 5.375% notes due May 15, 2019; losses from foreign exchange of a change in tax rates is recognized in the consolidated income
fluctuations; a non-recurring interest expense related to a change statement in the period in which the law is substantively enacted.
to uncertain tax positions; and a loss on the sale of financial assets. We concluded that the United States federal income tax rate reduction
This was partially offset by a change in the fair value of the financial causes our United States deferred tax assets and liabilities to be
liability to acquire Nokia Shanghai Bell non-controlling interest and revalued in 2017 and, therefore, recognized an additional tax provision
the absence of costs related to the early redemption of Alcatel Lucent of EUR 777 million related to such revaluation. The new tax law also
high yield bonds, which adversely affected full year 2016. contains several other changes, in addition to the reduction in the
federal corporate tax rate, many of which become effective for tax
Refer to “—Liquidity and capital resources” below. years beginning in 2018. We continue to consider the impact all the tax
Loss before tax reform provisions will have on us and have made reasonable estimates
Our loss before tax for Continuing operations in 2017 was for certain effects in our December 31, 2017 consolidated financial
EUR 510 million, a change of EUR 859 million compared to a loss statements, as appropriate.
of EUR 1 369 million in 2016. Loss attributable to equity holders of the parent and earnings
Income tax per share
Income taxes for Continuing operations was a net expense of The loss attributable to equity holders of the parent in 2017 was
EUR 927 million in 2017, a change of EUR 1 384 million compared to a EUR 1 494 million, an increase of EUR 728 million, compared to a loss
net benefit of EUR 457 million in 2016. The change in net income taxes of EUR 766 million in 2016. The change in profit attributable to equity
was primarily due to increased profitability, deferred tax expenses of holders of the parent was primarily due to an income tax expense,
EUR 777 million from re-measurement of deferred tax assets resulting compared to an income tax benefit in 2016 and a net negative
from the tax rate change in the United States, a non-recurring tax fluctuation in financial income and expenses. This was partially offset
expense of EUR 245 million (EUR 439 million tax benefit in 2016) by an operating profit in 2017, compared to an operating loss in 2016.
related to the integration of the former Alcatel Lucent and Nokia Our total basic EPS in 2017 decreased to negative EUR 0.26 (basic)
operating models; as well as income taxes for prior years primarily and negative EUR 0.26 (diluted) compared to negative EUR 0.13 (basic)
from to the disposal of the former Alcatel Lucent railway signaling and negative EUR 0.13 (diluted) in 2016.
business in 2006 to Thalès. This was partially offset by three factors:
lower income taxes due to our regional profit mix in 2017 compared Cost savings program
to 2016, lower losses than in 2016 in countries for which we do not On April 6, 2016, we launched a new cost savings program, targeting
recognize deferred tax assets, and a deferred tax benefit from approximately EUR 1 200 million of recurring annual cost savings to
re-measurement of deferred tax assets resulting from the tax rate be achieved in full year 2018. In 2017, we recognized restructuring
changes (in countries other than the United States). Refer to Note 12, and associated charges of approximately EUR 550 million related
Income taxes, of our consolidated financial statements included in to the cost savings program. Cumulative recognized restructuring
this annual report. and associated charges are approximately EUR 1 300 million and we
expect total restructuring and associated charges to be approximately
EUR 1 900 million.
In 2017, we had restructuring and associated cash outflows of
approximately EUR 550 million related to the cost savings program.
Cumulative restructuring and associated cash outflows are
approximately EUR 950 million and we expect total restructuring
and associated cash outflows to be approximately EUR 2 250 million,
including approximately EUR 550 million related to previous Nokia
and Alcatel Lucent restructuring and cost savings programs.

NOKIA IN 2017 49
Results of operations continued

For the year ended December 31, 2016 compared to the year ended December 31, 2015
The following table sets forth selective line items and the percentage of net sales that they represent for the years indicated.

2016 2015 Year-on-year

For the year ended December 31 EURm % of net sales EURm % of net sales change %
Net sales 23 641 100.0 12 560 100.0 88
Cost of sales (15 117) (63.9) (6 963) (55.4) 117
Gross profit 8 524 36.1 5 597 44.6 52
Research and development expenses (4 997) (21.1) (2 080) (16.6) 140
Selling, general and administrative expenses (3 767) (15.9) (1 772) (14.1) 113
Other income and expenses (860) (3.6) (48) (0.4) –
Operating (loss)/profit (1 100) (4.7) 1 697 13.5 –
Share of results of associated companies and joint ventures 18 0.1 29 0.2 (38)
Financial income and expenses (287) (1.2) (186) (1.5) 54
(Loss)/profit before tax (1 369) (5.8) 1 540 12.3 –
Income tax benefit/(expense) 457 1.9 (346) (2.8) –
(Loss)/profit for the year (912) (3.9) 1 194 9.5 –

Net sales Gross profit

Continuing operations net sales in 2016 were EUR 23 641 million, an Gross profit for Continuing operations in 2016 was EUR 8 524 million,
increase of EUR 11 081 million, or 88%, compared to EUR 12 560 million an increase of EUR 2 927 million, or 52%, compared to EUR 5 597 million
in 2015. The increase in Continuing operations net sales was primarily in 2015. The increase in gross profit was primarily due to Nokia’s
attributable to growth in Nokia’s Networks business and Group Networks business, partially offset by working capital-related purchase
Common and Other, primarily related to the acquisition of Alcatel price allocation adjustments, which resulted in higher cost of sales and
Lucent and, to a lesser extent, growth in Nokia Technologies. lower gross profit when the inventory was sold; and product portfolio
integration-related costs, all of which primarily related to the acquisition
The following table sets forth distribution of net sales by geographical of Alcatel Lucent. Gross margin for Continuing operations in 2016 was
area for the years indicated. 36.1% compared to 44.6% in 2015. In 2016, cost of sales included
working capital-related purchase price allocation adjustments of
2016 2015 Year-on-year
For the year ended December 31 EURm EURm change % EUR 509 million, which resulted in higher cost of sales and lower
gross profit when the inventory was sold; and product portfolio
Asia-Pacific 4 223 3 248 30
integration-related costs of EUR 274 million.
Europe(1) 6 410 3 817 68
Greater China 2 654 1 718 54 Operating expenses
Latin America 1 458 979 49 Our R&D expenses for Continuing operations in 2016 were
EUR 4 997 million, an increase of EUR 2 917 million, or 140%,
Middle East & Africa 1 872 1 195 57
compared to EUR 2 080 million in 2015. R&D expenses represented
North America 7 024 1 603 338 21.1% of our net sales in 2016 compared to 16.6% in 2015. The
Total 23 641 12 560 88 increase in R&D expenses was primarily attributable to Nokia’s
Networks business, amortization of acquired intangible assets and
(1) All Nokia Technologies net sales are allocated to Finland.
depreciation of acquired property, plant and equipment; and, to a
lesser extent, product portfolio integration costs, as well as Group
Common and Other, all of which primarily related to the acquisition
of Alcatel Lucent, in addition to Nokia Technologies. R&D expenses
included amortization and depreciation of acquired intangible assets,
and property, plant and equipment of EUR 619 million in 2016
compared to EUR 35 million in 2015, as well as product portfolio
integration-related costs of EUR 61 million in 2016.

50 NOKIA IN 2017
 Board review

Our selling, general and administrative expenses for Continuing Financial income and expenses
operations in 2016 were EUR 3 767 million, an increase of Financial income and expenses for Continuing operations was a net
EUR 1 995 million, or 113%, compared to EUR 1 772 million in 2015. expense of EUR 287 million in 2016 compared to a net expense of
Selling, general and administrative expenses represented 15.9% of EUR 186 million in 2015, an increase of EUR 101 million, or 54%. The
our net sales in 2016 compared to 14.1% in 2015. The increase in change in financial income and expenses was primarily attributable to
selling, general and administrative expenses was primarily attributable higher interest expenses, including charges of EUR 41 million related
to Nokia’s Networks business, amortization of acquired intangible to the redemption of Alcatel Lucent bonds, net interest expenses
assets and depreciation of acquired property, plant and equipment, of EUR 65 million for defined benefit pensions, and impairments of
and transaction and integration-related costs and Group Common and EUR 108 million for certain investments in private funds; partially
Other, all of which primarily related to the acquisition of Alcatel Lucent, offset by higher interest income, significantly lower foreign
as well as Nokia Technologies. Selling, general and administrative exchange losses and realized gains from venture fund distributions.
expenses included amortization and depreciation of acquired
intangible assets, and property, plant and equipment of EUR 385 million Refer to “—Liquidity and capital resources” below.
in 2016 compared to EUR 44 million in 2015, as well as transaction Loss/profit before tax
and integration-related costs of EUR 294 million in 2016. Our loss before tax for Continuing operations in 2016 was
Other income and expenses for Continuing operations in 2016 was EUR 1 369 million, a change of EUR 2 909 million compared to
a net expense of EUR 860 million, a change of EUR 812 million, a profit of EUR 1 540 million in 2015.
compared to a net expense of EUR 48 million in 2015. The change Income tax
was primarily attributable to higher restructuring and associated Income taxes for Continuing operations was a net benefit of
charges and, to a lesser extent, the absence of realized gains related EUR 457 million in 2016, a change of EUR 803 million compared to
to certain investments made through venture funds. Other income a net expense of EUR 346 million in 2015. In 2016, net income tax
and expenses included restructuring and associated charges of benefit was primarily related to two factors. Firstly, we recorded a loss
EUR 759 million in 2016 compared to EUR 121 million in 2015. before tax compared to profit before tax in 2015. Secondly, following
Operating loss/profit the completion of the squeeze-out of the remaining Alcatel Lucent
Our operating loss for Continuing operations in 2016 was securities, we launched actions to integrate the former Alcatel Lucent
EUR 1 100 million, a change of EUR 2 797 million, compared to an and Nokia operating models. In 2016, in connection with these
operating profit of EUR 1 697 million in 2015. The change in operating integration activities, we transferred certain intellectual property
result was primarily attributable to higher R&D expenses and selling, to our operations in the United States, recording a tax benefit and
general and administrative expenses, and a net negative fluctuation additional deferred tax assets of EUR 348 million. In addition, we
in other income and expenses, partially offset by higher gross profit. elected to treat the acquisition of Alcatel Lucent’s operations in the
Our operating margin in 2016 was negative 4.7% compared to United States as an asset purchase for United States tax purposes.
positive 13.5% in 2015. The impact of this election was to utilize or forfeit existing deferred tax
assets and record new deferred tax assets with a longer amortization
The following table sets forth the impact of unallocated items on period than the life of those forfeited assets. As a result of this we
operating profit: recorded EUR 91 million additional deferred tax assets in 2016.

EURm 2016 2015

Following the acquisition of Alcatel Lucent, we now have a strong
presence in three jurisdictions: Finland, France and the United States,
Total segment operating profit(1) 2 172 1 958 which had an impact on our effective tax rate in 2016. The local
Amortization and depreciation of acquired corporate tax rate in the United States and France is significantly
intangible assets and property, plant higher compared to Finland. In addition, we do not recognize deferred
and equipment (1 026) (79) tax assets for tax losses and temporary differences in France as
Release of acquisition-related fair value our ability to utilize unrecognized deferred tax assets is currently
adjustments to deferred revenue uncertain. As of December 31, 2016 we have unrecognized deferred
and inventory (840) – tax assets in France of EUR 4.8 billion.
Restructuring and associated charges (774) (123)
Product portfolio strategy costs (348) –
Transaction and related costs, including
integration costs relating to the acquisition
of Alcatel Lucent (295) (99)
Other 11 40
Total operating (loss)/profit (1 100) 1 697
(1) Excludes costs related to the acquisition of Alcatel Lucent and related integration, goodwill
impairment charges, intangible asset amortization and other purchase price fair value
adjustments, restructuring and associated charges and certain other items.

NOKIA IN 2017 51
Results of operations continued

Loss/profit attributable to equity holders of the parent Discontinued operations

and earnings per share
Background
The loss attributable to equity holders of the parent in 2016 was
The two businesses below are presented as Discontinued operations
EUR 766 million, a change of EUR 3 232 million, compared to a profit
in this annual report. Refer to Note 6, Disposals treated as
of EUR 2 466 million in 2015. Continuing operations generated a loss
Discontinued operations, of our consolidated financial statements
attributable to equity holders of the parent in 2016 of EUR 751 million
included in this annual report.
compared to a profit of EUR 1 192 million in 2015. The change in profit
attributable to equity holders of the parent was primarily attributable HERE business
to the operating loss in 2016, compared to an operating profit in 2015 We sold our HERE digital mapping and location services business to
and, to a lesser extent, a net negative fluctuation in financial income a German automotive industry consortium comprised of AUDI AG,
and expenses, both of which primarily related to the acquisition of BMW Group and Daimler AG, that was completed on December 4, 2015
Alcatel Lucent. This was partially offset by an income tax benefit, (“the Sale of HERE Business”). The transaction, originally announced on
resulting from the acquisition of Alcatel Lucent, compared to an August 3, 2015, valued HERE at an enterprise value of EUR 2.8 billion,
income tax expense in 2015. In addition, the loss attributable to the subject to certain purchase price adjustments. We received net
non-controlling interests was higher, as a result of the acquisition proceeds from the transaction of approximately EUR 2.55 billion at the
of Alcatel Lucent. Our total basic EPS in 2016 decreased to negative closing of the transaction. We recorded a gain on the Sale of the HERE
EUR 0.13 (basic) and negative EUR 0.13 (diluted) compared to Business, including a related release of cumulative foreign exchange
EUR 0.67 (basic) and EUR 0.63 (diluted) in 2015. In 2015, profit for the translation differences of approximately EUR 1.2 billion, in the year
year included EUR 1 178 million gain on the Sale of the HERE Business ended December 31, 2015.
recorded in Discontinued operations. From Continuing operations, EPS 
in 2016 decreased to negative EUR 0.13 (basic) and negative EUR 0.13 Devices & Services business
(diluted) compared to EUR 0.32 (basic) and EUR 0.31 (diluted) in 2015. We sold substantially all of our Devices & Services business to
Microsoft in a transaction that was completed on April 25, 2014
(the “Sale of the D&S Business”). We granted Microsoft a ten-year
non-exclusive license to our patents and patent applications.
The announced purchase price of the transaction was EUR 5.44 billion,
of which EUR 3.79 billion related to the purchase of substantially all of
the Devices & Services business, and EUR 1.65 billion to the ten-year
mutual patent license agreement and the option to extend this
agreement into perpetuity. Of the Devices & Services-related assets,
our former CTO organization and our patent portfolio remained
within the Nokia Group, and are now part of the Nokia Technologies
business group.
For the year ended December 31, 2017 compared to the year ended
December 31, 2016
Discontinued operations loss for the year on ordinary activities was
EUR 27 million compared to a loss of EUR 29 million in 2016.
Discontinued operations loss for the year was EUR 21 million
compared to a loss of EUR 15 million in 2016. Loss for the year in 2017
included EUR 5 million gain on the Sale of the HERE Business. Loss for
the year in 2016 included EUR 7 million gain on the Sale of the HERE
Business and EUR 7 million gain on the Sale of the D&S Business.

52 NOKIA IN 2017
 Board review

For the year ended December 31, 2016 compared to the year ended December 31, 2015
As the Sale of the HERE Business closed on December 4, 2015, the financial results of Discontinued operations in 2016 are not comparable
to the financial results of Discontinued operations in 2015.
The following table sets forth selective line items for the years indicated.

2016 2015
For the year ended December 31 EURm EURm
Net sales – 1 075
Cost of sales – (244)
Gross profit – 831
Research and development expenses – (498)
Selling, general and administrative expenses (11) (213)
Other income and expenses (4) (23)
Operating (loss)/profit (15) 97
Financial income and expenses 14 (9)
(Loss)/profit before tax (1) 88
Income tax (expense)/benefit (28) 8
(Loss)/profit for the year, ordinary activities (29) 96
Gain on the Sale of the HERE and D&S Businesses, net of tax 14 1 178
(Loss)/profit for the year (15) 1 274

Net sales Operating loss/profit

Discontinued operations did not generate net sales in 2016. In 2015, Discontinued operations operating loss in 2016 was EUR 15 million,
Discontinued operations net sales were EUR 1 075 million. The a change of EUR 112 million, compared to an operating profit of
decrease was attributable to the absence of net sales from HERE. EUR 97 million in 2015. The change in Discontinued operations
operating result was attributable to the absence of net sales and
Gross profit operating expenses from HERE.
Discontinued operations did not generate gross profit in 2016. In
2015, Discontinued operations gross profit was EUR 831 million and Loss/profit for the year
gross margin 77.3%. The decrease in gross profit was attributable Discontinued operations loss in 2016 was EUR 15 million, a change
to the absence of net sales and cost of sales from HERE. of EUR 1 289 million compared to a profit of EUR 1 274 million in
2015. The gain on the Sale of the HERE Business recorded in 2015
Operating expenses was EUR 1 178 million, which included a reclassification of
Discontinued operations operating expenses in 2016 were EUR 1 174 million of foreign exchange differences from other
EUR 15 million, a decrease of EUR 719 million, compared to comprehensive income.
EUR 734 million in 2015. The decrease was attributable to the
absence of operating expenses from HERE.

NOKIA IN 2017 53
Results of segments

Networks business
For the year ended December 31, 2017 compared to the year ended December 31, 2016
The following table sets forth selective line items and the percentage of net sales for the years indicated.

2017 2016 Year-on-year

For the year ended December 31 EURm % of net sales EURm % of net sales change %
Net sales 20 523 100.0 21 830 100.0 (6)
Cost of sales (12 590) (61.3) (13 370) (61.2) (6)
Gross profit 7 933 38.7 8 460 38.8 (6)
Research and development expenses (3 730) (18.2) (3 777) (17.3) (1)
Selling, general and administrative expenses (2 587) (12.6) (2 664) (12.2) (3)
Other income and expenses 95 0.5 (76) (0.3) –
Operating profit 1 711 8.3 1 943 8.9 (12)

Segment information(1)
Ultra IP Networks Ultra IP Networks
Broadband Global and Networks Broadband Global and Networks
Networks(2) Services Applications(3) total(4) Networks(2) Services Applications(3) total(4)
2017 2017 2017 2017 2016 2016 2016 2016
For the year ended December 31 EURm EURm EURm EURm EURm EURm EURm EURm
Net sales 8 970 5 810 5 743 20 523 9 758 6 036 6 036 21 830
Cost of sales (4 723) (4 697) (3 170) (12 590) (5 210) (4 825) (3 335) (13 370)
Gross profit 4 247 1 113 2 573 7 933 4 548 1 211 2 701 8 460
Research and development
expenses (2 361) (85) (1 284) (3 730) (2 393) (96) (1 288) (3 777)
Selling, general and
administrative expenses (1 162) (631) (794) (2 587) (1 212) (679) (773) (2 664)
Other income and expenses 57 14 24 95 (21) (30) (25) (76)
Operating profit 781 411 519 1 711 922 406 615 1 943
(1) Refer to Note 4, Segment information, of our consolidated financial statements included in this annual report.
(2) Net sales include EUR 6 895 million (EUR 7 357 million in 2016) attributable to Mobile Networks and EUR 2 075 million (EUR 2 401 million in 2016) attributable to Fixed Networks.
(3) Net sales include EUR 2 694 million (EUR 2 941 million in 2016) attributable to IP Routing; EUR 1 499 million (EUR 1 564 million in 2016) attributable to Optical Networks; and EUR 1 550 million
(EUR 1 531 million in 2016) attributable to Nokia Software.
(4) Includes Total Services net sales of EUR 8 221 million (EUR 8 531 million in 2016) which consists of all the services sales of Nokia’s Networks business, including Global Services of EUR 5 810 million
(EUR 6 036 million in 2016) and the services of Fixed Networks, IP/Optical Networks and Nokia Software.

The following table sets forth distribution of net sales by geographical Net sales
area for the years indicated. Nokia’s Networks business net sales in 2017 were EUR 20 523 million, a
decrease of EUR 1 307 million, or 6%, compared to EUR 21 830 million
2017 2016 Year-on-year in 2016. The decrease in Nokia’s Networks business net sales was
For the year ended December 31 EURm EURm change %
primarily due to Ultra Broadband Networks and, to a lesser extent,
Asia-Pacific 4 197 4 237 (1) IP Networks and Applications and Global Services. Ultra Broadband
Europe 4 442 4 884 (9) Networks net sales were EUR 8 970 million in 2017, a decrease of
Greater China 2 466 2 640 (7) EUR 788 million, or 8%, compared to EUR 9 758 million in 2016.
Latin America 1 245 1 446 (14) Global Services net sales were EUR 5 810 million in 2017, a decrease
of EUR 226 million, or 4%, compared to EUR 6 036 million in 2016.
Middle East & Africa 1 897 1 891 –
IP Networks and Applications net sales were EUR 5 743 million in 2017,
North America 6 276 6 732 (7) a decrease of EUR 293 million, or 5%, compared to EUR 6 036 million
Total 20 523 21 830 (6) in 2016.
The decrease in Ultra Broadband Networks net sales is comprised
of a decrease in Mobile Networks net sales of EUR 462 million and
a decrease in Fixed Networks net sales of EUR 326 million.

54 NOKIA IN 2017
 Board review

In 2017, Mobile Networks net sales were adversely affected by The increase in Nokia Software net sales was primarily due to growth
challenging market conditions. The decrease in Mobile Networks in network management, services and emerging businesses, partially
net sales was primarily due to radio networks and, to a lesser extent, offset by service delivery platforms and operational support systems.
converged core networks, partially offset by growth in advanced The year-on-year performance of Nokia Software benefitted from the
mobile networks solutions. From a growth perspective, small cells acquisition of Comptel. 2017 was a year of transformation for our
continued to deliver strong performance. Also, within radio networks, software business. It announced and executed plans to: 1) build our
LTE net sales grew, despite weakness in the global LTE market. For first standalone software sales force, 2) strengthen its services and
radio networks, the decrease was primarily related to Greater China, care practices, 3) increase R&D velocity through modern software
Europe and, to a lesser extent, North America and Latin America. development, including the introduction of a Common Software
This was partially offset by growth in Asia-Pacific. For converged Foundation that will improve the user experience for Nokia Software
core networks, the decrease was primarily related to North America, software, 4) acquire and integrate Comptel and 5) introduce new
partially offset by growth in Asia-Pacific. For advanced mobile networks products and services that provide customers with increased
solutions, the increase was primarily related to North America and intelligence and ability to push automation to new levels.
Greater China, partially offset by a decrease in Middle East & Africa.
Gross profit
The net sales performance in Fixed Networks was in comparison to Nokia’s Networks business gross profit in 2017 was EUR 7 933 million,
a particularly strong year 2016. The decrease in Fixed Networks net a decrease of EUR 527 million, or 6%, compared to EUR 8 460 million
sales was primarily due to broadband access and services. The in 2016. Nokia’s Networks business gross margin in 2017 was 38.7%,
decrease was primarily related to three specific customers, which compared to 38.8% in 2016. The decrease in Nokia’s Networks
led to declines in Asia-Pacific, North America and Latin America. For business gross profit was primarily due to Ultra Broadband Networks
broadband access, the decrease was primarily related to Asia-Pacific and, to a lesser extent, IP Networks and Applications and Global Services.
and, to a lesser extent, North America, partially offset by Europe.
Ultra Broadband Networks gross profit in 2017 was EUR 4 247 million,
For services, the decrease was primarily related to North America, a decrease of EUR 301 million, or 7%, compared to EUR 4 548 million
Europe and Latin America, partially offset by growth in Middle East & in 2016. The decrease in Ultra Broadband Networks gross profit was
Africa and Greater China. due to both Mobile Networks and Fixed Networks. The lower gross
profit in both Mobile Networks and Fixed Networks was primarily due
The decrease in Global Services net sales in 2017 was primarily due to lower net sales. Ultra Broadband Networks gross margin in 2017
to systems integration, care and managed services, partially offset was 47.3%, compared to 46.6% in 2016.
by growth in network implementation. For systems integration, the
decrease was primarily related to Europe and, to a lesser extent, North Global Services gross profit in 2017 was EUR 1 113 million, a decrease
America. The decrease in systems integration was attributable to the of EUR 98 million, or 8%, compared to EUR 1 211 million in 2016.
winding down of a specific set of legacy Alcatel Lucent contracts. For The decrease in Global Services gross profit was primarily due to
care, the decrease was primarily related to North America, Europe and network implementation, care and network planning and optimization,
Asia-Pacific, partially offset by growth in Greater China. For managed partially offset by systems integration. Global Services gross profit
services, the decrease was primarily related to Asia-Pacific, partially was negatively affected by the absence of a benefit related to lower
offset by growth in Europe. For network implementation, the increase incentive accruals in 2016. Global Services gross margin in 2017
was primarily related to North America, Latin America and Asia-Pacific, was 19.2%, compared to 20.1% in 2016.
partially offset by Middle East & Africa and Europe.
IP Networks and Applications gross profit in 2017 was EUR 2 573 million,
The decrease in IP Networks and Applications net sales is comprised a decrease of EUR 128 million, or 5%, compared to EUR 2 701 million
of decrease in IP/Optical Networks net sales of EUR 312 million, partly in 2016. The decrease in IP Networks and Applications gross profit was
offset by an increase in Nokia Software net sales of EUR 19 million. primarily due to IP/Optical Networks, partially offset by Nokia Software.
The lower gross profit in IP/Optical Networks was primarily due to
The decrease in IP/Optical Networks net sales was due to both lower net sales. The higher gross profit in Nokia Software was due to
IP routing and optical networks, primarily due to weakness in the higher net sales. IP Networks and Applications gross margin in 2017
communications service provider market in preparation for a new was 44.8%, compared to 44.7% in 2016.
product portfolio launch in IP routing. For IP routing, the decrease was
primarily related to North America and, to a lesser extent, Europe and
Latin America, partially offset by growth in Greater China. In addition,
IP routing net sales were adversely affected by lower resale of third
party IP routers. For optical networks, the decrease was primarily
related to Latin America, North America and Europe, partially offset
by Middle East & Africa and Asia-Pacific.

NOKIA IN 2017 55
Results of segments continued

Operating expenses Ultra Broadband Networks selling, general and administrative

Nokia’s Networks business R&D expenses were EUR 3 730 million expenses were EUR 1 162 million in 2017, a decrease of EUR 50 million,
in 2017, a slight decrease of EUR 47 million, or 1%, compared to compared to EUR 1 212 million in 2016. The decrease in Ultra
EUR 3 777 million in 2016. The decrease in Nokia’s Networks business Broadband Networks selling, general and administrative expenses
R&D expenses was primarily attributable to Ultra Broadband Networks was primarily due to Mobile Networks. The lower selling, general and
R&D expenses, and to a lesser extent, Global Services R&D expenses. administrative expenses in Mobile Networks was primarily due to lower
Ultra Broadband Networks R&D expenses were EUR 2 361 million in personnel expenses reflecting progress related to our cost savings
2017, a decrease of EUR 32 million, compared to EUR 2 393 million in program and lower consultancy costs. Ultra Broadband Networks
2016. The decrease in Ultra Broadband Networks R&D expenses was selling, general and administrative expenses were negatively affected
primarily due to Mobile Networks, partially offset by Fixed Networks. by the absence of a benefit related to lower incentive accruals for
The lower R&D expenses in Mobile Networks was primarily due to lower full year 2016. Global Services selling, general and administrative
personnel expenses, reflecting progress related to our cost savings expenses were EUR 631 million in 2017, a decrease of EUR 48 million,
program, with reduced R&D related to legacy technologies, partially compared to EUR 679 million in 2016. The decrease in Global Services
offset by an increase in R&D related to 5G. The higher R&D expenses selling, general and administrative expenses was primarily due to
in Fixed Networks was primarily related to investments to drive growth lower personnel expenses, reflecting progress related to our cost
and higher returns in our current addressable market, as well as to savings program. IP Networks and Applications selling, general and
expand into adjacent markets, both of which are priorities for Fixed administrative expenses were EUR 794 million in 2017, an increase
Networks. Related to our current addressable market, Fixed Networks of EUR 21 million, compared to EUR 773 million in 2016. The increase
has increased its investments to enhance its portfolio of offerings in IP Networks and Applications selling, general and administrative
towards the digital home and software defined access markets. expenses was primarily due to Nokia Software. The higher selling,
Related to adjacent markets, Fixed Networks has increased its general and administrative expenses in Nokia Software was primarily
investments towards the cable access market, and is now offering a due to investments to build an independent, dedicated software
disruptive cable solution which gives operators the flexibility to choose sales organization.
from a full range of options across both fiber and cable to meet their
unique network needs. Ultra Broadband Networks R&D expenses Nokia’s Networks business other income and expenses was an income
were negatively affected by the absence of a benefit related to lower of EUR 95 million in 2017, a change of EUR 171 million compared to an
incentive accruals for full year 2016. Global Services R&D expenses expense of EUR 76 million in 2016. The change in other income and
were EUR 85 million in 2017, a decrease of EUR 11 million, compared expenses was attributable to Ultra Broadband Networks, IP Networks
to EUR 96 million in 2016. The decrease in Global Services R&D and Applications and Global services other income and expenses.
expenses was primarily due to lower personnel expenses, reflecting The net positive fluctuation in Ultra Broadband Networks other income
progress related to our cost savings program. IP Networks and and expenses was primarily related to foreign exchange hedging.
Applications R&D expenses were EUR 1 284 million in 2017, a The net positive fluctuation in Global Services other income and
decrease of EUR 4 million, compared to EUR 1 288 million in 2016. expenses was primarily related to foreign exchange hedging and lower
doubtful accounts allowances. The net positive fluctuation in IP
Nokia’s Networks business selling, general and administrative expenses Networks and Applications other income and expenses was primarily
were EUR 2 587 million in 2017, a decrease of EUR 77 million, or 3%, due to lower doubtful accounts allowances and a settlement with a
compared to EUR 2 664 million in 2016. The decrease in Nokia’s component supplier.
Networks business selling, general and administrative expenses was
attributable to decreases in both Ultra Broadband Networks and Operating profit
Global Services selling, general and administrative expenses, partially Nokia’s Networks business operating profit was EUR 1 711 million in
offset by an increase in IP Networks and Applications selling, general 2017, a decrease of EUR 232 million compared to EUR 1 943 million in
and administrative expenses. 2016. Nokia’s Networks business operating margin in 2017 was 8.3%
compared to 8.9% in 2016. The decrease in operating margin was
attributable to decreases in both Ultra Broadband Networks and IP
Networks and Applications operating margin, partly offset by a slight
increase in Global Services operating margin. Ultra Broadband
Networks operating margin decreased from 9.4% in 2016 to 8.7%
in 2017. IP Networks and Applications operating margin decreased
from 10.2% in 2016 to 9.0% in 2017. The decreases in both Ultra
Broadband Networks and IP Networks and Applications operating
margins in 2017 were primarily attributable to lower gross profit.

56 NOKIA IN 2017
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For the year ended December 31, 2016 compared to the year ended December 31, 2015
The following table sets forth selective line items and the percentage of net sales for the years indicated.

2016 2015 Year-on-year

For the year ended December 31 EURm % of net sales EURm % of net sales change %
Net sales 21 830 100.0 11 548 100.0 89
Cost of sales (13 370) (61.2) (7 006) (60.7) 91
Gross profit 8 460 38.8 4 542 39.3 86
Research and development expenses (3 777) (17.3) (1 738) (15.0) 117
Selling, general and administrative expenses (2 664) (12.2) (1 420) (12.3) 88
Other income and expenses (76) (0.3) (35) (0.3) –
Operating profit 1 943 8.9 1 349 11.7 44

Segment information(1)
Ultra IP Networks Ultra IP Networks
Broadband Global and Networks Broadband Global and Networks
Networks(2) Services Applications(3) total(4) Networks(2) Services Applications(3) total(4)
2016 2016 2016 2016 2015 2015 2015 2015
For the year ended December 31 EURm EURm EURm EURm EURm EURm EURm EURm
Net sales 9 758 6 036 6 036 21 830 5 333 4 887 1 328 11 548
Cost of sales (5 210) (4 825) (3 335) (13 370) (2 716) (3 638) (652) (7 006)
Gross profit 4 548 1 211 2 701 8 460 2 617 1 249 676 4 542
Research and development
expenses (2 393) (96) (1 288) (3 777) (1 405) (65) (268) (1 738)
Selling, general and
administrative expenses (1 212) (679) (773) (2 664) (674) (472) (274) (1 420)
Other income and expenses (21) (30) (25) (76) (46) 7 4 (35)
Operating profit 922 406 615 1 943 492 719 138 1 349
(1) Refer to Note 4, Segment information, of our consolidated financial statements included in this annual report.
(2) Net sales include EUR 7 357 million (EUR 5 197 million in 2015) attributable to Mobile Networks and EUR 2 401 million (EUR 136 million in 2015) attributable to Fixed Networks.
(3) Net sales include EUR 2 941 million (EUR 515 million in 2015) attributable to IP Routing; EUR 1 564 million attributable to Optical Networks; and EUR 1 531 million (EUR 813 million in 2015) attributable
to Nokia Software.
(4) Includes Total Services net sales of EUR 8 531 million (EUR 5 424 million in 2015) which consists of all the services sales of Nokia’s Networks business, including Global Services of EUR 6 036 million
(EUR 4 887 million in 2015) and the services of Fixed Networks, IP/Optical Networks and Nokia Software.

NOKIA IN 2017 57
Results of segments continued

Net sales The following table sets forth distribution of net sales by geographical
Nokia’s Networks business net sales in 2016 were EUR 21 830 million, area for the years indicated.
an increase of EUR 10 282 million, or 89%, compared to
EUR 11 548 million in 2015. The increase in Nokia’s Networks business 2016 2015 Year-on-year
For the year ended December 31 EURm EURm change %
net sales was primarily attributable to the acquisition of Alcatel Lucent.
Ultra Broadband Networks net sales were EUR 9 758 million in 2016, Asia-Pacific 4 237 3 249 30
an increase of EUR 4 425 million, or 83%, compared to EUR 5 333 million Europe 4 884 2 809 74
in 2015. Global Services net sales were EUR 6 036 million in 2016, an Greater China 2 640 1 716 54
increase of EUR 1 149 million, or 24%, compared to EUR 4 887 million Latin America 1 446 976 48
in 2015. IP Networks and Applications net sales were EUR 6 036 million
Middle East & Africa 1 891 1 195 58
in 2016, an increase of EUR 4 708 million compared to
EUR 1 328 million in 2015. North America 6 732 1 603 320
Total 21 830 11 548 89
The increase in Ultra Broadband Networks net sales is comprised of
an increase in Mobile Networks net sales of EUR 2 160 million and
an increase in Fixed Networks net sales of EUR 2 265 million. The On a regional basis, Nokia’s Networks business net sales increased
increase in Mobile Networks net sales was primarily attributable to across all regions, with particularly strong growth in North America
the acquisition of Alcatel Lucent, which drove higher net sales in Radio and Europe, primarily attributable to the acquisition of Alcatel Lucent.
Networks. This was partially offset by revenue declines from several The increase in Mobile Networks net sales was driven by the acquisition
key customers in Asia-Pacific and North America due to previous of Alcatel Lucent, resulting in significant improvements in the North
build-outs and investments, as well as adverse market conditions in America, Greater China, and the Middle East & Africa regions, partially
Latin America. The increase in Fixed Networks net sales was primarily offset by revenue decreases in Asia-Pacific, Europe and Latin America.
attributable to the acquisition of Alcatel Lucent, and increases in The increase in Fixed Networks net sales was primarily attributable
Broadband Access, supported by the completion of a large project to the acquisition of Alcatel Lucent, supported by the completion
in Asia-Pacific. of a large project in Asia-Pacific, offset by contraction in Europe.
The increase in Global Services net sales of EUR 1 149 million was The increase in Global Services net sales was primarily attributable
primarily attributable to the acquisition of Alcatel Lucent, affecting all to the acquisition of Alcatel Lucent, resulting in increases in North
services business units. America, Europe, the Middle East & Africa, Greater China and
The increase in IP Networks and Applications net sales is comprised of Asia-Pacific regions, partially offset by revenue decreases in
an increase in IP/Optical Networks net sales of EUR 3 990 million and Latin America.
an increase in Nokia Software net sales of EUR 718 million, primarily The increases in both IP/Optical Networks net sales and Nokia Software
attributable to the acquisition of Alcatel Lucent. The increase in net sales were primarily attributable to significant increases in
IP/Optical Networks net sales was attributable to an increase in North America following the acquisition of Alcatel Lucent.
IP Routing net sales of EUR 2 426 million and an increase in Optical
Networks net sales of EUR 1 564 million. The increase in Nokia Software
net sales was primarily attributable to the acquisition of Alcatel Lucent,
and increases in Services.

58 NOKIA IN 2017
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Gross profit Nokia’s Networks business selling, general and administrative expenses
Nokia’s Networks business gross profit in 2016 was EUR 8 460 million, were EUR 2 664 million in 2016, an increase of EUR 1 244 million, or
an increase of EUR 3 918 million, or 86%, compared to EUR 4 542 million 88%, compared to EUR 1 420 million in 2015. The increase in Nokia’s
in 2015. The higher gross profit was due to both IP Networks and Networks business selling, general and administrative expenses was
Applications and Ultra Broadband Networks, primarily related to the primarily attributable to an increase in headcount attributable to the
acquisition of Alcatel Lucent, partly offset by slightly lower gross profit acquisition of Alcatel Lucent, partially offset by operational and
in Global Services. Nokia’s Networks business gross margin in 2016 synergy savings. The increase in Nokia’s Networks business selling,
was 38.8%, compared to 39.3% in 2015. general and administrative expenses was attributable to Ultra
Broadband Networks, Global Services and IP Networks and
Ultra Broadband Networks gross profit in 2016 was EUR 4 548 million, Applications. Ultra Broadband Networks selling, general and
an increase of EUR 1 931 million, or 74%, compared to EUR 2 617 million administrative expenses were EUR 1 212 million in 2016, an
in 2015. The increase in Ultra Broadband Networks gross profit was increase of EUR 538 million, compared to EUR 674 million in 2015.
primarily due to the acquisition of Alcatel Lucent. Ultra Broadband
Networks gross margin in 2016 was 46.6%, compared to 49.1% Global Services selling, general and administrative expenses were
in 2015. EUR 679 million in 2016, an increase of EUR 207 million, compared to
EUR 472 million in 2015. IP Networks and Applications selling, general
Global Services gross profit in 2016 was EUR 1 211 million, a slight and administrative expenses were EUR 773 million in 2016, an increase
decrease of EUR 38 million, or 3%, compared to EUR 1 249 million of EUR 499 million, compared to EUR 274 million in 2015.
in 2015. Global Services gross margin in 2016 was 20.1%,
compared to 25.6% in 2015. Nokia’s Networks business other income and expenses was an expense
of EUR 76 million in 2016, a change of EUR 41 million compared to an
IP Networks and Applications gross profit in 2016 was EUR 2 701 million, expense of EUR 35 million in 2015. The change was attributable to
an increase of EUR 2 025 million compared to EUR 676 million in 2015. Global Services and IP Networks and Applications, primarily related to
The increase in IP Networks and Applications gross profit was primarily doubtful accounts allowances, partially offset by Ultra Broadband
due to the acquisition of Alcatel Lucent. IP Networks and Applications Networks.
gross margin in 2016 was 44.7%, compared to 50.9% in 2015.
Operating profit
Operating expenses Nokia’s Networks business operating profit was EUR 1 943 million in
Nokia’s Networks business R&D expenses were EUR 3 777 million 2016, an increase of EUR 594 million compared to EUR 1 349 million in
in 2016, an increase of EUR 2 039 million, or 117%, compared to 2015. Nokia’s Networks business operating margin in 2016 was 8.9%
EUR 1 738 million in 2015. The increase in Nokia’s Networks business compared to 11.7% in 2015. The decrease in operating margin was
R&D expenses was primarily attributable to an increase in headcount primarily attributable to Global Services. Global Services operating
attributable to the acquisition of Alcatel Lucent, partially offset by margin decreased from 14.7% in 2015 to 6.7% in 2016. IP Networks
operational and synergy savings. The increase in Nokia’s Networks and Applications operating margin decreased from 10.4% in 2015 to
business R&D expenses was primarily attributable to Ultra Broadband 10.2% in 2016. The decreases in both Global Services and IP Networks
Networks and IP Networks and Applications. Ultra Broadband Networks and Applications operating margins in 2016 were attributable to lower
R&D expenses were EUR 2 393 million in 2016, an increase of gross margin and higher operating expenses.
EUR 988 million, compared to EUR 1 405 million in 2015. IP Networks
and Applications R&D expenses were EUR 1 288 million in 2016, an
increase of EUR 1 020 million, compared to EUR 268 million in 2015.

NOKIA IN 2017 59
Results of segments continued

Nokia Technologies
For the year ended December 31, 2017 compared to the year ended December 31, 2016
The following table sets forth selective line items and the percentage of net sales for the years indicated.

2017 2016 Year-on-year

For the year ended December 31 EURm % of net sales EURm % of net sales change %
Net sales 1 654 100.0 1 053 100.0 57
Cost of sales (71) (4.3) (42) (4.0) 69
Gross profit 1 583 95.7 1 011 96.0 57
Research and development expenses (235) (14.2) (249) (23.6) (6)
Selling, general and administrative expenses (218) (13.2) (184) (17.5) 18
Other income and expenses (6) (0.4) 1 0.1 –
Operating profit 1 124 68.0 579 55.0 94

Net sales Operating expenses

Nokia Technologies net sales in 2017 were EUR 1 654 million, an Nokia Technologies R&D expenses in 2017 were EUR 235 million,
increase of EUR 601 million, or 57%, compared to EUR 1 053 million a decrease of EUR 14 million, or 6%, compared to EUR 249 million
in 2016. In 2017, EUR 1 602 million of net sales related to patent and in 2016. The decrease in Nokia Technologies R&D expenses was
brand licensing and EUR 52 million of net sales related to digital health primarily due to lower patent portfolio costs.
and digital media. The increase in Nokia Technologies net sales was
primarily due to recurring net sales related to new license agreements Nokia Technologies selling, general and administrative expenses in
and settled arbitrations, non-recurring net sales related to settled 2017 were EUR 218 million, an increase of EUR 34 million, or 18%,
arbitrations and new license agreements and, to a lesser extent, our compared to EUR 184 million in 2016. The increase in Nokia
brand partnership with HMD. This was partially offset by lower licensing Technologies selling, general and administrative expenses was
income from certain existing licensees. In 2017, Nokia Technologies primarily due to a non-recurring licensing cost and the ramp-up
net sales included approximately EUR 300 million of non-recurring of digital health. This was partially offset by lower licensing-related
catch-up net sales related to prior years, compared to approximately litigation costs, which benefitted from a reimbursement related to a
zero in 2016. settled arbitration, as well as lower business support costs. The higher
selling, general and administrative expenses in digital health were
Gross profit primarily due to the acquisition of Withings in 2016.
Nokia Technologies gross profit in 2017 was EUR 1 583 million, an
increase of EUR 572 million, or 57%, compared to EUR 1 011 million Nokia Technologies other income and expense in 2017 was a net
in 2016. The higher gross profit in Nokia Technologies was primarily expense of EUR 6 million, a change of EUR 7 million compared to a net
due to higher net sales. income of EUR 1 million in 2016.
Operating profit
Nokia Technologies operating profit in 2017 was EUR 1 124 million,
an increase of EUR 545 million, or 94%, compared to an operating
profit of EUR 579 million in 2016. The increase in Nokia Technologies
operating profit was primarily attributable to higher gross profit.
Nokia Technologies operating margin in 2017 was 68.0% compared
to 55.0% in 2016.

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For the year ended December 31, 2016 compared to the year ended December 31, 2015
The following table sets forth selective line items and the percentage of net sales for the years indicated.

2016 2015 Year-on-year

For the year ended December 31 EURm % of net sales EURm % of net sales change %
Net sales 1 053 100.0 1 027 100.0 3
Cost of sales (42) (4.0) (7) (0.7) –
Gross profit 1 011 96.0 1 020 99.3 (1)
Research and development expenses (249) (23.6) (220) (21.4) 13
Selling, general and administrative expenses (184) (17.5) (109) (10.6) 69
Other income and expenses 1 0.1 7 0.7 (86)
Operating profit 579 55.0 698 68.0 (17)

Net sales Nokia Technologies selling, general and administrative expenses in

Nokia Technologies net sales in 2016 were EUR 1 053 million, an 2016 were EUR 184 million, an increase of EUR 75 million, or 69%,
increase of EUR 26 million, or 3%, compared to EUR 1 027 million compared to EUR 109 million in 2015. The increase in Nokia
in 2015. The increase in Nokia Technologies net sales was primarily Technologies selling, general and administrative expenses was
attributable to higher IPR licensing income and the inclusion of primarily attributable to the ramp-up of digital health and digital
Withings’ net sales from June 2016 onwards, resulting from the media, higher business support costs and increased licensing activity.
acquisition of Withings, partially offset by the absence of non-recurring The higher selling, general and administrative expenses in digital
adjustments to accrued net sales from existing and new agreements, health were primarily attributable to the inclusion of Withings’ selling,
and lower licensing income from certain existing licensees. general and administrative expenses from June 2016.
Gross profit Nokia Technologies other income and expense in 2016 was a net
Nokia Technologies gross profit in 2016 was EUR 1 011 million, a income of EUR 1 million, a decrease of EUR 6 million compared to
slight decrease of EUR 9 million, or 1%, compared to EUR 1 020 million a net income of EUR 7 million in 2015.
in 2015.
Operating profit
Operating expenses Nokia Technologies operating profit in 2016 was EUR 579 million,
Nokia Technologies R&D expenses in 2016 were EUR 249 million, a decrease of EUR 119 million, or 17%, compared to an operating
an increase of EUR 29 million, or 13%, compared to EUR 220 million profit of EUR 698 million in 2015. The decrease in Nokia Technologies
in 2015. The increase in R&D expenses in Nokia Technologies was operating profit was primarily attributable to higher selling, general
primarily attributable to the inclusion of Bell Labs’ patent portfolio and administrative and R&D expenses. Nokia Technologies operating
costs, resulting from the acquisition of Alcatel Lucent, and higher margin in 2016 was 55.0% compared to 68.0% in 2015.
investments in the areas of digital media and digital health.
The higher R&D expenses in digital health were primarily attributable
to the inclusion of Withings’ R&D expenses from June 2016. This was
partially offset by the focusing of general research investments
towards more specific opportunities.

NOKIA IN 2017 61
Results of segments continued

Group Common and Other Operating expenses

Group Common and Other R&D expenses in 2017 were EUR 260 million,
For the year ended December 31, 2017 compared to the year ended
an decrease of EUR 27 million, or 9%, compared to EUR 287 million in
December 31, 2016
2016. The decrease in Group Common and Other R&D expenses was
The following table sets forth selective line items for the years indicated.
primarily due to lower personnel expenses, reflecting progress related
to our cost savings program.
2017 2016
For the year ended December 31 EURm EURm
Group Common and Other selling, general and administrative
Net sales 1 114 1 142 expenses in 2017 were EUR 219 million, a decrease of EUR 16 million,
Cost of sales (956) (957) or 7%, compared to EUR 235 million in 2016. The decrease in Group
Gross profit 158 185 Common and Other selling, general and administrative expenses was
Research and development expenses (260) (287) primarily due to lower personnel expenses, reflecting progress related
to our cost savings program.
Selling, general and administrative
expenses (219) (235) Group Common and Other other income and expense in 2017 was a
Other income and expenses 73 (13) net income of EUR 73 million, a change of EUR 86 million compared to
Operating loss (248) (350) a net expense of EUR 13 million in 2016. The net positive fluctuation
in other income and expenses was primarily due to the unwinding of
a reinsurance contract, gains in venture fund investments and an
Net sales expiration of a former Alcatel Lucent stock option liability.
Group Common and Other net sales in 2017 were EUR 1 114 million,
a decrease of EUR 28 million, or 2%, compared to EUR 1 142 million Operating loss
in 2016. The decrease in Group Common and Other net sales was Group Common and Other operating loss in 2017 was EUR 248 million,
primarily due to Alcatel Submarine Networks, partially offset by a change of EUR 102 million, compared to an operating loss of
Radio Frequency Systems. EUR 350 million in 2016. The change in Group Common and Other
operating loss was primarily attributable to a positive fluctuation in
Gross profit other income and expense, and to a lesser extent, lower R&D and
Group Common and Other gross profit in 2017 was EUR 158 million, selling, general and administrative expenses, partly offset by lower
a decrease of EUR 27 million, or 15%, compared to EUR 185 million in gross profit.
2016. The lower gross profit was primarily due to Alcatel Submarine
Networks. Group Common and Other gross margin in 2017 was 14.2%
compared to 16.2% in 2016.

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For the year ended December 31, 2016 compared to the year ended Operating expenses
December 31, 2015 Group Common and Other R&D expenses in 2016 were EUR 287 million,
The following table sets forth selective line items for the years indicated. an increase of EUR 203 million, compared to EUR 84 million in 2015.
Group Common and Other R&D expenses increased, primarily
2016 2015 attributable to Nokia Bell Labs, related to the acquisition of
For the year ended December 31 EURm EURm Alcatel Lucent.
Net sales 1 142 –
Group Common and Other selling, general and administrative
Cost of sales (957) –
expenses in 2016 were EUR 235 million, an increase of EUR 138 million
Gross profit 185 – compared to EUR 97 million in 2015. The increase in Group Common
Research and development expenses (287) (84) and Other selling, general and administrative expenses was primarily
Selling, general and administrative attributable to higher central function costs, related to the acquisition
expenses (235) (97) of Alcatel Lucent.
Other income and expenses (13) 92
Group Common and Other other income and expense in 2016 was a
Operating loss (350) (89) net expense of EUR 13 million, a change of EUR 105 million compared
to a net income of EUR 92 million in 2015. The change was primarily
Net sales attributable to the absence of realized gains related to certain
Group Common and Other net sales in 2016 were EUR 1 142 million, investments made through venture funds and the non-cash
an increase of EUR 1 142 million, compared to approximately zero impairment of certain financial assets.
in 2015. The increase in Group Common and Other net sales was
Operating loss
primarily due to Alcatel Submarine Networks and Radio Frequency
Group Common and Other operating loss in 2016 was EUR 350 million,
Systems net sales, both of which related to the acquisition of
an increase of EUR 261 million, compared to an operating loss of
Alcatel Lucent.
EUR 89 million in 2015. The increase in Group Common and Other
Gross profit operating loss was primarily attributable to higher R&D and selling,
Group Common and Other gross profit in 2016 was EUR 185 million, general and administrative expenses and a net negative fluctuation
compared to approximately zero in 2015. The Group Common and in other income and expenses, partially offset by higher gross profit.
Other gross profit was attributable to gross profit from Alcatel
Submarine Networks and Radio Frequency Systems, both of which
related to the acquisition of Alcatel Lucent. Group Common and
Other gross margin in 2016 was 16.2%.

NOKIA IN 2017 63
Liquidity and
capital resources

Financial position Cash flow

As of December 31, 2017, our total cash and other liquid assets 2017
(defined as cash and cash equivalents; current available-for-sale Our cash inflow from operating activities in 2017 of EUR 1 811 million
investments, liquid assets; and investments at fair value through increased by EUR 3 265 million compared to a cash outflow of
profit and loss, liquid assets) equaled EUR 8 280 million, a EUR 1 454 million in 2016. The increase was primarily attributable to a
decrease of EUR 1 047 million, compared to EUR 9 327 million as EUR 597 million cash release from net working capital in 2017 compared
of December 31, 2016. The decrease was primarily attributable to a EUR 2 207 million cash being tied-up in 2016; and net profit,
to shareholder distributions, including payment of dividends of adjusted for non-cash items, of EUR 2 125 million, an increase of
EUR 970 million and repurchases of shares of EUR 785 million; EUR 645 million compared to EUR 1 480 million in 2016. The primary
EUR 394 million cash outflow related to the acquisitions of driver for the decrease in net working capital was related to an
businesses, and capital expenditures of EUR 601 million. The decrease increase in liabilities of EUR 1 314 million compared to a decrease
was partially offset by EUR 1 811 million positive cash flow from of EUR 2 758 million in 2016. The increase in liabilities was primarily
operating activities, including EUR 597 million total cash inflows attributable to an up-front cash payment of approximately
from net working capital. As of December 31, 2015, our total cash EUR 1 700 million, part of which has been recognized as net sales in
and other liquid assets equaled EUR 9 849 million. 2017, and an increase in accounts payable partially offset by restructuring
and associated cash outflows of approximately EUR 550 million. The
As of December 31, 2017, our net cash and other liquid assets increase in liabilities was partially offset by an increase in receivables
(defined as total cash and other liquid assets less long-term of EUR 421 million and an increase in inventories of EUR 296 million.
interest-bearing liabilities and short-term borrowings) equaled
EUR 4 514 million, a decrease of EUR 785 million, compared to Cash flow from operating activities also included interest paid
EUR 5 299 million as of December 31, 2016. The decrease was mainly of EUR 409 million, an increase of EUR 100 million compared to
attributable to drivers affecting our total cash and other liquid assets EUR 309 million in 2016; paid taxes of EUR 555 million, an increase
as described above. Our interest-bearing liabilities decreased by of EUR 52 million compared to EUR 503 million in 2016; and interest
EUR 262 million primarily attributable to changes in foreign exchange received of EUR 53 million, a decrease of EUR 32 million compared
rates and the issuance of senior notes and repurchases of selected to EUR 85 million in 2016. In 2017, out of EUR 555 million paid taxes,
outstanding senior notes during 2017. As of December 31, 2015, approximately EUR 260 million were non-recurring in nature and related
our net cash and other liquid assets equaled EUR 7 775 million. to the disposal of the former Alcatel Lucent railway signaling business
in 2006 to Thalés and the integration of the former Alcatel Lucent and
As of December 31, 2017, our cash and cash equivalents equaled Nokia operating models. In 2017, out of EUR 409 million interest paid,
EUR 7 369 million, a decrease of EUR 128 million compared to EUR 250 million were non-recurring in nature and related primarily to
EUR 7 497 million as of December 31, 2016. As of December 31, our offer to purchase selected outstanding notes.
2015, our cash and cash equivalents equaled EUR 6 995 million.
In 2017, our cash inflow from investing activities equaled EUR 10 million,
a decrease of EUR 6 826 million compared to EUR 6 836 million cash
inflow in 2016. The decrease in cash inflow from investing activities was
primarily driven by cash outflow due to the acquisition of businesses
of EUR 394 million, mainly related to the acquisition of Comptel,
compared to EUR 5 819 million cash inflow in 2016, which included cash
and cash equivalents acquired as part of the acquisition of Alcatel Lucent.
In 2017, cash outflow from acquisition of businesses was offset
by proceeds from maturities and sale of current available-for-sale
investments, liquid assets of EUR 3 265 million partially offset by
purchase of current available-for-sale investments, liquid assets
of EUR 2 729 million.
In 2017, our capital expenditure equaled EUR 601 million, an increase
of EUR 124 million compared to EUR 477 million in 2016. Major items
of capital expenditure in 2017 included investments in R&D equipment,
test equipment, hardware for telco and cloud environment, plants,
buildings and construction for transformation projects, and repair
or improvements of sites.
In 2017, our cash outflow from financing activities of EUR 1 749 million
decreased by EUR 3 174 million in comparison to EUR 4 923 million cash
outflow in 2016. The decrease in cash outflows was primarily driven by
proceeds from long-term borrowings of EUR 2 129 million, an increase
of EUR 1 904 million compared to 2016, mainly related to issued new
bonds; repayment of long-term borrowings of EUR 2 044 million, a
decrease of EUR 555 million compared to 2016; and paid dividends of
EUR 970 million, a decrease of EUR 545 million compared to 2016. The
decrease in cash outflow was partially offset by purchase of treasury
shares of EUR 785 million representing an increase of EUR 569 million
compared to 2016.

64 NOKIA IN 2017
 Board review

2016 Financial assets and debt

Our cash outflow from operating activities in 2016 of EUR 1 454 million
As of December 31, 2017, our net cash and other liquid assets equaled
decreased by EUR 1 957 million compared to a cash inflow of
EUR 4 514 million and consisted of EUR 8 280 million in total cash and
EUR 503 million in 2015. The decrease was primarily attributable to
other liquid assets and EUR 3 766 million of long-term interest-bearing
a EUR 2 207 million increase in net working capital in 2016 compared
liabilities and short-term borrowings.
to a EUR 1 377 million increase in 2015 and a decrease in net profit,
adjusted for non-cash items of EUR 727 million. The primary driver for We hold our cash and other liquid assets predominantly in euro. Our
the increase in net working capital related to a decrease in liabilities of liquid assets are mainly invested in high-quality money-market and
EUR 2 758 million in 2016 compared to a decrease of EUR 990 million fixed income instruments with strict maturity limits. We also have a
in 2015, partially offset by a decrease in inventories of EUR 533 million EUR 1 579 million undrawn revolving credit facility available for
in 2016 compared to a decrease of EUR 341 million in 2015. The liquidity purposes.
decrease in liabilities mainly related to restructuring cash outflows,
reductions in liabilities related to our actions to harmonize working As of December 31, 2017, our interest-bearing liabilities consisted of
capital processes and practices, termination of Alcatel Lucent’s license EUR 231 million notes due in 2019, USD 581 million notes due in 2019,
agreement with Qualcomm, the payment of incentives related to EUR 500 million notes due 2021, USD 500 million notes due 2022,
Alcatel Lucent’s and Nokia’s strong business performance in 2015 EUR 750 million notes due 2024, USD 500 million notes due 2027,
and the impact of foreign exchange fluctuations. USD 74 million notes due in 2028, USD 206 million notes due in 2029,
USD 500 million notes due in 2039 and EUR 326 million of other
The decrease in cash flow from operating activities was also liabilities. The notes maturing in 2019, 2021, 2022, 2024, 2027 and
attributable to a EUR 400 million increase in cash outflows related to 2039 are issued by Nokia Corporation, while the notes maturing in
net interest and income taxes paid in 2016 and 2015 of EUR 727 million 2028 and 2029 are issued by Lucent Technologies Inc., a predecessor
and EUR 327 million, respectively. Interest paid included cash outflows to Nokia of America Corporation (Nokia’s wholly-owned subsidiary,
from the premium paid for the redemption of Alcatel Lucent bonds formerly known as Alcatel-Lucent USA Inc.). Refer to Note 23,
and notes related to our capital structure optimization program. Interest-bearing liabilities, of our consolidated financial statements
Income taxes paid included a non-recurring tax payment due to the included in this annual report for further information regarding our
integration of the former Alcatel Lucent and former Nokia operating interest-bearing liabilities.
models into one combined operating model.
In March 2017, we executed capital markets transactions, including
In 2016, our cash inflow from investing activities equaled issuances of EUR 500 million notes due in 2021 and EUR 750 million
EUR 6 836 million, representing an increase of EUR 4 940 million notes due 2024 and, pursuant to cash tender offers, purchases of
compared to EUR 1 896 million cash inflow from investing activities EUR 269 million of notes due 2019, USD 86 million of notes due 2028
in 2015. The increase in cash inflow from investing activities was and USD 401 million of notes due 2029. In June 2017, we executed
primarily driven by cash and cash equivalents acquired as part of additional capital market transactions, including issuances of
the acquisition of Alcatel Lucent and an increase in proceeds from USD 500 million notes due 2022 and USD 500 million notes due 2027
maturities and sale of current available-for-sale investments, liquid and, pursuant to cash tender offers, purchases of USD 419 million
assets partially offset by purchase of current available-for-sale of notes due 2019, USD 140 million of notes due 2028 and
investments and liquid assets. USD 753 million of notes due 2029.
In 2016, our capital expenditure equaled EUR 477 million, an increase In June 2017, we exercised our option to extend our EUR 1 579 million
of EUR 163 million, as compared to EUR 314 million in 2015. Major revolving credit facility from June 2019 to June 2020. The facility
items of capital expenditure in 2016 included investments in R&D has no financial covenants and remains undrawn.
equipment, test equipment, hardware for telco and cloud environment,
plants, buildings and construction for transformation projects, We consider that with EUR 8 280 million of cash and other liquid
repair or improvements of sites as well as intangible rights. assets as well as our EUR 1 579 million revolving credit facility, we have
sufficient funds to satisfy our future working capital needs, capital
In 2016, our cash outflow from financing activities of EUR 4 923 million expenditures, R&D investments, structured finance, venture fund
increased by EUR 4 343 million in comparison to our cash outflow of commitments, acquisitions and debt service requirements, at least
EUR 580 million in 2015. The increase in cash outflows was primarily through 2018. We further consider that with our current credit ratings
driven by the repayment of long-term borrowings of EUR 2 599 million of BB+ by Standard & Poor’s and Ba1 by Moody’s, we have access
mainly including the redemption of Alcatel Lucent bonds and notes to the capital markets should any funding needs arise in 2018.
related to our capital structure optimization program, paid dividends
of EUR 1 515 million primarily related to the payment of the ordinary We aim to re-establish our investment grade credit rating.
and special dividends, purchase of equity instruments of subsidiaries
of EUR 724 million related to the purchase of Alcatel Lucent
shares and the equity component of the purchased Alcatel Lucent
convertible bonds and EUR 216 million cash outflow related
to the commencement of Nokia’s share repurchasing program.

NOKIA IN 2017 65
Liquidity and capital resources continued

Off-balance sheet arrangements Structured finance

There are no material off-balance sheet arrangements that have,
Structured finance includes customer financing and other third-party
or are reasonably likely to have, a current or future effect on our
financing. Network operators occasionally require their suppliers,
financial condition, changes in financial condition, revenues or
including us, to arrange, facilitate or provide long-term financing
expenses, results of operations, liquidity, capital expenditures
as a condition for obtaining infrastructure projects.
or capital resources that are material to investors, except for the
purchase obligations and leasing commitments, as well as guarantees As of December 31, 2017, our total customer financing, outstanding
and financing commitments disclosed in Note 30, Commitments and committed, equaled EUR 655 million, an increase of EUR 303 million
and contingencies, of our consolidated financial statements included as compared to EUR 352 million in 2016. As of December 31, 2015,
in this annual report. our total customer financing, outstanding and committed, equaled
EUR 213 million. Customer financing primarily consisted of financing
Capital structure optimization program commitments to network operators.
In 2015, we announced a two-year, EUR 7 billion program to optimize Refer to Note 36, Risk management, of our consolidated financial
the efficiency of our capital structure (our “capital structure statements included in this annual report for further information
optimization program”). The capital structure optimization program relating to our committed and outstanding customer financing.
was initially subject to the closing of the acquisition of Alcatel Lucent
and the Sale of the HERE Business, as well as the conversion of all We expect our customer financing commitments to be financed mainly
Nokia and Alcatel Lucent OCEANE convertible bonds. The Sale of the from cash and other liquid assets and through cash flow from operations.
HERE business closed in December 2015. The result of the successful As of December 31, 2017, guarantees of our performance consisted
offer for Alcatel Lucent securities was announced on January 5, 2016 of bank guarantees given on behalf of Nokia to its customers for
and 100% ownership was reached on November 2, 2016. However, EUR 1 678 million (EUR 1 805 million as of December 31, 2016).
not all convertible bonds were converted. In addition, Nokia Corporation issued corporate guarantees directly
In 2017, we completed the following shareholder distributions to our customers with primary obligation for EUR 1 114 million
as part of the capital structure optimization program: (EUR 1 608 million as of December 31, 2016). These instruments
entitle our customers to claim payments as compensation for
■■ ordinary dividend for 2016 of EUR 0.17 per share, totaling non-performance by Nokia of its obligations under supply agreements.
EUR 963 million, paid in June 2017; and Depending on the nature of the instrument, compensation is either
payable on demand, or is subject to verification of non-performance.
■■ share repurchases totaling EUR 785 million to complete our
EUR 1 billion share repurchase program commenced in Financial guarantees and any collateral pledged that we may give on
November 2016. behalf of customers, represent guarantees relating to payment by
certain customers and other third parties under specified loan
Thereafter, we consider that the Capital Structure Optimization
facilities between such customers or other third parties and their
Program announced in 2015 has been completed.
creditors. Our obligations under such guarantees are released upon
the earlier of expiration of the guarantee or early payment by the
customer or other third party.
Refer to Note 30, Commitments and contingencies, of our
consolidated financial statements included in this annual report
for further information regarding commitments and contingencies.

66 NOKIA IN 2017
 Board review

Venture fund investments and commitments

We make financing commitments to a number of unlisted venture
funds that make technology-related investments. The majority of the
Material
investments are managed by Nokia Growth Partners which specializes
in growth-stage investing, seeking companies that are changing the
face of mobility and connectivity. subsequent events
As of December 31, 2017, our unlisted venture fund investments After December 31, 2017 no material subsequent events have
equaled EUR 661 million, as compared to EUR 819 million as of taken place.
December 31, 2016. Refer to Note 24, Fair value of financial
instruments, of our consolidated financial statements included in
this annual report for further information regarding fair value of
our unlisted venture fund investments.
As of December 31, 2017, our venture fund commitments equaled
EUR 396 million, as compared to EUR 525 million as of December 31,
2016. As a limited partner in venture funds, we are committed to
capital contributions and entitled to cash distributions according to
the respective partnership agreements and underlying fund activities.
Refer to Note 30, Commitments and contingencies, of our
consolidated financial statements included in this annual report on
for further information regarding commitments and contingencies.

Treasury policy
Treasury activities are governed by the Nokia Treasury Policy approved
by the President and CEO and supplemented by operating procedures
approved by the CFO, covering specific areas such as foreign exchange
risk, interest rate risk, credit and liquidity risk. The objective of
treasury’s liquidity and capital structure management activities is
to ensure that we have sufficient liquidity to go through unfavorable
periods without being severely constrained by the availability of funds
to execute Nokia’s business plans and implement Nokia’s long-term
business strategy. We are risk-averse in our treasury activities.

NOKIA IN 2017 67
Sustainability and
corporate responsibility

1 bn
We create the technology to connect
the world and we aim to do this in
a responsible way. We have set the target of helping our
customers to connect the next billion by 2022

44%
The networks we modernized brought on
average energy savings of 44% for our
customers

We work together with key stakeholders to Materiality assessment and Based on the materiality analysis, we
drive change and enable better lives, greater concentrate our efforts on the benefits
access to opportunity and a healthier planet. sustainability performance of connectivity and sustainable products,
We design, create and deliver technology Description of our business model can be environmental impact and climate change
that can have a positive impact on people and found under “Results of Operations”. Our challenges. We work hard to ensure ethical
the world around us. We align with globally sustainability approach is aligned with both business practices and support the increasing
recognized ethical and responsible business our business strategy and focus, as well as the need for data privacy and freedom of
practices and frameworks, putting in place the key material issues identified in our materiality expression, supply chain responsibility and
processes, policies and programs to achieve analysis. Our sustainability priorities remain: transparency, health & safety, and employee
our aim. to improve people’s lives with technology, engagement as well as increased diversity.
to protect the environment, to conduct More details on our materiality assessment,
We believe we can achieve our greatest impact our business with integrity, and to respect including how we support the UN SDGs can
on the world’s sustainability challenges by our people. Sustainability and corporate be found in our People & Planet Report at
developing and enhancing solutions and responsibility issues are reviewed regularly www.nokia.com/people&planet.
technology that improve lives and provide at all levels within Nokia, including review
greater opportunities for people. The and feedback from the Board of Directors Setting concrete targets
continued development and rollout of 5G and the Group Leadership Team. In May 2017, we published our achievements
and IoT has the potential to socially and against 25 targets in our People & Planet
economically empower any individual. These, In 2017, we revisited and updated our sustainability report online and set 46 short
and other technologies can bring about materiality analysis. We analyzed current and long-term targets for the period 2017
smart efficiencies and improvements in cities, stakeholder requirements, our influence on to 2030. We also specifically set and received
homes, and industry as well as improved sustainable development throughout the approval for our science based targets on
access to digital health, greater public safety value chain, and further embedded the UN carbon emissions both for our products in
and a better climate. Our main business of Sustainable Development Goals (“SDGs”). use and for our operations. We were the first
delivering networks, technology solutions We believe the technology we create can have major telecoms vendor to set these targets,
and services to operators, enterprises and a positive impact on all 17 SDGs, but place showing our true commitment to take action
institutions provides the greatest potential special focus on the areas where we can in the fight against climate change.
positive impact on sustainable development. achieve the greatest positive outcomes.
EcoVadis is one of the evaluation platforms
through which we provide annual sustainability
information for evaluation which is then
shared with customers as requested. In 2017,
we were in the top 1% of suppliers assessed,
achieving excellent scores in environment,
sustainable procurement, and labor practices.
We also retained for a second consecutive
year our listing as Industry leader in the
Communications Equipment (“CMT”) sector
of the Dow Jones Sustainability Indices
(“DJSI”). We are listed in both the World
and European DJSI indices.

68 NOKIA IN 2017
 Board review

Other recognitions included being ranked at Improving people’s lives We also work closely with Non-Governmental
leadership level in the CDP for our work on Organizations (“NGOs”), customers, and
and disclosure of climate change data and through technology communities in our corporate community
being listed in the Europe 120 and Eurozone Our radio networks’ customers provide service investment. Our strategic social themes are:
120 indices of Euronext Vigeo. We were also for around 5.7 billion subscriptions worldwide. connecting the unconnected, empowering
reconfirmed as a constituent of Ethibel We have set a public target of helping our women, and saving lives. In 2017, as part of
Sustainability Indices and were among customers connect the next billion measured our community programs we collaborated
Corporate Knights Global 100 Most by number of subscriptions in our radio with others to realize programs in gender
Sustainable Corporations in the world in 2017. customers’ networks and by number of diversity that encourage girls into Science
fixed lines shipped to our customers. Technology Engineering and Mathematics and
We implement a variety of mitigation technology careers, such as greenlight4girls
processes and procedures to deal with any We have continued to develop our public
(see www.greenlightforgirls.org) and CodeBus
day-to-day potential environmental, social safety portfolio and Nokia Saving Lives
Africa (www.finland100africa.fi).
and ethical risks in our daily business. Potential project demonstrates the power of
external global environmental, social, and technology to save lives by combining mobile We look for initiatives where technology can
ethical risks are discussed in more detail communications technology with drones and make a positive contribution to people’s lives.
under the relevant topic areas below. applications like real-time high-definition For example, in India we support the Save
We have provided detailed reports on our video and infrared camera. We have also now the Children led Forecast Application for
progress and performance in sustainability included a humanitarian aid category into Risk Management (“FARM”) initiative which
and corporate responsibility matters annually, the Nokia Open Innovation Challenge 2017. is a pioneering initiative that would enable
and online for over a decade. For further Nokia ViTrust, using LTE, enables public safety farmers to reduce input costs and risks of
information, refer to our People and Planet networks to deliver real time video and data crop failure by taking informed farming
report, which is prepared in accordance with services that greatly enhance situational decisions and investing the savings in their
the GRI and UN Global Compact sustainability awareness and response time in emergencies children and families. This technology aims to
reporting guidelines, at http://www.nokia. when every second counts. galvanize the farmers against the ill-effects
com/en_int/about-us/sustainability. of changing climatic patterns. It is currently
being implemented in Nagapattinam district,
Tamil Nadu.

NOKIA IN 2017 69
Sustainability and
corporate responsibility continued

Protecting the environment Our greatest environmental contribution Energy efficiency and responsible waste
comes from improving the energy efficiency management remain key objectives in our
We believe that we have more opportunities
of our products and solutions in use, as well as operations. Working with the Science Based
than risks related to the environment. Our key
driving the positive impact digital technology Targets (“SBT”) initiative we have set the
potential environmental risks are the adverse
can have in the world. Our environmental long-term target of reducing emissions
effects resulting from climate change as
management system helps us monitor our from our operations by 41% by 2030,
well as natural and man-made disasters in
progress and identify ways to improve further. against 2014 baseline year. Read more at
countries where we have manufacturing
We manage our own footprint through www.sciencebasedtargets.org. In 2017,
or suppliers. These effects could include
continued certification to ISO 14001 we were well on track towards the target.
a material adverse impact on our ability to
environmental management standard and As a main element of the Scope 1 and 2
supply products and services, and therefore
our performance is audited regularly by emissions, our total energy consumption
on our potential sales.
external auditors. We apply a circular economy across our facilities decreased by 3% as
We are committed to protecting the approach, for example, offering an Asset compared to 2016.
environment and to the fight against climate Recovery Service, including remanufacturing,
reuse and recycling of older equipment as Targeting zero emissions
change by making our operations eco-friendly
part of product lifecycle management. In terms of our products in use, we have also
and reducing the energy usage of the products
In 2017, through our voluntary programs, set an SBT target for scope 3 emissions – and
we deliver to our customers. We have in place
we sent around 2 600 metric tons of old particularly for emissions from customer use
a mature, robust environmental management
telecommunications equipment for materials of our products. We target to reduce these
system, and company-wide environmental
recovery and we remanufactured or reused emissions by 75% by 2030 compared to 2014
policy and procedures. We also provide for
approximately 68 000 units. baseline, and are currently on track. We also
estimated costs of environmental remediation
further developed our zero-emissions radio
relating to soil, groundwater, surface water
network offering, which now includes some
and sediment contamination when we
20 products and services. We explored the
become obliged, legally or associatively, to
use of liquid cooling for base station sites as
perform restorative work on current and/or
well as investigating the capacity to capture
legacy sites.
waste heat from the base stations and use
it as useful heat e.g. for heating buildings.

70 NOKIA IN 2017
 Board review

We have delivered zero emission products Anti-corruption and bribery Oversight and grievance mechanisms
to 120 customers around the world, helping Our Code of Conduct covers, for example, Leadership involvement and oversight
them reduce their emissions. Modernization anti-corruption and bribery issues and is of ethics and compliance are provided by
is a key component to enable greater energy further supported by our internal the Board via the Audit Committee, which
efficiency. In 2017, the customer base-station Anti-Corruption Policy. As a global company convened nine times in 2017, and covered
sites we modernized used on average 44% working in many countries around the world, ethics and compliance topics in five of
less energy than those where our customers we naturally can face risks related to those meetings. Compliance management is
did not modernize. This reduces the corruption and bribery. To mitigate those risks further supported by both global and regional
environmental impact of electricity we have instigated a Compliance Controls compliance committees. Employees and
consumption and is directly reflected as Framework (“CCF”). This is a bottom-up external stakeholders are urged to report
increased financial benefits for our customers. exercise which includes internal gap-analysis any ethical misconduct using our dedicated
workshops and localized risk mitigation plans. Nokia EthicsPoint channels via email,
Conducting our business As per target for 2017, the Ethics & Compliance phone or online, anonymously if desired.
team together with relevant senior leaders
with integrity carried out 20 CCF reviews during 2017.
In 2017, our Ethics & Compliance office
received 678 concerns, of which 257
We apply our Code of Conduct across our We also use face-to-face training, open
were investigated by Ethics & Compliance
operations which allows us to build and communication and leadership roundtables.
Investigations as alleged violations of our
maintain personal integrity and protect our For example, we held specific anti-corruption
Code of Conduct. We also implemented
reputation. The Code of Conduct includes training targeting supplier and customer
corrective actions including 47 dismissals
key business policy statements for 14 topics, facing employee groups which have been
and 45 written warnings following these
including Improper Payments/Anti-Corruption, identified as groups who may face the
and  other investigations.
Fair Employment Practices, Human Rights, greatest potential risk. We perform risk-based
Environment and Working with Suppliers. due diligence procedures for different Human rights
We emphasize the implementation and categories of third parties (suppliers and Our human rights work is guided by the Code
understanding of the Code of Conduct across business partners) to assess and to manage of Conduct and the Human Rights Policy. We
our workforce, sales and supplier interactions. potential risks related to engaging and feel that more connectivity is better than less
Our employees are expected to comply with working with them. We also screen new and that the technologies we provide are a
our Code of Conduct. In addition, employees suppliers as part of our anti-corruption social good that can support human rights
are expected to successfully complete a supplier program, using two levels of by enabling free expression, access to
training module on ethical business practices. screening according to perceived risk. If issues information, exchange of ideas and economic
In 2017, 86% of our employees completed are identified during screening, additional development. However, we have identified
this training against our target of 95%. information or actions are required of the the potential misuse of the products and
We will continue and strengthen our efforts supplier, or the supplier is rejected and technology we provide, as the most salient
to increase the completion percentage of cannot be used. human rights risk in our operations. We aim to
this training in order to meet or exceed this ensure the technologies we provide are used
target in 2018. to respect, and not to infringe human rights.
We have also identified potential human rights
related risks in our supply chain. Please read
more about how we manage our supply chain,
including the KPI on conflict-free smelters,
in the “Responsible sourcing” section.

NOKIA IN 2017 71
Sustainability and
corporate responsibility continued

Freedom of expression and privacy In 2017, we implemented 393 supply We work closely with our supply chain through
In 2017, to increase transparency, we became chain audits (390 in 2016), which included the CDP Supply Chain Program to jointly
the first telecoms vendor to publish real 72 on-site audits on Corporate Responsibility create environmental improvement programs
human rights due diligence cases to increase topics; 47 were on-site audits against our and better our upstream indirect emissions
the dialogue and understanding of the issues supplier requirements and 274 suppliers that occur in our value chain. In 2017, 292
vendors can face. We run human rights due were assessed using the EcoVadis scorecards. of our key suppliers responded to the CDPs
diligence processes as part of our global sales Additionally, we run training workshops for request to disclose their climate performance
process, to further mitigate the potential risks suppliers operating in high-risk countries. information and 153 (127 in 2016) also
of product misuse. In March 2017, we took In 2017, we organized online training on provided emission reduction targets. With this
a seat on the board of the Global Network management of climate change and conflict result, we have achieved our target to have
Initiative (“GNI”) as a full member and as the minerals, and we arranged face-to-face 150 suppliers setting emission reduction
first and only telecommunications equipment training workshops establishing improvement targets by end of 2018.
provider. The former Telecommunications plans and actions for 253 suppliers. An extract
Industry Dialogue was disbanded as the from the Nokia Supplier Requirements Respecting our people
majority of its members have taken up document showing a summary of the corporate
membership in the GNI. responsibility requirements is available online The market for skilled employees in our
at www.nokia.com/people&planet. business is extremely competitive. Our
In June 2017, we published our Modern workforce has fluctuated over recent years
Slavery Statement. While it is often perceived We also carry out Health & Safety Maturity as we have introduced changes in our strategy
that ICT may enable many activities related to Assessments with those high-risk suppliers to respond to our business targets and our
modern slavery, it is our mission to help find who for example work at height or with endeavors. Such changes and uncertainty
ways in which the technology we provide can electricity. In 2017, we assessed 975 suppliers have caused, and may in the future cause
be used to eradicate modern slavery. We work delivering high-risk activity using our H&S disruption among employees as well as
with others in the industry to identify ways Maturity Assessment Process and 81% of fatigue due to the cumulative effect of several
through which we can, as an industry, assessed suppliers met “H&S compliant reorganizations over the past years. As a
contribute with concrete solutions to tackling supplier”-status. By the end of 2018 we result, we believe it is essential that we work
some of the issues related to modern slavery. target to increase the percentage of suppliers on creating a corporate culture that is
To this end we co-hosted a multi-stakeholder meeting H&S compliant supplier status to 90%. motivational, based on equal opportunities,
event to increase the cooperation and and encourages creativity and continuous
dialogue around the role of digital technology The traceability of our materials and ensuring learning to meet the challenges.
in tackling modern slavery. Moving forward, our products are conflict-free is a priority for
we will also continue to call on other ICT us, which is also reflected in our Conflict In 2017, we continued to measure the
companies to join us in this dialogue. Minerals Policy. In 2017, 83% (84% in 2016) of favorability of employee perceptions across
smelters identified as part of our supply chain a wide variety of topics about company and
Responsible sourcing have been validated as conflict-free or are culture, with an anonymous employee survey.
Whereas our Code of Conduct primarily active in the validation process. In our Mobile The result rose from 76% to 80% favorability
directs how we work in Nokia, our Supplier Networks business we target to achieve full towards the company. In 2018, we aim
Requirements, common to all Nokia suppliers, traceability of the smelters in our supply chain to continue strengthening our employee
is part of the contract appendices with and their conflict-free status by the end of engagement understanding by exploring
suppliers and details related requirements 2018, and achieve full traceability at the new means to capture employee opinion,
from suppliers. Nokia Supplier Requirements Nokia Group level by the end of 2020. Refer for overall perceptions of Nokia as a company
contain requirements on such responsibility to our conflict minerals report available at and our cultural direction, as well as team
related domains as environment, security, http://www.nokia.com/en_int/about-us/ dynamics. We offer training, development
privacy, risk management, human resources sustainability/downloads. programs, comprehensive reward packages
management, and health. We run robust and flexible working as part of our effort
assessments as well as training with our to motivate and show that we value our
supplier network to support them in meeting employees and the work they do. In 2017,
our ethical standards and improving we also introduced global volunteering
performance where necessary. guidelines allowing all employees the
opportunity to carry out two working
days per year as a volunteer.

72 NOKIA IN 2017
 Board review

In 2017, each employee spent an average Labor conditions Making change happen together
of approximately 16 hours on training (19 in Our Code of Conduct provides the basis for
our labor conditions, and is underpinned by a To achieve our sustainability goals, we
2016). Additionally, we arrange a one-hour
comprehensive set of global human resources collaborate closely with suppliers, customers,
dialog session every quarter between the line
policies and procedures that enable fair non-governmental organizations (“NGOs”),
manager and each team member, which
employment. We adhere to the International authorities and industry peers, not only
covers objective setting and review of results,
Labor Organization (“ILO”) Declaration on supporting them in achieving their
individual development, employee well-being
Fundamental Principles and Rights at Work sustainability goals but also driving the
and engagement, coaching by the line
and wherever we operate we meet the sustainability of our products and solutions.
manager, and mutual feedback.
requirements of labor laws and regulations, Cooperating with others in our industry
Diversity, inclusion and anti-discrimination and oftentimes strive to exceed those laws and beyond
are key to our employee makeup. On March 8, and regulations. In 2017, we remained a member of the
2017, International Women’s Day, our CEO
We strive to ensure decent working conditions United Nations Global Compact, Global
Rajeev Suri signed the United Nations Women
and fair employment, considering e-Sustainability Initiative, CDP supply
Empowerment Principles, stating that Nokia is
international and local laws and guidelines. chain program, Global Network Initiative,
committed to doing its part to eliminate the
Health and safety is a key priority for us. Climate Leadership Council, Digital Europe,
disparity in technology companies between
Responsible Mineral Initiative (formerly
men and women. We have a Diversity
We address job-related health and safety risks Conflict-Free Sourcing Initiative), GSMA
Steering Committee that makes decision
through training, analysis, assessments and Humanitarian Connectivity Charter and
proposals to the Group Leadership Team
consequence management. We have put in several standardization and university
and steers our various diversity programs.
place a wide range of programs to improve cooperation groups. We have further
In September 2017, our CEO also signed
our health and safety performance and structured engagement with the World
a letter of cooperation with UNESCO to
encourage reporting of near misses and Economic Forum, the Broadband Commission
promote gender equality, women’s
dangerous incidents by employees and and ITU Telecom World, amongst others.
empowerment and women’s leadership.
In 2017, approximately 13% (14% in 2016) contractors. As the highest risks exist with
our contractors who, for example, work at Working with NGOs
of our senior management positions were Based on our Corporate Community
held by women and around 2 300 leaders height or with electricity, we have therefore
set KPIs related to the supplier Health and Investment approach, we set a target of
and employees were trained on gender improving the lives of 2 000 000 people
balance topics, against the target of 2 000. Safety Maturity Assessment Process, which
are described in the Responsible sourcing between 2016-2025 through our corporate
In total, women accounted for 22% of and key regional community investment
our workforce in 2017. section above. In April 2017, we launched a
new corporate wellness program Healthier programs, focusing our action on gender
Together, encouraging and enabling active balance, education, and health, and on
lifestyle for all employees, and contributing how our products and services improve
to making Nokia a healthy place to work. people’s lives. By the end of 2017, already
around 1 122 400 people have benefitted
from our programs.
In addition to multi-year signature programs
for example with Save the Children and
Greenlight for Girls, in 2017 we supported
new signature programs such as the
Unicef mHealth program in Indonesia
(http://unicefstories.org/tech/mhealth/)
and HundrED (www.hundred.org/en).
In addition to these, we have worked with
several other organizations to activate
children and youth to innovate and be
empowered through technology.

NOKIA IN 2017 73
Employees

In 2017, the average number of employees

was 101 731 (102 687 in 2016 and 56 690 in
2015). The total amount of salaries and wages
paid in 2017 was EUR 6 456 million (EUR 6 275
million in 2016 and EUR 3 075 million in 2015).
Refer to Note 9, Personnel expenses, of our
consolidated financial statements in this
annual report.
The table below shows the average number of
employees in 2017, by geographical location:

Average number
Region of employees
Finland 6 359
Other European countries 32 698
Middle East & Africa 3 954
China 17 829
Asia-Pacific 22 179
North America 14 910
Latin America 3 802
Total 101 731

74 NOKIA IN 2017
 Board review

Dividend

The Board of Directors proposes

a dividend of EUR 0.19 per share
for 2017.
The proposed dividend is in line with our
distribution target. Nokia’s Board of Directors
is committed to proposing a growing dividend,
including for 2018. On a long-term basis,
Nokia targets to grow the dividend by
distributing approximately 40% to 70%
of earnings per share (“EPS”), excluding
unallocated items*, taking into account
Nokia’s cash position and expected cash
flow generation.
We distribute retained earnings, if any, within
the limits set by the Finnish Companies Act
(as defined below). We make and calculate
the distribution, if any, in the form of cash
dividends, share buy-backs, or in some other
form, or a combination of these. There is no
specific formula by which the amount of a
distribution is determined, although some
limits set by law are discussed below. The
timing and amount of future distributions
of retained earnings, if any, will depend on
our future results and financial conditions.
Under the Finnish Companies Act, we may
distribute retained earnings on our shares
only upon a shareholders’ resolution and
subject to limited exceptions in the amount
proposed by the Board. The amount of any
distribution is limited to the amount of
distributable earnings of the parent company
pursuant to the last accounts approved by our
shareholders, taking into account the material
changes in the financial situation of the parent
company after the end of the last financial
period and a statutory requirement that the
distribution of earnings must not result in
insolvency of the parent company. Subject
to exceptions relating to the right of minority
shareholders to request a certain minimum
distribution, the distribution may not exceed
the amount proposed by the Board of Directors.

* Includes costs related to the acquisition of Alcatel Lucent and

related integration, goodwill impairment charges, intangible
asset amortization and other purchase price fair value
adjustments, restructuring and associated charges and
certain other items.

NOKIA IN 2017 75
Risk factors

Set forth below is a description ■■ Our strategy is subject to various risks and ■■ Our patent licensing income and other
uncertainties and we may be unable to intellectual property-related revenues are
of risk factors that could affect successfully implement our strategic plans, subject to risks and uncertainties such as
our business. Shareholders sustain or improve the operational and our ability to maintain our existing sources
financial performance of our business of intellectual property-related revenue,
and potential investors should groups, correctly identify or successfully establish new sources of revenue and
carefully review the following pursue business opportunities or otherwise protect our intellectual property from
risk factors, in addition to other grow our business. infringement. A proportionally significant
share of the current patent licensing
information contained in this ■■ We may be materially and adversely income is generated from the smartphone
affected by general economic and market
annual report. The risk factors conditions and other developments in the
market which is rapidly changing and
features a limited number of large vendors.
described below should not be economies where we operate.
construed as exhaustive. There ■■ We face intense competition and may fail
■■ We conduct our business globally, exposing
us to political and regional risks, including
may be additional risks that are to effectively and profitably invest in new unfavorable or unpredictable treatment in
competitive high-quality products, services,
unknown to us and other risks upgrades and technologies or bring them
relation to tax matters, exchange controls,
and other restrictions.
currently believed to be to market in a timely manner or fail to adapt
immaterial that could turn to changing business models. ■■ Our efforts aimed at managing and
improving our financial or operational
out to be material. ■■ We are dependent on the development performance, cost savings, competitiveness
of the industries in which we operate, and obtaining the targeted synergy
These risks, either individually or collectively, including the information technology and benefits and cost savings, may not lead
could adversely affect our business, sales, communications industries and related to targeted results, benefits, cost savings
profitability, results of operations, financial services market, as well as the digital media or improvements.
condition, competitiveness, costs, expenses, and digital health markets. The information
liquidity, market share, brand, reputation and technology and communications industries ■■ We may be unable to realize the anticipated
share price. Unless otherwise indicated or and related services market are cyclical and benefits, synergies, cost savings or
the context otherwise requires, references are affected by many factors, including the efficiencies from acquisitions, including the
in these risk factors to “Nokia”, the “Nokia general economic environment, purchase acquisition of Alcatel Lucent, and we may
Group”, “Group”, “we”, “us” and “our” mean behavior, deployment, roll-out timing and encounter issues or inefficiencies related
Nokia’s consolidated operating segments. spending by service providers, consumers to our organizational and operational
Certain risks or events may be more prevalent and businesses. The digital media and structure, including being unable to
with respect to Nokia or a certain business digital health markets are rapidly evolving successfully implement our business plans.
group, business or part of the Group. markets affected by numerous factors,
including regulation and IPR. ■■ Due to our global operations, our net sales,
Additional risks and uncertainties not costs and results of operations, as well as
presently known to us, or that are currently ■■ We are dependent on a limited number the U.S. dollar value of our dividends and
believed to be immaterial, could impair of customers and large multi-year market price of our ADSs, are affected by
our business or the value of an investment agreements. The loss of a single customer exchange rate fluctuations.
made in it. This annual report also contains or contract, operator consolidation,
forward-looking statements that involve unfavorable contract terms or other issues ■■ Our products, services and business
risks and uncertainties presented related to a single agreement may have models depend on technologies that we
in “Forward-looking statements” below. a material adverse effect on our business have developed as well as technologies that
and financial condition. are licensed to us by certain third parties.
As a result, evaluating the rights related to
the technologies we use or intend to use is
increasingly challenging, and we expect
to continue to face claims that we have
allegedly infringed third parties’ IPR. The
use of these technologies may also result in
increased licensing costs for us, restrictions
on our ability to use certain technologies
in our products and/or costly and
time-consuming litigation.

76 NOKIA IN 2017
 Board review

■■ Our business is subject to direct and investigations, claims, and government ■■ Performance failures of our partners,
indirect regulation. As a result, changes proceedings, and the extent and outcome as well as failures to agree to partnering
in various types of regulations or their of such proceedings may be difficult to arrangements with third parties could
application, as well as economic and trade estimate with any certainty. We may be adversely affect us.
policies applicable to current or new subject to material fines, penalties and
other sanctions as a result of such ■■ The carrying amount of our goodwill
technologies or products, may adversely
investigations. may not be recoverable.
affect our business and results of
operations. Our governance, internal ■■ The amount of dividend and equity return
controls and compliance processes ■■ We may be adversely affected by
developments with respect to the customer distributed to shareholders for each
could also fail to prevent regulatory financial period is uncertain and is affected
penalties, both at operating subsidiaries financing or extended payment terms that
we provide our customers. by exchange rate fluctuations.
and in joint ventures.
■■ We have operations in many countries ■■ We are exposed to pension, employee fund-
■■ We are exposed to risks related to related and employee healthcare-related
information security. Our business model with different tax laws and rules, which may
result in complex tax issues and disputes. risks and we may be unsuccessful in our
relies on solutions for distribution of ability to avoid or control costs resulting
services and software or data storage, ■■ Our actual or anticipated performance, from a need for increased funding.
which entail inherent risks relating among other factors, could reduce our
to applicable regulatory regimes, ability to utilize our deferred tax assets. ■■ We engage in the installation
cybersecurity breaches and other and maintenance of undersea
unauthorized access to network data ■■ We may be unable to retain, motivate, develop telecommunications cable networks,
or other potential security risks and recruit appropriately skilled employees. and in the course of this activity we
that may adversely affect our business. may cause damage to existing undersea
■■ We may face problems or disruptions infrastructure, for which we may
■■ Inefficiencies, breaches, malfunctions or in our manufacturing, service creation, ultimately be held responsible.
disruptions of information technology delivery, logistics or supply chain.
systems and processes could have a Additionally, adverse events may have
material adverse effect on our business a profound impact on production sites
and results of operations. or the production sites of our suppliers,
which are geographically concentrated.
■■ Our Nokia Technologies business group
aims to generate net sales and profitability ■■ An unfavorable outcome of litigation,
through licensing of the Nokia brand arbitrations, agreement-related disputes or
and technologies in addition to the product liability-related allegations against
development and sales of products and our business could have a material adverse
services, especially in the area of digital effect on us.
health. We are also engaged with other ■■ We may not have access to sources of
business ventures including technology funding on favourable terms, or at all.
innovation and incubation. Expected net
sales and profitability for these businesses ■■ We may not be able to re-establish
may not materialize as planned or at all. investment grade rating or maintain
our credit ratings.
■■ We operate in a number of different
jurisdictions around the world and we ■■ We may be unable to achieve targeted
are subject to various legal frameworks benefits from, or successfully implement,
regulating corruption, fraud, trade policies, planned transactions or transactions may
and other risk areas. At any given time result in liabilities.
we may be subject to inspections,
■■ We are involved in joint ventures and are
exposed to risks inherent to companies
under joint management.

NOKIA IN 2017 77
Shares and
share capital

Nokia has one class of shares. In 2017, under the authorization held by
the Board of Directors, we issued a total
Each Nokia share entitles the of 12 199 284 treasury shares to our
holder to one vote at General employees, including certain members of the
Group Leadership Team, as settlement under
Meetings of Nokia. Nokia’s equity-based incentive plans. The
As of December 31, 2017, the total number shares were issued without consideration and
of Nokia shares was 5 839 404 303 and our in accordance with the plan rules. The total
share capital equaled EUR 245 896 461.96. number of treasury shares issued represented
As of December 31, 2017, Nokia and its 0.2% of the total number of shares and the
subsidiary companies owned a total of total voting rights as of December 31, 2017.
259 887 597 Nokia shares, representing The issuances did not have a significant effect
approximately 4.5% of the total number of on the relative holdings of other Nokia
the shares and voting rights of the company. shareholders, or on their voting power.

In 2017, we did not cancel any shares. Information on the authorizations held
by the Board of Directors in 2017 to issue
In 2017, under the authorization held by shares and special rights entitling to shares,
the Board of Directors and in line with the to transfer shares and repurchase own shares,
capital structure optimization program, as well as information on related party
Nokia repurchased 153 601 462 shares transactions, the shareholders, stock options,
representing approximately 2.6% of share shareholders’ equity per share, dividend yield,
capital and total voting rights as of December price per earnings ratio, share prices, market
31, 2017. In 2016, we had repurchased capitalization, share turnover and average
54 296 182 shares. The price paid for the number of shares is available in the
shares was based on the current market price “Corporate Governance—Compensation”,
of the Nokia share on the securities market at “Financial Statements”, “General facts on
the time of the repurchase. The 207 897 644 Nokia—Shares and shareholders” and
repurchased shares representing “General facts on Nokia—Related party
approximately 3.6% of share capital and total transactions” sections.
voting rights on December 31, 2017 were
cancelled, effective as of February 2, 2018. Refer to Note 20, Shares of the Parent
Company, of our consolidated financial
In 2017, under the authorization held by the statements included in this annual report for
Board of Directors, we issued 415 750 new further information regarding Nokia shares.
shares following the holders of stock options
issued in 2011, 2012 and 2013 exercising
their option rights. In addition, we issued
2 933 541 new shares without consideration
to Nokia to be transferred to fulfil our
obligation under the Nokia Equity Programs.

78 NOKIA IN 2017
 Board review

Board of Directors
and management

Pursuant to the Articles of

Association of Nokia Corporation,
our Board of Directors is
composed of a minimum of
seven and a maximum of 12
members. The Board of Directors
is elected at least annually at the
Annual General Meeting of the
shareholders for a term ending
at the end of the next Annual
General Meeting, which convenes
annually by June 30.
The Board of Directors has responsibility for
appointing and discharging the President and
CEO, the Chief Financial Officer and other
members of the Group Leadership Team.
For information on remuneration, shares
and stock options held by the Board of
Directors, the President and CEO and the
other members of the Group Leadership
Team, refer to “Corporate governance—
Compensation”. For more information
regarding corporate governance at Nokia,
refer to “Corporate governance—Corporate
governance statement” or to our website
at http://www.nokia.com/en_int/investors/
corporate-governance.

Articles of
Association
Our Articles of Association are available on
our website www.nokia.com/en_int/investors/
corporate-governance. Amendment of the
Articles of Association requires a resolution
of the general meeting of shareholders,
supported by two-thirds of the votes cast and
two-thirds of the shares represented at the
meeting. For information on our Articles of
Association, refer to “General facts on Nokia—
Memorandum and Articles of Association”.
Our Articles of Association include provisions
for obligation to redeem. Amendment of
the provisions of Article 13 of the Articles of
Association, “Obligation to purchase shares”,
requires a resolution supported by three-
quarters of the votes cast and three-quarters
of the shares represented at the meeting.
Board of Directors, Nokia Corporation
March 22, 2018

NOKIA IN 2017 79
Corporate
governance

80 NOKIA IN 2017
 Corporate governance

Contents
Corporate governance statement 82
Regulatory framework 82
Main corporate governance
bodies of Nokia 82
General meeting of shareholders 82
Board of Directors 83
Group Leadership Team and
President and CEO 89
Risk management, internal control
and internal audit functions
at Nokia 94
Main features of risk
management systems 94
Description of internal control
procedures in relation to the
financial reporting process 94
Description of the organization
of the internal audit function 94
Main procedures relating to
insider administration 95
Auditor fees and services 95
Audit Committee pre-approval
policies and procedures 95
Compensation96
Introduction96
Remuneration governance 97
Remuneration policy 99
Remuneration report 105

NOKIA IN 2017 81
Corporate governance statement

This corporate governance Regulatory framework stock option plans require shareholder

approval at the time of their launch. All other
statement is prepared in Our corporate governance practices comply plans that include the delivery of company
with Finnish laws and regulations as well as
accordance with Chapter 7, with our Articles of Association. We also comply
stock in the form of newly issued shares or
treasury shares require shareholder approval
Section 7 of the Finnish Securities with the Finnish Corporate Governance Code, at the time of the delivery of the shares,
Markets Act (2012/746, as available at www.cgfinland.fi, with the unless shareholder approval has been granted
following exception:
amended) and the Finnish through an authorization to the Board, a
In 2017, we complied with the Finnish maximum of five years earlier. The NYSE
Corporate Governance Code Corporate Governance Code, with the corporate governance standards require that
2015 (the “Finnish Corporate exception that we were not in full compliance the equity compensation plans be approved
by a company’s shareholders. Nokia aims to
Governance Code”). with recommendation 24, because our
minimize the necessity for, or consequences
restricted share plans did not include
performance criteria but were time-based of, conflicts between the laws of Finland
only. The restricted shares vest in three and applicable non-domestic corporate
equal tranches on the first, second and third governance standards.
anniversary of the award subject to continued The Board has also adopted corporate
employment with Nokia. Restricted Shares governance guidelines (“Corporate
were to be granted on a limited basis for Governance Guidelines”) to reflect our
exceptional purposes related to retention and commitment to good corporate governance.
recruitment, primarily in the United States, to Our Corporate Governance Guidelines are
ensure Nokia is able to retain and recruit vital available on our website at http://www.nokia.
talent for the future success of the company. com/en_int/investors/corporate-governance.
The restricted share plan for 2018 is designed
in a similar manner. The Board approves, upon
recommendation from the Board’s Personnel Main corporate governance
Committee, any long-term incentive bodies of Nokia
compensation and all equity plans, programs
Pursuant to the provisions of the Finnish
or similar arrangements of significance that
Limited Liability Companies Act (2006/624,
the company establishes for its employees.
as amended) (the “Finnish Companies Act”)
We comply with the corporate governance and Nokia’s Articles of Association, the control
standards of Nasdaq Helsinki, which are and management of Nokia are divided among
applicable due to the listing of our shares on the shareholders at a general meeting, the
the exchange. Furthermore, as a result of the Board, the President and CEO and the Group
listing of our American Depositary Shares on Leadership Team, chaired by the President
the New York Stock Exchange (the “NYSE”) and CEO.
and our registration under the U.S. Securities
General meeting of shareholders
Exchange Act of 1934, we must comply
The shareholders may exercise their
with the U.S. federal securities laws and
decision-making power and their right to
regulations, including the Sarbanes-Oxley
speak and ask questions at the general
Act of 2002 as well as the rules of the NYSE,
meeting of shareholders. Each Nokia share
in particular the corporate governance
entitles a shareholder to one vote at
standards under Section 303A of the NYSE
general meetings of Nokia. Pursuant to the
Listed Company Manual, which is available
Finnish Companies Act, an Annual General
at http://nysemanual.nyse.com/lcm/.
Meeting must convene annually by June 30.
We comply with these standards to the
The Annual General Meeting decides,
extent such provisions are applicable
among other things, on the election and
to foreign private issuers.
remuneration of the Board, the adoption of
To the extent any non-domestic rules would the annual accounts, the distribution of profit
require a violation of the laws of Finland, shown on the balance sheet, and discharging
we are obliged to comply with Finnish law. the members of the Board and the President
There are no significant differences in the and CEO from liability, as well as on the
corporate governance practices applied by election and fees of the external auditor.
Nokia compared to those applied by United
In addition to the Annual General Meeting,
States companies under the NYSE corporate
an Extraordinary General Meeting shall be
governance standards, with the exception
convened when the Board considers such
that Nokia complies with Finnish law
meeting to be necessary, or when the
with respect to the approval of equity
provisions of the Finnish Companies Act
compensation plans. Under Finnish law,
mandate that such a meeting must be held.
 

82 NOKIA IN 2017
 Corporate governance

Corporate governance framework The Board has adopted principles concerning

Board diversity describing (a) our commitment
General Meeting of Shareholders to promoting diverse Board composition,
and (b) how diversity is embedded into our
processes and practices when identifying and
proposing new Board candidates as well as
re-election of current Board members.
At Nokia, Board diversity consists of a number
of individual elements, including gender,
Board of Directors age, nationality, cultural and educational
Audit Committee backgrounds, skills and experience. At Nokia
External Personnel Committee Internal diversity is not a static concept, but rather
Audit Corporate Governance and Audit a relevant mix of required elements for the
Nomination Committee Board as a whole that evolves with time
based on, among other things, the relevant
business objectives and future needs of
Nokia. Board diversity is treated as a means
of improvement and development rather
than an end in itself.
Nokia acknowledges and supports
the resolution adopted by the Finnish
Nokia Group Leadership Team Government on February 17, 2015 on
President and CEO gender equality on the boards of directors of
Finnish large and mid-cap listed companies.
Accordingly, we aim to have representation of
Board of Directors Our Board’s leadership structure consists of 40% of both genders in our Board by January
The operations of Nokia are managed a Chair and Vice Chair elected annually by the 1, 2020 by proposing a corresponding Board
under the direction of the Board, within the Board, and confirmed by the independent composition for shareholder approval in the
framework set by the Finnish Companies Act directors of the Board, from among the Board Annual General Meeting of 2019, at the latest.
and Nokia’s Articles of Association as well as members upon the recommendation of the At the Annual General Meeting on May 23,
any complementary rules of procedure as Corporate Governance and Nomination 2017, Jeanette Horan was elected to the
defined by the Board, such as the Corporate Committee. On May 23, 2017, the Board Board after which the gender balance of the
Governance Guidelines and the charters of elected Risto Siilasmaa to continue to serve as Board was 70% male and 30% female. We
the Board’s committees. the Chair and Olivier Piou as the Vice Chair of report annually our objectives relating to both
the Board. The Chair of the Board has certain genders being represented on our Board, the
Election and composition of the Board specific duties as stipulated by Finnish law and means to achieve them, and the progress we
of Directors our Corporate Governance Guidelines. The have made in achieving them.
Pursuant to the Articles of Association of Vice Chair of the Board assumes the duties of
Nokia Corporation, we have a Board that is the Chair of the Board in the event he or she is
composed of a minimum of seven and a prevented from performing his or her duties.
maximum of 12 members. The Board is
elected at least annually at each Annual We do not have a policy concerning the
General Meeting with a simple majority of the combination or separation of the roles of the
shareholders’ votes cast at the meeting. The Chair of the Board and the President and CEO,
term of a Board member shall begin at the but the leadership structure is dependent
closing of the general meeting at which he or on our needs, shareholder value and other
she was elected, or later as resolved by the relevant factors applicable from time to time,
general meeting, and expire at the closing while respecting the highest corporate
of the following Annual General Meeting. governance standards. In 2017, Rajeev Suri
The Annual General Meeting convenes by served as the President and CEO, while Risto
June 30 annually. Siilasmaa served as the Chair of the Board.
The Annual General Meeting held on May 23, The current members of the Board are all
2017 elected the following ten members to non-executive. For the term of the Board that
the Board for a term ending at the close of the began at the Annual General Meeting on May
Annual General Meeting in 2018: Bruce Brown, 23, 2017, all Board member candidates were
Jeanette Horan, Louis R. Hughes, Edward determined to be independent under the
Kozel, Jean C. Monty, Elizabeth Nelson, Olivier Finnish corporate governance standards
Piou, Risto Siilasmaa, Carla Smits-Nusteling and the rules of the NYSE.
and Kari Stadigh.

NOKIA IN 2017 83
Corporate governance statement continued

Members of the Vice Chair Olivier Piou Jeanette Horan Edward Kozel
Board of Directors b. 1958 b. 1955 b. 1955
Vice Chair of the Nokia Board. Nokia Board member since 2017. Nokia Board member since 2017.
Set forth below are Board member and Vice Chair Member of the Audit Committee. Member of the Audit Committee.
the current members since 2016. Member of the
Personnel Committee and the MBA, Business Administration and Degree in Electrical Engineering
of the Board and Corporate Governance and Management, Boston University, and Computer Science, University
the United States. BSc, of California, the United States.
their biographical Nomination Committee.
Mathematics, University of
details. Information Engineer, École Centrale de Lyon, London, United Kingdom. President and CEO of Range
France. Networks 2013–2014, Owner of
about the share Various executive and managerial Open Range 2000–2013, Chief
ownership of the Board Chief Executive Officer of positions in IBM 1998–2015. Vice Technology and Innovation
Gemalto N.V. 2006–2016. Chief President of Digital Equipment Officer and member of the Board
members is disclosed Executive Officer of Axalto N.V. Corporation 1994–1998. Vice of Management of Deutsche
in the Remuneration 2004–2006. With Schlumberger President, Development, of Open Telecom 2010–2012, CEO of
Statement, refer to Ltd 1981–2004, including Software Foundation 1989–1994. Skyrider 2006–2008, Managing
numerous management positions Director of Integrated Finance
“— Compensation” below. in the areas of technology, Member of the Supervisory Board 2005–2006, Senior Vice
marketing and operations, in at Wolters Kluwer, and the Chair President, Business development
France and the United States. of the Remuneration Committee. and Chief Technology Officer
Chair Risto Siilasmaa
Member of the Board of Advisors and Board Member of Cisco
b. 1966
Member of the Board of Directors at Jane Doe No More, a non-profit 1989–2001.
Chair of the Nokia Board. Board
of Gemalto N.V. Member of the organization.
member since 2008. Chair since
Board of Directors of the PESH Various Board Memberships in
2012. Chair of the Corporate Member of the Board of Advisors
foundation. 1999–2009.
Governance and Nomination of Cyberreason 2017-2018.
Committee. Member of the Board of Directors Member of the Board of Directors
Jean Monty
of Alcatel Lucent SA 2008–2016. of West Corporation 2016-2017.
Master of Science (Eng.), Helsinki b. 1947
Member of the Board of Directors
University of Technology, Finland. Nokia Board member since 2016.
Bruce Brown of Microvision 2006-2017.
Member of the Personnel
President and CEO of F-Secure b. 1958 Committee.
Corporation 1988–2006. Nokia Board member since 2012. Louis Hughes
Chair of the Personnel b. 1949 Bachelor of Arts, Collège
Chairman of the Board of Committee. Member of the Nokia Board member since 2016. Sainte-Marie de Montréal, Canada.
Directors of F-Secure Corporate Governance and Member of the Audit Committee. Master of Arts in Economics,
Corporation. Chairman of the Nomination Committee. University of Western Ontario,
Board of Directors of the Master’s Degree in Business Canada. Master of Business
Federation of Finnish Technology MBA (Marketing and Finance), Administration, Harvard Administration, University of
Industries. Vice Chairman of the Xavier University, the United University, Graduate School Chicago, the United States.
Board of Directors of the States. BS (Chemical Engineering), of Business, the United States.
Confederation of Finnish Polytechnic Institute of New York Bachelor of Mechanical Chairman of the Board and Chief
Industries (EK). Member of University, the United States. Engineering, General Motors Executive Officer of Bell Canada
European Roundtable of Institute, now Kettering Enterprises until 2002. President
Retired from The Procter & University, the United States. and Chief Executive Officer of
Industrialists.
Gamble Company in 2014. Chief Nortel Networks Corporation
Chairman of the Board of Technology Officer of the Procter President & Chief Operating until 1997.
Directors of Elisa Corporation & Gamble Company 2008–2014. Officer of Lockheed Martin in
2008–2012. Various executive and managerial 2000. Executive Vice President Member of the Board of Directors
positions in Baby Care, Feminine of General Motors Corporation of Fiera Capital Inc. Member of
Care, and Beauty Care units of 1992–2000. President of General the Boards of Directors of
The Procter & Gamble Company Motors International Operations Bombardier 1998–2017. Member
since 1980 in the United States, 1992–1998. President of General of the Board of Directors of
Germany and Japan. Motors Europe 1992–1994. Alcatel Lucent SA 2008–2016.
Member of the Board of Directors Chairman of InZero Systems
of Agency for Science, Technology (formerly GBS Laboratories) (the
& Research (A*STAR) in Singapore. United States). Independent
Member of the Board of Directors, director and member of the
the Audit Committee and the Audit Committee of AkzoNobel.
Nominating and Corporate Independent director and
Governance Committee of P. H. chairman of the Audit, Finance
Glatfelter Company. Member of and Compliance Committee of
the Board of Directors, the Audit ABB. Executive advisor partner
Committee and the Compensation of Wind Point Partners.
Committee of Medpace, Inc.
Member of the Board of Directors
of Alcatel Lucent SA 2008–2016.
84 NOKIA IN 2017
 Corporate governance

Elizabeth Nelson Kari Stadigh Chair Risto Siilasmaa Vice Chair Olivier Piou
b. 1960 b. 1955
Nokia Board member since 2012. Group CEO and President of
Chair of the Audit Committee. Sampo plc. Nokia Board member
since 2011. Member of the
MBA (Finance), the Wharton Personnel Committee and the
School, University of Corporate Governance and
Pennsylvania, the United States. Nomination Committee.
BS (Foreign Service), Georgetown
University, the United States. Master of Science (Eng.),
Helsinki University of Technology,
Executive Vice President and Finland. Bachelor of Business
Chief Financial Officer, Administration, Hanken School
Macromedia, Inc. 1997–2005. of Economics, Helsinki, Finland.
Vice President, Corporate Bruce Brown Jeanette Horan
Development, Macromedia, Inc. Deputy CEO of Sampo plc
1996–1997. Various roles in 2001–2009. President of Sampo
Corporate Development and Life Insurance Company Limited
International Finance, 1999–2000. President of Nova
Hewlett-Packard Company Life Insurance Company Ltd
1988–1996. 1996–1998. President and
COO of Jaakko Pöyry Group
Chairman of the Board of 1991–1996.
Directors of DAI. Independent
Lead Director and Chair of the Member of the Board of Directors
Audit Committee of Zendesk Inc. and Chair of the Board’s Risk
Committee of Nordea Bank AB
Member of the Board of Directors (publ). Chairman of the Board of
of Pandora Media 2013–2017. Louis Hughes Edward Kozel
Directors of If P&C Insurance
Member of the Boards of Holding Ltd (publ) and Mandatum
Directors of Brightcove, Inc. Life Insurance Company Limited.
2010–2014, SuccessFactors, Inc. Member of the Board of Directors
2007–2012 and Ancestry.com, of the Federation of Finance
Inc. 2009–2012. Finland (previously Finnish
Financial Services). Member of the
Carla Smits-Nusteling Board of Directors of Waypoint
b. 1966 Capital Group Holdings SA.
Nokia Board member since 2016. Member of the Board of Directors
Member of the Audit Committee. of Niilo Helanderin Säätiö.
Master’s Degree in Business
Economics, Erasmus University Jean Monty Elizabeth Nelson
Rotterdam, the Netherlands.
Executive Master of Finance and
Control, Vrije University
Amsterdam, the Netherlands.
Member of the Board of Directors
and Chief Financial Officer of KPN
2009–2012. Various financial
positions in KPN 2000–2009.
Various financial and operational
positions in TNT/PTT Post
1990–2000.
Member of the Supervisory Board Carla Smits-Nusteling Kari Stadigh
since 2013 and Chair of the Audit
Committee of ASML. Member of
the Board of Directors since 2013
and Chair of the Audit Committee
of TELE2 AB. Member of the
Management Board of the
Unilever Trust Office since 2015.
Lay Judge in the Enterprise Court
of the Amsterdam Court of
Appeal since 2015.

NOKIA IN 2017 85
Corporate governance statement continued

Election of the Chair of the Board of The Board is ultimately responsible for The Board has three committees: the Audit
Directors and Vice Chair of the Board of monitoring and reviewing Nokia’s financial Committee, the Corporate Governance and
Directors and the chair and members of reporting process, effectiveness of related Nomination Committee and the Personnel
the Board’s Committees control and audit functions and the Committee. These committees assist the
The Chair of the Board and the Vice Chair independence of Nokia’s external auditor, Board in its duties pursuant to their
of the Board of Directors are elected from as well as for monitoring the statutory audit respective committee charters. The
among the members of the Board by the new of the annual and consolidated financial independent directors of the Board elect
Board and confirmed by the independent statements. The Board’s responsibilities the members and chairs of the Board’s
directors of the Board based on the also include overseeing the structure and committees from among the Board’s
recommendation of the Corporate composition of our top management and independent directors based on the
Governance and Nomination Committee. monitoring legal compliance and the recommendation of the Corporate
The independent directors of the new Board management of risks related to our Governance and Nomination Committee
also confirm the election of the members operations. In doing so, the Board may set and based on each committee’s member
and chairs for the Board’s committees from annual ranges and/or individual limits for qualification standards. The Board may also
among the Board’s independent directors capital expenditures, investments and establish ad hoc committees for detailed
upon the recommendation of the Corporate divestitures and financial commitments reviews or consideration of particular topics
Governance and Nomination Committee and that may not be exceeded without separate to be proposed for the approval of the Board.
based on each committee’s member Board approval.
In line with our Corporate Governance
qualification standards. These elections will
In risk management policies and processes, Guidelines, the Board conducts annual
take place at the Board’s assembly meeting
the Board’s role includes risk analysis and performance evaluations, which also include
following the Annual General Meeting in 2018.
assessment in connection with financial, evaluations of the Board committees’ work
Operations of the Board of Directors strategy and business reviews, updates and as well as the Board and Committee Chairs
The Board represents and is accountable decision-making proposals. Risk management and individual Board members. In 2017,
to the shareholders of Nokia. The Board’s policies and processes are integral parts of an external evaluator assisted in the
responsibilities are active, not passive, and Board deliberations and risk-related updates Board evaluation process consisting of
include the responsibility to evaluate the are provided to the Board on a recurring basis. self-evaluations and peer evaluations, as well
strategic direction of Nokia, its management For a more detailed description of our risk as interviews. The evaluation process included
policies and the effectiveness of the management policies and processes, refer both numeric assessments and the possibility
implementation of such by the management to “—Risk management, internal control and to provide more detailed written comments.
on a regular basis. It is the responsibility of the internal audit functions at Nokia—Main The feedback from selected members of
members of the Board to act in good faith and features of risk management systems” below. management was also requested as part of
with due care, so as to exercise their business this evaluation process. The results of the
judgment on an informed basis, in a manner The Board has the responsibility for evaluation are discussed and analyzed by
which they reasonably and honestly believe appointing and discharging the President and the entire Board and improvement actions
to be in the best interests of Nokia and its CEO and the other members of the Group are agreed based on such discussion.
shareholders. In discharging that obligation, Leadership Team. Since May 2014, Rajeev Suri
the members of the Board must inform has served as the President and CEO. His
themselves of all relevant information rights and responsibilities include those
reasonably available to them. The Board and allotted to the President under Finnish law
each Board committee also have the power and he also chairs the Group Leadership Team.
to appoint independent legal, financial or Subject to the requirements of Finnish law,
other advisors as they deem necessary the independent directors of the Board
from time to time. confirm the compensation and terms of
employment of the President and CEO upon
the recommendation of the Personnel
Committee of the Board. The compensation
and employment conditions of the other
members of the Group Leadership Team
are approved by the Personnel Committee
upon the recommendation of the President
and CEO.

86 NOKIA IN 2017
 Corporate governance

Meetings of the Board of Directors

The Board held 21 meetings excluding committee meetings during 2017, of which approximately 40% were regularly scheduled meetings held
in person, complemented by meetings via video or conference calls or by other means. Additionally, in 2017, the non-executive directors held
meetings regularly without management in connection with Board meetings.
Directors’ attendance at Board meetings, including committee meetings but excluding meetings among the non-executive directors or
independent directors only, in 2017 is set forth in the table below:

Corporate
Governance
Audit and Nomination Personnel
Board Committee Committee Committee
meetings meetings meetings meetings
% % % %
Bruce Brown 100 100 100
Jeanette Horan (from May 23, 2017) 100 100
Louis Hughes 100 100
Edward Kozel (from May 23, 2017) 100 100
Jean Monty 100 100
Elizabeth Nelson 100 100
Olivier Piou 95 80 88
Risto Siilasmaa 100 100
Carla Smits-Nusteling 100 100
Kari Stadigh 90 100 100

Additionally, many of the directors attended, Committees of the Board of Directors ■■ the performance of the internal audit
as non-voting observers, meetings of a The Audit Committee consists of a minimum function; and
committee of which they were not a member. of three members of the Board who meet all
applicable independence, financial literacy ■■ the company’s compliance with legal and
According to Board practices, the and other requirements as stipulated by regulatory requirements, including the
non-executive directors meet without Finnish law, the rules of Nasdaq Helsinki and performance of its ethics and compliance
management in connection with each regularly the NYSE. From May 23, 2017, the Audit program.
scheduled meeting. Such sessions are chaired Committee consisted of the following five
by the non-executive Chair of the Board. If the Audit Committee also maintains procedures
members of the Board: Elizabeth Nelson for the receipt, retention and treatment
non-executive Chair of the Board is unable (Chair), Jeanette Horan, Louis Hughes,
to chair these meetings, the non-executive of complaints received by the company
Edward Kozel and Carla Smits-Nusteling. regarding accounting, internal controls, or
Vice Chair of the Board chairs the meeting.
Additionally, the independent directors meet The Audit Committee is established by the auditing matters and for the confidential,
separately at least once annually. Board primarily for the purpose of oversight anonymous submission by our employees of
of the accounting and financial reporting concerns relating to accounting or auditing
All the directors who served on the Board for processes of Nokia and the audits of its matters. Nokia’s disclosure controls and
the term until the close of the Annual General financial statements. The Committee is procedures, which are reviewed by the Audit
Meeting in 2017 attended Nokia’s Annual responsible for assisting the Board in the Committee and approved by the President
General Meeting held on May 23, 2017. oversight of: and CEO and the Chief Financial Officer, as
The Finnish Corporate Governance Code well as the internal controls over financial
recommends that the Chair and members of ■■ the quality and integrity of the company’s reporting, are designed to provide reasonable
the Board and the President shall be present financial statements and related assurance regarding the quality and integrity
at the general meeting of shareholders to disclosures; of the company’s financial statements and
ensure the possibility for the shareholders related disclosures. For further information on
to exercise their right to present questions ■■ the statutory audit of the company’s internal control over financial reporting, refer
to both the Board and management. financial statements; to “—Risk management, internal control and
■■ the external auditor’s qualifications internal audit functions at Nokia—Description
and independence; of internal control procedures in relation
to the financial reporting process” below.
■■ the performance of the external auditor
subject to the requirements of Finnish law;
■■ the performance of the company’s internal
controls and risk management and
assurance function;

NOKIA IN 2017 87
Corporate governance statement continued

Under Finnish law, an external auditor is The Audit Committee meets a minimum The Committee fulfills its responsibilities by:
elected by shareholders by a simple majority of four times a year based on a schedule
established at the first meeting following ■■ actively identifying individuals qualified to
vote at the Annual General Meeting for one
the appointment of the Committee. The be elected members of the Board as well as
year at a time. The Audit Committee prepares
Committee meets separately with the considering and evaluating the appropriate
the proposal to the shareholders, upon
representatives of Nokia’s management, level and structure of director remuneration;
its evaluation of the qualifications and
independence of the external auditor, of the heads of the internal audit, and ethics and ■■ preparing proposal to the shareholders
nominee for election or re-election. Under compliance functions, and the external on the director nominees for election at
Finnish law, the fees of the external auditor auditor in connection with each regularly the general meetings as well as director
are also approved by the shareholders by a scheduled meeting. The head of the internal remuneration;
simple majority vote at the Annual General audit function has, at all times, direct access
Meeting. The Committee prepares the to the Audit Committee, without the ■■ monitoring significant developments in the
proposal to the shareholders in respect of involvement of management. law and practice of corporate governance
the fees of the external auditor, and approves and of the duties and responsibilities of
the external auditor’s annual audit fees The Audit Committee held nine meetings in directors of public companies;
under the guidance given by the Annual 2017. Attendance at the meetings was 100%.
Additionally, any director who so wishes may ■■ assisting the Board and each Committee
General Meeting. For information about of the Board in its annual performance
the fees paid to Nokia’s external auditor, attend meetings of the Audit Committee as
a non-voting observer. evaluations, including establishing
PricewaterhouseCoopers Oy, during 2017, criteria to be applied in connection with
refer to “—Auditor fees and services” below. The Corporate Governance and Nomination such evaluations;
In discharging its oversight role, the Audit Committee consists of three to five members
of the Board who meet all applicable ■■ developing and recommending to the
Committee has full access to all company Board and administering Nokia’s Corporate
books, records, facilities and personnel. independence requirements as stipulated by
Finnish law, the rules of Nasdaq Helsinki and Governance Guidelines; and
The Committee may appoint counsel,
auditors or other advisors in its sole the NYSE. From May 23, 2017, the Corporate ■■ reviewing Nokia’s disclosure in the
discretion, and must receive appropriate Governance and Nomination Committee has corporate governance statement.
funding, as determined by the Audit consisted of the following four members of
the Board: Risto Siilasmaa (Chair), Bruce The Committee has the power to appoint
Committee, from Nokia for the payment
Brown, Olivier Piou and Kari Stadigh. recruitment firms or advisors to identify
of compensation to such outside advisors.
appropriate candidates. The Committee may
The Board has determined that all members The Corporate Governance and Nomination also appoint counsel or other advisers, as it
of the Audit Committee, including its Chair, Committee’s purpose is to prepare the deems appropriate from time to time. The
Elizabeth Nelson, are “audit committee proposals for the general meetings in respect Committee has the sole authority to appoint
financial experts” as defined in the of the composition of the Board and the or terminate the services of such firms or
requirements of Item 16A of the annual director remuneration to be approved by advisers and to review and approve such
report on Form 20-F filed with the U.S. the shareholders, and to monitor issues and firm’s or adviser’s fees and other retention
Securities and Exchange Commission (“SEC”). practices related to corporate governance terms. It is the Committee’s practice to
Ms. Nelson and each of the other members and to propose necessary actions in appoint a recruitment firm to identify new
of the Audit Committee are “independent respect thereof. director candidates.
directors” as defined by Finnish law and
The Corporate Governance and Nomination
Finnish Corporate Governance Code and
Committee held five meetings in 2017.
in Section 303A.02 of the NYSE Listed
The average attendance at the meetings
Company Manual.
was 95%. Additionally, any director who so
wishes may attend meetings of the Corporate
Governance and Nomination Committee
as a non-voting observer.

88 NOKIA IN 2017
 Corporate governance

The Personnel Committee consists of a Further information

minimum of three members of the Board The Corporate Governance Guidelines
who meet all applicable independence concerning the directors’ responsibilities, the
requirements as stipulated by Finnish law, the composition and election of the members of
rules of Nasdaq Helsinki and the NYSE. From the Board, its committees and certain other
May 23, 2017, the Personnel Committee has matters relating to corporate governance are
consisted of the following four members of available on our website at http://www.nokia.
the Board: Bruce Brown (Chair), Jean Monty, com/en_int/investors/corporate-governance.
Olivier Piou and Kari Stadigh. We have a Code of Conduct that is applicable
to all of our employees, directors and
The primary purpose of the Personnel management and, in addition, we have a Code
Committee is to oversee the personnel-related of Ethics applicable to the President and CEO,
policies and practices at Nokia, as described Chief Financial Officer and Corporate
in the Committee charter. It assists the Board Controller. These documents and the charters
in discharging its responsibilities in relation of the Audit Committee, the Corporate
to all compensation, including equity Governance and Nomination Committee and
compensation, of the company’s executives the Personnel Committee are available on our
and their terms of employment. The website at http://www.nokia.com/en_int/
Committee has overall responsibility investors/corporate-governance.
for evaluating, resolving and making
recommendations to the Board regarding: Group Leadership Team and the President
and CEO
■■ compensation of the company’s top We have a Group Leadership Team that is
executives and their terms of employment; responsible for the operative management of
■■ all equity-based plans; Nokia. The Chair and members of the Group
Leadership Team are appointed by the Board.
■■ incentive compensation plans, policies The Group Leadership Team is chaired by the
and programs of the company affecting President and CEO. The President and CEO’s
executives; and rights and responsibilities include those
■■ other significant incentive plans. allotted to the President and CEO under
Finnish law.
The Committee is responsible for overseeing
compensation philosophy and principles and
ensuring the above compensation programs
are performance-based, and designed to
contribute to long-term shareholder value
creation and alignment to shareholders’
interests, properly motivate management,
and support overall corporate strategies.
The Personnel Committee held eight
meetings in 2017. The average attendance
at the meetings was 97%. Additionally,
any director who so wishes may attend
meetings of the Personnel Committee
as a non-voting observer.

NOKIA IN 2017 89
Corporate governance statement continued

Members of the Nokia Further, during 2017 and Strategic Planning, ICL India (ICIM) Rajeev Suri
thereafter, the following 1990–1993. Production Engineer,
Group Leadership Team members of the Group Calcom Electronics 1989.
Set forth below are the current Leadership Team resigned:
and appointed members of Basil Alwan
the Group Leadership Team ■■ Samih Elhage, formerly
b. 1962
and their biographical details. President of Mobile Networks,
President of IP/Optical Networks.
Information about the shares stepped down from the
Group Leadership Team member
and share-based rights of Group Leadership Team
since 2016. Joined Nokia in 2016.
the members of the Group as of March 31, 2017;
Leadership Team is disclosed in Bachelor in Computer
■■ Monika Maurer, formerly
the Remuneration Statement; Engineering, University of Illinois
Chief Operating Officer,
refer to “—Compensation” below. at Urbana-Champaign, the
stepped down from the
United States.
During 2017 and thereafter, Group Leadership Team as Basil Alwan
the following new appointments of December 11, 2017; and Previously President of IP Routing
were made to the Group and Transport, Alcatel Lucent
■■ Igor Leprince, President of
Leadership Team: 2012–2016. President of IP
Global Services, will step down
Division, Alcatel Lucent
■■ Kristian Pullola was appointed from the Group Leadership
2003–2012. Founder, President
Chief Financial Officer and Team as of March 31, 2018.
and CEO, TiMetra Networks
member of the Group 2000–2003. Vice President and
Leadership Team as of Rajeev Suri General Manager, Bay Networks
January 1, 2017; b. 1967 (acquired by Nortel) Enterprise
President and Chief Executive Products Division (EPD)
■■ Monika Maurer was appointed Officer of Nokia Corporation. 1997–2000. Vice President
Chief Operating Officer Chair of the Group Leadership of Product Management
and member of the Group Team since 2014. Joined Nokia and Marketing, Rapid City Hans-Jürgen Bill
Leadership Team as of in 1995. Communications 1996–1997.
April 1, 2017;
Bachelor of Engineering
■■ Igor Leprince was appointed (Electronics and Communications), Hans-Jürgen Bill
President of Global Services Manipal Institute of Technology, b. 1960
and member of the Group Karnataka, India. Chief Human Resources Officer.
Leadership Team as of Group Leadership Team member
April 1, 2017; CEO, Nokia Solutions and since 2016. Joined Nokia Siemens
Networks 2009–2014. Head of Networks in 2007.
■■ Marcus Weldon was appointed Services, Nokia Siemens Networks
Chief Technology Officer and 2007–2009. Head of Asia Pacific, Diploma in Telecommunications
President of Nokia Bell Labs, Nokia Siemens Networks April from the University of Deutsche
and member of the Group 2007. Senior Vice President, Bundespost, Dieburg/Darmstadt,
Leadership Team as of Nokia Networks Asia Pacific Germany. Diploma in Economics
April 1, 2017; 2005–2007. Vice President, from the University of Applied
Hutchison Customer Business Sciences, Pforzheim, Germany.
■■ Gregory Lee was appointed
Team, Nokia Networks
President of Nokia Technologies Executive Vice President, Human
2004–2005. General Manager,
and member of the Group Resources, Nokia Corporation
Business Development, Nokia
Leadership Team as of 2014–2016. Head of Human
Networks Asia Pacific 2003.
June 30, 2017; Resources, NSN 2009–2014.
Sales Director–BT, O2 and
Head of West South Europe
■■ Joerg Erlemeier was appointed Hutchison Global Customers,
region, NSN 2007–2009. Head of
Chief Operating Officer and Nokia Networks 2002. Director,
Asia Pacific for Mobile Networks,
member of the Group Technology and Applications, BT
Siemens 2003–2007. Head of
Leadership Team as of Global Customer, Nokia Networks
Operations for Mobile Networks,
December 11, 2017; and 2000–2001. Head of Global
Siemens 2001–2003. Head of
Competitive Intelligence, Nokia
■■ Sanjay Goel was appointed Region Central-East and North
Networks 1999–2000. Head of
President of Global Services Europe for Mobile Networks,
Product Competence Center,
and member of the Group Siemens 1998–2001. Head of
Nokia Networks South Asia
Leadership Team as of Mobile Networks in Indonesia,
1997–1999. System Marketing
April 1, 2018. Siemens 1994–1998. Various
Manager, Cellular Transmission,
management positions, Siemens
Nokia Networks India 1995–1997.
1983–1994.
Head of Group Procurement,
imports and special projects,
Churchgate Group, Nigeria
1993–1995. National Account
Manager–Transmission/Manager–

90 NOKIA IN 2017
 Corporate governance

Kathrin Buvac Kathrin Buvac Ashish Chowdhary Joerg Erlemeier

b. 1980 b. 1965 b. 1965
Chief Strategy Officer. Group Chief Customer Operations Chief Operating Officer. Group
Leadership Team member since Officer. Group Leadership Team Leadership Team member since
2016. Joined Nokia Siemens member since 2016. Joined Nokia 2017. Joined Nokia in 1994.
Networks in 2007. in 2003.
Bachelor of Engineering
Degree in Business Information MBA, Wharton School, University (Electronics and
Systems from University of of Pennsylvania, Philadelphia, Telecommunications),
Cooperative Education, Germany. the United States. MS Computer Fachhochschule, Aachen,
Bachelor Degree in Business Science, Emory University, Germany.
Administration from Open Atlanta, the United States. BA
University, London, the United Mathematics from University Senior Vice President, Integration,
Kingdom. of Delhi, India. Nokia, 2015. Vice President,
Ashish Chowdhary Global Services, Europe, Nokia,
Vice President, Corporate Executive Vice President and 2015. Head of Delivery, North
Strategy, Nokia Networks Chief Business Officer at Nokia America market, Nokia, 2013/14.
2014–2016. Chief of staff to Networks 2015–2016. Head of Head of Program Management
the CEO, Nokia Solutions and Customer Operations Asia, Middle Office, Nokia Siemens Networks,
Networks 2011–2013. Head of East & Africa (AMEA), Nokia 2012. Head of Middle East &
Strategic Projects, Business Networks 2011–2015. Head of Africa, Nokia Siemens Networks,
Solutions, Nokia Siemens Global Services, Nokia Siemens 2009–2011. Held several
Networks 2009–2011. General Networks 2009–2010. Head of executive level positions in
Manager, Integration Programme, Managed Services, Nokia Siemens Nokia/Nokia Siemens Networks,
Nokia Siemens Networks Networks 2007–2009. Country 1994–2009.
2007–2009. General Manager, Head India, Nokia Networks
Corporate Audit, Siemens Holding 2003–2007. Vice President for
Joerg Erlemeier S.p.A. 2006–2007. Head of Enterprise Business, Hughes
Controlling International Communications Ltd 2000–2003
Businesses, Siemens and 1994–1998. Software and
Communications 2003–2006. Project Engineer, Hughes Network
Head of Performance Controlling Systems 1989–1993. Teaching
USA, Siemens Communications Assistant, Computer Science,
2002–2003. Business Process Emory University 1987–1989.
Manager Global IT Strategy,
Siemens Communications
2001–2002. Business Analyst,
EADS Aerospace and Defence
1999–2000.

NOKIA IN 2017 91
Corporate governance statement continued

Barry French Sanjay Goel Federico Guillén Barry French

b. 1963 b. 1967 b. 1963
Chief Marketing Officer. Group Senior Vice President, Global President of Fixed Networks.
Leadership Team member since Services. President of Global Group Leadership Team member
2016. Joined Nokia in 2006. Services and Group Leadership since 2016. Joined Nokia in 2016.
Team member as of April 1, 2018.
Master’s Degree in International Joined Nokia Networks in 2001. Degree in Telecommunications
Affairs from Columbia University’s Engineering, ETSIT at Universidad
School of International and Public Bachelor’s Degree in Politécnica de Madrid, Spain.
Affairs, New York, the United Engineering in Electronics and Master’s degree in Switching &
States. Bachelor of Arts degree in Communications from Manipal Communication Architectures,
Political Science, Bates Colleges, Institute of Technology, ETSIT at Universidad Politécnica
Lewiston, Maine, the United States. Karnataka, India. de Madrid, Spain. Master’s Degree
in International Management,
Chief Marketing Officer and Senior Vice President, Services Sanjay Goel
ESC Lyon and Alcatel, France.
Executive Vice President, Marketing Portfolio Sales, Global Services,
and Corporate Affairs, Nokia Nokia since 2015. Vice President, President of Fixed Networks,
2014–2016. Head of Marketing and Services, Customer Operations, Alcatel Lucent 2013–2016.
Corporate Affairs, Nokia Siemens Asia, Middle East & Africa, Nokia President and CEO of Alcatel
Networks 2010–2014. Head of Networks 2012 – 2015. Head of Lucent Spain & Global Account
Communications, Nokia Siemens Global Services, Asia Pacific & Manager Telefonica, Alcatel
Networks 2006–2010. Vice Japan, Nokia Siemens Networks Lucent 2009–2013. Vice
President, Corporate 2009-2012. Head of Managed President Sales of Vertical Market
Communications, United Airlines Services, Asia Pacific (including Sales in Western Europe, Alcatel
2004–2006. Director, Corporate India & Japan), Nokia Siemens Lucent 2009. Head of Regional
Communications, Dell 2000–2004. Networks 2007-2009. Several Support Centre within Alcatel
Additional roles included director and manager level Lucent’s Fixed Access Division for
communications, government positions in Nokia Networks South Europe, MEA, India and Bhaskar Gorti
relations and management 2001-2007. Manager in IBM India CALA 2007–2009. CEO, Alcatel
positions, Engineering Animation, 1996-2001. Several engineer Mexico & Global Account Manager,
Raytheon, KRC Research and the positions in Asea Brown Boveri Telmex 2003–2007. Various R&D,
Sawyer/Miller Group. Ltd 1990-1996. Portfolio and Sales Management
Positions, Telettra and then
Board member, World Affairs Alcatel in Spain, Belgium and
Bhaskar Gorti
Council of Dallas. the United States 1989–2003.
b. 1966
President of Nokia Software.
Group Leadership Team member
since 2016. Joined Nokia in 2016.
Master’s degree in Electrical
Engineering from Virginia Federico Guillén
Polytechnic Institute and State
University, Blacksburg, the
United States. Bachelor’s degree
in Technology and Electrical
Engineering from National
Institute of Technology,
Warangal, India.
Previously President of IP
Platforms, Alcatel Lucent
2015–2016. Senior Vice President
and General Manager,
Communications Global Business
Unit, Oracle 2006–2015. Senior Gregory Lee
Vice President, Portal Software
2002–2006.

92 NOKIA IN 2017
 Corporate governance

Igor Leprince Gregory Lee Kristian Pullola Maria Varsellona

b. 1963 b. 1973 b. 1970
President of Nokia Technologies. Chief Financial Officer. Group Chief Legal Officer. Group
Group Leadership Team member Leadership Team member since Leadership Team member since
since 2017. Joined Nokia in 2017. 2017. Joined Nokia in 1999. 2016. Joined Nokia Siemens
Networks in 2013.
Bachelor of Science degree in Master of Science (Economics),
Biochemistry, University of the Hanken School of Economics, Law Degree from University of
California at San Diego, the Helsinki, Finland. Finance diploma, Palermo (Juris Doctor), Italy.
United States. the Stockholm School of
Economics, Stockholm, Sweden. Executive Vice President and
President and Chief Executive Chief Legal Officer, Nokia
Officer, North America and Senior Vice President, Corporate 2014–2016. General Counsel,
Director, Media Solutions Center Controller, Nokia 2011–2016. Vice NSN 2013–2014. Tetra Pak Group
Kristian Pullola of America, Samsung Electronics President, Treasury & Investor General Counsel, Tetra Laval
Co. Ltd 2014–2017. President, Relations, Nokia 2009–2011. Vice Group 2011–2013. Sidel Group
Samsung Telecommunications President, Corporate Treasurer, General Counsel, Tetra Laval
America (STA) 2013–2014. Nokia 2006–2008. Director, Group 2009–2011. Senior
President, Samsung Asia Treasury Finance & Control, Nokia Counsel Commercial Operations
2010–2013. Global Chief 2003–2006. Various roles in Nokia and Global Services, GE Oil & Gas
Marketing Officer, Samsung Treasury 1999–2003. Associate, 2006–2009. Senior Counsel
Electronics Co. Ltd 2004–2010. Citibank International Europe, Hertz Europe
Vice President, Franchises and 1998–1999. 2005–2006. Senior Counsel
Customer Development, Johnson Global Services, GE Oil & Gas
& Johnson Consumer Asia Pacific Member of the Board of Directors 2001–2005. Lawyer, Pini
2002–2004. President, Vision of Ilmarinen Mutual Pension Birmingham & Partners
Care, Asia Pacific, Johnson & Insurance Company. 1998–2001. Lawyer, Greco Law
Marc Rouanne Johnson Medical Devices Firm 1994–1998.
1999–2002. Marc Rouanne
b. 1963 Member of the Board of Directors
Member of the Board of Directors President of Mobile Networks. of Nordea Bank AB (publ).
of HMD Global. Group Leadership Team member
since 2016. Joined Nokia Siemens Marcus Weldon
Igor Leprince Networks in 2008. b. 1968
b. 1971 Corporate Chief Technology
President of Global Services Ph.D. in Information Theory from Officer and President of Nokia Bell
until March 31, 2018. Group University of Notre Dame, Indiana, Labs. Group Leadership Team
Leadership Team member since the United States. Engineering member since 2017. Joined Nokia
2017. Joined Nokia Siemens degree in Signal Processing from in 2016.
Networks in 2007. Supélec, France. Degree in
Computer Science from Ph.D (Physical Chemistry) degree,
Maria Varsellona Master’s degree in Université d’Orsay, France. Harvard University, Cambridge,
Telecommunications and Network Massachusetts, United States.
Engineering, E.N.S.T. Paris, France. Executive Vice President, Mobile Bachelor of Science (Computer
Bachelor’s and Master’s degree in Broadband, Nokia Networks Science and Chemistry) joint
Computer Science and Systems 2011–2016. Head of Network degree, King’s College, London,
and Networks, University Paris 7, Systems, Nokia Siemens Networks United Kingdom.
Paris, France. 2010–2011. Head of Radio
Access, Nokia Siemens Networks Corporate Chief Technology
Executive Vice President, Global 2008–2009. Executive Vice Officer and President of Bell Labs,
Services, Nokia since 2014. Senior President of Alcatel, President Alcatel Lucent (then Nokia)
Vice President and Head of Middle of Convergence Business Group, 2013–2016. Corporate Chief
East & Africa, Nokia Networks Alcatel Lucent 2006–2008. Chief Technology Officer, Alcatel Lucent
2011–2014. Vice President, Head Operating Officer, then President 2009–2013. Chief Technology
Marcus Weldon of Care, Global Services, Nokia Wireless Business Group, then Officer, Broadband Networks &
Siemens Networks 2010–2011. Executive Vice President, Alcatel Solutions, Alcatel Lucent
Vice President, Head of Network 2003–2006. VP positions, then 2006–2009. Member of Technical
Planning & Optimization, Global Chief Operating Officer, then Staff, Bell Labs, Lucent
Services, Nokia Siemens Networks President Wireless Business Technologies 1997–2006.
2007–2010. Senior Vice Division, Alcatel 1997–2003.
president, LCC International R&D and Engineering Director Network Partner to Keen Venture
2007. Managing Director EMEA, positions, Matra and Nortel Matra Partners. Advisor to Mundi
WFI 2005–2007. Cellular 1988–1997. Ventures.

Chairman of Advisory Board

of Dhatim.

NOKIA IN 2017 93
Corporate governance statement continued

Risk management, internal control ■■ the significant processes, structured under so-called financial
cycles. Financial cycles have been designed to: (i) give a complete
and internal audit functions at Nokia end-to-end view of all financial processes; (ii) identify key control
Main features of risk management systems points; (iii) identify involved organizations; (iv) ensure coverage
We have a systematic and structured approach to risk management. for important accounts and financial statement assertions; and
Key risks and opportunities are primarily identified against business (v) enable internal control management within Nokia;
targets either in business operations or as an integral part of strategy
and financial planning. Risk management covers strategic, operational, ■■ the control activities, which consist of policies and procedures to
financial and hazard risks. Key risks and opportunities are analyzed, ensure the management’s directives are carried out and the related
managed and monitored as part of business performance management documentation is stored according to our document retention
with the support of risk management personnel and the centralized practices and local statutory requirements; and
Enterprise Risk Management function. ■■ the information systems’ general controls to ensure that sufficient
The principles documented in the Nokia Enterprise Risk Management IT general controls, including change management, system
Policy, which is approved by the Audit Committee of the Board, require development and computer operations, as well as access and
risk management and its elements to be integrated into key processes. authorizations, are in place.
One of the core principles is that the business or function head is also Further, the management has also:
the risk owner, although all employees are responsible for identifying,
analyzing and managing risks, as appropriate, given their roles and ■■ assessed the design of the controls in place aimed at mitigating
duties. Our overall risk management concept is based on managing the financial reporting risks;
the key risks that would prevent us from meeting our objectives, rather ■■ tested operating effectiveness of all key controls; and
than solely focusing on eliminating risks. In addition to the principles
defined in the Nokia Enterprise Risk Management Policy, other key ■■ evaluated all noted deficiencies in internal controls over financial
policies reflect implementation of specific aspects of risk management. reporting in the interim and as of year-end.
Key risks and opportunities are reviewed by the Group Leadership In 2017, Nokia has followed the procedures as described above and
Team and the Board in order to create visibility on business risks has reported on the progress and assessments to the management
as well as to enable prioritization of risk management activities. and to the Audit Committee of the Board on a quarterly basis.
Overseeing risk is an integral part of the Board’s deliberations. The
Board’s Audit Committee is responsible for, among other matters, risk Description of the organization of the internal audit function
management relating to the financial reporting process and assisting We also have an internal audit function that acts as an independent
the Board’s oversight of the risk management function. The Board’s appraisal function by examining and evaluating the adequacy and
role in overseeing risk includes risk analysis and assessment in effectiveness of our system of internal control. Internal audit reports
connection with financial, strategy and business reviews, updates to the Audit Committee of the Board. The head of the internal audit
and decision-making proposals. function has direct access to the Audit Committee, without
involvement of the management. Internal Audit staffing levels and
Description of internal control procedures in relation to the annual budget are approved by the Audit Committee. All authority of
financial reporting process the internal audit function is derived from the Board. Internal audit
The management is responsible for establishing and maintaining aligns to the business regionally and by business and function.
adequate internal control over financial reporting for Nokia. Our
internal control over financial reporting is designed to provide Annually, an internal audit plan is developed with input from the
reasonable assurance to the management and the Board regarding management, including key business risks and external factors. This
the reliability of financial reporting and the preparation and fair plan is approved by the Audit Committee of the Board. Audits are
presentation of published financial statements. completed across the business focused on country level, customer
level, IT system implementation, IT security, operations activities or
The management conducts a yearly assessment of Nokia’s internal at a Group function level. The results of each audit are reported to
controls over financial reporting in accordance with the Committee of the management identifying issues, financial impact, if any, and
Sponsoring Organizations framework (the “COSO framework”, 2013) the correcting actions to be completed. Quarterly, internal audit
and the Control Objectives for Information and related technology of communicates the progress of the internal audit plan completion,
internal controls. The assessment is performed based on a top-down including the results of the closed audits.
risk assessment of our financial statements covering significant
accounts, processes and locations, corporate-level controls and Internal audit also works closely with our Ethics and Compliance office
information systems’ general controls. to review any financial concerns brought to light from various channels
and, where possible, works with Enterprise Risk Management to ensure
As part of its assessment the management has documented: priority risk areas are reviewed through audits.
■■ the corporate-level controls, which create the “tone from the top” In 2017, the internal audit plan was completed and all results of these
containing the Nokia values and Code of Conduct and which provide reviews were reported to the management and to the Audit
discipline and structure to decision-making processes and ways of Committee of the Board.
working. Selected items from our operational mode and governance
principles are separately documented as corporate-level controls;

94 NOKIA IN 2017
 Corporate governance

Main procedures relating to insider administration The following table presents fees by type paid to
PricewaterhouseCoopers for the years ended December 31:
Our insider administration is organized according to the applicable
European Union and Finnish laws and regulations. In addition, the EURm 2017 2016
Board of Directors has approved Nokia Insider Policy, which sets
out Nokia-wide rules and practices to ensure full compliance with Audit fees(1) 25.3 31.3
applicable rules and that inside information is recognized and treated Audit-related fees(2) 1.8 1.8
in an appropriate manner and with the highest integrity. The policy Tax fees(3) 1.2 3.4
is applicable to all Nokia employees. All other fees(4) 0.1 –
Persons discharging managerial responsibilities Total 28.4 36.5
Nokia has identified members of the Board of Directors and the Group (1) Audit fees consist of fees incurred for the annual audit of the Group’s consolidated financial
Leadership Team as persons discharging managerial responsibilities statements and the statutory financial statements of the Group’s subsidiaries.
who, along with persons closely associated with them, are required to (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 Group’s financial statements or that
notify Nokia and the Finnish Financial Supervisory Authority of their are traditionally performed by the independent auditor, and include consultations concerning
transactions with Nokia’s financial instruments. Nokia publishes the financial accounting and reporting standards; advice on tax accounting matters; advice and
transaction notifications on a stock exchange release. assistance in connection with local statutory accounting requirements; due diligence related to
mergers and acquisitions; employee benefit plan audits and reviews; and audit procedures in
connection with investigations in the pre-litigation phase and compliance programs. They also
In addition, under the Nokia Insider Policy, persons discharging
include fees billed for other audit services, which are those services that only the independent
managerial responsibilities are obligated to clear with the Vice President, auditor can reasonably provide, and include the provision of comfort letters and consents
Corporate Legal, a planned transaction in Nokia’s financial instruments in connection with statutory and regulatory filings and the review of documents filed with the
SEC and other capital markets or local financial reporting regulatory bodies.
in advance. It is also recommended that trading and other transactions
(3) Tax fees include fees billed for: (i) services related to tax compliance including preparation and/or
in Nokia’s financial instruments are carried out in times when the review of tax returns, preparation, review and/or filing of various certificates and forms and
information available to the market is as complete as possible. consultation regarding tax returns and assistance with revenue authority queries; customs
duties reviews and advice; compliance reviews, advice and assistance on other indirect taxes;
Closed Window and transaction cost analysis; (ii) service related to tax audits; (iii) services related to individual
compliance (preparation of individual tax returns and registrations for employees (non-
Persons discharging managerial responsibilities are subject to a closed executives), assistance with applying visa, residency, work permits and tax status for expatriates);
window period of 30 calendar days preceding the disclosure of Nokia’s (iv) services related to technical guidance on tax matters; (v) services related to transfer pricing
quarterly or annual result announcements, as well as the day of the advice and assistance with tax clearances; and (vi) tax consultation and planning (advice on
stock-based remuneration, local employer tax laws, social security laws, employment laws
disclosure. During the closed window period persons discharging and compensation programs and tax implications on short-term international transfers).
managerial responsibilities are prohibited from dealing in Nokia’s (4) Other fees include fees billed for company establishments; liquidations; forensic accounting,
financial instruments. data security, other consulting services and reference materials and services.

Nokia has imposed this closed window period also on separately

designated Financial Reporting Persons who are recurrently involved
Audit Committee pre-approval
with the preparation of Nokia’s quarterly and annual results policies and procedures
announcements. These persons are separately notified of their The Audit Committee of the Board is responsible, among other
status as Financial Reporting Persons. matters, for oversight of the external auditor’s independence, subject
Insider Registers to the requirements of applicable legislation. The Audit Committee has
Nokia does not maintain a permanent insider register. Insiders are adopted a policy regarding an approval procedure of audit services
identified on a case-by-case basis for specific projects and are notified performed by the external auditors of Nokia Group and permissible
of their insider status. Persons included in a project-specific insider non-audit services performed by the principal external auditor of the
register are prohibited from dealing in Nokia’s financial instruments Nokia Group (the “Pre-approval Policy”).
until the project ends or is made public. Under the Pre-approval Policy, proposed services either: (i) may be
Supervision pre-approved by the Audit Committee in accordance with certain
Our insider administration’s responsibilities include internal service categories described in the Pre-approval Policy (“general
communications related to insider matters and trading restrictions, pre-approval”); or (ii) require the specific pre-approval of the Audit
setting up and maintaining our insider registers, arranging related Committee (“specific pre-approval”). The Pre-approval Policy sets out
trainings as well as organizing and overseeing compliance with the the audit, audit-related, tax and other services that have received
insider rules. the general pre-approval of the Audit Committee. All other audit,
audit-related (including services related to internal controls and
Violations of the Nokia Insider Policy must be reported to the Vice significant mergers and acquisitions projects), tax and other services
President, Corporate Legal. Nokia employees may also use channels are subject to specific pre-approval by the Audit Committee. All service
stated in the Nokia Code of Conduct for reporting incidents involving requests concerning generally pre-approved services will be submitted
alleged violations of the Nokia Insider Policy. to an appointed Audit Committee delegate within management, who
will determine whether the services are within the services generally
Auditor fees and services pre-approved. The Pre-approval Policy is subject to annual review
by the Audit Committee.
PricewaterhouseCoopers Oy has served as our auditor for each of
the fiscal years in the three-year period ended December 31, 2017. The Audit Committee establishes budgeted fee levels annually
The auditor is elected annually by our shareholders at the Annual for each of the categories of audit and non-audit services that
General Meeting for the fiscal year in question. The Audit Committee are pre-approved under the Pre-approval Policy, namely, audit,
of the Board prepares the proposal to the shareholders in respect audit-related, tax and other services. At each regular meeting of
of the appointment of the auditor based upon its evaluation of the the Audit Committee, the auditor provides a report in order for the
qualifications and independence of the auditor to be proposed for Audit Committee to review the services that the auditor is providing,
election or re-election on an annual basis. as well as the cost of those services.

NOKIA IN 2017 95
Compensation

This section sets out our remuneration governance, In 2017, the President and CEO was awarded a long-term incentive
award, which will vest to him in 2020 based on performance in 2017
policies and how they have been implemented and 2018.
within Nokia and includes our Remuneration Report The base salary of the President and CEO will remain at EUR 1 050 000
where we provide disclosure of the compensation for 2018, the third year in which his salary has remained at this level.
of our Board, the President and CEO and His target short-term incentive will also remain at 125% of base salary.
aggregated compensation information for the Looking forward on long-term incentives
The change to our long-term incentive resulted from the Personnel
Group Leadership Team for 2017. We report Committee’s review of the performance measures used in our
information related to executive compensation in long-term incentive plan. The review resulted in two recommendations
accordance with Finnish regulatory requirements to the Board. First, while earnings per share remains core to the plan,
the committee recommended to introduce a relative measure by
and with requirements set forth by the U.S. changing the measure of revenue to revenue relative to market,
Securities and Exchange Commission. measuring Nokia’s revenue relative to its primary addressable market
to recognize cyclicality in the industry. The weighting of the measure
was also reduced from 50% to 33.3% with the second change to
Introduction introduce a free cash flow measure. In any business managing cash
2017 was a challenging year, with our primary addressable market flow is critical and in the challenging market environment ahead it
declining in the range of 4 to 5%. Despite this, we continued to is essential to ensure the management remain focused on the dual
execute well on our “rebalancing for growth” strategy, maintain cost priorities of managing for cash and investing in 5G.
and pricing discipline, and deliver solid financial results, though lower
than the annual plan. On a compensation front this led to lower than The Personnel Committee continues to monitor the effectiveness
target annual bonuses, though a little higher than last year driven of the long-term incentive plans comparing performance and payout
by the performance of the patent licensing business. to that of our peers and then comparing performance of the plans
with the total shareholder return of Nokia over time. The analysis is
Compensation in 2017 discussed in more detail below in the Remuneration Report with a
Our compensation approach is driven by our fundamental belief in headline that there is strong correlation between performance of the
pay for performance and aligning the interests of employees and plans and total shareholder return over time and within a given year.
shareholders. We strive to pay competitively compared to peer However, the nature of long-term incentives means that there is
companies and we pay based on performance. Compensation received a delay between the time they are earned and the time they are
in any one year consists primarily of base salary, annual short-term received which can distort the snapshot at any one point in time.
incentive and a long-term incentive awarded three years prior In 2017 the 2014 long-term incentive award vested which rewarded
to vesting. for strong performance in 2014 and 2015 while the results in 2017
showed a weaker revenue and impact on the share price.
The business delivered weaker revenue than planned, but resilient
operating profit and cash flow, resulting in an annual short-term The pattern of performance of the performance share plans follows
incentive being below target (76%) for our President and CEO. the movement in the share price of the company with the most recent
performance being the 2016 cycle where 46.25% of the target award
The settlement of the Apple patent litigation was not built into the
will vest. In the recent years, the payout of our long-term incentive
2017 forecast and target, as it was not expected to be resolved in
plans has been as follows:
2017, but it did have a significant impact on the results in 2017.
The Board exercised discretion on the treatment of the settlement The 2014 performance share plan vested on January 1, 2017 with
of the Apple patent litigation providing credit for the financial benefit 125.72% of the target award vesting based on the achievement
of an earlier settlement, but not recognizing the full value of the against the revenue and earnings per share targets during the
settlement in 2017. performance period (financial years 2014 and 2015); and
Long-term incentive payments received in the year reflect the The 2015 performance share plan vested on January 1, 2018 with
performance share award granted in 2014. Based on strong 123.75% of the target award vesting based on the achievement
performance in 2014 and 2015 the payout under that plan was against the revenue and earnings per share targets during the
125.72% of target. The President and CEO also received the performance period (financial years 2015 and 2016); and
payment under the first tranche of a special award granted in 2016
to incentivize the delivery of synergies from the Alcatel Lucent The 2016 performance share plan will vest on January 1, 2019
acquisition. That award was based on financial synergies and cultural with 46.25% of the target award vesting based on the achievement
integration and the targets were achieved in full. The three-tranche against the revenue and earnings per share targets during the
vesting of the award ensures continued interest in delivering performance period (financial years 2016 and 2017).
sustainable integration.

96 NOKIA IN 2017
 Corporate governance

Employee Share Purchase Plan The Board of Directors

Finally, a word about our employee share purchase plan, Share in ■■ Approves, and the independent members of the Board confirm,
Success. The plan offers the opportunity for our employees to own the compensation of the President and CEO, upon recommendation
shares in Nokia, fosters share ownership as a component of the culture of the Personnel Committee;
in Nokia and is a key part of aligning everyone’s interests and helping
Nokia grow. We are particularly proud of Share in Success, under which ■■ Approves, upon recommendation of the Personnel Committee, any
participating employees receive one matching share for every two long-term incentive compensation and all equity plans, programs or
purchased shares that the participant still holds at the end of the similar arrangements of significance that the company establishes
12-month plan cycle. In 2017, Nokia offered the plan to employees in for its employees; and
57 countries and 36% of those eligible joined the plan. In 2018, it is ■■ Decides on the issuance of shares (under authorization by
intended for employees in 18 new countries to be invited to join, shareholders) to fulfill the company’s obligations under equity
taking the total number of participating countries to 75. plans in respect of vested awards to be settled.
The Personnel Committee
Remuneration governance The Personnel Committee assists the Board in discharging its
We manage our remuneration through clearly defined processes, responsibilities relating to all compensation, including equity
with well-defined governance principles, ensuring that no individual compensation, of the company’s executives and the terms of
is involved in the decision-making process related to their own employment of the executives.
remuneration and that there is appropriate oversight of any
compensation decision. Remuneration of the Board is annually ■■ In respect of the President and CEO, the Committee is accountable
presented to shareholders for approval at the Annual General Meeting to the Board for:
and the remuneration of the President and CEO is approved by –– reviewing and recommending to the Board the goals and
the Board. objectives relevant to compensation;
The General Meeting of Shareholders –– evaluating and presenting to the Board the assessment
■■ Shareholders approve the composition of the Board and the of performance in light of those goals and objectives; and
director remuneration based on proposals of the Board’s Corporate
Governance and Nomination Committee, which actively considers –– proposing to the Board the total compensation based on
and evaluates the appropriate level and structure of director this evaluation.
remuneration. The composition of the Board and director
remuneration are resolved by a majority vote of the shareholders ■■ In respect of the other members of the Group Leadership Team
represented at the General Meeting and determined as of the (other than the President and CEO) and the direct reports to the
date of the General Meeting, until the close of the next Annual President and CEO in Vice President-level positions and above,
General Meeting. the Committee:

■■ Shareholders authorize the Board to resolve to issue shares, –– reviews and approves the goals and objectives relevant to the
for example, to settle the company’s equity-based incentive plans compensation, upon recommendation of the President and CEO;
based on the proposal of the Board. –– reviews the results of the evaluation of performance in relation
to the approved goals and objectives. The Committee approves
the incentive compensation based on such evaluation;
–– approves and oversees the total compensation recommendations
made by the President and CEO; and
–– reviews and approves compensation proposals made by the
President and CEO in the event of termination of employment
of a member of the Group Leadership Team.

NOKIA IN 2017 97
Compensation continued

■■ The Committee reviews periodically, and makes recommendations ■■ The Committee reviews annually the company’s share ownership
to the Board regarding any equity programs, plans and other policy to determine the appropriateness of the policy against its
long-term incentive compensation arrangements, or similar stated objectives.
arrangements of significance that the company establishes for,
or makes available to, its employees, the appropriateness of the ■■ The Committee has the power, in its sole discretion, to retain
allocation of benefits under the plans and the extent to which compensation consultants having special competence to assist
the plans are meeting their intended objectives. the Personnel Committee in evaluating director and executive
compensation.
■■ The Committee reviews and resolves, at its discretion, any other
significant compensation arrangements applicable to the wider ■■ The Committee reviews and approves changes to the company’s
executive population in the Nokia Group. peer group for the assessment of the competitiveness of our
compensation from time to time.
■■ The Committee reports to the Board at least annually on
its views as to whether the President and CEO is providing the The committee consults regularly with the President and CEO and
necessary leadership for the company in the long- and short-term. the Chief Human Resources Officer though they are not present
when their own compensation is reviewed or discussed.
■■ The Committee reviews and discusses with management the
compensation philosophy, strategy, principles, and management
compensation to be included in our Remuneration Report.

Work of the Personnel Committee January: September:

The Personnel Committee convened five times during 2017 with ■■ 2016 achievement review ■■ Compensation strategy and
a general theme for each meeting. The discussion and timing of and short-term incentive plan philosophy review
certain remuneration-related elements was unique in 2017, payment approvals including
given the specific needs following the acquisition of Alcatel Lucent review of the performance of ■■ Risk review
and any associated integration-related matters, as required. the President and CEO Update on:
■■ Budget approval for the 2017 ■■ market and legal environment;
Nokia equity program and and
DEC JAN
performance review for the
2015 performance share plan ■■ adviser market practices
FE
OV
■■ Review of the Group November:
B
N

Leadership Team succession Review of:

4 1
planning ■■ framework for the short-term
OCT

MAR

March: incentive program for 2018;

■■ Share ownership policy ■■ framework for the long-term
compliance review incentive program for 2018;
APR

and
SEP

■■ Review of the 2016

3 2 Remuneration Statement ■■ the Remuneration Statement
and Report and Report for 2017
G ■■ Group Leadership Team
AU

AY

M
compensation reviews
JUL
JU N August:
Review of:
1 Approvals & reporting ■■ Talent summit outcomes;
2 Philosophy & structure
3 Long-term direction & market review ■■ diversity; and
4 Planning
■■ policy

98 NOKIA IN 2017
 Corporate governance

The President and CEO Remuneration policy

The President and CEO has an active role in the compensation
This section of our statement describes our remuneration policy,
governance and performance management processes for the Group
the aspects considered when setting the policy and how we currently
Leadership Team and the wider employee population at Nokia.
compensate our directors and executives.
The President and CEO is not a member of the Personnel Committee
Board of Directors
and does not vote at Personnel Committee meetings, nor does he
The objective of the Board’s Corporate Governance and Nomination
participate in any conversations regarding his own compensation.
Committee when determining director remuneration is to ensure that
Advisors Nokia is able to compete for top-of-class board competence in order
The Personnel Committee engaged Aon, an independent external to maximize shareholder value. Therefore, it is the practice of the
consultant, to assist in the review and determination of executive Corporate Governance and Nomination Committee to review and
compensation and program design and provide insight into market compare the total remuneration levels and their criteria paid in other
trends and regulatory developments. The Personnel Committee global companies with net sales, geographical coverage and
has reviewed and established that Aon is independent of Nokia and complexity of business comparable to that of Nokia’s. The Corporate
does not have any other material business relationships with Nokia. Governance and Nomination Committee’s aim is to ensure that
Nokia has an efficient Board consisting of international professionals
Authorizations and resolutions of the Board concerning remuneration representing a diverse and relevant mix of skills and experience.
Valid authorizations Nokia believes that a competitive Board remuneration contributes
The Annual General Meeting held on May 23, 2017 resolved to to the achievement of this target.
authorize the Board to resolve to issue a maximum of 560 million
shares through one or more issuances of shares or special rights Director remuneration at Nokia consists of an annual fee and a
entitling to shares. The authorization may be used to develop meeting fee. Director remuneration for the term that began at the
the company’s capital structure, diversify the shareholder base, Annual General Meeting held on May 23, 2017 and ends at the close
finance or carry out acquisitions or other arrangements, to settle of the Annual General Meeting in 2018 consists of the following fees:
the company’s equity-based incentive plans or for other purposes
resolved by the Board. Annual fee EUR

The authorization is effective until November 23, 2018 and the Chair 440 000
authorization terminated the earlier shareholder authorization for the Vice Chair 185 000
Board to issue shares and special rights entitling to shares resolved at Member 160 000
the Annual General Meeting on June 16, 2016. The authorization did Chair of Audit Committee 30 000
not terminate the authorization granted by the Extraordinary General Member of Audit Committee 15 000
Meeting held on December 2, 2015 to the Board for the issuance Chair of Personnel Committee 30 000
of shares in order to implement the acquisition of Alcatel Lucent.
Meeting fee(1) EUR
Board resolutions Meeting requiring intercontinental travel 5 000
On January 31, 2018, the Board approved the Nokia equity program Meeting requiring continental travel 2 000
for 2018 and the issuance, without consideration, of a maximum
of 10.5 million Nokia shares held by the company to settle its (1) Paid for a maximum of seven meetings per term. Not paid to the Chair of the Board.
commitments to Nokia’s equity plan participants during 2018.
Approximately 40% of the annual fee is paid in Nokia shares purchased
from the market or by using treasury shares. According to our policy,
the directors shall retain until the end of their directorship such
number of shares as corresponds to the number of shares they have
received as Board remuneration during their first three years of service
on the Board (the net amount received after deducting those shares
needed to offset any costs relating to the acquisition of the shares,
including taxes). The shares shall be purchased from the market on
behalf of the directors, or, if treasury shares are used, transferred to
the directors, as soon as practicable after the Annual General Meeting.
The remainder of the annual fee is payable in cash, most of which is
typically used to cover taxes arising from the paid remuneration.
A meeting fee for Board and Committee meetings is paid to all
members of the Board except the Chair of the Board based on cost
of travel required between the home location of the member of the
Board and the location of a meeting. Only one meeting fee is payable
for multiple Board and Committee meetings per eligible travel.
The meeting fee is paid for a maximum of seven meetings per term.
The meeting fee is paid in cash.
According to our policy, non-executive directors do not participate in
any of Nokia’s equity programs and do not receive performance
shares, restricted shares or any other equity-based or other form
of variable compensation for their duties as members of the Board.

NOKIA IN 2017 99
Compensation continued

The President and CEO We aim to provide a globally competitive compensation offering,
Our focus when considering policies related to remuneration of the which is comparable to that of our peer group companies, taking into
President and CEO is to: account industry, geography, size and complexity. The peer group
is reviewed annually and external advice is sought to confirm the
■■ attract, retain and motivate the right individuals to lead Nokia; appropriateness of the peer group, the quantum and the relative mix
■■ drive performance and appropriate behaviors; and of compensation packages. The peer group for 2017 is presented
in “—Remuneration Report” below. We also monitor a wider group
■■ align the interests of the President and CEO and the results of companies as emerging competitors in the labor markets from
of our compensation programs with the interests and returns which we hire.
of our shareholders.
In designing our variable compensation programs key consideration
These principles are then also applied to the compensation of the is given to:
Group Leadership Team.
■■ incorporating specific performance measures that align directly
Compensation philosophy, design and strategy with the execution of our strategy and driving long-term
Our compensation programs are designed to attract, drive and retain sustainable success;
the talent necessary to deliver long-term sustainable results to the
ultimate benefit of our shareholders. Rewards are tied to the ■■ delivering an appropriate amount of performance-related variable
execution of our strategy by adopting an appropriate mix of fixed and compensation for the achievement of strategic goals and financial
variable compensation to engage and incentivize delivery of these targets in both the short and long term;
objectives and ensure alignment with shareholder interests. ■■ appropriately balancing rewards between company and individual
A single compensation framework is used across the Nokia Group performance; and
with a varying mix of fixed and variable compensation for each level ■■ fostering an ownership culture that promotes sustainability and
of responsibility. Higher levels of performance-based compensation long-term value creation that aligns the interests of participants
and equity compensation are used to reward executives for delivering with those of our shareholders.
long-term sustainable results and creating value for our shareholders.
Compensation structure and target setting
In line with our overall compensation philosophy, our executives are rewarded using a mix of fixed and variable pay. The variable pay is determined
based on performance against a mix of targets, either short- or long-term in nature, depending on the strategic impact for the business.
Targets for the short- and long-term incentive plans are set by the Board. The Board reviews business plans, external analysts’ expectations,
previous year’s performance and the overall macro-economic environment to arrive at suitable targets for the plans. The goal of target-setting
is to set targets that are achievable and sufficiently demanding to create shareholder value.
The elements of the compensation structure for the President and CEO are further detailed below.

Element Purpose Operation Opportunity

Base salary To attract and retain the Base pay is reviewed annually taking into Base salary increases are expected to be set
best individual with the consideration a variety of factors, including, in the context of wider employee increases.
requisite level of knowledge, for example, the following:
skills and experience to lead
our businesses and provide ■■ performance of the individual;
a degree of financial ■■ changes in the market and the remuneration
certainty and stability. of our external comparator group;
■■ changes in individual responsibilities; and
■■ average employee salary increases across
Nokia and in the local market.

Short-term To incentivize and reward Short-term incentives are based on As a percentage of base salary
incentives performance against performance against single year targets
delivery of the annual and paid in cash. Min 0%
business plan. Target 125%
Targets for the short-term incentives are set
at the start of the year, in the context of Max 281.25%
analyst expectations and the annual plan,
selecting measures that align to delivery
of Nokia’s strategy.
Achievement is assessed at the end of the year.

100 NOKIA IN 2017

 Corporate governance

Element Purpose Operation Opportunity

Long-term To reward for delivery Annual long-term incentive awards are made in Payout as a percentage of target award
incentives of sustainable long-term performance shares and paid for performance
performance, align the against longer-term targets. Min 0%
President and CEO’s Target 100%
interests with those Targets are set in the context of the Nokia
of shareholders and long-term plans which are validated against Max 200%
aid retention. analyst forecasts ensuring that they are
considered both demanding and motivational.
The target value of a long-term incentive award
is determined by reference to Nokia’s peer
group and informed by reference to a wider
group of emerging competitors in the markets
where we recruit our talent including a range
of technology companies.
The Board retains the discretion to make
exceptional awards in circumstances where
there is a strategically significant change in
Nokia for which they believe that additional
incentives would increase or accelerate
value creation.
Benefits & To attract, retain and Benefits are made available as part of the n/a
perquisites protect the President same policy that applies to employees more
and CEO. broadly in the relevant country, with additional
security provisions, as appropriate.
Relocation To support the international Support may be offered to cover additional n/a
& mobility mobility and ensure the costs related to relocation to and working in
right person is in the a location other than home country based
right location to meet on business need. The policy supports the
business needs. mobility needs of an individual and their
dependants or the reasonable costs of
commuting. Benefits are market-specific and
are not compensation for performing the role
but provided to defray costs or additional
burdens of a relocation or residence outside
the home country.
Retirement To provide for retirement Retirement age is defined and pensions are As mandated by Finnish law
plans with a level of certainty. provided in line with local country arrangements;
in Finland this is the statutory Finnish pension
system (“Finnish TyEL”).
Under the TyEL arrangements, base salary,
incentives and other taxable benefits are
included in the definition of earnings while
gains from equity related plans are not.
No supplemental pension arrangements are
provided in Finland.
Change To ensure the continuity of Change of control arrangements are offered n/a
of control management in connection on a very limited basis only and are based on
arrangements with a possible change of a double trigger structure, which means that
control event. both a specified change of control event and
termination of the individual’s employment
must take place for any change of control-based
severance payment to materialize. Refer to
“—Termination provisions of the President
and CEO”.

NOKIA IN 2017 101

Compensation continued

Compensation mix and opportunity 2017 Pay opportunity (EURm)

To align the interests of the President and CEO with those of our
shareholders, the compensation mix for the President and CEO is 12.00
heavily geared towards performance-based pay with only 19.5%
of core target compensation in 2017 consisting of fixed pay. The 10.00
total remuneration of the President and CEO is thus dependent on
performance and the range of possible outcomes is shown opposite: 8.00
Remuneration on recruitment
Our policy on recruitment is to offer a compensation package which is 6.00
sufficient to attract, retain and motivate the individual with the right
skills for the required role. On occasion, we may offer compensation to 4.00
buy out awards or other lost compensation which the candidate held
prior to joining Nokia, but which lapsed upon the candidate leaving 2.00
their previous employer. Due consideration is given to the potential
value and timing of such awards, taking into account any conditions 0.00
attached to the awards and the likely performance against Min Target Max
such conditions.
Base salary
Clawback Short-term incentive
The President and CEO is subject to a clawback policy where any Long-term incentive
restatement of financial results may result in the reclaiming of
amounts previously paid which had been based on numbers which
have since been materially restated. Any such reclaimed amount,
and the period over which payments can be reclaimed, will take
into account the circumstances and duration of any misstatement.
Share ownership requirement
Nokia believes that it is desirable for its executives to own shares in
Nokia to align their interests with those of shareholders and to ensure
that their decisions are in the long-term interest of the company.
The President and CEO is required to own three times his base salary
in Nokia shares and is given a period of five years from appointment
to achieve the required level of share ownership.
Termination provisions
In the event of a termination of employment, any payable
compensation is determined in line with legal advice regarding local
legislation, country policies, contractual obligations and the rules
of the applicable incentive and benefit plans. Current termination
provisions of the President and CEO’s service agreement are
described under “—Termination provisions of the President and CEO”.

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 Corporate governance

Group Leadership Team Share ownership policy

Remuneration of the Group Leadership Team Members of the Group Leadership Team are required to own two
The remuneration of the members of the Group Leadership Team times their base salary in Nokia Shares. They are given five years from
(excluding the President and CEO) consists of base salary, fringe joining the Group Leadership Team to meet the requirements of
benefits and short- and long-term incentives and follows the same the policy.
policy framework as the President and CEO and other eligible
employees, except that the quantum differs by role. Short-term Pension arrangements of the Group Leadership Team
incentive plans are based on rewarding the delivery of business The members of the Group Leadership Team participate in the local
performance utilizing certain, or all, of the following metrics as retirement plans applicable to employees in the country of residence.
appropriate to the member’s role: revenue, operating profit, free cash Executives based in Finland participate in the statutory Finnish
flow and defined strategic objectives. The revenue and operating pension system, as regulated by the Finnish TyEL.
profit metrics exclude costs related to the acquisition of Alcatel Lucent Executives based outside Finland participate in arrangements relevant
and related integration, goodwill impairment charges, intangible to their location. Retirement plans vary by country and include defined
asset amortization and other purchase price fair value adjustments, benefit, defined contribution and cash balance plans. The retirement
restructuring and associated charges and certain other items. age for the members of Group Leadership Team varies between 60
Remuneration on recruitment and 65.
Our policy on recruitment is to offer a compensation package which is Termination provisions
sufficient to attract, retain and motivate individuals with the right skills In all cases, if an executive is dismissed for cause, no compensation will
for the required role. On occasion, we may offer compensation to buy be payable and no outstanding equity will vest.
out awards or other lost compensation which the candidate held prior
to joining Nokia, but which lapsed upon the candidate leaving their In the event of termination by Nokia for any other reason than cause,
previous employer. Due consideration is given to the potential value where Nokia pays compensation in lieu of notice period salary,
and timing of such awards, taking into account any conditions attached the benefits and target short-term incentive amounts are taken
to the awards and the likely performance against such conditions. into account.

Clawback The Board has discretion to implement change of control agreements

Our executives are subject to a clawback policy where any restatement if there is a period of significant instability in the business to facilitate
of financial results may result in the reclaiming of amounts previously stable and effective leadership during such a time, for example during
paid which had been based on numbers which have since been a merger. At the end of 2017 there were no change of control
materially restated. Any such reclaimed amount, and the period agreements in place for the Group Leadership Team members.
over which payments can be reclaimed, will take into account the
circumstances and duration of any misstatement.
Nokia Equity Program
The Nokia equity program includes the following equity instruments:

Performance shares Restricted shares Employee share purchase plan

Eligible employees Grade-based eligibility Grade-based eligibility Employees in participating countries
Purpose Annual long-term incentive awards, Limited use for recruitment Encourage share ownership within the
to reward delivery of sustainable and retention Nokia employee population, increasing
long-term performance, align with engagement and sense of ownership
the interests of shareholders and in the company
aid retention of key employees
Vesting schedule Two-year performance period based Vest equally in three tranches on the Matching shares vest at the end of the
on financial targets and one-year 1st, 2nd and 3rd anniversary of grant 12-month savings period
restriction period

NOKIA IN 2017 103

Compensation continued

Performance share plans Restricted share plan

In accordance with previous years’ practice, the primary equity Restricted shares are granted to Nokia’s executives and other eligible
instruments granted to eligible employees are performance shares. employees on a more limited basis than performance shares for
The performance shares represent a commitment by Nokia to deliver purposes related to retention and recruitment to ensure Nokia is
Nokia shares to employees at a future point in time, subject to our able to retain and recruit vital talent for the future success of Nokia.
fulfillment of the performance criteria.
Under the 2018 restricted share plan, the restricted shares are
The table below illustrates the performance criteria of the divided into three tranches, each tranche consisting of one third of the
performance share plans that are currently active. restricted shares granted. The first tranche has a one-year restriction
period, the second tranche a two-year restriction period, and the third
Performance criteria(1) (Nokia group) 2018 2017 2016 tranche a three-year restriction period.
Annual earnings per share (diluted) Yes The grant under the 2018 restricted share plan could result in an
Annual free cash flow Yes aggregate maximum settlement of 8 million Nokia shares. Until
Revenue relative to market Yes the Nokia shares are delivered, the participants will not have any
Average annual net sales Yes Yes shareholder rights, such as voting or dividend rights, associated
Average annual earnings per share with the restricted shares.
(diluted) Yes Yes Employee Share Purchase Plan
Minimum settlement at below threshold Under our employee share purchase plan 2018 “Share in Success”,
performance(2) – – 25% eligible employees can elect to make monthly contributions from
(1) Measures exclude costs related to the acquisition of Alcatel Lucent and related integration,
their salary to purchase Nokia shares. The contribution per employee
goodwill impairment charges, intangible asset amortization and other purchase price fair value cannot exceed EUR 1 800 per year. The share purchases are made at
adjustments, restructuring and associated charges and certain other items. market value on predetermined dates on a quarterly basis during a
(2) In 2014, a minimum payout level was introduced to reinforce the retentive impact of the plan
by giving some certainty to remaining employees during the transformation of Nokia following
12-month savings period. Nokia intends to deliver one matching share
the Sale of the D&S Business and integration of the Nokia Networks business. The 2017 plan for every two purchased shares the employee still holds at the end of
removes the minimum payout of 25% of the grant amount for executive employees. Employees the plan cycle. Participation in the plan is voluntary for all employees in
who are not executives at the time the awards are granted to them will continue to benefit from
a minimum payout of 25% with the intention of this continuing to provide a retention effect.
countries where the plan is offered. The Employee Share Purchase Plan
is planned to be offered to Nokia employees in up to 75 countries for
Under the 2018 performance share plan, the pay-out will depend on the plan cycle commencing in 2018.
whether the performance criteria have been met by the end of the
performance period. The performance criteria are: Nokia annual Legacy equity programs
earnings per share (diluted), annual free cash flow and revenue relative Stock Options
to market. The criteria exclude costs related to the acquisition of The granting of stock options ceased at the end of 2013; however,
Alcatel Lucent and related integration, goodwill impairment charges, awards granted under the 2011 stock option plan remain in force.
intangible asset amortization and other purchase price fair value Under the plan, each stock option entitles the holder to subscribe for
adjustments, restructuring and associated charges and certain one new Nokia share. The stock options are non-transferable and may
other items. be exercised for shares only. The vesting schedule of the 2011 stock
option plan is as follows:
The 2018 performance share plan has a two-year performance
period (2018-2019) and a subsequent one-year restriction period. Plan Vesting schedule
The number of performance shares to be settled would be determined 2011 stock 50% on third anniversary of grant
with reference to the performance targets during the performance option plan
period. For non-executive participants, 25% of the performance 50% on fourth anniversary of grant
shares granted in 2018 will settle after the restriction period,
Term is approximately six years
regardless of the satisfaction of the applicable performance criteria.
In case the applicable performance criteria are not satisfied, The final subscription periods end on December 27, 2019
employees who are executives at the date of the performance
share grant in 2018 will not receive any settlement.
Shares will be eligible for dividends in respect of the financial year in
The grant under the 2018 performance share plan could result which the share subscription takes place. Other shareholder rights will
in an aggregate maximum settlement of 94 million Nokia shares, commence on the date on which the subscribed shares are entered in
in the event that maximum performance against all the performance the trade register. The stock option grants are generally forfeited if the
criteria is achieved. employment relationship is terminated with Nokia.
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.

104 NOKIA IN 2017

 Corporate governance

Alcatel Lucent liquidity agreements Compensation paid in 2017:

In 2016, Nokia and Alcatel Lucent entered into liquidity agreements
with beneficiaries of the 2015 Alcatel Lucent performance share plan. EUR(1) Shares(2)
Pursuant to the agreements, the 2015 Alcatel Lucent performance Risto Siilasmaa, Chair 440 000 30 497
shares (as well as other unvested performance share plans, where the Olivier Piou, Vice Chair(3) 199 000 12 823
employee elected to enter into a liquidity agreement rather than
Bruce Brown(4) 209 000 13 169
accelerate their equity), would be exchanged for Nokia shares, or for
the cash equivalent of the market value of such Nokia shares, shortly Jeanette Horan(5) 175 000 12 129
after expiration of the vesting period. The exchange ratio would be Louis R. Hughes(6) 194 000 12 129
aligned with the exchange ratio of Nokia’s exchange offer for all Edward Kozel(7) 175 000 12 129
outstanding Alcatel Lucent securities, subject to certain adjustments Jean C. Monty(8) 174 000 11 090
in the event of financial transactions by either Nokia or Alcatel Lucent. Elizabeth Nelson(9) 207 000 13 169
Carla Smits-Nusteling(10) 195 000 12 129
Remuneration Report Kari Stadigh(11) 170 000 11 090
The Remuneration Report provides information on the Board and Total 2 138 000 140 354
executive remuneration between January 1, 2017 and December 31,
2017. We provide disclosure of the compensation of our Board, the (1) The meeting fees for the term that ended at the close of the Annual General Meeting in 2017
were paid in cash in 2017 and are included in the table above. The meeting fees for the current
President and CEO and aggregated compensation information for the term as resolved by the Annual General Meeting in 2017 will be paid in cash in 2018 and are not
Group Leadership Team. Revenue, operating profit and earnings per included in the table above.
share measures referred to in the Remuneration Report exclude costs (2) Approximately 40% of each Board member’s annual fee was paid in Nokia shares purchased
from the market and the remaining amount of approximately 60 % was paid in cash.
related to the acquisition of Alcatel Lucent and related integration, (3) Consists of EUR 185 000 for services as the Vice Chair of the Board and meeting fees
goodwill impairment charges, intangible asset amortization and other of EUR 14 000.
purchase price fair value adjustments, restructuring and associated (4) Consists of EUR 160 000 for services as a member of the Board, EUR 30 000 for services
as the Chair of the Personnel Committee and meeting fees of EUR 19 000.
charges and certain other items. (5) Consists of EUR 160 000 for services as a member of the Board and EUR 15 000 for services
as a member of the Audit Committee.
Board of Directors (6) Consists of EUR 160 000 for services as a member of the Board, EUR 15 000 for services as
In 2017, the aggregate amount of compensation paid to the members a member of the Audit Committee and meeting fees of EUR 19 000.
(7) Consists of EUR 160 000 for services as a member of the Board and EUR 15 000 for services
of the Board for their services on the Board and its committees as a member of the Audit Committee.
equaled EUR 2 138 000. (8) Consists of EUR 160 000 for services as a member of the Board and meeting fees of
EUR 14 000.
The Annual General Meeting held on May 23, 2017 resolved to elect (9) Consists of EUR 160 000 for services as a member of the Board, EUR 30 000 for services
ten members to the Board. The following members of the Board as the Chair of the Audit Committee and meeting fees of EUR 17 000.
(10) Consists of EUR 160 000 for services as a member of the Board, EUR 15 000 for services
were re-elected for a term ending at the close of the Annual General as a member of the Audit Committee and meeting fees of EUR 20 000.
Meeting in 2018: Bruce Brown, Louis R. Hughes, Jean C. Monty, (11) Consists of EUR 160 000 for services as a member of the Board and meeting fees
Elizabeth Nelson, Olivier Piou, Risto Siilasmaa, Carla Smits-Nusteling of EUR 10 000.

and Kari Stadigh. Jeanette Horan and Edward Kozel were elected The President and CEO
as new members of the Board for the same term. For director The following table shows the remuneration received by the President
remuneration resolved by the Annual General Meeting for the current and CEO in 2017 and 2016. The long-term incentive payments reflect
term refer to “Remuneration Policy—Board of Directors” above. actual payments in the respective years attributable to the vesting
The following table outlines the total annual compensation paid in of the 2014 Nokia performance share plan in 2017 and the 2012
2017 to the members of the Board for their services, as resolved by Nokia Networks equity incentive plan that vested in 2016.
shareholders at the Annual General Meeting on May 23, 2017. The
table does not include the meeting fees as resolved by the Annual EUR 2017 2016
General Meeting in 2017. The meeting fees for applicable Board and Salary 1 050 000 1 049 044
Committee meetings held in 2017 will be paid in 2018. For details of Short-term incentive(1) 997 369 780 357
Nokia shares held by the members of the Board, refer to “—Share Long-term incentive
ownership—Share ownership of the Board of Directors” below.
From role as Nokia President and CEO 4 261 633 –
From role as NSN CEO(2) – 7 556 598
Other compensation(3) 114 557 122 157
Total 6 423 559 9 508 156
(1) Short-term incentives represent amounts earned in respect of the financial year, but that are
paid in April of the following year.
(2) Amount represents the value of the 2012 Nokia Networks equity incentive plan.
(3) Other compensation includes compensation for housing equaling EUR 44 463
(2016: EUR 41 312); travel assistance equaling EUR 22 628 (2016: EUR 33 482); Tax services
equaling EUR 17 595 (2016: EUR 19 260) and other benefits including mobile phone, driver
and supplemental medical and disability insurance equaling EUR 29 871 (2016: EUR 28 103).

Pursuant to Finnish legislation, Nokia is required to make contributions

to the Finnish TyEL pension arrangements in respect of the President
and CEO. Such payments can be characterized as defined contribution
payments. In 2017, payments to the Finnish state pension system
equaled EUR 304 546 (EUR 469 737 in 2016).

NOKIA IN 2017 105

Compensation continued

Variable pay Incentive opportunity by metric (% of total variable pay)

Targets for the short-term incentives are set annually at or
before the start of the year, balancing the need to deliver value 45.00
with the need to motivate and drive the performance of the 40.00
President and CEO. Targets are selected from a set of strategic
metrics that align with driving sustainable value for shareholders and 35.00
are set in the context market expectations and analyst consensus 30.00
forecasts. The long-term incentive targets are set in a similar context 25.00
and are set for the life of the plan at the start of the performance 20.00
period and locked in for the life of the plan.
15.00
The variable pay of the President and CEO is determined based on 10.00
performance against a mix of targets, either short- or long-term in
5.00
nature, depending on the strategic impact for the business.
0.00
Based on the Board’s assessment, the most appropriate measures Revenue Earnings Operating Free Personal
for driving sustainable business performance at Nokia in 2017 were: per share profit cash flow strategic
objectives
■■ revenue;
Short-term incentive
■■ operating profit; Long-term incentive

■■ earnings per share; 2017 Pay mix

■■ free cash flow; and
■■ personal strategic objectives.
1
The variable compensation focused on these measures including
personal strategic objectives to support the strategic development of
Nokia, which is not necessarily measurable or easily measured in purely
financial terms.
Short-term incentive
The 2017 short-term incentive framework for the President and CEO 3 2
was based on three core metrics: revenue, operating profit and free
cash flow.
The short-term incentive for the President and CEO were based on the
achievement of key financial targets and other strategic objectives, as
defined below. Performance against these defined targets was then 1 Base salary 19.43%
multiplied by a business results multiplier, which acts as a funding 2 Short-term incentive 24.29%
factor for the incentive plan for most employees, to determine the 3 Long-term incentive 56.28%
final payment.

% of base salary
Minimum Target Maximum
performance performance performance Measurement criteria
0% 125% 281.25% 80% of the incentive was based on performance against the Nokia scorecard:
■■ revenue (⅓);
■■ operating profit (⅓); and
■■ free cash flow (⅓).
The final 20% of the incentive was determined based on the achievement of personal
strategic objectives set for President and CEO by the Board.

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 Corporate governance

Short-term incentive targets and achievements reflect the challenging market conditions yet also show the operational resilience of our
business. In line with Nokia’s performance in 2017, the short-term incentive of the President and CEO equaled EUR 997 369, or 76% of the
target award, reflecting the challenging market environment. Achievement by each element of the short-term incentive plan was as follows:

Target
Metric EURm Achievement
Revenue 24 283 22.11%
Operating profit 2 483 96.94%
Free cash flow(1) (244) 105.31%
(1) Free cash flow target was negative due to expected restructuring costs and roadmap integration issues.

The Board reviewed the impact of the settlement of the Apple patent litigation on the short-term Incentive and decided not to recognize
the impact of the settlement itself on either revenue or operating profit on the basis that it had not been included in targets due to the
unpredictable nature of such large litigations. It was deemed appropriate to give credit for the cash flow benefit, value a swift settlement
and recognize the cost savings achieved by avoiding extensive litigation.
Long-term incentive
In 2017, the President and CEO’s 2014 performance share award vested at 125.72% of the target award valued at EUR 3 968 064.
In 2016, the President and CEO was granted a restricted share award subject to the fulfillment of predetermined and demanding performance
conditions related to the successful integration of Nokia and Alcatel Lucent. This award vests in three equal tranches, the first of which was in
2017 and worth EUR 293 569.
In 2017, the President and CEO was awarded the following equity awards under the Nokia equity program:

Award Units awarded Grant date fair value (EUR) Grant date Vesting date
Performance shares(1) 596 421 3 040 554 July 5, 2017 January 1, 2020
(1) The 2017 performance share plan has a two-year performance period based on financial targets and a one-year restriction period. There is no minimum payout at below threshold performance for
executive employees. The maximum payout would be 200% subject to maximum performance against all the performance criteria. Vesting is subject to continued employment.

Share ownership
Our share ownership policy requires that the President and CEO holds a minimum of three times his base salary in Nokia shares in order to
ensure alignment with shareholder interests over the long term. This requirement has been met.

Units Value (EUR)

Beneficially owned shares as of December 31, 2017(1) 1 366 994 5 317 607
Vested shares under the 2015 performance share plan delivered on February 14, 2018(2) 436 530 1 964 385
Unvested shares under outstanding Nokia equity plans(3) 1 032 533 4 015 553
Total 2 836 057 11 294 545
(1) The value is based on the closing price of a Nokia share of EUR 3.89 on Nasdaq Helsinki on December 29, 2017.
(2) The value and number of units represent fair market value of a Nokia share of EUR 4.50 on Nasdaq Helsinki on February 14, 2018 and the net number of shares delivered after the applicable taxes were
withheld from the number of shares that vested to the President and CEO.
(3) The number of units represents the number of unvested awards as of December 31, 2017 including the payout factor of the 2016 performance share plan and excluding the 2015 performance share
plan that vested on January 1, 2018. The value is based on the closing price of a Nokia share of EUR 3.89 on Nasdaq Helsinki on December 29, 2017. Vesting is subject to continued employment.

Termination provisions of the President and CEO

Currently the termination provisions for the President and CEO’s service agreement specify alternatives for termination and associated
compensation in accordance with the following table:

Termination by Reason Notice Compensation

Nokia Cause None The President and CEO is entitled to no additional compensation and all unvested equity
awards would be forfeited.
Nokia Reasons other Up to 18 months The President and CEO is entitled to a severance payment equaling up to 18 months of
than cause compensation (including annual base salary, benefits, and target incentive) and unvested
equity awards would be forfeited.
President Any reason Six months The President and CEO may terminate his service agreement at any time with six months’
and CEO prior notice. The President and CEO would either continue to receive salary and benefits
during the notice period or, at Nokia’s discretion, a lump sum of equivalent value. Additionally,
the President and CEO would be entitled to any short- or long-term incentives that would
normally vest during the notice period. Any unvested equity awards would be forfeited.
President Nokia’s material Up to 18 months In the event that the President and CEO terminates his service agreement based on a final
and CEO breach of arbitration award demonstrating Nokia’s material breach of the service agreement, he is entitled
the service to a severance payment equaling up to 18 months of compensation (including annual base
agreement salary, benefits and target incentive). Any unvested equity awards would be forfeited.

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Compensation continued

The President and CEO’s service agreement includes special severance provisions in the event of a termination of employment following a change
of control event. Such change of control provisions are based on a double trigger structure, which means that both a change of control event and
the termination of the President and CEO’s employment within a defined period of time must take place in order for any change of control-based
severance payment to become payable. More specifically, if a change of control event has occurred, as defined in the service agreement, and
the President and CEO’s service with Nokia is terminated by either Nokia or its successor without cause, or by the President and CEO for “good
reason”, in either case within 18 months from such change of control event, the President and CEO would be entitled to a severance payment
equaling up to 18 months of compensation (including annual base salary, benefits, and target incentive) and cash payment (or payments) for the
pro-rated value of his outstanding unvested equity awards, restricted shares, performance shares and stock options (if any), payable pursuant
to the terms of the service agreement. “Good reason” referred to above includes a material reduction of the President and CEO’s compensation
and a material reduction of his duties and responsibilities, as defined in the service agreement and as determined by the Board.
The President and CEO is subject to a 12-month non-competition obligation that applies after the termination of the service agreement or the
date when he is released from his obligations and responsibilities, whichever occurs earlier.
Group Leadership Team
In 2017, our Group Leadership Team grew following the realignment of the business to accelerate delivery of our strategy, bringing a Chief
Operating Officer, Chief Technology Officer and the President of the new business group, Global Services onto the Group Leadership Team.
At the end of 2017, the Group Leadership Team consisted of 15 persons split between Finland, other European countries and the United States.

Name Position in 2017 Appointment date

Rajeev Suri President and CEO May 1, 2014
Federico Guillén President of Fixed Networks January 8, 2016
Basil Alwan President of IP/Optical Networks January 8, 2016
Bhaskar Gorti President of Nokia Software January 8, 2016
Igor Leprince (1) President of Global Services April 1, 2017
Marc Rouanne President of Mobile Networks January 8, 2016
Samih Elhage(2) President of Mobile Networks May 1, 2014
Gregory Lee President of Nokia Technologies June 30, 2017
Kristian Pullola Chief Financial Officer January 1, 2017
Monika Maurer(3) Chief Operating Officer April 1, 2017
Joerg Erlemeier Chief Operating Officer December 11, 2017
Hans-Jürgen Bill Chief Human Resources Officer January 8, 2016
Kathrin Buvac Chief Strategy Officer January 8, 2016
Ashish Chowdhary Chief Customer Operations Officer January 8, 2016
Barry French Chief Marketing Officer January 8, 2016
Maria Varsellona Chief Legal Officer January 8, 2016
Marcus Weldon Chief Technology Officer and President of Bell Labs April 1, 2017
(1) Igor Leprince will step down from the Group Leadership Team as of March 31, 2018. Sanjay Goel was nominated as President of Global Services and member of the Group Leadership Team from April 1, 2018.
(2) Samih Elhage was a member of the Group Leadership Team until March 31, 2017.
(3) Monika Maurer was a member of the Group Leadership Team until December 11, 2017.

Remuneration of the Group Leadership Team (excluding the President and CEO) in 2017 and 2016, in the aggregate, was as follows:

2017 2016
EURm(1) EURm(1)
Salary, short-term incentives and other compensation(2) 20.3 22.7
Long-term incentives(3) 7.0 25.5
Total 27.3 48.2
(1) The values represent each member’s time on the Group Leadership Team.
(2) Short-term incentives represent amounts earned in respect of 2017 performance. Other compensation includes mobility related payments, local benefits and pension costs.
(3) The 2016 amount represents the value of the 2012 Nokia Networks equity incentive plan or other equity awards vesting or stock options exercised during 2016 and share awards from Alcatel Lucent
where appropriate.

In 2017, the Group Leadership Team (excluding the President and the CEO) was awarded the following equity awards under the Nokia equity program:

Grant date fair

Award Units awarded(2) value (EUR) Grant date Vesting date
Performance shares(1) 1 333 567 6 798 525 July 5, 2017 January 1, 2020
Restricted shares 696 835 3 548 981 July 5, 2017 October 1, 2018, 2019 and 2020
(1) The 2017 performance share plan has a two-year performance period based on financial targets and a one-year restriction period. There is no minimum payout at below threshold performance for
executive employees. The maximum payout would be 200% subject to maximum performance against all the performance criteria. Vesting is subject to continued employment.
(2) Includes units awarded to persons who were Group Leadership Team members during 2017.

108 NOKIA IN 2017

 Corporate governance

Review of our incentive plans Relative degree of alignment pay vs total shareholder return ranking
Each year we monitor the performance of our incentive plans against
the targets for the plan, total shareholder return and the impact that 12
the plans have on total compensation compared to market peers. 11
10

Relative performance rank

Target setting
Targets for the short-term incentives are set annually at or before 9
the start of the year, balancing the need to deliver value with the need 8
to motivate and drive performance of the Group Leadership Team. 7
Targets are selected from a set of strategic metrics that align with 6
driving sustainable value for shareholders and are set in the context 5
market expectations and analyst consensus forecasts. Targets for our 4
long-term incentive plans are set in a similar context. The long-term 3
incentive targets are set at the start of the performance period and
2
locked in for the life of the plan.
1
Short-term incentives 0
Short-term incentive targets and achievements for the members of 0 1 2 3 4 5 6 7 8 9 10 11 12
the Group Leadership Team (excluding the President and CEO) were Relative pay rank
based on a mix of revenue, operating profit and cash flow targets. Nokia
These targets are measured either at a Nokia Group level or,
alternatively, a mix of Nokia Group and business group level for Share price and total shareholder return vs long-term
business group presidents. Payout levels for 2017 represent the incentive performance
challenging business environment in which Nokia has been operating
with median payout at 83% of target. 250%

Long-term incentives
We have actively introduced a rolling review of compensation 200%
against key metrics such as total shareholder return and share price
to validate the effectiveness of our equity plans.
150%
The 2014 performance share plan vested on January 1, 2017 with
125.72% of the target award vesting based on the achievement 25.72% 23.75%
against the revenue and earnings per share targets during the 100%
performance period (financial years 2014 and 2015).
The 2015 performance share plan vested on January 1, 2018 with 50%
86% 100% 100%
123.75% of the target award vesting based on the achievement
46.25%
against the revenue and earnings per share targets during the Nil Nil
0
performance period (financial years 2015 and 2016).
TSR 2011 2012 2013 2014 2015 2016 2017*
The 2016 performance share plan will vest on January 1, 2019 with value Long-term incentive plan year,
46.25% of the target award vesting based on the achievement against as of December 31
the revenue and earnings per share targets during the performance Achieved
period (financial years 2016 and 2017). Overachieved
Nokia total shareholder return (“TSR”)
While short-term performance in 2017 was affected by a challenging
market and the integration of Alcatel Lucent, the performance under * Performance period not yet completed.

long-term incentive plans represents the significant turnaround of Nokia

from 2013 when it acquired the remainder of Nokia Siemens Networks
and the continued focus on delivering profit despite challenging
market conditions. The performance of the business in 2014, 2015
and 2016 against targets set in the context of analyst forecasts shows
fair rewards for a business well positioned for the longer term.
Pay for performance
Core to our compensation philosophy is a desire to pay for performance.
We conduct two tests each year on our long-term incentives:
1. We compare ourselves to a group of peer companies ranking our
performance against the peer group based on total shareholder
return and total compensation paid. Data are only publicly available
for our peer group for financial years to December 31, 2016.
2. Overall total shareholder return is compared to long-term
incentive payouts mapping the performance of the plans against
the total shareholder return curve.

NOKIA IN 2017 109

Compensation continued

The first test is a snapshot at any given point in time, showing the Share ownership
compensation received in a year compared to peers versus total Share ownership of the Board of Directors
shareholder return over the three years prior. The second test looks As of December 31, 2017, the members of our Board held a total of
over time at the progress of the long-term incentive plans. While the 4 915 481 shares and ADSs in Nokia, which represented approximately
comparison to a group of peers shows Nokia with a low performance 0.09% of our outstanding shares and total voting rights excluding
rank and relatively high pay compared to its peers the comparison shares held by Nokia Group.
of long-term incentive payouts over time aligns well to the total
shareholder return performance of the business over a longer The following table sets forth the number of shares and ADSs held
time frame. The key driver of much of this is timing with long-term by the members of the Board as of December 31, 2017:
incentives paid sometime after the share price (and total shareholder
Name(1) Shares(1) ADSs(1)
return) has moved. To highlight this point, in 2019 Nokia would expect
to see 46.25% of the 2016 performance share plan award vest to the Risto Siilasmaa 1 313 205 –
President and CEO. Olivier Piou 265 583 –
Bruce Brown – 113 130
Based on the peer group comparison, Nokia was tenth over the three
preceding years, as measured by total shareholder return. Whilst the Jeanette Horan 12 129 –
compensation paid out to the President and CEO (as opposed to Louis R. Hughes 53 956 –
awarded) was ranked second, reflecting the final payment to him of Edward Kozel 12 129 20 525
the Nokia Networks equity incentive plan award granted in 2012 and Jean C. Monty 2 778 647 –
rewarding the transformation of the Nokia Networks business which Elizabeth Nelson – 59 037
has since become the core of Nokia. Carla Smits-Nusteling 26 050 –
However, looking at the performance of our long-term incentive plans Kari Stadigh 261 090 –
against total shareholder return there is a stronger alignment with
(1) The number of shares or ADSs includes shares and ADSs received as director compensation as
the performance of the plans declining as total shareholder return well as shares and ADSs acquired through other means. Stock options or other equity awards
declines and the trend lines are reasonably aligned. that are deemed as being beneficially owned under the applicable SEC rules are not included. For
the number of shares or ADSs received as director compensation, refer to Note 35, Related party
The Board continues to actively monitor the performance of its transactions, of our consolidated financial statements included in this annual report.
long-term incentive plans to ensure that they deliver value for
shareholders. Accordingly, the Board has changed the performance
metrics in the 2018 long-term incentive plan to better fit with the
needs of the business.
Our Peers
In looking for suitable comparators, we have considered ourselves a
European technology company and looked at businesses of similar
size, global scale and complexity, such as:

ABB Infineon
ASML Kone
BT Phillips
Deutsche Telekom Rolls-Royce
Ericsson SAP
Hexagon Vodafone

110 NOKIA IN 2017

 Corporate governance

Share ownership of the Nokia Group Leadership Team

The following table sets forth the share ownership of the President and CEO, and the other members of the Group Leadership Team in office as of
December 31, 2017. The share ownership of all members of the Group Leadership Team, including the President and CEO, was 2 569 891 Nokia
shares, which represented 0.05% of the outstanding shares and total voting rights excluding shares held by Nokia Group as of December 31, 2017.

Beneficially owned shares

Name Position in 2017 number
Rajeev Suri President and Chief Executive Officer 1 366 994
Federico Guillén President of Fixed Networks 24 761
Basil Alwan President of IP/Optical Networks 176 716
Bhaskar Gorti President of Nokia Software 25 417
Igor Leprince President of Global Services 50 288
Marc Rouanne President of Mobile Networks 239 362
Gregory Lee President of Nokia Technologies –
Kristian Pullola Chief Financial Officer 126 156
Joerg Erlemeier Chief Operating Officer 5 125
Hans-Jürgen Bill Chief Human Resources Officer 150 853
Kathrin Buvac Chief Strategy Officer 38 569
Ashish Chowdhary Chief Customer Operations Officer 88 481
Barry French Chief Marketing Officer 108 603
Maria Varsellona Chief Legal Officer 149 613
Marcus Weldon Chief Technology Officer and President of Nokia Bell Labs 18 953

Stock-option ownership of the Nokia Group Leadership Team

The following table sets forth the aggregate stock option ownership of the Group Leadership Team in office as of December 31, 2017.

Category Number of stock options Exercise price (EUR) Expiration date

2012 Q2 40 000 2.08 December 27, 2018
2012 Q3 50 000 1.82 December 27, 2018
2013 Q2 45 000 2.35 December 27, 2019

Unvested equity awards held by the Nokia Group Leadership Team

The following table sets forth the potential aggregate ownership interest through the holding of equity-based incentives of the Group
Leadership Team in office, including the President and CEO, as of December 31, 2017:

Shares receivable Shares receivable Shares receivable

Shares receivable through performance through performance through restricted
through stock options shares at grant shares at maximum(4) shares
Number of equity awards held by the Group Leadership Team(1) 135 000 4 625 484 9 250 968 1 440 039
% of the outstanding shares(2) 0.002% 0.08% 0.16% 0.02%
% of the total outstanding equity incentives (per instrument)(3) 30.17% 7.64% 7.64% 25.86%
(1) Includes the 15 members of the Group Leadership Team in office as of December 31, 2017. The number of units held under awards made before June 30, 2016 was adjusted to reflect the impact of
the special dividend paid in 2016.
(2) The percentages are calculated in relation to the outstanding number of shares and total voting rights of Nokia as of December 31, 2017, excluding shares held by Nokia Group. No member of the
Group Leadership Team owns more than 1% of the outstanding Nokia shares.
(3) The percentages are calculated in relation to the total outstanding equity incentives per instrument. The number of units outstanding under awards made before June 30, 2016 reflects the impact of
the special dividend paid in 2016.
(4) At maximum performance, under the performance share plans outstanding as of December 31, 2017, the payout would be 200% and the table reflects this potential maximum payout. The restriction
period for the performance share plan 2015 and the performance period for the performance share plan 2016 ended on December 31, 2017 and Nokia’s performance against the performance criteria
set out in the plan rules, was above the threshold performance level for both plans. The settlement to the participants under the performance share 2015 plan took place in February 2018 and the
settlement for the performance share 2016 plan is expected to take place in the beginning of 2019 after the restriction period ends.

NOKIA IN 2017 111

General facts
on Nokia

112 NOKIA IN 2017

 General facts on Nokia

Contents
Our history 114
Memorandum and Articles
of Association 115
Selected financial data 117
Shares and shareholders 119
Related party transactions 127
Production of infrastructure
equipment and products 127
Key ratios 128

NOKIA IN 2017 113

General facts on Nokia

Our history A shifting industry

In 2007, Nokia combined its telecoms infrastructure operations with
Few companies have Nokia’s storied capacity for transforming, those of Siemens to create the NSN joint venture. We later bought
developing new technologies and adapting to shifts in market Siemens’ stake in NSN in 2013 as the business was emerging from
conditions. From its beginning in 1865 as a single paper mill operation, a successful strategy shift and the reality of what Nokia calls a
Nokia has found and nurtured success in several sectors over the Programmable World of connected devices, sensors and people was
years, including cable, paper products, rubber boots and tires, mobile starting to take shape.
devices and telecommunications infrastructure equipment.
In 2011, we joined with Microsoft to strengthen our position in the
Nokia’s sector-by-sector success over the years has mirrored its highly competitive smartphone market, which in 2014 resulted in
geographical rise: from a Finnish-focused company until the 1980s the closing of the Sale of the D&S Business. Nokia emerged from
with a growing Nordic and European presence; to a genuine European the transaction with a firm financial footing and three strong
company in the early 1990s; and on to a truly global company from businesses—Nokia Networks, HERE and Nokia Technologies—focused
the mid-1990s onward. With our recent acquisitions of Alcatel Lucent, on connecting the things and people of the Programmable World.
Gainspeed, Withings, Deepfield, and Comptel, we can deliver today
a near 100% end-to-end portfolio on a global scale. Nokia’s transformation was not complete. Our former HERE digital
mapping and location services business, an arena we entered in 2006,
Nokia has been producing telecommunications equipment since the had been a key pillar of Nokia’s operational performance. However,
1880s—almost since telephony began. following a strategic review of the business by the Board in light of
A storied past plans to acquire Alcatel Lucent, Nokia decided to sell its HERE Business.
When Finnish engineer Fredrik Idestam set up his initial wood pulp Acquisition of Alcatel Lucent and beyond
mill in Southern Finland in 1865, he took the first step in laying the The acquisition of Alcatel Lucent positions Nokia as an innovation
foundation of Nokia’s capacity for innovating and finding opportunity. leader in next-generation technology and services.
Sensing growing pulp product demand, Idestam opened a second mill
a short time later on the Nokianvirta River, inspiring him to name his Our reputation as an innovation powerhouse has been bolstered
company Nokia AB. by the addition of Bell Labs, now known as Nokia Bell Labs. It joins a
future-focused business backed by tens of thousands of engineers
Idestam’s sense of endeavor would continue to prevail in the different and thousands of patent families, a reflection of Nokia’s innovation
phases Nokia would take. pedigree which has produced a huge array of benefits for consumers,
In the 1960s, Nokia became a conglomerate, comprised of rubber, business, and society as a whole.
cable, forestry, electronics and power generation businesses, The acquisition helps us shape the connectivity and digitization
resulting from the merger of Idestam’s Nokia AB, and Finnish Cable revolution before us—the Programmable World—in which billions of
Works Ltd, a phone and power cable producer founded in 1912, people, devices, and sensors are connected in a way that opens up
and other businesses. a world of possibilities. These can make our planet safer, cleaner,
Transformation anew healthier, more sustainable, more efficient and more productive.
It was not long before transformation would occur again. Nokia’s long history is marked by change and reinvention. We have
Deregulation of the European telecommunications industries in the always been excited by where technology will lead us as we seek to
1980s triggered new thinking and fresh business models. enable the human possibilities of a connected world. We will continue
to innovate, reimagining how technology works for us discreetly while
In 1982, Nokia introduced both the first fully-digital local telephone blending into, and enriching, our daily lives.
exchange in Europe and the world’s first car phone for the Nordic
Mobile Telephone analog standard. The breakthrough of GSM (global
system for mobile communications) in the 1980s introduced more
efficient use of radio frequencies and higher-quality sound. The first
GSM call was made with a Nokia phone over the Nokia-built network
of a Finnish operator called Radiolinja in 1991.
It was around this time that Nokia made the strategic decision to make
telecommunications and mobile phones our core business. Our other
businesses, including aluminum, cable, chemicals, paper, rubber,
power plant, and television businesses were subsequently divested.
By 1998, Nokia was the world leader in mobile phones, a position
it enjoyed for more than a decade.
And still, the business and technology worlds would continue to evolve,
as would Nokia.

114 NOKIA IN 2017

 General facts on Nokia

Memorandum and Articles of Association To attend and vote at a general meeting, a shareholder must be
registered in the register of shareholders in the Finnish book-entry
Registration system on or prior to the record date set forth in the notice of the
Nokia is organized under the laws of the Republic of Finland and general meeting. A registered holder or a beneficial owner of the ADSs,
registered under the business identity code 0112038-9. Under its like other beneficial owners whose shares are registered in the company’s
current Articles of Association, Nokia’s corporate purpose is to register of shareholders in the name of a nominee, may vote with their
research, develop, manufacture, market, sell and deliver products, shares provided that they arrange to have their name entered in the
software and services in a wide range of consumer and temporary register of shareholders for the general meeting.
business-to-business markets. These products, software and
services relate to, among others, network infrastructure for The record date is the eighth business day preceding the meeting.
telecommunication operators and other enterprises, the IoT, human To be entered in the temporary register of shareholders for the
health and well-being, multimedia, big data and analytics, mobile general meeting, a holder of ADSs must provide the Depositary, or
devices and consumer wearables and other electronics. The company have his broker or other custodian provide the Depositary, on or
may also create, acquire and license intellectual property and software before the voting deadline, as defined in the proxy material issued
as well as engage in other industrial and commercial operations, by the Depositary, a proxy with the following information: the name,
including securities trading and other investment activities. The address, and social security number or another corresponding
company may carry on its business operations directly, through personal identification number of the holder of the ADSs, the number
subsidiary companies, affiliate companies and joint ventures. of shares to be voted by the holder of the ADSs and the voting
instructions. The register of shareholders as of the record date of
Director’s voting powers each general meeting is public until the end of the respective meeting.
Under Finnish law, resolutions of the Board shall be made by a Other nominee registered shareholders can attend and vote at the
majority vote. A director shall refrain from taking any part in the general meetings by instructing their broker or other custodian to
consideration of an agreement between the director and the company register the shareholder in Nokia’s temporary register of shareholders
or third party, or any other issue that may provide any material benefit and give the voting instructions in accordance with the broker’s or
to him or her, which may be contradictory to the interests of the custodian’s instructions.
company. Under Finnish law, there is no age limit requirement for
directors, and there are no requirements under Finnish law that a By completing and returning the form of proxy provided by the
director must own a minimum number of shares in order to qualify Depositary, a holder of ADSs also authorizes the Depositary to give
to act as a director. However, in accordance with the current company notice to us, required by our Articles of Association, of the holder’s
policy, approximately 40% of the annual fee payable to the Board intention to attend the general meeting.
members is paid in Nokia shares purchased from the market or
alternatively by using treasury shares held by Nokia, and the directors Each of our shares confers equal rights to share in the distribution of
shall retain until the end of their directorship such number of shares the company’s funds. For a description of dividend rights attaching to
that corresponds to the number of shares they have received as our shares, refer to “—Shares and shareholders”. Dividend entitlement
Board remuneration during their first three years of service (the net lapses after three years if a dividend remains unclaimed for that
amount received after deducting those shares used for offsetting period, in which case the unclaimed dividend will be retained by Nokia.
any costs relating to the acquisition of the shares, including taxes). Under Finnish law, the rights of shareholders are related to the shares
Share rights, preferences and restrictions as set forth in law and our Articles of Association. Neither Finnish law
Each share confers the right to one vote at general meetings. nor our Articles of Association sets limitations on the rights to own
According to Finnish law, a company generally must hold an Annual Nokia securities, including the rights of foreign shareholders to hold or
General Meeting called by the Board within six months from the end of exercise voting rights in the said securities. Amendment of the Articles
the fiscal year. Additionally, the Board is obliged to call an Extraordinary of Association requires a decision of the general meeting, supported
General Meeting, whenever such meeting is deemed necessary, or at by two-thirds of the votes cast and two-thirds of the shares
the request of the auditor or shareholders representing a minimum of represented at the meeting.
one-tenth of all outstanding shares. Under our Articles of Association, Disclosure of shareholder ownership or voting power
the Board is elected at least annually at the Annual General Meeting According to the Finnish Securities Market Act, which entered into
of the shareholders for a term ending at the end of the next Annual effect on January 1, 2013, a shareholder shall disclose their ownership
General Meeting. or voting power to the company and the Finnish Financial Supervisory
Under Finnish law, shareholders may attend and vote at general Authority when the ownership or voting power reaches, exceeds or
meetings in person or by proxy. It is not customary in Finland for falls below 5, 10, 15, 20, 25, 30, 50 or 90% of all the shares or the
a company to issue forms of proxy to its shareholders. Accordingly, voting rights outstanding. The term “ownership” includes ownership
Nokia does not do so. However, registered holders and beneficial by the shareholder, as well as selected related parties, and calculating
owners of ADSs are issued forms of proxy by the Depositary. the ownership or voting power covers agreements or other
arrangements, which when concluded would cause the proportion
of voting rights or number of shares to reach, exceed or fall below
the aforementioned limits. Upon receiving such notice, the company
shall disclose it by a stock exchange release without undue delay.

NOKIA IN 2017 115

General facts on Nokia continued

Purchase obligation Under the Finnish Companies Act, a shareholder whose holding
Our Articles of Association require a shareholder that holds one-third exceeds nine-tenths of the total number of shares or voting rights
or one-half of all of our shares to purchase the shares of all other in Nokia has both the right and, upon a request from the minority
shareholders that so request, at a price generally based on the shareholders, the obligation to purchase all the shares of the minority
historical weighted average trading price of the shares. A shareholder shareholders for the current market price. The market price is
who becomes subject to the purchase obligation is also obligated to determined, among other things, on the basis of the recent market
purchase any subscription rights, stock options or convertible bonds price of the shares. The purchase procedure under the Finnish
issued by the company if so requested by the holder. The purchase Companies Act differs, and the purchase price may differ, from the
price of the shares under our Articles of Association is the higher of: purchase procedure and price under the Finnish Securities Market Act,
(a) the weighted average trading price of the shares on Nasdaq Helsinki as discussed above. However, if the threshold of nine-tenths has been
during the ten business days prior to the day on which we have been exceeded through either a mandatory or a voluntary public offer
notified by the purchaser that its holding has reached or exceeded the pursuant to the Finnish Securities Market Act, the market price under
threshold referred to above or, in the absence of such notification or the Finnish Companies Act is deemed to be the price offered in the
its failure to arrive within the specified period, the day on which our public offer, unless there are specific reasons to deviate from it.
Board otherwise becomes aware of this; or (b) the average price,
weighted by the number of shares, which the purchaser has paid for Pre-emptive rights
the shares it has acquired during the last 12 months preceding the In connection with any offering of shares, the existing shareholders
date referred to in (a). have a pre-emptive right to subscribe for shares offered in proportion
to the amount of shares in their possession. However, a general
Under the Finnish Securities Market Act, a shareholder whose voting meeting of shareholders may vote, by a majority of two-thirds of the
power exceeds 30% or 50% of the total voting rights in a company votes cast and two-thirds of the shares represented at the meeting,
shall, within one month, offer to purchase the remaining shares of the to waive this pre-emptive right provided that, from the company’s
company, as well as any other rights entitling to the shares issued by perspective, weighty financial grounds exist.
the company, such as subscription rights, convertible bonds or stock
options issued by the company. The purchase price shall be the market Under the Finnish Act on the Monitoring of Foreign Corporate
price of the securities in question. The market price is determined Acquisitions (2012/172 as amended), a notification to the Ministry
on the basis of the highest price paid for the security during the of Employment and the Economy is required for a non-resident of
preceding six months by the shareholder or any party in close Finland, directly or indirectly, when acquiring one-tenth or more of
connection to the shareholder. This price can be deviated from for a the voting power or corresponding factual influence in a company.
specific reason. If the shareholder or any related party has not during The Ministry of Employment and the Economy has to confirm the
the six months preceding the offer acquired any securities that are acquisition unless the acquisition would jeopardize important national
the target for the offer, the market price is determined based on the interests, in which case the matter is referred to the Council of State.
average of the prices paid for the security in public trading during the If the company in question is operating in the defense sector, an
preceding three months weighted by the volume of trade. This price approval by the Ministry of Employment and the Economy is required
can be deviated from for a specific reason. before the acquisition is made. These requirements are not applicable
if, for instance, the voting power is acquired in a share issue that is
proportional to the holder’s ownership of the shares. Moreover, the
requirements do not apply to residents of countries in the European
Economic Area or EFTA countries.

116 NOKIA IN 2017

 General facts on Nokia

Selected financial data

The financial data for our Continuing operations set forth below at and for the years ended December 31, 2017 and 2016 and for each of the
years in the three-year period ended December 31, 2017 has been derived from our audited consolidated financial statements included in this
annual report. Financial data at December 31, 2015 has been derived from our historical audited consolidated financial statements not included
in this annual report. The financial data at December 31, 2017 and 2016 and for each of the years in the three-year period ended December 31,
2017 should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements.

2017 2016 2015

For the year ended December 31 (in EURm, except for percentage and personnel data)
From the consolidated income statement
Net sales 23 147 23 641 12 560
Change % (2.1)% 88.2% 6.8%
Operating profit/(loss) 16 (1 100) 1 697
% of net sales 0.1% (4.7)% 13.5%
Financial income and expenses (537) (287) (186)
(Loss)/profit before tax (510) (1 369) 1 540
Income tax (expense)/benefit (927) 457 (346)
(Loss)/profit attributable to equity holders of the parent (1 473) (751) 1 192
(Loss)/profit attributable to non-controlling interests 36 (161) 2
(Loss)/profit for the year from Continuing operations (1 437) (912) 1 194
Earnings per share (for (loss)/profit attributable to equity holders of the parent)         
Basic earnings per share, EUR (0.26) (0.13) 0.32
Diluted earnings per share, EUR (0.26) (0.13) 0.31
From the statement of financial position         
Non-current assets 21 160 24 182 5 102
Cash and other liquid assets(1) 8 280 9 326 9 849
Other current assets 11 561 11 349 5 975
Assets held for sale and assets of disposal groups classified as held for sale 23 44 –
Total assets 41 024 44 901 20 926
Capital and reserves attributable to equity holders of the parent 16 138 20 094 10 503
Non-controlling interests 80 881 21
Non-interest bearing liabilities(2) 21 040 19 899 8 328
Interest-bearing liabilities(3) 3 766 4 027 2 074
Total equity and liabilities 41 024 44 901 20 926
Other information         
Research and development expenses (4 916) (4 997) (2 080)
% of net sales (21.2)% (21.1)% (16.6)%
Purchases of property, plant and equipment, and intangible assets(4) (601) (477) (278)
% of net sales (2.6)% (2.0)% (2.2)%
Salaries and social expenses (7 845) (7 814) (3 738)
Average number of employees 101 731 102 687 56 690
Key financial indicators         
Cash dividends per share, EUR(5) 0.19 0.17 0.26
Dividends(6) 1 060 963 1 501
Return of capital employed, % neg. neg. 14.1%
Return on shareholders’ equity, % neg. neg. 12.5%
Equity ratio, % 45.9% 51.7% 59.0%
Net debt to equity (gearing), % (27.8)% (25.3)% (73.9)%
Net cash 4 514 5 299 7 775
Free cash flow 1 210 (1 931) 193
(1) Cash and other liquid assets consist of the following line items from our consolidated statement of financial position: cash and cash equivalents, available-for-sale investments, liquid assets and
investments at fair value through profit and loss, liquid assets.
(2) Includes deferred tax liabilities, deferred revenue and other long-term liabilities, provisions, other financial liabilities, current income tax liabilities, accounts payable and accrued expenses and deferred
revenue and other liabilities.
(3) Includes long-term interest-bearing liabilities, current portion of long-term interest-bearing liabilities and short-term borrowings.
(4) Includes purchases of property, plant and equipment and intangible assets for Continuing operations.
(5) The Board proposes a cash dividend of EUR 0.19 per share for 2017 for the shareholders’ approval at the Annual General Meeting convening on May 30, 2018.
(6) Maximum amount to be distributed as dividends based on the number of shares at December 31, 2017 excluding the number of shares owned by the Group companies. Comparative figures
represents the total actual amounts paid.

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Exchange rate data

Our business and results of operations are, from time to time, affected by changes in exchange rates, particularly between the euro, our
reporting currency, and other currencies such as the U.S. dollar, the Chinese yuan, the Japanese yen and the Korean won. The following table
sets forth information concerning the noon buying rate for the years 2013 to 2017 and for each of the months in the six-month period ended
February 28, 2018, expressed in U.S. dollars per euro. The average rate for a year means the average of the exchange rates on the last day
of each month during a year. The average rate for a month means the average of the daily exchange rates during that month.

End of period rate Average rate Highest rate Lowest rate

For the year ended December 31 (unless otherwise specified) (USD per EUR)
2013 1.3779 1.3303 1.3816 1.2774
2014 1.2101 1.3210 1.3927 1.2101
2015 1.0859 1.1032 1.2015 1.0524
2016 1.0552 1.1029 1.1516 1.0375
2017 1.2022 1.1396 1.2041 1.0416
September 30, 2017 1.1813 1.1913 1.2041 1.1747
October 31, 2017 1.1648 1.1755 1.1847 1.1580
November 30, 2017 1.1898 1.1743 1.1936 1.1577
December 30, 2017 1.2022 1.1836 1.2022 1.1725
January 31, 2018 1.2428 1.2197 1.2488 1.1922
February 28, 2018 1.2211 1.2340 1.2482 1.2211
March 1, 2018 to March 9, 2018 1.2326 1.2330 1.2415 1.2216

On March 9, 2018, the noon buying rate was USD 1.2326 per EUR 1.00.

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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.
As of December 31, 2017, the share capital of Nokia Corporation equaled EUR 245 896 461.96 and the total number of shares issued was
5 839 404 303. As of December 31, 2017, the total number of shares included 259 887 597 shares owned by Group companies representing
approximately 4.5% of the total number of shares and the total voting rights.
Nokia does not have minimum or maximum share capital or a par value of a share.

As of December 31 2017 2016 2015 2014 2013

Share capital, EURm 246 246 246 246 246
Shares, (000s) 5 839 404 5 836 055 3 992 864 3 745 044 3 744 994
Shares owned by the Group, (000s) 259 887 115 552 53 669 96 901 32 568
Number of shares excluding shares owned by the Group, (000s) 5 579 517 5 720 503 3 939 195 3 648 143 3 712 427
Average number of shares excluding shares owned by the Group
during the year, (000s), basic 5 651 814 5 732 371 3 670 934 3 698 723 3 712 079
Average number of shares excluding shares owned by the Group
during the year, (000s), diluted 5 651 814 5 741 117 3 949 312 4 131 602 3 712 079
Number of registered shareholders(1) 247 717 237 700 209 509 216 830 225 587
(1) Each account operator is included in the figure as only one registered shareholder.

Key ratios
As of December 31, Continuing operations 2017 2016 2015 2014 2013
Earnings per share for (loss)/profit attributable
to equity holders of the parent
Earnings per share, basic, EUR (0.26) (0.13) 0.32 0.73 0.07
Earnings per share, diluted, EUR (0.26) (0.13) 0.31 0.67 0.07
P/E ratio, basic(1) neg. neg. 20.63 8.99 83.14
Dividend per share, EUR(2) 0.19 0.17 0.26 0.14 0.37
Total dividends paid, EURm(2)(3) 1 060 963 1 501 511 1 374
Payout ratio, basic(2) neg. neg. 0.81 0.19 5.29
Dividend yield, %(2) 4.88 3.70 3.94 2.13 6.36
Shareholders’ equity per share, EUR(4) 2.89 3.51 2.67 2.36 1.74
Market capitalization, EURm(4) 21 704 26 257 25 999 23 932 21 606
(1) Based on Nokia closing share price at year-end.
(2) The Board proposes a cash dividend of EUR 0.19 per share for 2017, subject to shareholders’ approval at the Annual General Meeting convening on May 30, 2018.
(3) For 2017, the figure represents the maximum amount to be distributed as dividends, based on the number of shares as of December 31, 2017, excluding the number of shares owned by the Group
companies. Comparative figures represent the total actual amounts paid.
(4) Excludes shares owned by Group companies.

Reductions of share capital and number of shares

Amount Amount Amount
of reduction of reduction of reduction
Number of of the share of the restricted of the retained
shares capital capital earnings
Type of reduction Year 000s EURm EURm EURm
Cancellation of shares 2013 – – – –
Cancellation of shares 2014 – – – –
Cancellation of shares 2015 66 904 – – –
Cancellation of shares 2016 – – – –
Cancellation of shares 2017 – – – –

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 General facts on Nokia continued

Share turnover
2017 2016 2015 2014 2013
Share turnover (000s)(1) 8 839 680 9 604 722 8 490 823 9 278 853 16 748 295
Total number of shares (000s) 5 839 404 5 836 055 3 992 823 3 745 044 3 744 956
% of total number of shares 151 165 213 248 447
(1) Source: Nasdaq Helsinki, the NYSE composite tape and Euronext Paris (since November 2015).

The principal trading markets for the shares are Nasdaq Helsinki and Euronext Paris, in the form of shares, and the NYSE, in the form of ADSs.
Nasdaq Helsinki share prices(1)
EUR 2017 2016 2015 2014 2013
Low/high 3.81/5.96 3.66/6.99 4.91/7.87 4.89/6.97 2.30/6.03
Average(2) 4.88 5.07 6.53 5.99 3.57
Year-end 3.89 4.59 6.60 6.56 5.82
(1) Source: Nasdaq Helsinki.
(2) Total turnover divided by total volume.

Euronext Paris share prices(1)

EUR 2017 2016 2015 2014 2013
Low/high 3.81/5.93 3.66/6.99 6.29/7.15 – –
Average(2) 5.07 4.98 6.66 – –
Year-end 3.89 4.57 6.59 – –
(1) Source: Euronext Paris.
(2) Total turnover divided by total volume.

NYSE share prices (ADS)(1)

USD 2017 2016 2015 2014 2013
Low/high 4.50/6.65 4.04/7.55 5.71/8.37 6.64/8.73 3.02/8.18
Average(2) 5.59 5.64 7.28 7.79 4.82
Year-end 4.66 4.81 7.02 7.86 8.11
(1) Source: The NYSE composite tape.
(2) Total turnover divided by total volume.

Nokia share prices on Nasdaq Helsinki (EUR) and the NYSE (USD) 2013–2017

10

8
Local share price value (EUR/USD)

0
Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Dec 17
Nasdaq Helsinki NYSE

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Stock option exercises 2013–2017

Subscription price Number of new Date of Net proceeds New share capital
Year Stock option category EUR shares 000s payment EURm EURm
2013 Nokia Stock Option Plan 2008 1Q 24.15 0 2013 0.00 –
Nokia Stock Option Plan 2008 2Q 19.16 0 2013 0.00 –
Nokia Stock Option Plan 2008 3Q 17.80 0 2013 0.00 –
Nokia Stock Option Plan 2008 4Q 12.43 0 2013 0.00 –
Nokia Stock Option Plan 2009 1Q 9.82 0 2013 0.00 –
Nokia Stock Option Plan 2009 2Q 11.18 0 2013 0.00 –
Nokia Stock Option Plan 2009 3Q 9.28 0 2013 0.00 –
Nokia Stock Option Plan 2009 4Q 8.76 0 2013 0.00 –
Nokia Stock Option Plan 2010 1Q 10.11 0 2013 0.00 –
Nokia Stock Option Plan 2010 2Q 8.86 0 2013 0.00 –
Nokia Stock Option Plan 2010 3Q 7.29 0 2013 0.00 –
Nokia Stock Option Plan 2010 4Q 7.59 0 2013 0.00 –
Total 0 0.00
2014 Nokia Stock Option Plan 2009 1Q 9.56 0 2014 0.00 –
Nokia Stock Option Plan 2009 2Q 10.92 0 2014 0.00 –
Nokia Stock Option Plan 2009 3Q 9.02 0 2014 0.00 –
Nokia Stock Option Plan 2009 4Q 8.50 0 2014 0.00 –
Nokia Stock Option Plan 2010 1Q 9.85 0 2014 0.00 –
Nokia Stock Option Plan 2010 2Q 8.60 0 2014 0.00 –
Nokia Stock Option Plan 2010 3Q 7.03 0 2014 0.00 –
Nokia Stock Option Plan 2010 4Q 7.33 0 2014 0.00 –
Nokia Stock Option Plan 2011 2Q 5.76 50 2014 0.29 –
Nokia Stock Option Plan 2011 3Q 3.50 0 2014 0.00 –
Total 50 0.29
2015 Nokia Stock Option Plan 2010 1Q 9.85 0 2015 0.00 –
Nokia Stock Option Plan 2010 2Q 8.60 0 2015 0.00 –
Nokia Stock Option Plan 2010 3Q 7.03 0 2015 0.00 –
Nokia Stock Option Plan 2010 4Q 7.33 0 2015 0.00 –
Nokia Stock Option Plan 2011 2Q 5.76 442 2015 2.55 –
Nokia Stock Option Plan 2011 3Q 3.50 212 2015 0.74 –
Nokia Stock Option Plan 2011 4Q 4.58 90 2015 0.41 –
Nokia Stock Option Plan 2012 1Q 3.58 0 2015 0.00 –
Nokia Stock Option Plan 2012 2Q 2.18 213 2015 0.47 –
Nokia Stock Option Plan 2012 3Q 1.92 285 2015 0.55 –
Total 1 242 4.72

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Subscription price Number of new Date of Net proceeds New share capital
Year Stock option category EUR shares 000s payment EURm EURm
2016 Nokia Stock Option Plan 2011 2Q 5.66 104 2016 0.60 –
Nokia Stock Option Plan 2011 3Q 3.40 0 2016 0.00 –
Nokia Stock Option Plan 2011 4Q 4.48 0 2016 0.00 –
Nokia Stock Option Plan 2012 1Q 3.48 0 2016 0.00 –
Nokia Stock Option Plan 2012 2Q 2.08 240 2016 0.51 –
Nokia Stock Option Plan 2012 3Q 1.82 308 2016 0.57 –
Nokia Stock Option Plan 2012 4Q 1.76 10 2016 0.02 –
Nokia Stock Option Plan 2013 1Q 2.58 0 2016 0.00 –
Nokia Stock Option Plan 2013 2Q 2.35 166 2016 0.39 –
Nokia Stock Option Plan 2013 3Q 2.72 5 2016 0.01 –
Total 833 2.10
2017 Nokia Stock Option Plan 2011 2Q 5.66 0 2017 0.00 –
Nokia Stock Option Plan 2011 3Q 3.40 0 2017 0.00 –
Nokia Stock Option Plan 2011 4Q 4.48 5 2017 0.02 –
Nokia Stock Option Plan 2012 1Q 3.48 0 2017 0.00 –
Nokia Stock Option Plan 2012 2Q 2.08 61 2017 0.13 –
Nokia Stock Option Plan 2012 3Q 1.82 148 2017 0.27 –
Nokia Stock Option Plan 2012 4Q 1.76 9 2017 0.02 –
Nokia Stock Option Plan 2013 1Q 2.58 0 2017 0.00 –
Nokia Stock Option Plan 2013 2Q 2.35 193 2017 0.45 –
Nokia Stock Option Plan 2013 3Q 2.72 0 2017 0.00 –
Nokia Stock Option Plan 2013 4Q 5.41 0 2017 0.00 –
Total 416 0.87

Shareholders
As of December 31, 2017, shareholders registered in Finland represented 21.00% and shareholders registered in the name of a nominee
represented 79.00% of the total number of shares of Nokia Corporation. The number of directly registered shareholders was 247 717
as of December 31, 2017. Each account operator (13) is included in this figure as only one registered shareholder.
Largest shareholders registered in Finland as of December 31, 2017(1)
Total number
Shareholder of shares 000s % of all shares % of all voting rights
Varma Mutual Pension Insurance Company 57 222 0.98 1.02
The State Pension Fund 42 000 0.72 0.75
Ilmarinen Mutual Pension Insurance Company 31 565 0.54 0.56
Folketrygdfondet 26 605 0.46 0.48
Schweizerische Nationalbank 25 881 0.44 0.46
Elo Mutual Pension Insurance Company 23 300 0.40 0.42
OP-Finland Fund 18 758 0.32 0.34
Lival Oy Ab 16 369 0.28 0.29
Nordea Pro Finland Fund 16 059 0.28 0.29
Svenska Litteratursällskapet i Finland rf 15 431 0.26 0.28
(1) Excluding nominee registered shares and shares owned by Nokia Corporation. Nokia Corporation owned 248 428 936 shares as of December 31, 2017.

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Breakdown of share ownership as of December 31, 2017(1)

Number of % of Total number % of
By number of shares owned shareholders shareholders of shares all shares
1–100 50 000 20.18 2 832 324 0.05
101–1 000 119 783 48.35 55 281 401 0.95
1 001–10 000 68 363 27.60 215 685 638 3.69
10 001–100 000 9 022 3.64 220 190 388 3.77
100 001–500 000 424 0.17 81 577 276 1.40
500 001–1 000 000 45 0.02 31 401 574 0.54
1 000 001–5 000 000 51 0.02 110 898 260 1.90
Over 5 000 000 29 0.01 5 121 537 442 87.71
Total 247 717 100.00 5 839 404 303 100.00
(1) The breakdown covers only shareholders registered in Finland, and each account operator (13) is included in the number of shareholders as only one registered shareholder. As a result, the breakdown
is not illustrative of the entire shareholder base of Nokia.

By nationality % of shares
Non-Finnish shareholders 79.00
Finnish shareholders 21.00
Total 100.00

By shareholder category (Finnish shareholders) % of shares

Corporations 6.24
Households 8.20
Financial and insurance institutions 2.19
Non-profit organizations 1.11
Governmental bodies (incl. pension insurance companies) 3.26
Total 21.00

As of December 31, 2017, a total of 640 129 725 ADSs (equivalent to the same number of shares or approximately 10,96% of the total
outstanding shares) were outstanding and held of record by 132 478 registered holders in the United States. We are aware that many ADSs
are held of record by brokers and other nominees, and accordingly the above number of holders is not necessarily representative of the actual
number of persons who are beneficial holders of ADSs or the number of ADSs beneficially held by such persons. Based on information available
from Automatic Data Processing Inc., the number of beneficial owners of ADSs as of December 31, 2017 was 392 913.
Based on information known to us as of January 29, 2018, as of December 31, 2017 Blackrock, Inc. beneficially owned 364 870 084 Nokia shares
or convertible bonds combined, which at that time corresponded to approximately 6.2% of the total number of shares and voting rights of Nokia.
To the best of our knowledge, Nokia is not directly or indirectly owned or controlled by any other corporation or any government, and there are
no arrangements that may result in a change of control of Nokia.
Shares and stock options owned by the members of the Board and the Nokia Group Leadership Team
As of December 31, 2017, the members of our Board and the Group Leadership team held a total of 7 485 372 shares and ADSs in Nokia,
which represented approximately 0.13% of our outstanding shares and total voting rights excluding shares held by Nokia Group.

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Authorizations
Authorizations to issue shares and special rights entitling to shares
At the Extraordinary General Meeting held on December 2, 2015, the shareholders authorized the Board of Directors to issue, in deviation from
the shareholders’ pre-emptive right, a maximum of 2 100 million shares through one or more share issues. The authorization includes the right
for the Board of Directors to resolve on all the terms and conditions of such share issuances. The authorization may be used to issue Parent
Company shares to the holders of Alcatel Lucent shares, American Depositary Shares and convertible bonds as well as to beneficiaries of
Alcatel Lucent employee equity compensation arrangements for the purpose of implementing the transaction with Alcatel Lucent, including
the consummation of the public exchange offers made to Alcatel Lucent shareholders as well as other transactions contemplated by the
memorandum of understanding between the Group and Alcatel Lucent, and/or otherwise to effect the combination. The authorization is
effective until December 2, 2020.
At the Annual General Meeting held on June 16, 2016, the shareholders authorized the Board of Directors to issue a maximum of 1 150 million
shares through one or more issues of shares or special rights entitling to shares. The Board of Directors was authorized to issue either new
shares or shares held by the Parent Company. The authorization included the right for the Board of Directors to resolve on all the terms
and conditions of such share and special rights issuances, including issuance in deviation from the shareholders’ pre-emptive rights. The
authorization may be used to develop the Parent Company’s capital structure, diversify the shareholder base, finance or carry out acquisitions
or other arrangements, settle the Parent Company’s equity-based incentive plans, or for other purposes resolved by the Board of Directors.
The authorization that would have been effective until December 16, 2017 was terminated by a resolution of Annual General Meeting on
May 23, 2017.
At the Annual General Meeting held on May 23, 2017, the shareholders authorized the Board of Directors to issue a maximum of 560 million
shares through one or more issues of shares or special rights entitling to shares. The Board of Directors is authorized to issue either new shares
or shares held by the Parent Company. The authorization included the right for the Board of Directors to resolve on all the terms and conditions
of such share and special rights issuances, including issuance in deviation from the shareholders’ pre-emptive rights. The authorization may be
used to develop the Parent Company’s capital structure, diversify the shareholder base, finance or carry out acquisitions or other arrangements,
settle the Parent Company’s equity-based incentive plans, or for other purposes resolved by the Board of Directors. The authorization is
effective until November 23, 2018.
In 2017, under the authorization held by the Board of Directors, the Parent Company issued 415 750 new shares following the holders of stock
options issued in 2011, 2012 and 2013 exercising their option rights.
In 2017, the Parent Company issued 2 933 541 new shares without consideration to the Parent Company to fulfil the company’s obligation
under the Nokia Equity Programs.
In 2017, under the authorization held by the Board of Directors, the Parent Company issued 12 199 284 treasury shares to employees,
including certain members of the Group Leadership Team, as settlement under equity-based incentive plans and the employee share purchase
plan. The shares were issued without consideration and in accordance with the plan rules.
As of December 31, 2017, the Board of Directors had no other authorizations to issue shares, convertible bonds, warrants or stock options.

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 General facts on Nokia

Authorization to repurchase shares

At the Annual General Meeting held on June 16, 2016, the shareholders authorized the Board of Directors to repurchase a maximum
of 575 million shares. The amount corresponded to less than 10% of the total number of Parent Company’s shares. The shares may be
repurchased in order to optimize the capital structure of the Parent Company. In addition, the shares may be repurchased in order to finance
or carry out acquisitions or other arrangements, to settle the Parent Company’s equity-based incentive plans or to be transferred for other
purposes. The authorization that would have been effective until December 16, 2017 was terminated by a resolution of the Annual General
Meeting on May 23, 2017.
At the Annual General Meeting held on May 23, 2017, the shareholders authorized the Board of Directors to repurchase a maximum of 560
million shares. The amount corresponds to less than 10% of the total number of Parent Company’s shares. The shares may be repurchased in
order to optimize the capital structure of the Company. In addition, shares may be repurchased in order to meet obligations arising from debt
financial instruments that are exchangeable into equity instruments, to settle equity-based incentive plans for employees of the Group or of
its associated companies, or to be transferred for other purposes such as financing or carrying out acquisitions. The authorization is effective
until November 23, 2018.
Under the authorization held by the Board of Directors and in line with the capital structure optimization program, the Parent Company
repurchased 153 601 462 shares in 2017 representing approximately 2.6% of share capital and total voting rights as of December 31, 2017.
In 2016, the Parent Company had repurchased 54 296 182 shares. The price paid for the shares was based on the current market price of the
Nokia share on the securities market at the time of the repurchase. On February 1, 2018 the Parent Company announced that the Board of
Directors had decided to cancel 207 897 644 treasury shares repurchased under the capital structure optimization program. The cancellation
of  the shares does not have an impact on the Parent Company’s share capital.
On November 15, 2016, in line with its previously announced EUR 7 billion capital structure optimization program, the Board resolved to
commence a share repurchase program under the authorization granted by the Nokia Annual General Meeting on June 16, 2016. The Board
resolved to repurchase a maximum of 575 million Nokia shares up to an equivalent of EUR 1 billion. The share repurchase program was
completed in November 2017 with a total of 207 897 644 shares repurchased during 2016 and 2017 and a total spend of EUR 1 billion.

Total number of shares Maximum value

purchased as part of of shares that may yet
Total number of Average price publicly announced plans be purchased under the
Period shares purchased paid per share, EUR or programs(1) plans or programs, EUR
January – – 54 296 182 769 389 815
February 23 146 576 4.67 77 442 758 661 389 853
March 22 923 357 4.97 100 366 115 547 389 895
April 1 136 600 5.28 101 502 715 541 389 897
May 18 135 447 5.59 119 638 162 439 989 947
June 11 914 517 5.76 131 552 679 371 390 053
July 1 997 670 5.41 133 550 349 360 590 071
August 24 487 731 5.34 158 038 080 229 792 560
September 19 822 720 5.15 177 860 800 127 793 146
October 4 236 729 4.25 182 097 529 109 793 275
November 25 800 115 4.26 207 897 644 –
December – – 207 897 644 –
Total 153 601 462 5.01 207 897 644 –
(1) On October 29, 2015 Nokia announced a capital structure optimization program including share repurchases. In line with the program, a EUR 1 billion share repurchase program was announced
on November 15, 2016. The column includes all the shares purchased as part of the EUR 1 billion share repurchase program.

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Offer and listing details

Our capital consists of shares traded on Nasdaq Helsinki under the symbol “NOKIA” and Euronext Paris under the symbol “NOKIA”. Our ADSs,
each representing one of our shares, are traded on the NYSE under the symbol “NOK”. The ADSs are evidenced by American Depositary
Receipts (“ADRs”) issued by Citibank, N.A., as the Depositary under the Amended and Restated Deposit Agreement dated as of March 28, 2000
(as amended), among Nokia, Citibank, N.A. and registered holders from time to time of ADRs, as amended on February 6, 2008.
The table below sets forth, for the periods indicated, the reported high and low quoted prices for our shares on Nasdaq Helsinki and Euronext
Paris, and the high and low quoted prices for the ADSs, as reported on the NYSE composite tape.

Nasdaq Helsinki New York Stock Exchange Euronext Paris

price per share price per ADS price per share(1)
High Low High Low High Low
EUR USD EUR
2013 6.03 2.30 8.18 3.02 – –
2014 6.97 4.89 8.73 6.64 – –
2015 7.87 4.91 8.37 5.71 7.15 6.29
2016 6.99 3.66 7.55 4.04 6.99 3.66
2017
First Quarter 5.17 4.12 5.57 4.50 5.17 4.13
Second Quarter 5.96 4.80 6.65 5.17 5.93 4.80
Third Quarter 5.64 4.97 6.59 5.83 5.64 4.97
Fourth Quarter 5.23 3.81 6.11 4.51 5.23 3.81
Full year 5.96 3.81 6.65 4.50 5.93 3.81
Most recent six months
September 2017 5.29 4.97 6.29 5.83 5.28 4.97
October 2017 5.23 4.16 6.11 4.75 5.23 4.16
November 2017 4.47 4.04 5.14 4.79 4.47 4.04
December 2017 4.22 3.81 4.97 4.51 4.22 3.81
January 2018 4.13 3.85 5.00 4.68 4.12 3.85
February 2018 4.88 3.89 5.95 5.23 4.88 3.89
March 9, 2018(2) 4.83 4.62 5.96 5.68 4.83 4.62
(1) Nokia’s listing and trading on Euronext Paris commenced on November 19, 2015.
(2) For the period until March 9, 2018.

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Related party transactions Production of infrastructure equipment

Other than the paid compensation, as described above, there have and products
been no material transactions during the last three fiscal years Our operations team handles the supply chain management of all its
to which any director, executive officer or 5% shareholder, or any hardware, software and original equipment manufacturer products.
relative or spouse of any of them, was a party. There is no significant This includes supply planning, manufacturing, distribution,
outstanding indebtedness owed to Nokia by any director, executive procurement, logistics and supply.
officer or 5% shareholder. Refer to Note 35, Related party
transactions, of our consolidated financial statements included On December 31, 2017, we had twelve manufacturing facilities
in this annual report. globally: one in Australia, one in Brazil, three in China, one in Finland,
two in France, one in Germany, one in India, one in the United Kingdom
HMD global Oy (“HMD”) is a related party to Nokia. As announced in and one in the United States.
May 2016, Nokia has a strategic agreement covering branding rights
and intellectual property licensing to grant HMD an exclusive global Most of our production and assembly is outsourced, while the
license to create Nokia-branded mobile phones and tablets for ten remaining portion is carried out in our production sites. This system
years. Under the agreement, Nokia Technologies receives royalty provides us with considerable flexibility in our manufacturing and
payments from HMD for sales of Nokia-branded mobile products, enables us to meet demands related to cost, availability and customer
covering both brand and intellectual property rights. The Board of requirements more easily.
Directors of HMD includes a representative from Nokia.
The table below shows the productive capacity per location of
As part of the acquisition of Alcatel Lucent in 2016, Nokia acquired significant manufacturing facilities for our infrastructure equipment
a partly owned consolidated subsidiary, Alcatel-Lucent Shanghai Bell on December 31, 2017.
Co., Ltd. On May 18, 2017 Nokia announced the signing of definitive
agreements with the China Huaxin Post & Telecommunication Productive
Economy Development Center (“China Huaxin”). related to the capacity,
Country Location and products(1) Net (m2)(2)
integration of Alcatel-Lucent Shanghai Bell Co., Ltd. and Nokia’s China
business into a new joint venture branded as Nokia Shanghai Bell. Australia Kilsyth: radio frequency systems 5 000
On July 3, 2017, Nokia and China Huaxin commenced operations of Brazil Embu: radio frequency systems 7 800
the new joint venture. Nokia holds an ownership interest of 50% plus China Shanghai: fixed access and wireless access
one share in the parent company, Nokia Shanghai Bell Co., Ltd., systems 22 000
with China Huaxin holding the remaining ownership interests. Refer to China Shanghai (cable): radio frequency systems 9 200
Note 33, Significant partly-owned subsidiaries, of our consolidated China Shanghai (antenna): radio frequency systems 12 500
financial statements included in this annual report. Finland Oulu: base stations 13 800
France Calais: submarine cables 63 000
France Trignac: radio frequency systems 10 200
Germany Hannover: radio frequency systems 21 000
India Chennai: base stations, radio controllers and
transmission systems 12 000
UK Greenwich: submarine cables 19 500
USA Meriden: radio frequency systems 31 000
(1) We consider the production capacity of our manufacturing network to be sufficient to meet
the requirements of its network infrastructure business. The extent of utilization of our
manufacturing facilities varies from plant to plant and from time to time during the year.
None of these facilities is subject to a material encumbrance.
(2) Productive capacity equals the total area allotted to manufacturing and to the storage
of manufacturing-related materials.

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Key ratios Interest-bearing liabilities

Long-term interest-bearing liabilities (including the current portion
Operating profit
thereof) + short-term borrowings
Profit before interest and taxes
Return on capital employed %
Earnings per share (basic)
Profit before taxes + interest and other financial expenses
Profit attributable to equity holders of the parent 
Average capital and reserves attributable to the Company’s
Average adjusted number of shares during the year
equity holders + average non-controlling interests + average
Earnings per share (diluted) interest-bearing liabilities
Adjusted profit attributable to equity holders of the parent
Return on shareholders’ equity %
Average number of shares during the year adjusted for the Profit attributable to the equity holders of the parent   
effect of dilutive shares
Average capital and reserves attributable to the company’s
P/E ratio equity holders during the year
Closing share price at December 31         Equity ratio %
Earnings per share (basic) for Continuing operations Capital and reserves attributable to equity
holders of the parent + non-controlling interests
Payout ratio
Dividend per share                Total assets—advance payments received
Earnings per share (basic) for Continuing operations Net debt to equity (gearing) %
Interest-bearing liabilities—cash and other liquid assets
Dividend yield %
Dividend per share        Capital and reserves attributable to the equity holders
of the parent + non-controlling interests
Closing share price at December 31
Net cash
Shareholders’ equity per share
Total cash and other liquid assets—interest-bearing liabilities
Capital and reserves attributable to equity holders of the parent
Number of shares at December 31—number of treasury shares Free cash flow(1)
at December 31 Net cash from/(used in) operating activities—purchases of property,
plant and equipment, and intangible assets
Market capitalization
(Number of shares at December 31—number of treasury shares (1) The consolidated statement of cash flows combines cash flows from both Continuing operations
and Discontinued operations.
at December 31) x closing share price at December 31
Share turnover %
Number of shares traded during the year 
Average number of shares during the year

128 NOKIA IN 2017

 Financial statements

Financial statements

Contents
Consolidated primary statements 130 Parent Company primary statements 196
Consolidated income statement 130 Parent Company income statement 196
Consolidated statement of Parent Company statement
comprehensive income 131 of financial position 197
Consolidated statement of Parent Company statement
financial position 132 of cash flows 199
Consolidated statement Notes to Parent Company financial
of cash flows 133 statements 200
Consolidated statement of changes 1. Accounting principles 200
in shareholders’ equity 134 2. Personnel expenses 202
Notes to consolidated financial 3. Auditor’s fees 202
statements136 4. Other income 202
1. Corporate information 136 5. Financial income and expenses 203
2. Significant accounting policies 136 6. Group contributions 203
3. Use of estimates and critical 7. Income taxes 203
accounting judgments 145 8. Property, plant and equipment 204
4. Segment information 147 9. Investments 204
5. Acquisitions 149 10. Other non-current receivables 205
6. Disposals treated as 11. Prepaid expenses and
Discontinued operations 152 accrued income 205
7. Revenue recognition 153 12. Shareholders’ equity 205
8. Expenses by nature 154 13. Distributable earnings 206
9. Personnel expenses 154 14. Fair value and other reserves 206
10. Other income and expenses 154 15. Fair value of financial instruments 207
11. Financial income and expenses 155 16. Derivative financial instruments 208
12. Income taxes 155 17. Provisions 208
13. Earnings per share 158 18. Long-term interest-bearing liabilities209
14. Intangible assets 159 19. Accrued expenses and
15. Property, plant and equipment 160 deferred revenue 209
16. Impairment 161 20. Commitments and contingencies 209
17. Inventories 162 21 Loans granted to the management
18. Allowances for doubtful accounts 162 of the company 209
19. Prepaid expenses and 22. Notes to the statement
accrued income 163 of cash flows 210
20. Shares of the Parent Company 163 23. Principal Group companies 210
21. Fair value and other reserves 164 24. Shares of the Parent Company 210
22. Other comprehensive income 165 25. Risk management 210
23. Interest-bearing liabilities 166 Signing of the Annual Accounts 2017
24. Fair value of financial instruments 167 and proposal by the Board of
25. Derivative financial instruments 169 Directors for distribution of profit 211
26. Share-based payment 170 Auditor’s report 212
27. Pensions and other
post-employment benefits 172
28. Accrued expenses, deferred
revenue and other liabilities 180
29. Provisions 181
30. Commitments and contingencies 183
31. Notes to the consolidated
statement of cash flows 184
32. Principal Group companies 185
33. Significant partly-owned subsidiaries186
34. Investments in associated
companies and joint ventures 187
35. Related party transactions 187
36. Risk management 188

NOKIA IN 2017 129

Consolidated income statement

2017 2016(1) 2015(1)

For the year ended December 31 Notes EURm EURm EURm
Net sales 4, 7 23 147 23 641 12 560
Cost of sales 8 (14 008) (15 117) (6 963)
Gross profit 9 139 8 524 5 597
Research and development expenses 8 (4 916) (4 997) (2 080)
Selling, general and administrative expenses 8 (3 615) (3 767) (1 772)
Other income 10 363 117 236
Other expenses 8, 10 (955) (977) (284)
Operating profit/(loss) 16 ( ) 1 697
Share of results of associated companies and joint ventures 34 11 18 29
Financial income and expenses 11 (537) (287) (186)
(Loss)/profit before tax () ( )  
Income tax (expense)/benefit 12 (927) 457 (346)
(Loss)/profit for the year from Continuing operations ( ) () 1 194
(Loss)/profit for the year from Continuing operations attributable to:
Equity holders of the parent (1 473) (751) 1 192
Non-controlling interests 36 (161) 2
(Loss)/profit for the year from Continuing operations ( ) () 1 194
(Loss)/profit for the year from Discontinued operations attributable to:
Equity holders of the parent (21) (15) 1 274
Non-controlling interests – – –
(Loss)/profit for the year from Discontinued operations 6 () () 1 274
(Loss)/profit for the year attributable to:
Equity holders of the parent (1 494) (766) 2 466
Non-controlling interests 36 (161) 2
(Loss)/profit for the year ( ) () 2 468

Earnings per share attributable to equity holders of the parent 13 EUR EUR EUR
Basic earnings per share
Continuing operations (0.26) (0.13) 0.32
Discontinued operations 0.00 0.00 0.35
(Loss)/profit for the year (0.26) (0.13) 0.67
Diluted earnings per share
Continuing operations (0.26) (0.13) 0.31
Discontinued operations 0.00 0.00 0.32
(Loss)/profit for the year (0.26) (0.13) 0.63

Average number of shares 13 000s shares 000s shares 000s shares

Basic 5 651 814 5 732 371 3 670 934
Diluted 5 651 814 5 741 117 3 949 312
(1) In 2017, the Group adopted a more activity-based allocation method which resulted in changes to allocation and presentation principles of certain costs. In addition, it changed the presentation of
certain hedging gains and losses. Comparatives for 2016 and 2015 have been recasted to reflect these changes.

The notes are an integral part of these consolidated financial statements.

130 NOKIA IN 2017

 Financial statements

Consolidated statement
of comprehensive income

2017 2016 2015

For the year ended December 31 Notes EURm EURm EURm
(Loss)/profit for the year ( ) () 2 468
Other comprehensive income
Items that will not be reclassified to profit or loss:
Remeasurements on defined benefit plans 723 613 112
Income tax related to items that will not be reclassified to profit or loss (58) (269) (28)
Items that may be reclassified subsequently to profit or loss:
Translation differences (1 819) 251 (1 054)
Net investment hedges 440 (103) 322
Cash flow hedges 35 14 (5)
Available-for-sale investments (88) (75) 113
Other (decrease)/increase, net (1) (6) 2
Income tax related to items that may be reclassified subsequently to profit or loss (92) 20 (88)
Other comprehensive (loss)/income, net of tax 22 () 445 ()
Total comprehensive (loss)/income for the year ( ) () 1 842
Attributable to:
Equity holders of the parent (2 304) (277) 1 837
Non-controlling interests (14) (205) 5
Total comprehensive (loss)/income for the year ( ) () 1 842
Attributable to equity holders of the parent:
Continuing operations (2 283) (262) 1 513
Discontinued operations (21) (15) 324
Total attributable to equity holders of the parent ( ) () 1 837
Attributable to non-controlling interests:
Continuing operations (14) (205) 5
Discontinued operations – – –
Total attributable to non-controlling interests () () 5

The notes are an integral part of these consolidated financial statements.

NOKIA IN 2017 131

Consolidated statement of financial position

2017 2016
As of December 31 Notes EURm EURm
ASSETS
Non-current assets
Intangible assets 14, 16 9 219 10 960
Property, plant and equipment 15 1 853 1 981
Investments in associated companies and joint ventures 34 128 116
Available-for-sale investments 24 816 1 040
Deferred tax assets 12 4 582 5 701
Other non-current financial assets 24, 36 215 254
Defined benefit pension assets 27 3 979 3 802
Other non-current assets 19 368 328
Total non-current assets 21 160  
Current assets
Inventories 17 2 646 2 506
Accounts receivable, net of allowances for doubtful accounts 18, 24, 36 6 880 6 972
Prepaid expenses and accrued income 19 1 259 1 296
Current income tax assets 474 279
Other financial assets 24, 25, 36 302 296
Investments at fair value through profit and loss, liquid assets 24, 36 – 327
Available-for-sale investments, liquid assets 24, 36 911 1 502
Cash and cash equivalents 24, 36 7 369 7 497
Total current assets 19 841 20 675
Assets held for sale 23 44
Total assets 41 024 44 901
SHAREHOLDERS' EQUITY AND LIABILITIES
Capital and reserves attributable to equity holders of the parent
Share capital 20 246 246
Share issue premium 447 439
Treasury shares (1 480) (881)
Translation differences 21 (932) 483
Fair value and other reserves 21 1 094 488
Reserve for invested non-restricted equity 15 616 15 731
Retained earnings 1 147 3 588
Total capital and reserves attributable to equity holders of the parent 16 138 20 094
Non-controlling interests 80 881
Total equity 16 218 20 975
Non-current liabilities
Long-term interest-bearing liabilities 23, 24, 36 3 457 3 657
Deferred tax liabilities 12 413 403
Defined benefit pension and post-retirement liabilities 27 4 440 5 000
Deferred revenue and other long-term liabilities 24, 28 2 986 1 453
Provisions 29 766 808
Total non-current liabilities 12 062 11 321
Current liabilities
Short-term interest-bearing liabilities 23, 24, 36 309 370
Other financial liabilities 24, 25, 36 268 236
Current income tax liabilities 383 536
Accounts payable 24, 36 3 996 3 781
Accrued expenses, deferred revenue and other liabilities 28 6 666 6 412
Provisions 29 1 122 1 270
Total current liabilities 12 744 12 605
Total liabilities 24 806 23 926
Total shareholders' equity and liabilities 41 024 44 901

The notes are an integral part of these consolidated financial statements.

132 NOKIA IN 2017

 Financial statements

Consolidated statement of cash flows

2017 2016 2015

For the year ended December 31 Notes EURm EURm EURm
Cash flow from operating activities
(Loss)/profit for the year (1 458) (927) 2 468
Adjustments, total 31 3 583 2 407 (261)
Change in net working capital 31 597 (2 207) (1 377)
Cash from/(used in) operations 2 722 (727) 830
Interest received 53 85 62
Interest paid (409) (309) (99)
Income taxes paid, net (555) (503) (290)
Net cash from/(used in) operating activities 1 811 ( ) 503
Cash flow from investing activities
Acquisition of businesses, net of acquired cash (394) 5 819 (98)
Purchase of current available-for-sale investments, liquid assets(1) (2 729) (4 131) (3 133)
Purchase of investments at fair value through profit and loss, liquid assets – – (311)
Purchase of non-current available-for-sale investments (104) (73) (88)
Purchase of shares in associated companies (10) – –
(Payment of)/proceeds from other long-term loans receivable (2) 11 (2)
Proceeds from/(payment of) short-term loans receivable 2 19 (17)
Purchases of property, plant and equipment, and intangible assets (601) (477) (314)
Proceeds from disposal of businesses, net of disposed cash (16) 6 2 586
Proceeds from disposal of shares in associated companies – 10 –
Proceeds from maturities and sale of current available-for-sale
investments, liquid assets(1) 3 265 5 121 3 074
Proceeds from maturities and sale of investments at fair value through
profit and loss, liquid assets 324 368 48
Proceeds from sale of non-current available-for-sale investments 207 134 149
Proceeds from sale of property, plant and equipment and other
intangible assets 67 28 –
Dividends received 1 1 2
Net cash from investing activities 10 6 836 1 896
Cash flow from financing activities
Proceeds from stock option exercises 1 6 4
Purchase of treasury shares (785) (216) (173)
Purchase of equity instruments of subsidiaries(1) (38) (724) (52)
Proceeds from long-term borrowings 2 129 225 232
Repayment of long-term borrowings(1) (2 044) (2 599) (24)
Repayment of short-term borrowings (42) (100) (55)
Dividends paid and other contributions to shareholders (970) (1 515) (512)
Net cash used in financing activities ( ) ( ) ()
Translation differences (200) 43 6
Net (decrease)/increase in cash and cash equivalents () 502 1 825
Cash and cash equivalents as of January 1 7 497 6 995 5 170
Cash and cash equivalents as of December 31 7 369 7 497 6 995
(1) In 2016, Alcatel Lucent ordinary shares and ADSs and OCEANEs acquired in cash by the Group subsequent to the closing of the reopened exchange offer are presented within cash flow from financing
activities as purchase of equity instruments of subsidiaries and repayment of long-term borrowings, respectively. In relation to the Public Buy-Out offer/Squeeze-Out, the Group’s pledged cash asset
of EUR 724 million to cover the purchase of the remaining Alcatel Lucent securities was recorded within cash flow from investing activities as purchase of current available-for-sale investments, liquid
assets. The amount of pledged cash released upon acquisition of Alcatel Lucent securities of EUR 724 million was recorded within cash flow from investing activities as proceeds from maturities and
sale of current available-for-sale investments, liquid assets.

The consolidated statement of cash flows combines cash flows from both the Continuing and the Discontinued operations. Refer to Note ,
Disposals treated as Discontinued operations.
The amounts in the consolidated statement of cash flows cannot be directly traced from the consolidated statement of financial position
without additional information on the acquisitions and disposals of subsidiaries and the net foreign exchange differences arising on
consolidation.
The notes are an integral part of these consolidated financial statements.

NOKIA IN 2017 133

Consolidated statement of
changes in shareholders’ equity

Reserve for
Number Invested
of shares Share Fair value non- Equity Non-
outstanding Share issue Treasury Translation and other restricted Retained holders of controlling
EURm Notes 000s capital premium shares differences reserves equity earnings the parent interests Total

As of January 1, 2015 3 648 143 246 439 () 1 099 22 3 083 4 710 8 611 58 8 669
Remeasurements of defined benefit
plans, net of tax 21 85 (7) 78 78
Translation differences 21 (1 057) (1 057) 4 (1 053)
Net investment hedge gains,
net of tax 21 252 252 252
Cash flow hedges, net of tax 21 (4) (4) (4)
Available-for-sale investments,
net of tax 21 95 95 95
Other increase, net 6 1 7 (1) 6
Profit for the year 2 466 2 466 2 2 468
Total comprehensive income/(loss)
for the year – – – () 182 – 2 460 1 837 5 1 842
Share-based payment 34 34 34
Excess tax benefit on share-based
payment (2) (2) (2)
Settlement of performance and
restricted shares 1 281 (12) 24 (16) (4) (4)
Acquisition of treasury shares (24 516) (174) (174) (174)
Cancellation of treasury shares 427 (427) – –
Stock options excercised 1 042 4 4 4
(1)
Dividends (507) (507) (5) (512)
Acquisition of non-controlling interests (15) (15) (37) (52)
Convertible bondequity component (57) 57 – –
Convertible bondconversion to equity 313 681 (30) 750 720 720
Other movements (436) 8 (7) (2) (1) 1 (1) (1)
Total other equity movements – () 270 () – 737 () 55 () 13
As of December 31, 2015 3 939 195 246 380 () 292 204 3 820 6 279 10 503 21 10 524
Remeasurements of defined benefit
plans, net of tax 21 348 348 (4) 344
Translation differences 21 289 289 (38) 251
Net investment hedge losses, net of tax 21 (83) (83) (83)
Cash flow hedges, net of tax 21 12 12 12
Available-for-sale investments,
net of tax 21 (73) (73) (73)
Other decrease, net (1) (3) (4) (2) (6)
Loss for the year (766) (766) (161) (927)
Total comprehensive income/(loss)
for the year – – – 206 286 – () () () ()
Share-based payment 117 117 117
Excess tax benefit on share-based
payment (6) (6) (6)
Settlement of performance and
restricted shares 3 408 (22) 68 (52) (6) (6)
Acquisition of treasury shares 20 (54 296) (231) (231) (231)
Stock options excercised 1 074 3 3 6 6
(1)
Dividends (1 501) (1 501) (14) (1 515)
Acquisitions through business
combinations 5 1 765 358 11 616 11 616 1 714 13 330
Equity issuance costs related to
acquisitions (16) (16) (16)
Acquisition of non-controlling interests 65 778 (15) (2) 359 (459) (117) (635) (752)
Vested portion of share-based
payment awards related to
acquisitions 5 6 6 6
Convertible bondequity component (38) 38 – –
Other movements (14) (1) 1 – –
Total other equity movements – 59 () () () 11 911 ( ) 9 868 1 065 10 933
As of December 31, 2016 5 720 503 246 439 () 483 488 15 731 3 588 20 094 881 20 975

134 NOKIA IN 2017

 Financial statements

Reserve for
Number Invested
of shares Share Fair value non- Equity Non-
outstanding Share issue Treasury Translation and other restricted Retained holders of controlling
EURm Notes 000s capital premium shares differences reserves equity earnings the parent interests Total
As of December 31, 2016 5 720 503 246 439 () 483 488 15 731 3 588 20 094 881 20 975
Remeasurements of defined benefit
plans, net of tax 21 662 662 662
Translation differences 21 (1 768) (1 768) (50) (1 818)
Net investment hedge losses,
net of tax 21 352 352 352
Cash flow hedges, net of tax 21 28 28 28
Available-for-sale investments,
net of tax 21 (86) (86) (86)
Other increase, net 2 2 2
Loss for the year (1 494) (1 494) 36 (1 458)
Total comprehensive (loss)/income
for the year – – – ( ) 606 – ( ) ( ) () ( )
Share-based payment 92 92 92
Excess tax benefit on share-based
payment (7) (7) (7)
Settlement of performance and
restricted shares 20 12 199 (79) 170 (116) (25) (25)
Acquisition of treasury shares 20 (153 601) (769) (769) (769)
Stock options excercised 20 416 1 1 1
(1)
Dividends (963) (963) (7) (970)
Acquisitions through business
combinations – 17 17
Acquisition of non-controlling interests 12
12 (788) (776)
Disposal of subsidiaries – (9) (9)
Other movements 2 1 4 7 7
Total other equity movements – 8 () 1 – () () ( ) () ( )
As of December ,  5 579 517 246 447 ( ) () 1 094 15 616 1 147 16 138 80 16 218
(1) Dividend declared is EUR 0.19 per share, subject to shareholders’ approval (dividend EUR 0.17 per share for 2016; dividend EUR 0.16 per share for 2015; and special dividend EUR 0.10 per
share for 2015).

The notes are an integral part of these consolidated financial statements.

NOKIA IN 2017 135

Notes to consolidated financial statements

1. Corporate information All inter-company transactions are eliminated as part of the

consolidation process. Non-controlling interests are presented
Nokia Oyj, a public limited liability company incorporated and separately as a component of net profit and are shown as a
domiciled in Helsinki, Finland, is the parent company (“Parent component of shareholders’ equity in the consolidated statement
Company” or “Parent”) for all its subsidiaries (“Nokia” or “the of financial position.
Group”). The Group’s operational headquarters are located in Espoo,
Finland. The Group is listed on the Nasdaq Helsinki stock exchange, Business combinations
the New York stock exchange and the Euronext Paris stock exchange. Business combinations are accounted for using the acquisition
The Group is a leading global provider of mobile and fixed network method. The consideration transferred in a business combination
infrastructure combining hardware, software and services, as well as is measured as the aggregate of the fair values of the assets
advanced technologies and licensing that connect people and things. transferred, liabilities incurred towards the former owners of
the acquired entity or business and equity instruments issued.
On March ,  the Board of Directors authorized the financial Acquisition-related costs are recognized as expenses in the
statements for  for issuance and filing. consolidated income statement in the period in which the costs
are incurred and the related services are received with the exception
2. Significant accounting policies of costs directly attributable to the issuance of equity instruments
Basis of presentation and statement of compliance that are accounted for as a deduction from equity.
The consolidated financial statements are prepared in accordance Identifiable assets acquired and liabilities assumed are measured
with International Financial Reporting Standards as issued by the at the acquisition date fair values. The Group elects whether to
International Accounting Standards Board (“IASB”) and as adopted by measure the non-controlling interests in the acquiree at fair value
the European Union (“IFRS”). The consolidated financial statements or at the proportionate share of the acquiree’s identifiable net
are presented in millions of euros (“EURm”), except as otherwise assets on a business combination by business combination basis.
noted, and are prepared under the historical cost convention, The excess of the aggregate of the consideration transferred and
except as disclosed in the accounting policies below. The notes the amount recognized for non-controlling interests over the
to the consolidated financial statements also conform to the acquisition date fair values of the identifiable net assets acquired
Finnish accounting legislation. is recorded as goodwill.
In , comparative presentation of certain items in the Investment in associates and joint ventures
consolidated financial statements has been modified to conform An associate is an entity over which the Group exercises significant
with current year presentation. influence. Significant influence is the power to participate in the
Other information financial and operating policy decisions of the entity, but is not
This paragraph is included in connection with statutory reporting control or joint control over those policies.
requirements in Germany. The fully consolidated German subsidiary, A joint venture is a type of joint arrangement whereby the parties
Nokia Solutions and Networks GmbH & Co. KG, registered in the that have joint control of the arrangement have rights to the net
commercial register of Munich under HRA , has made use assets of the arrangement. Joint control is the contractually agreed
of the exemption available under § b and §  of the German sharing of control of an arrangement, which exists only when
Commercial Code (“HGB”). decisions about relevant activities require the unanimous consent
Principles of consolidation of the parties sharing control.
The consolidated financial statements comprise the financial The Group’s investments in associates and joint ventures are
statements of the Parent Company, and each of those companies accounted for using the equity method. Under the equity method,
over which it exercises control. Control over an entity exists when the investment in an associate or joint venture is initially recognized
the Group is exposed, or has rights, to variable returns from its at cost. The carrying amount of the investment is adjusted to
involvement with the entity and has the ability to affect those recognize changes in the Group’s share of net assets of the
returns through its power over the entity. When the Group has less associate or joint venture since the acquisition date. The Group’s
than a majority of voting or similar rights in an entity, the Group share of profits and losses of associates and joint ventures is
considers all relevant facts and circumstances in assessing whether included in the consolidated income statement outside operating
it has power over an entity, including the contractual arrangements, profit or loss. Any change in other comprehensive income (“OCI”)
and voting rights and potential voting rights. The Group reassesses of associates and joint ventures is presented as part of the
whether or not it controls an entity if facts and circumstances Group’s OCI.
indicate that there are changes to the elements of control.
After application of the equity method, as of each reporting date
Consolidation of a subsidiary begins when the Group obtains the Group determines whether there is objective evidence that the
control over the subsidiary and ceases when the Group loses control investment in an associate or joint venture is impaired. If there is
over the subsidiary. Assets, liabilities, income and expenses of a such evidence, the Group recognizes an impairment loss that is
subsidiary acquired or disposed of during the year are included in calculated as the difference between the recoverable amount of the
the consolidated financial statements from the date the Group gains associate or joint venture and its carrying value. The impairment loss
control until the date the Group ceases to control the subsidiary. is presented in ‘Share of results of associated companies and joint
A change in the ownership interest of a subsidiary, without a loss of ventures’ in the consolidated income statement.
control, is accounted for as an equity transaction. If the Group loses
control in a subsidiary, the related assets, liabilities, non-controlling
interest and other components of equity are derecognized with
any gain or loss recognized in the consolidated income statement.
Any investment retained in the former subsidiary is measured at
fair value.

136 NOKIA IN 2017

 Financial statements

Non-current assets held for sale (or disposal groups) and Revenue on license fees is recognized in accordance with the
discontinued operations substance of the relevant agreements. In the majority of cases,
Non-current assets or disposal groups are classified as assets the Group retains obligations related to the licensed assets after
held for sale if their carrying amounts will be recovered principally the initial licensing transaction, and as a result revenue is recognized
through a sale transaction rather than through continuing use. over a period of time during which the Group is expected to
For this to be the case, the asset, or the disposal group, must be perform. Where the Group has no remaining obligations to perform
available for immediate sale in its present condition subject only subsequent to the initial licensing transaction, and licensing fees are
to terms that are usual and customary for sales of such assets or non-refundable, revenue is recognized after the customer has been
disposal groups, and the sale must be highly probable. These assets, provided access to the underlying assets. In some multiple element
or in the case of disposal groups, assets and liabilities, are presented licensing transactions, the Group applies the residual method in the
separately in the consolidated statement of financial position and absence of reference information.
measured at the lower of the carrying amount and fair value less
costs to sell. Non-current assets classified as held for sale, or Net sales includes revenue from all licensing negotiations, litigations
included in a disposal group classified as held for sale, are not and arbitrations to the extent that the criteria for revenue
depreciated or amortized. recognition have been met.

Discontinued operations are reported when a component of the Government grants

Group, comprising operations and cash flows that can be clearly Government grants are recognized when there is reasonable
distinguished both operationally and for financial reporting purposes assurance that the Group will comply with the conditions attached
from the rest of the Group, is classified as held for sale or has to them and the grants will be received. Government grants received
been disposed of, or the component represents a major line of as compensation for expenses or losses incurred are recognized
business or geographical area of operations, or is a part of a single in the consolidated income statement as a deduction against
coordinated plan to dispose of a separate major line of business the related expenses. Government grants related to assets are
or geographical area of operations. Profit or loss from Discontinued presented in the consolidated statement of financial position as
operations is reported separately from income and expenses deferred income and recognized as income over the same period
from Continuing operations in the consolidated income statement, the asset is depreciated or amortized.
with prior periods presented on a comparative basis. Cash flows Government grants received in the form of R&D tax credits are
for Discontinued operations are presented separately in the notes recognized as a deduction against R&D expenses if the amount of
to the consolidated financial statements. Intra-group revenues the tax credit is linked to the amount of R&D expenditures incurred
and expenses between Continuing and Discontinued operations by the Group and the tax credit is a fully collectible asset which will
are eliminated. be paid in cash by the government in case the Group is not able
Revenue recognition to offset it against its income tax payable. R&D tax credits that do
Revenue is recognized when the following criteria for the transaction not meet both conditions are recognized as income tax benefit.
have been met: significant risks and rewards of ownership have Employee benefits
transferred to the buyer; continuing managerial involvement and Pensions and other post-employment benefits
effective control usually associated with ownership have ceased; the The Group companies have various post-employment plans in
amount of revenue can be measured reliably; it is probable that the accordance with the local conditions and practices in the countries
economic benefits associated with the transaction will flow to the in which they operate. The plans are generally funded through
Group; and the costs incurred or to be incurred in respect of the payments to insurance companies or contributions to trustee-
transaction can be measured reliably. Revenue is measured at the administered funds as determined by periodic actuarial calculations.
fair value of the consideration received or receivable net of
discounts and excluding taxes and duties. In a defined contribution plan, the Group’s legal or constructive
obligation is limited to the amount that it agrees to contribute
Recurring service revenue which includes managed services and to the fund. The Group’s contributions to defined contribution plans,
maintenance services is generally recognized on a straight-line basis multi-employer and insured plans are recognized in the consolidated
over the agreed period, unless there is evidence that some other income statement in the period to which the contributions relate.
method better represents the rendering of services. If a pension plan is funded through an insurance contract where the
The Group enters into contracts consisting of any combination of Group does not retain any legal or constructive obligations, the plan
hardware, services and software. Within these multiple element is treated as a defined contribution plan. All arrangements that do
arrangements, separate components are identified and accounted not fulfill these conditions are considered defined benefit plans.
for based on the nature of those components, considering the For defined benefit plans, including pension and post-retirement
economic substance of the entire arrangement. Revenue is allocated healthcare and life insurance, costs are assessed using the projected
to each separately identifiable component based on the relative unit credit method: the cost is recognized in the consolidated
fair value of each component. The fair value of each component income statement so as to spread the benefit over the service lives
is determined by taking into consideration factors such as the price of employees. The defined benefit obligation is measured as the
of the component when sold separately and the component cost present value of the estimated future cash outflows using interest
plus a reasonable margin when price references are not available. rates on high-quality corporate bonds or government bonds with
The revenue allocated to each component is recognized when the maturities that most closely match expected payouts of benefits.
revenue recognition criteria for that component have been met. Actuarial gains and losses arising from experience adjustments and
Revenue from contracts involving the construction of an asset changes in actuarial assumptions are charged or credited to equity
according to customer specifications is recognized using in other comprehensive income in the period in which they arise.
the percentage of completion method. Stage of completion Past service costs and settlement gains and losses are recognized
for each contract is measured by either the achievement of immediately in the consolidated income statement as part of service
contractually defined milestones or costs incurred compared cost, when the plan amendment, curtailment or settlement occurs.
to total project costs. Curtailment gains and losses are accounted for as past service costs.

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Notes to consolidated financial statements continued

The liability or asset recognized in the consolidated statement of Following the IFRS Interpretations Committee agenda decision in
financial position is the defined benefit obligation as of the closing September  on interest and penalties related to income taxes,
date less the fair value of plan assets including effects relating to the Group no longer accounts for these items as income taxes.
any asset ceiling. Interest expenses and income are presented in financial expenses
and income, respectively, and penalties are presented in other
Remeasurements, comprising actuarial gains and losses, operating expenses in the consolidated income statement.
the effect of the asset ceiling and the return on plan assets, In relation to this, the Group has retrospectively revised the
excluding amounts recognized in net interest, are recognized presentation of interest and penalties related to income taxes
immediately in the consolidated statement of financial position from current income tax liabilities to provisions in the consolidated
with a corresponding debit or credit to Fair Value and Other statement of financial position. The impact of the revision was
Reserves in Equity through the consolidated statement of other EUR  million as of December ,  and EUR  million as
comprehensive income in the period in which they occur. of December , .
Remeasurements are not reclassified to the consolidated
income statement in subsequent periods. The Group periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to
Actuarial valuations for the Group’s defined benefit post- interpretation. It adjusts the amounts recorded, where appropriate,
employment plans are performed annually or when a material on the basis of amounts expected to be paid to the tax authorities.
curtailment or settlement of a defined benefit plan occurs. The amount of current income tax liabilities for uncertain income tax
Termination benefits positions is recognized when it is more likely than not that certain tax
Termination benefits are payable when employment is terminated positions may not be fully sustained upon review by tax authorities.
before the normal retirement date, or whenever an employee The amounts recorded are based upon the estimated future
accepts voluntary redundancy in exchange for these benefits. The settlement amount as of each reporting date.
Group recognizes termination benefits when it is demonstrably Deferred tax assets and liabilities are determined using the liability
committed to either terminating the employment of current method for all temporary differences arising between the tax
employees according to a detailed formal plan without possibility of bases of assets and liabilities and their carrying amounts in the
withdrawal, or providing termination benefits as a result of an offer consolidated financial statements. Deferred tax assets are
made to encourage voluntary redundancy. Local laws may provide recognized to the extent that it is probable that future taxable profit
employees with the right to benefits from the employer upon will be available against which the unused tax losses, unused tax
termination whether the termination is voluntary or involuntary. For credits or deductible temporary differences can be utilized before
these specific termination benefits, the portion of the benefit that the unused tax losses or unused tax credits expire. Deferred tax
the Group would be required to pay to the employee in the case of assets are assessed for realizability as of each reporting date. When
voluntary termination is treated as a legal obligation determined by circumstances indicate it is no longer probable that deferred tax
local law and accounted for as a defined benefit arrangement as assets will be utilized, adjustments are made as necessary. Deferred
described in the pensions section above. tax liabilities are recognized for temporary differences that arise
Share-based payment between the fair value and the tax base of identifiable net assets
The Group offers three types of global equity-settled share-based acquired in business combinations.
compensation plans for employees: performance shares, restricted Deferred tax assets and deferred tax liabilities are offset for
shares and the employee share purchase plan. presentation purposes when there is a legally enforceable right
Employee services received and the corresponding increase in to set off current tax assets against current tax liabilities, and the
equity are measured by reference to the fair value of the equity deferred tax assets and deferred tax liabilities relate to income
instruments as of the grant date, excluding the impact of any non- taxes levied by the same taxation authority on either the same
market vesting conditions. Non-market vesting conditions attached taxable entity or different taxable entities which intend either to
to the performance shares are included in assumptions about the settle current tax liabilities and assets on a net basis, or to realize
number of shares that the employee will ultimately receive. The the assets and settle the liabilities simultaneously in each future
Group reviews the assumptions made on a regular basis and, where period in which significant amounts of deferred tax liabilities or
necessary, revises its estimates of the number of performance deferred tax assets are expected to be settled or recovered.
shares that are expected to be settled. Plans that apply tranched Deferred tax liabilities are not recognized if they arise from the
vesting are accounted for under the graded vesting model. initial recognition of goodwill. Deferred tax liabilities are provided
Share-based compensation is recognized as an expense in the on taxable temporary differences arising from investments in
consolidated income statement over the relevant service periods. subsidiaries, associates and joint arrangements, except for deferred
Income taxes tax liability where the timing of the reversal of the temporary
The income tax expense comprises current tax and deferred tax. difference is controlled by the Group, and it is probable that the
Tax is recognized in the consolidated income statement except temporary difference will not reverse in the foreseeable future.
to the extent that it relates to items recognized in other The enacted or substantively enacted tax rates as of each reporting
comprehensive income, or directly in equity; then the related tax is date that are expected to apply in the period when the asset is
recognized in other comprehensive income or equity, respectively. realized or the liability is settled are used in the measurement of
Current taxes are based on the results of group companies and deferred tax assets and deferred tax liabilities. Deferred tax assets
are calculated using the local tax laws and tax rates that are and liabilities are not discounted.
enacted or substantively enacted as of each reporting date.
Corporate taxes withheld at the source of the income on behalf
of group companies, both recoverable and irrecoverable, are
accounted for in income taxes.

138 NOKIA IN 2017

 Financial statements

Foreign currency translation Property, plant and equipment

Functional and presentation currency Property, plant and equipment are stated at cost less accumulated
The financial statements of all group companies are measured using depreciation and accumulated impairment losses. Depreciation is
functional currency, which is the currency of the primary economic recorded on a straight-line basis over the expected useful lives of
environment in which the entity operates. The consolidated financial the assets as follows:
statements are presented in euro, the functional and presentation
currency of the Parent Company. Buildings and constructions
Buildings and constructions 20–33 years
Transactions in foreign currencies
Light buildings and constructions 3–20 years
Transactions in foreign currencies are recorded at exchange rates
prevailing as of the dates of the individual transactions. For practical Machinery and equipment
reasons, a rate that approximates the actual rate as of the date of Production machinery, measuring and test equipment 1–5 years
the transaction is often used. At the end of the reporting period, Other machinery and equipment 3–10 years
monetary assets and liabilities denominated in foreign currency are
valued at the exchange rates prevailing at the end of the reporting Land and water areas are not depreciated.
period. Foreign exchange gains and losses arising from monetary
assets and liabilities as well as fair value changes of related hedging Maintenance, repairs and renewals are generally expensed in the
instruments are recognized in financial income and expenses. period in which they are incurred. However, major renovations are
Unrealized foreign exchange gains and losses related to non- capitalized and included in the carrying amount of the asset when it
monetary non-current available-for-sale investments are included is probable that future economic benefits in excess of the originally
in the fair value measurement of these investments and recognized assessed standard of performance of the existing asset will flow to
in other comprehensive income. the Group. Major renovations are depreciated over the remaining
useful life of the related asset. Leasehold improvements are
Foreign group companies depreciated over the shorter of the lease term and the useful life.
All income and expenses of foreign group companies where the Gains and losses on the disposal of property, plant and equipment
functional currency is not the euro are translated into euro at the are included in operating profit or loss.
average foreign exchange rates for the reporting period. All assets
and liabilities of foreign group companies are translated into euro at Leases
foreign exchange rates prevailing at the end of the reporting period. Leases are classified as finance leases whenever the terms of
Differences resulting from the translation of income and expenses the lease transfer substantially all the risks and rewards incidental
at the average rate and assets and liabilities at the closing rate are to ownership to the lessee. All other leases are classified as
recognized as translation differences in consolidated statement of operating leases.
comprehensive income. On the disposal of all or part of a foreign The Group has entered into various operating lease contracts as
group company through sale, liquidation, repayment of share capital a lessee. The related payments are treated as rental expenses and
or abandonment, the cumulative amount or proportionate share recognized in the consolidated income statement on a straight-line
of translation differences is recognized as income or expense when basis over the lease terms unless another systematic approach
the gain or loss on disposal is recognized. is more representative of the pattern of the benefit.
Intangible assets The Group does not have any significant finance lease arrangements.
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a Impairment of goodwill, other intangible assets and property,
business combination is their fair value as of the date of acquisition. plant and equipment
Internally generated intangibles, except for development costs The Group assesses the recoverability of the carrying value of
that may be capitalized, are expensed as incurred. Development goodwill, other intangible assets and property, plant and equipment
costs are capitalized only if the Group has the technical feasibility if events or changes in circumstances indicate that the carrying
to complete the asset; has an ability and intention to use or value may be impaired. In addition, the Group tests the carrying
sell the asset; can demonstrate that the asset will generate future value of goodwill for impairment annually even if there is no
economic benefits; has resources available to complete the indication of impairment.
asset; and has the ability to measure reliably the expenditure
Factors that the Group considers when it reviews indications of
during development.
impairment include, but are not limited to, underperformance
Following initial recognition, intangible assets are carried at cost of the asset relative to its historical or projected future results,
less accumulated amortization and accumulated impairment losses. significant changes in the manner of using the asset or the strategy
Intangible assets are amortized over their useful lives, generally for the overall business, and significant negative industry or
three to ten years, using the straight-line method which is economic trends.
considered reflecting best the pattern in which the asset’s
Goodwill is allocated to the cash-generating units or groups of
future economic benefits are expected to be consumed. The
cash-generating units that are expected to benefit from the
amortization charges are presented within cost of sales, research
synergies of the related business combination and that reflect the
and development expenses and selling, general and administrative
lowest level at which goodwill is monitored for internal management
expenses in the consolidated income statement.
purposes. A cash-generating unit, as determined for the purposes
of the Group’s goodwill impairment testing, is the smallest group of

NOKIA IN 2017 139

Notes to consolidated financial statements continued

assets, including goodwill, generating cash inflows that are largely Financial assets
independent of the cash inflows from other assets or groups of The Group has classified its financial assets in the following
assets. The carrying value of a cash-generating unit includes its categories: available-for-sale investments, derivative and other
share of relevant corporate assets allocated to it on a reasonable current financial assets, loans receivable, accounts receivable,
and consistent basis. When the composition of one or more groups financial assets at fair value through profit or loss, and cash and cash
of cash generating units to which goodwill has been allocated is equivalents. Derivatives are described in the section on derivative
changed, the goodwill is reallocated based on the relative fair value financial instruments.
of the affected groups of cash generating units.
Available-for-sale investments
The Group conducts its impairment testing by determining the The Group invests a portion of the cash needed to cover the
recoverable amount for an asset or a cash-generating unit. The projected cash outflows of its ongoing business operations in
recoverable amount of an asset or a cash-generating unit is the highly liquid, interest-bearing investments and certain equity
higher of its fair value less costs of disposal and its value-in-use. instruments. The following investments are classified as available-
The recoverable amount is compared to the asset’s or cash- for-sale based on the purpose of the investment and the Group’s
generating unit’s carrying value. If the recoverable amount for the ongoing intentions:
asset or cash-generating unit is less than its carrying value, the asset
is considered impaired and is written down to its recoverable  Available-for-sale investments, liquid assets consist of highly
amount. Impairment losses are presented in other expenses, liquid, fixed-income and money-market investments with
or as a separate line item if significant, in the consolidated maturities at acquisition of more than three months, as well
income statement. as bank deposits with maturities or contractual call periods at
acquisition of more than three months.
Inventories
Inventories are stated at the lower of cost and net realizable value.  Investments in technology-related publicly quoted equity shares
Cost is determined using standard cost, which approximates actual or unlisted private equity shares and unlisted venture funds,
cost on a first-in first-out (“FIFO”) basis. Net realizable value is the classified in the consolidated statement of financial position
amount that can be realized from the sale of the inventory in the as non-current available-for-sale investments.
normal course of business after allowing for the costs of realization. Current fixed-income and money-market investments are fair valued
In addition to the cost of materials and direct labor, an appropriate by using quoted market rates, discounted cash flow analyses and
proportion of production overhead is included in the inventory other appropriate valuation models as of the reporting date.
values. An allowance is recorded for excess inventory and Investments in publicly quoted equity shares are measured at fair
obsolescence based on the lower of cost and net realizable value. value using exchange quoted bid prices. Other available-for-sale
Fair value measurement investments carried at fair value include holdings in unlisted shares.
A number of financial instruments are measured at fair value as of Fair value is estimated using a number of methods, including, but
each reporting date after initial recognition. Fair value is the price not limited to: the current market value of similar instruments; prices
that would be received to sell an asset or paid to transfer a liability established from a recent arm’s-length financing transaction of
in an orderly transaction between market participants at the target companies; and analysis of market prospects and operating
measurement date. The fair value of an asset or a liability is performance of target companies, taking into consideration public
measured using the assumptions that market participants would market comparable companies in similar industry sectors. The Group
use when pricing the asset or liability, assuming that market uses judgment in selecting the appropriate valuation methodology
participants act in their economic best interest by using quoted as well as underlying assumptions based on existing market practice
market rates, discounted cash flow analyses and other appropriate and conditions. Changes in these assumptions may cause the Group
valuation models. The Group uses valuation techniques that are to recognize impairments or losses in future periods.
appropriate in the circumstances and for which sufficient data is The remaining available-for-sale investments are carried at cost less
available to measure fair value, maximizing the use of relevant impairment. These are technology-related investments in private
observable inputs and minimizing the use of unobservable inputs. equity shares and unlisted venture funds for which fair value cannot
All assets and liabilities for which fair values are being measured or be measured reliably due to non-existent public markets or reliable
disclosed in the consolidated financial statements are categorized valuation methods.
within the fair value hierarchy, described as follows, based on the
lowest level input that is significant to the fair value measurement All purchases and sales of investments are recorded on the trade
as a whole: date, that is, when the Group commits to purchase or sell the asset.

Level —Quoted (unadjusted) market prices for exchange-traded Changes in the fair value of available-for-sale investments are
products in active markets for identical assets or liabilities; recognized in fair value and other reserves as part of other
comprehensive income, with the exception of interest calculated
Level —Valuation techniques for which significant inputs other using the effective interest method and foreign exchange gains
than quoted prices are directly or indirectly observable; and and losses on monetary available-for-sale investments recognized
Level —Valuation techniques for which significant inputs are directly in the consolidated income statement. Dividends on
unobservable. available-for-sale equity instruments are recognized in the
consolidated income statement when the Group’s right to receive
The Group categorizes assets and liabilities that are measured at fair payment is established. When the investment is disposed of, the
value on a recurring basis into an appropriate level of the fair value related accumulated fair value changes are released from other
hierarchy at the end of each reporting period. comprehensive income and recognized in the consolidated income
statement. The weighted average method is used to determine the
cost basis of publicly listed equities being disposed of. The FIFO
method is used to determine the cost basis of fixed-income
securities being disposed of. An impairment charge is recorded if the
carrying amount of an available-for-sale investment is greater than
the estimated fair value and there is objective evidence that the

140 NOKIA IN 2017

 Financial statements

asset is impaired including, but not limited to, counterparty default Financial liabilities
and other factors causing a reduction in value that can be considered The Group has classified its financial liabilities into the following
other than temporary. The cumulative net loss relating to the categories: derivative and other current financial liabilities,
investment is removed from equity and recognized in the compound financial instruments, loans payable, and accounts
consolidated income statement for the period. If, in a subsequent payable. Derivatives are described in the section on derivative
period, the fair value of the investment in a non-equity instrument financial instruments.
increases and the increase can be objectively related to an event
occurring after the loss was recognized, the loss is reversed and Compound financial instruments
the reversal is recognized in the consolidated income statement. Compound financial instruments have both a financial liability and an
equity component from the issuers’ perspective. The components
Investments at fair value through profit and loss, liquid assets are defined based on the terms of the financial instrument and
Certain highly liquid financial assets are designated at inception presented and measured separately according to their substance.
as investments at fair value through profit and loss, liquid assets. The financial liability component is initially recognized at fair value,
These investments must meet one of the following two criteria: the residual being allocated to the equity component. The allocation
the designation eliminates or significantly reduces an inconsistent remains the same for the life of the compound financial instrument.
treatment that would otherwise arise from measuring the assets The financial liability components of convertible bonds issued by the
or recognizing gains or losses on a different basis; or the assets Group are accounted for as loan payables.
are part of a group of financial assets, which are managed and their
performance evaluated on a fair value basis in accordance with Loans payable
a documented risk management or investment strategy. These Loans payable are recognized initially at fair value net of transaction
investments are initially recognized and subsequently remeasured costs. In subsequent periods, loans payable are presented at
at fair value. Fair value adjustments and realized gains and losses amortized cost using the effective interest method. Transaction
are recognized in the consolidated income statement. costs and loan interest are recognized in the consolidated income
statement as financial expenses over the life of the instrument.
Loans receivable
Loans receivable include loans to customers and suppliers and are Accounts payable
measured initially at fair value and subsequently at amortized cost Accounts payable are carried at invoiced amount which is considered
less impairment using the effective interest method. Loans are to be the fair value due to the short-term nature of the Group’s
subject to regular review as to their collectability and available accounts payable.
collateral. A valuation allowance is made if a loan is deemed not to be Derivative financial instruments
fully recoverable. The related cost is recognized in other expenses All derivatives are recognized initially at fair value on the date a
or financial expenses, depending on the nature of the receivable to derivative contract is entered into and subsequently remeasured at
reflect the shortfall between the carrying amount and the present fair value. The method of recognizing the resulting gain or loss varies
value of expected future cash flows. Interest income on loans according to whether the derivatives are designated and qualify
receivable is recognized in financial income and expenses in the under hedge accounting. Generally, the cash flows of a hedge are
consolidated income statement by applying the effective interest classified as cash flows from operating activities in the consolidated
rate. statement of cash flows as the underlying hedged items relate to the
Cash and cash equivalents Group’s operating activities. When a derivative contract is accounted
Cash and cash equivalents consist of cash at bank and in hand and for as a hedge of an identifiable position relating to financing or
available-for-sale investments, cash equivalents. Available-for-sale investing activities, the cash flows of the contract are classified
investments, cash equivalents consist of highly liquid, fixed-income in the same way as the cash flows of the position being hedged.
and money-market investments that are readily convertible Derivatives not designated in hedge accounting relationships
to known amounts of cash with maturities at acquisition of carried at fair value through profit and loss
three months or less, as well as bank deposits with maturities or Forward foreign exchange contracts are valued at market-forward
contractual call periods at acquisition of three months or less. exchange rates. Changes in fair value are measured by comparing
Due to the high credit quality and short-term nature of these these rates with the original contract-forward rate. Currency
investments, there is an insignificant risk of change in value. options are valued as of each reporting date by using the Garman
Investments in money-market funds that have a risk profile & Kohlhagen option valuation model. Changes in fair value are
consistent with the aforementioned criteria are also classified as recognized in the consolidated income statement.
cash equivalents.
Fair values of forward rate agreements, interest rate options, futures
Accounts receivable contracts and exchange-traded options are calculated based on
Accounts receivable include amounts invoiced to customers, quoted market rates as of each reporting date. Discounted cash flow
amounts where revenue recognition criteria have been fulfilled but analyses are used to value interest rate and cross-currency interest
the customers have not yet been invoiced, and amounts where the rate swaps. Changes in fair value are recognized in the consolidated
contractual rights to the cash flows have been confirmed but the income statement.
customers have not yet been invoiced. Billed accounts receivable
are carried at the amount invoiced to customers less allowances for For derivatives not designated under hedge accounting but
doubtful accounts. Allowances for doubtful accounts are based on hedging identifiable exposures such as anticipated foreign currency
a periodic review of all outstanding amounts, including an analysis denominated sales and purchases, the gains and losses are
of historical bad debt, customer concentrations, customer recognized in other income or expenses. The gains and losses
creditworthiness, past due amounts, current economic trends on all other derivatives not designated under hedge accounting are
and changes in customer payment terms. Impairment charges recognized in financial income and expenses in the consolidated
on receivables identified as uncollectible are included in other income statement.
operating expenses in the consolidated income statement.

NOKIA IN 2017 141

Notes to consolidated financial statements continued

Embedded derivatives, if any, are identified and monitored Cash flow hedges: hedging of cash flow variability on variable
by the Group and measured at fair value as of each reporting rate liabilities
date with changes in fair value recognized in the consolidated From time to time, the Group applies cash flow hedge accounting
income statement. for hedging cash flow variability on certain variable rate liabilities.
The effective portion of the gain or loss relating to interest rate
Hedge accounting swaps hedging variable rate borrowings is deferred in fair value and
The Group applies hedge accounting on certain forward foreign other reserves. The gain or loss related to the ineffective portion
exchange contracts, options or option strategies, and interest rate is recognized immediately in the consolidated income statement.
derivatives. Qualifying options and option strategies have zero net If hedging instruments are settled before the maturity date of the
premium or a net premium paid. For option structures, the critical related liability, hedge accounting is discontinued and all cumulative
terms of the bought and sold options are the same and the nominal gains and losses recycled gradually to the consolidated income
amount of the sold option component is not greater than that of statement when the hedged variable interest cash flows affect the
the bought option. consolidated income statement.
Cash flow hedges: hedging of forecast foreign currency Fair value hedges: hedging of foreign exchange exposure
denominated sales and purchases The Group applies fair value hedge accounting for foreign exchange
The Group applies hedge accounting for qualifying hedges. Qualifying risk with the objective to reduce the exposure to fluctuations in the
hedges are those properly documented cash flow hedges of foreign fair value of firm commitments due to changes in foreign exchange
exchange rate risk of future forecast foreign currency denominated rates. Changes in the fair value of derivatives designated and
sales and purchases that meet the requirements set out in IAS , qualifying as fair value hedges, together with any changes in the
Financial Instruments: Recognition and Measurement. The hedged fair value of the hedged firm commitments attributable to the
item must be highly probable and present an exposure to variations hedged risk, are recorded in financial income and expenses in
in cash flows that could ultimately affect profit or loss. The hedge the consolidated income statement.
must be highly effective, both prospectively and retrospectively.
Fair value hedges: hedging of interest rate exposure
For qualifying foreign exchange forwards, the change in fair value The Group applies fair value hedge accounting to reduce exposure
that reflects the change in spot exchange rates and, for qualifying to fair value fluctuations of interest-bearing liabilities due to changes
foreign exchange options or option strategies, the change in intrinsic in interest rates and foreign exchange rates. Changes in the fair
value are deferred in fair value and other reserves in shareholders’ value of derivatives designated and qualifying as fair value hedges,
equity to the extent that the hedge is effective. The ineffective together with any changes in the fair value of hedged liabilities
portion is recognized immediately in the consolidated income attributable to the hedged risk, are recognized in financial income
statement. Hedging costs, expressed either as the change in fair and expenses. If the hedged item no longer meets the criteria for
value that reflects the change in forward exchange rates less the hedge accounting, hedge accounting ceases and any fair value
change in spot exchange rates for forward foreign exchange adjustments made to the carrying amount of the hedged item
contracts, or as changes in the time value for options or options while the hedge was effective are recognized in financial income
strategies, are recognized in other income or expenses in the and expenses based on the effective interest method.
consolidated income statement.
Hedges of net investments in foreign operations
Accumulated changes in fair value from qualifying hedges are The Group applies hedge accounting for its foreign currency
released from fair value and other reserves into the consolidated hedging on net investments. Qualifying hedges are those properly
income statement as adjustments to other operating income and documented hedges of foreign exchange rate risk of foreign
expenses when the hedged cash flow affects the consolidated currency denominated net investments that are effective both
income statement. Forecast foreign currency sales and purchases prospectively and retrospectively.
affect the consolidated income statement at various dates up to
approximately one year from the reporting date. If the forecasted The change in fair value that reflects the change in spot exchange
transaction is no longer expected to take place, all deferred gains rates for qualifying foreign exchange forwards, and the change
or losses are released immediately into the consolidated income in intrinsic value for qualifying foreign exchange options, are
statement. If the hedged item ceases to be highly probable but is deferred in translation differences in the consolidated statement
still expected to take place, accumulated gains and losses remain in of shareholder’s equity. The change in fair value that reflects the
fair value and other reserves until the hedged cash flow affects the change in forward exchange rates less the change in spot exchange
consolidated income statement. rates for forwards, and changes in time value for options are
recognized in financial income and expenses. If a foreign currency
Cash flow hedges: hedging of foreign currency risk of highly denominated loan is used as a hedge, all foreign exchange gains
probable business acquisitions and other transactions and losses arising from the transaction are recognized in translation
From time to time, the Group hedges cash flow variability caused differences. The ineffective portion is recognized immediately
by foreign currency risk inherent in highly probable business in the consolidated income statement.
acquisitions and other future transactions that result in the
recognition of non-financial assets. When those non-financial assets Accumulated changes in fair value from qualifying hedges are
are recognized in the consolidated statement of financial position, released from translation differences on the disposal of all or part
the gains and losses previously deferred in fair value and other of a foreign Group company by sale, liquidation, repayment of share
reserves are transferred to the initial acquisition cost of the asset. capital or abandonment. The cumulative amount or proportionate
The deferred amounts are ultimately recognized in the consolidated share of changes in the fair value of qualifying hedges deferred in
income statement as a result of goodwill assessments for business translation differences is recognized as income or expense when
acquisitions and through depreciation or amortization for other the gain or loss on disposal is recognized.
assets. The application of hedge accounting is conditional on the
forecast transaction being highly probable and the hedge being
highly effective, prospectively and retrospectively.

142 NOKIA IN 2017

 Financial statements

Provisions New and amended standards and interpretations adopted

Provisions are recognized when the Group has a present legal or On January , , the Group adopted amendments to IAS ,
constructive obligation as a result of past events, it is probable that Statement of Cash Flows (“IAS ”) and IAS , Income Taxes
an outflow of resources will be required to settle the obligation and (“IAS ”). The amendments to IAS  are part of the IASB’s Disclosure
a reliable estimate of the amount can be made. When the Group Initiative and help users of financial statements to better understand
expects a provision to be reimbursed, the reimbursement is changes in an entity’s debt arising from financing activities, including
recognized as an asset only when the reimbursement is virtually both changes arising from cash flows and non-cash changes. The
certain. The Group assesses the adequacy of its existing provisions amendments to IAS  relate to potential restrictions of tax laws
and adjusts the amounts as necessary based on actual experience to sources of taxable profits against which an entity may make
and changes in facts and circumstances as of each reporting date. deductions on the reversal of deductible temporary difference,
as well as to provide additional guidance on how an entity should
Restructuring provisions determine future taxable profits. The amendments did not have a
The Group provides for the estimated cost to restructure when a material impact on the Group’s consolidated financial statements.
detailed formal plan of restructuring has been completed, approved
by management, and announced. Restructuring costs consist Standards issued but not yet effective
primarily of personnel restructuring charges. The other main The Group will adopt the following new and revised standards,
components are costs associated with exiting real estate locations, amendments and interpretations to existing standards issued by
and costs of terminating certain other contracts directly linked to the IASB that are expected to be relevant to its operations and
the restructuring. financial position when they become effective and are endorsed
by the EU. Other revisions, amendments and interpretations to
Warranty provisions existing standards issued by the IASB that are not yet effective,
The Group provides for the estimated liability to repair or replace except what has been described below, are not expected to have
products under standard warranty at the time revenue is recognized. a material impact on the consolidated financial statements of the
The provision is an estimate based on historical experience of the Group when adopted.
level of repairs and replacements.
The Group has not early adopted any standard, interpretation
Litigation provisions or amendment that has been issued but is not yet effective.
The Group provides for the estimated future settlements related
to litigation based on the probable outcome of potential claims. IFRS  Financial Instruments
IFRS , Financial Instruments (“IFRS ”), was issued in July 
Environmental provisions and it replaces IAS , Financial Instruments: Recognition and
The Group provides for estimated costs of environmental Measurement (“IAS ”). IFRS  addresses the classification and
remediation relating to soil, groundwater, surface water and measurement of financial assets and liabilities, introduces a new
sediment contamination when the Group becomes obliged, impairment model and a new hedge accounting model. The Group
legally or constructively, to rectify the environmental damage, will adopt the standard on the effective date of January , .
or to perform restorative work. On adoption, the Group does not restate comparative periods but
Project loss provisions will present the cumulative effect of adopting IFRS  as a transition
The Group provides for onerous contracts based on the lower of adjustment to the opening balance of retained earnings as of
the expected cost of fulfilling the contract and the expected cost of January , .
terminating the contract. An onerous contract is a contract in which Classification and measurement
the unavoidable costs of meeting the obligations under the contract Based on assessment of the Group’s business models for holding
exceed the economic benefits expected to be received under it. financial assets, the Group has identified the following to be the
Divestment-related provisions most significant impacts in the classification and measurement of
The Group provides for indemnifications it is required to make financial assets:
to the buyers of its disposed businesses.  The Group’s investments in venture funds that are under IAS 39
Material liability provisions classified as non-current available-for-sale investments will be
The Group recognizes the estimated liability for non-cancellable classified at fair value through profit or loss with value changes
purchase commitments for inventory in excess of forecasted included to other operating income and expenses. Upon initial
requirements at each reporting date. application of the standard, the accumulated net positive fair
value changes of approximately EUR 200 million, formerly
Other provisions recorded to other comprehensive income, will be presented as an
The Group provides for other legal and constructive obligations adjustment to opening balance of retained earnings. There will be
based on the expected cost of executing any such commitments. no change in the valuation nor carrying amount of these assets.
Treasury shares  Certain restricted bank deposits currently classified as non-
The Group recognizes its own equity instruments that are acquired current available-for-sale investments under IAS 39 will be
(“treasury shares”) as a reduction of equity at cost of acquisition. classified as amortized cost. There will be no change in the
When cancelled, the acquisition cost of treasury shares is recognized carrying amount of these deposits.
in retained earnings.
 Trade receivables are under IAS 39 carried at the invoiced amount
Dividends less allowances for doubtful accounts. The Group’s business
Dividends proposed by the Board of Directors are recognized in the model for managing trade receivables is both to collect
consolidated financial statements when they have been approved contractual cash flows and to sell assets and hence trade
by the shareholders at the Annual General Meeting. receivables will be measured at fair value through other
comprehensive income. The initial fair value adjustment,
which will be presented in other comprehensive income as a
transition adjustment upon initial application of the standard,
is not material.

NOKIA IN 2017 143

Notes to consolidated financial statements continued

 The Group’s business model for managing customer finance Arrangements with customers
assets is both to collect contractual cash flows and to sell assets Management considered the definition of a contract in accordance
and hence customer finance assets will be measured at fair with the new standard and concluded that only legally binding
value through other comprehensive income. The initial fair value commitments should be considered in evaluating the accounting
adjustment, which will be presented in other comprehensive for arrangements with customers. As such, frame agreements will
income as a transition adjustment upon initial application of be accounted for based on purchase orders, initial discounts and
the standard, is not material. other material rights. Previously, a broader contract definition was
permitted for accounting purposes.
 The Group has assessed the investments currently classified as
current available-for-sale, liquid assets, and will classify certain Identification of performance obligations and allocation of
investment funds to be measured at fair value through profit transaction price
or loss at the adoption of the new standard. The rest of these In accordance with IFRS , the identification of performance
investments satisfy the conditions for classification at fair value obligations and allocation of transaction price is based on a fair value
through other comprehensive income. model. The Group’s application of previous accounting standards is
consistent with IFRS .
 Certain term deposits used as collaterals for derivative
transactions that are under IAS 39 classified as cash equivalents Transfer of control of hardware
will be classified to current financial investments based on IFRS 9 The point at which control transfers to the customer under IFRS 
business model assessment. is consistent with the Group’s assessed point of transfer of the
significant risks and rewards of ownership to the customer under
Impairment model the previous standard.
The Group has assessed the impact of the new impairment model.
As the credit quality of the Group’s fixed income and money market Software revenue
investments is high, there will be no significant impact from the new In accordance with IFRS , revenue related to software
model. There will be a limited impact to loans extended to the arrangements will be recognized at points in time. Under previous
Group’s customers as the new model results in an earlier recognition standards, certain software revenue arrangements were recorded as
of credit losses. revenue over the terms of the arrangements where customers had
access to a portfolio of software solutions. After the adoption of
Hedge accounting model IFRS , this change may result in larger fluctuations in revenue
The new hedge accounting model will align the accounting for between quarters than under the previous standard.
hedging instruments more closely with the Group’s risk management
practices. The Group’s foreign exchange risk management policy and Patent license agreements in Nokia Technologies
hedge accounting model have been aligned with the requirements The Group’s current revenue recognition principles for license
from IFRS  and hence there is no impact on the accounting for its agreements, which contain future commitments to perform, are in
hedging relationships. For cash flow hedge accounting, the Group line with IFRS  and continue to be recorded over time. Further, the
has elected to defer cost of hedging in other comprehensive income Group has determined that, upon transition to IFRS , one specific
until the hedged item impacts profit and loss. For net investment license agreement is a completed contract as it has no such future
hedge accounting, the Group has elected to defer cost of hedging in commitments (refer to Application of transition guidance below).
other comprehensive income and amortize it over the duration of
the hedge. The initial adjustment related to treatment of cost of Application of transition guidance
hedging, that is recorded between other comprehensive income and In April , the Group entered into an agreement to license
retained earnings as a transition adjustment upon initial application certain technology patents and patent applications owned
of the standard, is not material. by the Group on the effective date of that agreement, on a
non-exclusive basis, to a licensee, for a period of  years (the
Disclosure “License Agreement”). Contemporaneously and under the terms
The new standard also introduces expanded disclosure requirements of the License Agreement, the Group issued to the licensee an
and changes in presentation that are expected to change the nature option to extend the technology patent license for remaining life
and extent of the Group’s disclosures about its financial instruments, of the licensed patents. The Group received all cash consideration
particularly in the year of the adoption of the new standard. The due for the sale of the -year license and option upon closing
financial effect of the IFRS  transition will be presented in the  of the License Agreement. Management has determined that,
annual report. upon transition to IFRS , the License Agreement is a completed
contract. As such, in accordance with the transition requirements
IFRS  Revenue from Contracts with Customers of the standard, the Group continues to apply its prior revenue
IFRS , Revenue from Contracts with Customers, (“IFRS ”) was accounting policies, based on IAS , Revenue, and related
issued in May  and establishes a new five-step model that interpretations, to the License Agreement. Under those
will apply to revenue arising from contracts with customers. Under policies, the Group is recognizing revenue over the term of
IFRS , revenue is recognized to reflect the transfer of promised the License Agreement.
goods and services to customers for amounts that reflect the
consideration to which an entity expects to be entitled in exchange As of  December , the balance of deferred revenue related
for those goods and services. The Group will adopt the standard on to the License Agreement of EUR  million, recognized in advance
the effective date of January , . The new standard replaces IAS payments and deferred revenue in the consolidated statement
, Revenue, and IAS , Construction contracts. The Group adopted of financial position, is expected to be recognized as revenue
the standard by applying the modified retrospective method and will through .
present the cumulative effect of adopting IFRS  as an adjustment
to the opening balance of retained earnings as of January , . Opening balance sheet adjustment
Adoption of the standard will result in a net decrease of retained
Management has analyzed the impact of the adoption of IFRS  earnings of approximately EUR  million in the opening balance
and concluded that the new standard will not have a material impact sheet of .
on the Group’s consolidated financial statements. The procedures
performed by management focused on a review of existing contracts
through December , , focusing on the following areas:

144 NOKIA IN 2017

 Financial statements

Disclosure Estimation and judgment are required in determining the fair value
The new standard introduces expanded disclosure requirements of the acquisition, including the discount rate, the terminal growth
which will impact the presentation of the statement of financial rate, the number of years on which to base the cash flow projections,
position by providing information on customer-related contract and the assumptions and estimates used to determine the cash
assets and liabilities. The standard requires presentation of the inflows and outflows. The discount rate reflects current assessments
net position of the Group’s contract-related balances, excluding of the time value of money, relevant market risk premiums, and
invoiced receivables, as of the reporting date, on a contract-by- industry comparisons. Risk premiums reflect risks and uncertainties
contract basis. for which the future cash flow estimates have not been adjusted.
Terminal values are based on the expected life of products and
IFRS  Leases forecasted life cycle, and forecasted cash flows over that period.
IFRS , Leases, (“IFRS ”) issued in January , sets out the The assumptions are based on information available at the date of
requirements for the recognition, measurement, presentation and acquisition; actual results may differ materially from the forecast as
disclosure of leases. IFRS  provides a single lessee accounting more information becomes available. Refer to Note , Acquisitions.
model, requiring lessees to recognize right-of-use assets and lease
liabilities for substantially all leases in the consolidated statement Revenue recognition
of financial position. The Group will adopt IFRS  on the effective The Group enters into transactions involving multiple components
date of January ,  using the cumulative catch-up transition consisting of any combination of hardware, services, software and
method, whereby the cumulative effect of initially applying IFRS  intellectual property rights where the Group identifies the separate
will be recognized as an adjustment to the opening balance of components and estimates their relative fair values, considering the
retained earnings on January ,  and comparative information economic substance of the entire arrangement. The fair value of
will not be restated. The Group is currently assessing the full impact each component is determined by taking into consideration factors
of IFRS  but the initial expectation is that the main impact from such as the price of the component when sold separately and the
adoption relates to the recognition and disclosure of the Group’s component cost plus a reasonable margin when price references
real estate-related operating leases. In the consolidated financial are not available. The determination of the fair value and allocation
statements for the year ended December ,  the Group thereof to each separately identifiable component requires the use
disclosed non-cancellable operating lease commitments of of estimates and judgment which may have a significant impact on
EUR  million. Refer to Note , Commitments and contingencies. the timing and amount of revenue recognized. In some multiple
element licensing transactions, the Group applies the residual
3. Use of estimates and critical method in the absence of reference information.
accounting judgments Net sales includes revenue from all licensing negotiations, litigations
The preparation of consolidated financial statements requires use of and arbitrations to the extent that the criteria for revenue
management judgment in electing and applying accounting policies recognition have been met. The final outcome may differ from the
as well as in making estimates that involve assumptions about the current estimate. Refer to Note , Revenue recognition.
future. These judgments, estimates and assumptions may have a Pension and other post-employment benefit obligations
significant effect on the consolidated financial statements. and expenses
The estimates used in determining the carrying amounts of The determination of pension and other post-employment
assets and liabilities subject to estimation uncertainty are based benefit obligations and expenses for defined benefit plans is
on historical experience, expected outcomes and various other dependent on a number of estimates and assumptions, including
assumptions that were available when these consolidated financial the discount rate, future mortality rate, annual rate of increase
statements were prepared, and they are believed to be reasonable in future compensation levels, and healthcare costs trend rates
under the circumstances. The estimates are revised if changes in and usage of services in the United States where the majority
circumstances occur, or as a result of new information or more of our post-employment healthcare plans are maintained.
experience. As estimates inherently contain a varying degree of A portion of plan assets is invested in debt and equity securities,
uncertainty, actual outcomes may differ, resulting in additional which are subject to market volatility. Changes in assumptions
charges or credits to the consolidated income statement. and actuarial estimates may materially affect the benefit
obligation, future expense and future cash flow. Based on these
Management considers that the estimates, assumptions and estimates and assumptions, defined benefit obligations amount
judgments about the following accounting policies represent to EUR   million (EUR   million in ) and the
the most significant areas of estimation uncertainty and fair value of plan assets amounts to EUR   million
critical judgment that may have an impact on the consolidated (EUR   million in ). Refer to Note , Pensions
financial statements. and other post-employment benefits.
Business combinations Income taxes
The Group applies the acquisition method to account for The Group is subject to income taxes in the jurisdictions in
acquisitions of separate entities or businesses. The determination which it operates. Judgment is required in determining current
of the fair value and allocation thereof to each separately identifiable tax expense, uncertain tax positions, deferred tax assets and
asset acquired and liability assumed as well as the determination deferred tax liabilities; and the extent to which deferred tax assets
of the acquisition date, when the valuation and allocation is to be can be recognized.
conducted require estimation and judgment.
Estimates related to the recoverability of deferred tax assets are
based on forecasted future taxable income and tax planning
strategies. Based on these estimates and assumptions, the Group
has EUR   million (EUR   million in ) of temporary
differences, tax losses carry forward and tax credits for which no
deferred tax assets are recognized due to uncertainty of utilization.
The majority of the unrecognized deferred tax assets relate to
France. Refer to Note , Income taxes.

NOKIA IN 2017 145

Notes to consolidated financial statements continued

The utilization of deferred tax assets is dependent on future taxable Allowances for excess and obsolete inventory
profit in excess of the profit arising from the reversal of existing Allowances for excess and obsolete inventory are recognized for
taxable temporary differences. The recognition of deferred tax excess amounts, obsolescence and declines in net realizable value
assets is based on the assessment of whether it is more likely than below cost. Estimation and judgment are required in determining
not that sufficient taxable profit will be available in the future to the value of the allowance for excess and obsolete inventory at
utilize the reversal of deductible temporary differences, unused tax each reporting date. Management specifically analyzes estimates
losses and unused tax credits before the unused tax losses and of future demand for products when determining allowances for
unused tax credits expire. Recognition of deferred tax assets excess and obsolete inventory. Changes in these estimates could
involves judgment regarding the future financial performance of the result in revisions to the valuation of inventory in future periods.
particular legal entity or tax group that has recognized the deferred Based on these estimates and assumptions, allowances for excess
tax asset. and obsolete inventory are EUR  million (EUR  million in
), representing % of inventory (% in ). Refer to
Liabilities for uncertain tax positions are recorded based on Note , Inventories.
estimates and assumptions of the amount and likelihood of outflow
of economic resources when it is more likely than not that certain Fair value of derivatives and other financial instruments
positions may not be fully sustained upon review by local tax The fair value of derivatives and other financial instruments
authorities. Currently, the Group has ongoing tax investigations that are not traded in an active market such as unlisted equities is
in multiple jurisdictions, including India and Canada. Due to the determined using valuation techniques. Estimation and judgment
inherently uncertain nature of tax investigations, the ultimate are required in selecting an appropriate valuation technique and in
outcome or actual cost of settlement may vary materially from determining the underlying assumptions. Where quoted market
estimates. Refer to Note , Income taxes. prices are not available for unlisted shares, the fair value is based on
a number of factors including, but not limited to, the current market
Goodwill recoverability value of similar instruments; prices established from recent arm’s-
The recoverable amounts of the groups of CGUs and the CGU length transactions; and/or analysis of market prospects and
were based on fair value less costs of disposal that was determined operating performance of target companies with reference to public
using market participant assumptions based on a discounted cash market comparable companies in similar industry sectors. Changes
flow calculation. The cash flow projections used in calculating the in these estimates could result in impairments or losses in future
recoverable amounts were based on financial plans approved by periods. Based on these estimates and assumptions, the fair value
management covering an explicit forecast period of three years. of derivatives and other financial assets that are not traded in an
Seven additional years of cash flow projections subsequent to the active market, using non-observable data (level  of the fair value
explicit forecast period reflect a gradual progression towards the hierarchy), is EUR  million (EUR  million in ), representing
steady state cash flow projections modeled in the terminal year. % of total financial assets measured at fair value on a recurring
Estimation and judgment are required in determining the basis (% of total net financial assets in ). Level  financial
components of the recoverable amount calculation, including the liabilities include conditional obligation to China Huaxin as part
discount rate, the terminal growth rate, estimated revenue growth of the Nokia Shanghai Bell definitive agreements where China Huaxin
rates, gross margin and operating margin. The discount rates reflect obtained the right to fully transfer its ownership interest in Nokia
current assessments of the time value of money and relevant Shanghai Bell to the Group in exchange for a future cash settlement.
market risk premiums reflecting risks and uncertainties for which the The calculated net present value of the expected future cash
future cash flow estimates have not been adjusted. The terminal settlement is EUR  million, representing % of total financial
growth rate assumptions reflect long-term average growth rates for liabilities measured at fair value on recurring basis. Refer to Note ,
the industry and economies in which the groups of CGUs and the Fair value of financial instruments.
CGU operate.
Provisions
The results of the impairment testing indicate adequate headroom Provisions are recognized when the Group has a present legal or
for each group of CGUs. Total goodwill amounts to EUR   million constructive obligation as a result of past events, it is probable
as of December ,  (EUR   million in ). Refer to that an outflow of resources will be required to settle the obligation,
Note , Intangible assets and Note , Impairment. and a reliable estimate of the amount can be made. At times,
Allowances for doubtful accounts judgment is required in determining whether the Group has a
Allowances for doubtful accounts are recognized for estimated present obligation; estimation is required in determining the value
losses resulting from customers’ inability to meet payment of the obligation. Whilst provisions are based on the best estimate
obligations. Estimation and judgment are required in determining of unavoidable costs, management may be required to make a
the value of allowances for doubtful accounts at each reporting date. number of assumptions surrounding the amount and likelihood of
Management specifically analyzes accounts receivable and historical outflow of economic resources, and the timing of payment. Changes
bad debt; customer concentrations; customer creditworthiness; in estimates of timing or amounts of costs to be incurred may
past due balances; current economic trends; and changes in become necessary as time passes and/or more accurate information
customer payment terms when determining allowances for doubtful becomes available. Based on these estimates and assumptions,
accounts. Additional allowances may be required in future periods provisions amount to EUR   million (EUR   million in ).
if financial positions of customers deteriorate, reducing their Refer to Note , Provisions.
ability to meet payment obligations. Based on these estimates and Legal contingencies
assumptions, allowances for doubtful accounts are EUR  million Legal proceedings covering a wide range of matters are pending or
(EUR  million in ), representing % of accounts receivable threatened in various jurisdictions. Provisions are recognized for
(% in ). Refer to Note , Allowances for doubtful accounts. pending litigation when it is apparent that an unfavorable outcome
is probable and a best estimate of unavoidable costs can be
reasonably estimated. Due to the inherently uncertain nature of
litigation, the ultimate outcome or actual cost of settlement may
vary materially from estimates. Refer to Note , Provisions.

146 NOKIA IN 2017

 Financial statements

4. Segment information Segment descriptions

Ultra Broadband Networks
The Group has two businesses: Nokia’s Networks business and Nokia Ultra Broadband Networks comprises Mobile Networks and Fixed
Technologies, and four reportable segments for financial reporting Networks operating segments.
purposes: () Ultra Broadband Networks, () Global Services and
() IP Networks and Applications within Nokia’s Networks business; The Mobile Networks operating segment offers an industry-leading
and () Nokia Technologies. Segment-level information for Group portfolio of end-to-end mobile networking solutions comprising
Common and Other is also presented. hardware and software for communications service providers,
enterprises and related markets/verticals, such as public safety
The Group has aggregated Mobile Networks and Fixed Networks and Internet of Things (“IoT”).
operating segments to one reportable segment, Ultra Broadband
Networks; and IP/Optical Networks and Nokia Software() operating The Fixed Networks operating segment provides copper and fiber
segments to one reportable segment, IP Networks and Applications. access products, solutions and services. The portfolio allows for a
The aggregated operating segments have similar economic customized combination of technologies that brings fiber to the
characteristics, such as long-term margins; have similar products, most economical point for the customer.
production processes, distribution methods and customers; and
Global Services
operate in a similar regulatory environment.
Global Services operating segment provides a wide range of
The Group adopted its current operational and reporting structure professional services with multi-vendor capabilities, covering
on April , . Previously the Group had three reportable network planning and optimization, systems integration as well
segments for financial reporting purposes: Ultra Broadband as company-wide managed services. It also provides network
Networks and IP/Networks and Applications within Nokia's Networks implementation and care services for mobile networks, using
business, and Nokia Technologies. Ultra Broadband Networks was the strength of its global service delivery for quality, speed
comprised of two aggregated operating segments: Mobile Networks and efficiency.
and Fixed Networks, and IP Networks and Applications was comprised
IP Networks and Applications
of two aggregated operating segments: IP/Optical Networks and
IP Networks and Applications comprises IP/Optical Networks and
Nokia Software. On March , , the Group announced changes
Nokia Software operating segments.
in its organizational structure which included the separation of the
Group’s former Mobile Networks operating segment into two distinct The IP/Optical Networks operating segment provides the key
operating segments: one focused on products and solutions, called IP routing and optical transport systems, software and services
Mobile Networks, and the other on services, called Global Services. to build high capacity network infrastructure for the internet and
The Global Services operating segment is comprised of the services global connectivity.
that resided within the previous Mobile Networks operating segment,
including company-wide managed services. Global Services does not The Nokia Software operating segment offers software solutions
include the services of Fixed Networks, IP/Optical Networks and spanning customer experience management, network operations
Nokia Software, which continue to reside within the respective and management, communications and collaboration, policy and
operating segments. charging, as well as Cloud, IoT, security, and analytics platforms
that enable digital services providers and enterprises to
The President and CEO is the chief operating decision maker and accelerate innovation, monetize services, and optimize their
monitors the operating results of operating and reportable customer experience.
segments for the purpose of making decisions about resource
allocation and performance assessment. Key financial performance Nokia Technologies
measures of the segments include primarily net sales and operating The Nokia Technologies operating segment has two main objectives:
profit. The evaluation of segment performance and allocation of to drive growth and renewal in its existing patent licensing business;
resources is based on segment operating profit(). and to build new businesses based on breakthrough innovation in
key technologies and products, in the areas of Digital Media and
Accounting policies of the segments are the same as those Digital Health. The majority of net sales and related costs and
described in Note , Significant accounting policies. Inter-segment expenses attributable to licensing and patenting the separate patent
revenues and transfers are accounted for as if the revenues were portfolios of Nokia Technologies, Nokia’s Networks business, and
to third parties, that is, at current market prices. Certain costs and Nokia Bell Labs are recorded in Nokia Technologies. Each reportable
revenue adjustments are not allocated to the segments(). segment continues to separately record its own research and
development expenses.
No single customer represents % or more of revenues.
Group Common and Other
Group Common and Other includes Alcatel-Lucent Submarine
Networks and Radio Frequency Systems, both of which are being
managed as separate entities. In addition, Group Common and
Other includes Nokia Bell Labs’ operating expenses, as well as certain
corporate-level and centrally managed operating expenses.

(1) Applications & Analytics operating segment was renamed as Nokia Software on February 1, 2018.
(2) Segment results exclude costs related to the acquisition of Alcatel Lucent and related integration, goodwill impairment charges, intangible asset amortization and other purchase price fair
value adjustments, restructuring and associated charges and certain other items.

NOKIA IN 2017 147

Notes to consolidated financial statements continued

Segment information
Nokia's
Ultra IP Networks Networks Group
Broadband Global and Business Nokia Common Segment Unallocated
EURm Networks(1) Services Applications(2) Total(3) Technologies and Other Eliminations total items(4) Total
Continuing operations

Net sales to external customers 8 970 5 810 5 743 20 523 1 639 1 060 – 23 222 (75) 23 147
Net sales to other segments – – – – 15 54 (69) – – –
Depreciation and amortization (258) (80) (160) (498) (12) (48) – () (1 033) ( )
Impairment charges – – – – – (11) – () (199) ()
Operating profit/(loss) 781 411 519 1 711 1 124 (248) – 2 587 (2 571) 16
Share of results of associated
companies and joint ventures 21 – – 21 (10) – – 11 – 11

Net sales to external customers 9 757 6 036 6 036 21 829 1 038 1 105 – 23 972 (331) 23 641
Net sales to other segments 1 – – 1 15 37 (53) – – –
Depreciation and amortization (270) (70) (160) (500) (9) (43) – () (1 042) ( )
Impairment charges (9) – – (9) – (8) – () – ()
Operating profit/(loss) 922 406 615 1 943 579 (350) – 2 172 (3 272) ( )
Share of results of associated
companies and joint ventures 18 – – 18 – – – 18 – 18

Net sales to external customers 5 333 4 887 1 328 11 548 1 012 – – 12 560 – 12 560
Net sales to other segments – – – – 15 – (15) – – –
Depreciation and amortization (112) (46) (35) (193) (6) (8) – () (79) ()
Impairment charges – – – – – (11) – () – ()
Operating profit/(loss) 492 719 138 1 349 698 (89) – 1 958 (261) 1 697
Share of results of associated
companies and joint ventures 29 – – 29 – – – 29 – 29
(1) Includes Mobile Networks net sales of EUR 6 895 million (EUR 7 357 million in 2016 and EUR 5 197 million in 2015) and Fixed Networks net sales of EUR 2 075 million (EUR 2 401 million in 2016 and
EUR 136 million in 2015).
(2) Includes IP Routing net sales of EUR 2 694 million (EUR 2 941 million in 2016 and EUR 515 million in 2015), Optical Networks net sales of EUR 1 499 million (EUR 1 564 million in 2016) and Nokia Software
net sales of EUR 1 550 million (EUR 1 531 million in 2016 and EUR 813 million in 2015).
(3) Includes total services net sales of EUR 8 221 million (EUR 8 531 million in 2016 and EUR 5 424 million in 2015) which consists of all the services sales of Nokia’s Networks business, including Global
Services of EUR 5 810 million (EUR 6 036 million in 2016 and EUR 4 887 million in 2015) and the services of Fixed Networks, IP/Optical Networks and Nokia Software.
(4) Excludes costs related to the acquisition of Alcatel Lucent and related integration, goodwill impairment charges, intangible asset amortization and other purchase price fair value adjustments,
restructuring and associated charges and certain other items.

Reconciliation of total segment operating profit to total operating profit/(loss)

EURm 2017 2016 2015
Total segment operating profit 2 587 2 172 1 958
Amortization and depreciation of acquired intangible assets and property,
plant and equipment (1 033) (1 026) (79)
Restructuring and associated charges (579) (774) (123)
Product portfolio strategy costs (536) (348) –
Transaction and related costs, including integration costs relating to the
acquisition of Alcatel Lucent (206) (295) (99)
Impairment of intangible assets (173) – –
Release of acquisition-related fair value adjustments to deferred revenue
and inventory (55) (840) –
Other 11 11 40
Total operating profit/(loss) 16 ( ) 1 697

148 NOKIA IN 2017

 Financial statements

Net sales to external customers by geographic location of customer

EURm 2017 2016 2015
Finland(1) 1 698 1 138 1 100
United States 5 991 6 639 1 498
China 2 082 2 248 1 329
India 1 455 1 288 1 098
France 1 295 1 055 207
Japan 759 631 892
Great Britain 637 718 394
Germany 523 568 312
Italy 514 519 355
Saudi Arabia 499 566 380
Other 7 694 8 271 4 995
Total 23 147 23 641 12 560
(1) All Nokia Technologies IPR and licensing net sales are allocated to Finland.

Non-current assets by geographic location(1)

EURm 2017 2016
Finland 1 437 726
United States 6 132 7 946
France 1 949 2 369
China 377 458
India 125 130
Other 1 052 1 312
Total 11 072 12 941
(1) Consists of goodwill and other intangible assets and property, plant and equipment.

5. Acquisitions
The Group completed the acquisitions of two businesses in  and five businesses in :
Company/business Description
2017
Deepfield Networks Inc. Deepfield Networks Inc. is a United States-based leader in real-time analytics for Internet Protocol
(“IP”) network performance management and security. The Group acquired % ownership
interest on January , . Goodwill was allocated to IP/Optical Networks operating segment.
Comptel Corporation Comptel Corporation is a Finland-based telecommunications software company. The Group
acquired .% of the share capital and voting rights as part of the tender offer on March ,
. The Group acquired % ownership interest on June , . Goodwill was allocated
to Nokia Software operating segment.
2016
Alcatel Lucent SA Alcatel Lucent is a global leader in Internet Protocol (“IP”) networking, ultra-broadband access and
Cloud applications. The Group obtained control on January ,  and completed the acquisition
of % of the share capital and voting rights on November , .
Nakina Systems Inc. Nakina Systems Inc. is a Canadian security and operational systems software company. The Group
acquired the business through an asset transaction on March , . Goodwill was allocated to
Nokia Software operating segment.
Withings S.A. Withings S.A. is a provider of digital health products and services. The Group acquired %
ownership interest on May , . Goodwill was allocated to Nokia Technologies operating
segment.
Gainspeed, Inc. Gainspeed is a United States-based start-up specializing in Distributed Access Architecture (“DDA”)
solutions for the cable industry through its Virtual Converged Cable Access Platform (“CCAP”)
product line. The Group acquired % ownership interest on July , . Goodwill was
allocated to Fixed Networks operating segment.
ETA Devices, Inc. ETA Devices is a United States-based start-up specializing in power amplifier efficiency solutions
for base stations, access points and devices. The Group acquired % ownership interest on
October , . Goodwill was allocated to Mobile Networks operating segment.

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Notes to consolidated financial statements continued

Information on the Alcatel Lucent acquisition is presented below. All other acquisitions completed by the Group in  and  are
individually immaterial to the consolidated financial statements. Goodwill arising from these acquisitions is attributable to future derivations
of the acquired technology, future customers, synergies and assembled workforce, and was allocated to cash-generating units or groups of
cash-generating units expected to benefit from the synergies of the combination. Refer to Note , Impairment. The majority of the goodwill
acquired from these acquisitions is not expected to be deductible for tax purposes. The Group also recognised intangible assets from these
acquisitions related to acquired customer relationships and technology assets. As of each respective acquisition date, the total consideration
paid, aggregate fair values of intangible assets, other net assets acquired and resulting goodwill for the individually immaterial acquisitions
are as follows:
EURm 2017 2016
Other intangible assets 169 70
Other net assets 67 16
Total identifiable net assets 236 86
Goodwill 162 274
Total purchase consideration 398 360

Alcatel Lucent business combination

Acquisition of Alcatel Lucent Securities
On April , , the Group and Alcatel Lucent announced their intention to combine through a public exchange offer (“exchange offer”)
in France and the United States. The Group obtained control of Alcatel Lucent on January ,  when the interim results of the successful
initial exchange offer were announced by the French stock market authority, Autorité des Marchés Financiers (“AMF”). On January , ,
as required by the AMF General Regulation, the Group reopened its exchange offer in France and the United States for the outstanding
Alcatel Lucent ordinary shares, Alcatel Lucent American Depositary Shares (“ALU ADS”) and OCEANE convertible bonds (the “OCEANEs”,
collectively “Alcatel Lucent Securities”) not tendered during the initial exchange offer period. The reopened exchange offer closed on
February , . The Group has determined that the initial and the reopened exchange offers are linked transactions that are considered
together as a single arrangement, given that the reopened exchange offer is required by the AMF General Regulation and is based on the
same terms and conditions as the initial exchange offer. Following the initial and reopened exchange offers, the Group held .% of the
share capital, and at least .% of the voting rights of Alcatel Lucent.
Subsequent to the exchange offers, a series of transactions were carried out to acquire the remaining outstanding equity interests in Alcatel
Lucent. As a result, the Group held .% of the share capital and .% of the voting rights in Alcatel Lucent, corresponding to .%
of the Alcatel Lucent shares on a fully diluted basis.
On September , , the Group and Alcatel Lucent filed a joint offer document with the AMF relating to the proposed Public Buy-Out
Offer, in cash, for the remaining Alcatel Lucent shares and OCEANEs (the “Public Buy-Out Offer”). The Public Buy-Out Offer was followed by
a Squeeze-Out in accordance with the AMF General Regulation, in cash, for the Shares and OCEANEs not tendered into the Public Buy-Out
Offer (the “Squeeze-Out”, and together with the Public Buy-Out Offer, the “Offer”). In the Squeeze-Out, the Alcatel Lucent shares and
OCEANEs not tendered into the Public Buy-Out Offer were transferred to the Group for the same consideration provided in the Public
Buy-Out Offer, net of all costs. The remaining outstanding Alcatel Lucent stock options and performance shares were modified to settle
in cash or Nokia shares.
The Public Buy-Out Offer period ended on October , , and the Squeeze-Out was implemented on November , , in accordance
with the AMF General Regulation. On November , , the Group held % of the share capital and voting rights of Alcatel Lucent.
Alcatel Lucent ordinary shares and ALU ADSs acquired subsequent to the exchange offer, including through the Public Buy-Out Offer and
the Squeeze-Out, were accounted for as equity transactions with the remaining non-controlling interests in Alcatel Lucent. As such, any
new Nokia shares or cash consideration paid for these instruments were recorded directly in equity against the carrying amount of non-
controlling interests. The acquisition of OCEANEs subsequent to the transactions linked to the exchange offer was treated both as
extinguishment of debt and equity transaction with remaining non-controlling interests in Alcatel Lucent, with the redemption consideration
allocated to the liability and equity components.

150 NOKIA IN 2017

 Financial statements

Purchase consideration
The purchase consideration comprises the fair value of the consideration paid for the Alcatel Lucent Securities obtained through the
exchange offer, and the fair value of the portion of Alcatel Lucent stock options and performance shares attributable to pre-combination
services that were settled with Nokia shares. The fair value of the purchase consideration is based on the closing price of Nokia share of
EUR . on Nasdaq Helsinki on January , , and the exchange offer ratio of . Nokia share for every Alcatel Lucent share.
Fair value of the purchase consideration:
EURm
Alcatel Lucent shares or ADSs 10 046
OCEANE convertible bonds 1 570
Consideration attributable to the vested portion of replacement share-based payment awards 6
Total 11 622

Purchase accounting
The fair values of the acquired identifiable assets and liabilities of Alcatel Lucent, as of the date of acquisition:
EURm
Non-current assets
Intangible assets 5 711
Property, plant and equipment 1 412
Deferred tax assets 2 328
Defined benefit pension assets 3 201
Other non-current assets 687
Total non-current assets 13 339
Current assets
Inventories 1 992
Accounts receivable 2 813
Other current assets 1 360
Cash and cash equivalents 6 198
Total current assets 12 363
Total assets acquired 25 702
Non-current liabilities
Long-term interest-bearing liabilities 4 037
Deferred tax liabilities 425
Defined benefit pension and post-retirement liabilities 4 464
Other non-current liabilities 601
Total non-current liabilities 9 527
Current liabilities
Current borrowings and other financial liabilities 671
Other current liabilities 7 252
Total current liabilities 7 923
Total liabilities assumed 17 450
Net identifiable assets acquired 8 252
Attributable to:
Equity holders of the parent 6 538
Non-controlling interests 1 714
Goodwill 5 084
Purchase consideration 11 622

Goodwill arising from the acquisition of Alcatel Lucent amounted to EUR   million and was primarily attributable to synergies arising
from the significant economies of scale and scope that the Group is expecting to benefit from as part of the new combined entity. Refer
to Note , Impairment for allocation of goodwill.
The components of non-controlling interests in Alcatel Lucent that are present ownership interests and entitle their holders to a
proportionate share of the entity’s net assets in the event of liquidation, were measured based on the non-controlling interests’
proportionate share of the fair value of the acquired identifiable net assets. As such, goodwill excludes the goodwill related to the
non-controlling interests. The equity component of the remaining outstanding OCEANEs, as well as the outstanding stock options and
performance shares that were to be settled in Alcatel Lucent ordinary shares were measured at fair value within non-controlling interests.

NOKIA IN 2017 151

Notes to consolidated financial statements continued

Fair values of identifiable intangible assets acquired:

Fair value Amortization
EURm period years
Customer relationships 2 902 10
Technologies 2 170 4
Other 639 8
Total 5 711

Acquisition-related costs not directly attributable to the issue of shares, recorded in selling, general and administrative expenses and
other expenses in the consolidated income statement, and in operating cash flows in the consolidated statement of cash flows, amounted
to EUR  million, of which EUR  million was recognized in .
From January  to December ,  the acquired business contributed revenues of EUR   million and a net loss of EUR  million to the
consolidated income statement. These amounts were calculated using the subsidiary’s results, adjusting them for accounting policy alignments.

6. Disposals treated as Discontinued operations

Results of Discontinued operations(1)
EURm 2017 2016 2015
Net sales – – 1 075
Cost of sales – – (244)
Gross profit – – 831
Research and development expenses – – (498)
Selling, general and administrative expenses (7) (11) (213)
Other income and expenses (15) (4) (23)
Operating (loss)/profit () () 97
Financial income and expenses 6 14 (9)
(Loss)/profit before tax () () 88
Income tax (expense)/benefit (10) (28) 8
(Loss)/profit for the year, ordinary activities () () 96
Gain on the sale, net of tax(2) 5 14 1 178
(Loss)/profit for the year () () 1 274
(1) Results of Discontinued operations include the results of the HERE business and the D&S business, the disposals of which were completed on December 4, 2015 and April 25, 2014, respectively.
In 2013, the tax authorities in India commenced an investigation into withholding tax in respect of payments by Nokia India Private Limited to Nokia Corporation for the supply of operating software.
(2) In 2017, an additional gain on the sale of EUR 5 million was recognized related to the HERE business due to a tax indemnification. In 2016, an additional gain on the sale of EUR 7 million was recognized
related to the HERE business as a result of the final settlement of the purchase price, and EUR 7 million related to the D&S business due to a tax indemnification.

Cash flows from Discontinued operations(1)

EURm 2017 2016 2015
Net cash (used in)/from operating activities (14) (10) 6
Net cash (used in)/from investing activities (16) 3 2 553
Net cash flow for the period () () 2 559
(1) Cash flows from Discontinued operations include the cash flows from the HERE business and the D&S business, the disposals of which were completed on December 4, 2015 and April 25, 2014, respectively.

Sale of the HERE Business

On August ,  the Group announced the Sale of the HERE Business to a consortium of leading automotive companies, comprising AUDI
AG, BMW Group and Daimler AG. Subsequent to the announcement, the Group has presented the HERE business as Discontinued operations.
The HERE business was previously an operating and reportable segment and its business focused on the development of location
intelligence, location-based services and local commerce. The Sale of the HERE Business was completed on December , .

152 NOKIA IN 2017

 Financial statements

Gain on the Sale of the HERE Business

EURm
Fair value of sales proceeds less costs to sell(1) 2 551
Net assets disposed of (2 667)
Total ()
Foreign exchange differences reclassified from other comprehensive income(2) 1 174
Gain before tax 1 058
Income tax benefit(3) 120
Total gain 1 178
(1) Comprises purchase price of EUR 2 800 million, offset by adjustments for certain defined liabilities of EUR 249 million.
(2) Includes cumulative translation differences for the duration of ownership from translation of mainly U.S. dollar denominated balances into euro.
(3) The disposal was largely tax exempt, the tax benefit is due to hedging-related tax deductible losses.

Assets and liabilities, HERE business

Assets and liabilities disposed of as of December , :
EURm December 4, 2015
Goodwill and other intangible assets 2 722
Property, plant and equipment 115
Deferred tax assets and non-current assets 151
Inventories 14
Trade and other receivables 174
Prepaid expenses and other current assets 87
Cash and cash equivalents and current available-for-sale investments, liquid assets 56
Total assets 3 319
Deferred tax liabilities and other liabilities 286
Trade and other payables 55
Deferred income and accrued expenses 306
Provisions 5
Total liabilities 652
Net assets disposed of 2 667

7. Revenue recognition
EURm 2017 2016 2015
Continuing operations
Revenue from sale of products and licensing 14 216 14 543 7 080
Revenue from services(1) 8 150 8 166 5 421
Contract revenue recognized under percentage of completion accounting(2) 781 932 59
Total 23 147 23 641 12 560
(1) Excludes services performed as part of contracts under percentage of completion accounting.
(2) In 2017 and 2016, contract revenue includes submarine projects, which account for the majority of the revenue.

Revenue recognition-related positions for construction contracts in progress as of December :

2017 2016
EURm Assets Liabilities Assets Liabilities
Contract revenues recorded prior to billings(1) 132 129
Billings in excess of costs incurred 151 164
Work in progress on construction contracts 28 57
Advances received 45 113
Retentions – 1
(1) Contract revenues recorded prior to billings in 2016 have been revised to include non-invoiced receivables from submarine projects.

Work in progress is included in inventories, other assets are included in accounts receivable, and liabilities are included in accrued expenses in
the consolidated statement of financial position.
The aggregate amount of costs incurred and profits recognized, net of recognized losses, for construction contracts in progress since
inception are EUR   million as of December ,  (EUR  million in ).

NOKIA IN 2017 153

Notes to consolidated financial statements continued

8. Expenses by nature
EURm 2017 2016 2015
Continuing operations
Personnel expenses (Note 9) 7 845 7 814 3 738
Cost of material 7 776 7 260 2 907
Depreciation and amortization (Notes 14, 15) 1 591 1 594 286
Rental expenses 339 344 164
Impairment charges 210 17 11
Other 5 733 7 829 3 993
Total operating expenses 23 494 24 858 11 099

Operating expenses include government grant income and R&D tax credits of EUR  million (EUR  million in  and EUR  million
in ) that have been recognized in the consolidated income statement as a deduction against research and development expenses.

9. Personnel expenses
EURm 2017 2016 2015
Continuing operations
Salaries and wages 6 456 6 275 3 075
Share-based payment expense(1) 99 130 67
Pension and other post-employment benefit expense, net(2) 445 458 223
Other social expenses 845 951 373
Total 7 845 7 814 3 738
(1) Includes EUR 97 million for equity-settled awards (EUR 119 million in 2016 and EUR 43 million in 2015).
(2) Includes costs related to defined contribution plans of EUR 231 million (EUR 236 million in 2016 and EUR 172 million in 2015) and costs related to defined benefit plans of EUR 214 million (EUR 222 million
in 2016 and EUR 51 million in 2015). Refer to Note 27, Pensions and other post-employment benefits.

The average number of employees is   (  in  and   in ).

10. Other income and expenses

EURm 2017 2016 2015
Continuing operations
Other income
Foreign exchange gain on hedging forecasted sales and purchases, net 93 – –
Pension curtailment income and amendment income 38 5 –
Realized gains from unlisted venture funds 51 13 144
Interest income from customer receivables and overdue payments 25 29 6
Profit on sale of property, plant and equipment 19 – 8
Expiration of stock option liability 18 – –
VAT and other indirect tax refunds and social security credits – 19 17
Subsidies and government grants 2 11 4
Other 117 40 57
Total 363 117 236
Other expenses
Restructuring, cost reduction and associated charges (568) (759) (120)
Impairment charges (210) (17) (11)
Pension curtailment expenses (41) (7) –
Expenses related to sale of receivables transactions (37) (42) (21)
Valuation allowances for doubtful accounts and accounts receivable write-offs (24) (116) 24
Loss on sale of property, plant and equipment (23) (3) (5)
Losses and expenses related to unlisted venture funds (6) (4) (47)
Foreign exchange loss on hedging forecasted sales and purchases, net – (54) (83)
Other (46) 25 (21)
Total () () ()

154 NOKIA IN 2017

 Financial statements

11. Financial income and expenses

EURm 2017 2016 2015
Continuing operations
Interest income on investments and loans receivable 35 84 31
Net interest expense on derivatives not under hedge accounting – (18) (4)
Interest expense on financial liabilities carried at amortized cost(1) (472) (234) (135)
Net interest expense on defined benefit pensions (Note 27) (37) (65) (9)
Net realized (losses)/gains on disposal of fixed income available-for-sale financial
investments(2) (33) 15 2
Net fair value (losses)/gains on investments at fair value through profit and loss – (18) (2)
Net gains/(losses) on other derivatives designated at fair value through profit and loss – 21 (5)
Net fair value gains on hedged items under fair value hedge accounting 42 11 7
Net fair value losses on hedging instruments under fair value hedge accounting (23) (15) (12)
Net foreign exchange losses (157) (9) (76)
Other financial income(3) 172 85 31
Other financial expenses(4) (64) (144) (14)
Total () () ()
(1) In 2017, interest expense includes one-time charges of EUR 220 million related to the Group’s tender offer to purchase USD 300 million 6.50% notes due January 15, 2028, USD 1 360 million 6.45%
notes due March 15, 2029, EUR 500 million 6.75% notes due February 4, 2019 and USD 1 000 million 5.375% notes due May 15, 2019 as well as an interest expense of EUR 69 million related to a change
in uncertain tax positions. In 2016, interest expense included one-time charges of EUR 41 million, primarily related to the redemption of Nokia of America Corporation. USD 650 million 4.625% notes
due July 2017, USD 500 million 8.875% notes due January 2020 and USD 700 million 6.750% notes due November 2020.
(2) In 2017, includes a one-time charge of EUR 32 million related to the sale of certain financial assets.
(3) In 2017, includes distributions of EUR 80 million (EUR 66 million in 2016 and EUR 25 million in 2015) from private venture funds held as non-current available-for-sale investments as well as income of
EUR 64 million due to a change in the fair value of the financial liability related to Nokia Shanghai Bell. Refer to Note 33, Significant partly-owned subsidiaries.
(4) In 2017, includes impairments of EUR 34 million (EUR 108 million in 2016) related to private venture funds held as non-current available-for-sale investments. Refer to Note 16, Impairment.

12. Income taxes

Components of the income tax (expense)/benefit
EURm 2017 2016 2015
Continuing operations
Current tax (261) (534) (258)
Deferred tax (666) 991 (88)
Total () 457 ()

Income tax reconciliation

Reconciliation of the difference between income tax computed at the statutory rate in Finland of % and income tax recognized in the
consolidated income statement:
EURm 2017 2016 2015
Income tax benefit/(expense) at statutory rate 102 274 (308)
Permanent differences 85 31 16
Tax impact on operating model changes(1) (245) 439 –
Non-creditable withholding taxes (29) (42) (17)
Income taxes for prior years(2) (132) 3 6
Effect of different tax rates of subsidiaries operating in other jurisdictions 178 88 (50)
Effect of deferred tax assets not recognized(3) (164) (318) (35)
Benefit arising from previously unrecognized deferred tax assets 56 19 38
Net (increase)/decrease in uncertain tax positions – (20) 4
Change in income tax rates(4) (738) 3 –
Income taxes on undistributed earnings (42) (23) (7)
Other 2 3 7
Total () 457 ()
(1) In 2017, the Group continued to integrate former Nokia and Alcatel Lucent operating models, the Group transferred certain intellectual property between its operations in Finland and in the United States,
recording a tax expense of EUR 245 million. These transactions reduced the deferred tax assets in the United States and increased the deferred tax assets in Finland. In 2016, following the completion of the
Squeeze-Out of the remaining Alcatel Lucent Securities, the Group launched actions to integrate the former Alcatel Lucent and Nokia operating models. In connection with these integration activities, the
Group transferred certain intellectual property to its operations in the United States, recording a tax benefit and additional deferred tax assets of EUR 348 million. In addition, the Group elected to treat the
acquisition of Alcatel Lucent’s operations in the United States as an asset purchase for United States tax purposes. The impact of this election was to utilize or forfeit existing deferred tax assets and record new
deferred tax assets with a longer amortization period than the life of those forfeited assets. As a result of this, EUR 91 million additional deferred tax assets were recorded in 2016.
(2) In 2017, the Group recorded a EUR 139 million tax expense related to an uncertain tax position in Germany. The matter relates to the disposal of the former Alcatel Lucent railway signaling business in 2006 to Thalès.
(3) In 2016, relates primarily to tax losses and temporary differences in France.
(4) In 2017, primarily resulting from the tax rate change in the United States. The United States federal income tax rate reduction caused a revaluation of the United States deferred tax assets and
liabilities, resulting in the recognition of an additional tax provision of EUR 777 million.

NOKIA IN 2017 155

Notes to consolidated financial statements continued

Income tax liabilities and assets include a net EUR  million liability (EUR  million in ) relating to uncertain tax positions with
inherently uncertain timing of cash outflows.
Prior period income tax returns for certain Group companies are under examination by local tax authorities. The Group has on-going tax
audits in various jurisdictions, including India, Finland and Canada. The Group’s business and investments, especially in emerging market
countries, may be subject to uncertainties, including unfavorable or unpredictable tax treatment. Management judgment and a degree of
estimation are required in determining the tax expense or benefit. Even though management does not expect that any significant additional
taxes in excess of those already provided for will arise as a result of these examinations, the outcome or actual cost of settlement may vary
materially from estimates.
Deferred tax assets and liabilities
2017 2016
Deferred Deferred Deferred Deferred
EURm tax assets tax liabilities Net balance tax assets tax liabilities Net balance
Tax losses carried forward and unused tax credits 1 019 – 1 428 –
Undistributed earnings – (106) – (67)
Intangible assets and property, plant and equipment 2 851 (353) 3 713 (501)
Defined benefit pension assets 13 (940) 3 (1 334)
Other non-current assets 85 (6) 19 (52)
Inventories 157 (1) 154 (3)
Other current assets 241 (7) 81 (66)
Defined benefit pension and other post-retirement
liabilities 933 (60) 1 478 (29)
Other non-current liabilities 34 – 12 (2)
Provisions 240 (55) 249 (6)
Other current liabilities 223 (78) 307 (56)
Other temporary differences 12 (33) 16 (46)
Total before netting 5 808 ( ) 4 169 7 460 ( ) 5 298
Netting of deferred tax assets and liabilities (1 226) 1 226 – (1 759) 1 759 –
Total after netting 4 582 () 4 169 5 701 () 5 298

Movements in the net deferred tax balance during the year:

EURm 2017 2016
As of January 1 5 298 2 573
Recognized in income statement, Continuing Operations (666) 991
Recognized in income statement, Discontinued Operations 2 (2)
Recognized in other comprehensive income (150) (255)
Recognized in equity (7) (5)
Acquisitions through business combinations and disposals (29) 1 914
Translation differences (279) 82
As of December 31 4 169 5 298

156 NOKIA IN 2017

 Financial statements

Amount of temporary differences, tax losses carried forward and tax credits for which no deferred tax asset was recognized due to
uncertainty of utilization:
EURm 2017 2016
Temporary differences 1 879 2 214
Tax losses carried forward 18 449 18 706
Tax credits 37 32
Total 20 365 20 952

The majority of the unrecognized temporary differences and tax losses relate to France. Based on the pattern of losses in the past years and
in the absence of convincing other evidence of sufficient taxable profit in the future years, it is uncertain whether these deferred tax assets
can be utilized in the foreseeable future. A significant portion of the French unrecognized deferred tax assets are indefinite in nature and
available against future French tax liabilities, subject to a limitation of % of annual taxable profits.
The deferred tax assets are recognized to the extent it is probable that taxable profit will be available against which the tax losses, tax credits
and deductible temporary difference can be utilized in the relevant jurisdictions. The majority of the Group's recognized deferred tax assets
relate to unused tax losses, tax credits and deductible temporary differences in Finland of EUR . billion (EUR . billion in ) and the
United States of EUR . billion (EUR . billion in ). Based on the recent years’ profitability in Finland and the United States, as well as
the latest forecasts of future financial performance, the Group has been able to establish a pattern of sufficient tax profitability in Finland
and the United States to conclude that it is probable that it will be able to utilize the tax losses, tax credits and deductible temporary
differences in the foreseeable future.
Expiry of tax losses carried forward and unused tax credits:
2017 2016
EURm Recognized Unrecognized Total Recognized Unrecognized Total
Tax losses carried forward
Within 10 years 1 338 1 491 2 828 1 853 1 681 3 534
Thereafter 135 25 160 79 17 96
No expiry 1 674 16 933 18 608 1 878 17 008 18 886
Total 3 147 18 449 21 596 3 810 18 706 22 516
Tax credits
Within 10 years 367 21 388 395 23 418
Thereafter 111 5 116 94 – 94
No expiry 35 11 46 66 9 75
Total 513 37 550 555 32 587

The Group has undistributed earnings of EUR   million (EUR   million in ) for which a deferred tax liability has not been
recognized as these earnings will not be distributed in the foreseeable future.

NOKIA IN 2017 157

Notes to consolidated financial statements continued

13. Earnings per share

2017 2016 2015
EURm EURm EURm
Basic
(Loss)/profit for the year attributable to equity holders of the parent
Continuing operations (1 473) (751) 1 192
Discontinued operations (21) (15) 1 274
Total (1 494) (766) 2 466
Diluted
Effect of profit adjustments
Profit adjustment relating to Alcatel Lucent American Depositary Shares – (8) –
Elimination of interest expense, net of tax, on convertible bonds, where dilutive – – 36
Total effect of profit adjustments – (8) 36
(Loss)/profit attributable to equity holders of the parent adjusted for the effect
of dilution
Continuing operations (1 473) (759) 1 228
Discontinued operations (21) (15) 1 274
Total (1 494) (774) 2 502

000s shares 000s shares 000s shares

Basic
Weighted average number of shares in issue 5 651 814 5 732 371 3 670 934
Diluted
Effect of dilutive shares
Effect of dilutive equity-based share incentive programs
Restricted shares and other – – 4 253
Performance shares – – 3 179
Stock options – – 1 971
Total effect of dilutive equity-based share incentive programs – – 9 403
Effect of other dilutive shares
Alcatel Lucent American Depositary Shares – 8 746 –
Assumed conversion of convertible bonds – – 268 975
Total effect of other dilutive-shares – 8 746 268 975
Total effect of dilutive shares – 8 746 278 378
Adjusted weighted average number of shares 5 651 814 5 741 117 3 949 312

Earnings per share attributable to equity holders of the parent EUR EUR EUR
Basic earnings per share
Continuing operations (0.26) (0.13) 0.32
Discontinued operations 0.00 0.00 0.35
(Loss)/profit for the year (0.26) (0.13) 0.67
Diluted earnings per share
Continuing operations (0.26) (0.13) 0.31
Discontinued operations 0.00 0.00 0.32
(Loss)/profit for the year (0.26) (0.13) 0.63

Basic earnings per share is calculated by dividing the profit/loss attributable to equity holders of the parent by the weighted average number
of shares outstanding during the year, excluding treasury shares. Diluted earnings per share is calculated by adjusting the profit/loss
attributable to equity holders of the parent to eliminate the interest expense of dilutive convertible bonds and other equity instruments; and
by adjusting the weighted average number of shares outstanding with the dilutive effect of stock options, restricted shares and performance
shares outstanding during the period as well as the assumed conversion of convertible bonds and other equity instruments.
 million restricted shares are outstanding ( million in  and none in ) that could potentially have a dilutive impact in the future but
are excluded from the calculation as they are determined to be anti-dilutive.
 million performance shares are outstanding ( million in  and none in ) that could potentially have a dilutive impact in the
future but are excluded from the calculation as they are determined to be anti-dilutive. In addition,  million performance shares ( million
in  and ) have been excluded from the calculation of diluted shares as contingency conditions have not been met.
Stock options equivalent to fewer than  million shares (fewer than  million shares in  and ) have been excluded from the
calculation of diluted shares as they are determined to be anti-dilutive.

158 NOKIA IN 2017

 Financial statements

In , the Group exercised its option to redeem the EUR  million convertible bonds at their original amount plus accrued interest.
Virtually all bondholders elected to convert their convertible bonds into Nokia shares before redemption.  million potential shares have
been included in the calculation of diluted shares to reflect the part-year effect of these convertible bonds.
In , the Group acquired    Alcatel Lucent shares from JPMorgan Chase Bank N.A., as depositary, pursuant to the share
purchase agreement announced on March , . These shares represent Alcatel Lucent shares that remained in the Alcatel Lucent
American Depositary Receipts program after the cancellation period and following the program’s termination on April , . On May ,
 the Group registered with the Finnish Trade Register    new Nokia shares issued to the Alcatel depositary in settlement of the
transaction.  million potential shares have been included in the calculation of diluted shares from March ,  to reflect the part-year
effect of these shares, and were included in the calculation as dilutive shares until the registration date.

14. Intangible assets

EURm Goodwill Other Total
Acquisition cost as of January 1, 2016 1 145 3 137 4 282
Translation differences 129 424 553
Additions – 62 62
Acquisitions through business combinations 5 358 5 781 11 139
Disposals and retirements(1) – (22) (22)
Acquisition cost as of December 31, 2016 6 632 9 382 16 014
Accumulated amortization and impairment charges as of January 1, 2016 (908) (2 814) (3 722)
Translation differences – (325) (325)
Disposals and retirements(1) – 9 9
Amortization – (1 016) (1 016)
Accumulated amortization and impairment charges as of December 31, 2016 () ( ) ( )
Net book value as of January 1, 2016 237 323 560
Net book value as of December 31, 2016 5 724 5 236 10 960
Acquisition cost as of January 1, 2017 6 632 9 382 16 014
Translation differences (497) (521) (1 018)
Additions – 40 40
Acquisitions through business combinations 162 169 331
Disposals and retirements – (73) (73)
Acquisition cost as of December 31, 2017 6 297 8 997 15 294
Accumulated amortization and impairment charges as of January 1, 2017 (908) (4 146) (5 054)
Translation differences – 131 131
Impairment charges (141) (33) (174)
Disposals and retirements – 72 72
Amortization – (1 050) (1 050)
Accumulated amortization and impairment charges as of December 31, 2017 ( ) ( ) ( )
Net book value as of January 1, 2017 5 724 5 236 10 960
Net book value as of December 31, 2017 5 248 3 971 9 219
(1) Includes impairment charges of EUR 9 million in 2016. Refer to Note 16, Impairment.

Net book value of other intangible assets by type of asset:

EURm 2017 2016
Customer relationships 2 306 2 765
Technologies 1 107 1 786
Tradenames and trademarks 233 308
Other 325 377
Total 3 971 5 236

The remaining amortization periods are approximately one to nine years for customer relationships, one to five years for developed
technology, two to six years for tradenames and trademarks and one to six years for other.

NOKIA IN 2017 159

Notes to consolidated financial statements continued

15. Property, plant and equipment

Buildings and Machinery and Assets under
EURm constructions equipment Other construction Total
Acquisition cost as of January 1, 2016 427 1 746 41 15 2 229
Transfers to assets held for sale (47) – – – (47)
Translation differences 1 (15) 2 – (12)
Additions 65 361 3 87 516
Acquisitions through business combinations 587 674 68 84 1 413
Reclassifications 20 75 2 (97) –
Disposals and retirements (54) (148) (2) – (204)
Acquisition cost as of December 31, 2016 999 2 693 114 89 3 895
Accumulated depreciation as of January 1, 2016 (174) (1 351) (9) – (1 534)
Transfers to assets held for sale 5 – – – 5
Translation differences 1 13 – – 14
Disposals and retirements 46 133 – – 179
Depreciation (94) (480) (4) – (578)
Accumulated depreciation as of December 31, 2016 () ( ) () – ( )
Net book value as of January 1, 2016 253 395 32 15 695
Net book value at December 31, 2016 783 1 008 101 89 1 981
Acquisition cost as of January 1, 2017 999 2 693 114 89 3 895
Translation differences (52) (105) (9) (5) (171)
Additions 115 370 3 89 577
Acquisitions through business combinations 1 1 – – 2
Reclassifications 42 43 – (85) –
Disposals and retirements (40) (353) (2) (2) (397)
Acquisition cost as of December 31, 2017 1 065 2 649 106 86 3 906
Accumulated depreciation as of January 1, 2017 (216) (1 685) (13) – (1 914)
Translation differences 20 67 1 – 88
Impairment charges – (25) – – (25)
Disposals and retirements 22 315 2 – 339
Depreciation (97) (440) (4) – (541)
Accumulated depreciation as of December 31, 2017 () ( ) () – ( )
Net book value as of January 1, 2017 783 1 008 101 89 1 981
Net book value as of December 31, 2017 794 881 92 86 1 853

In , the tax authorities in India placed a lien which prohibited the Group from transferring the mobile devices-related facility in Chennai
to Microsoft as part of the Sale of the D&S Business.

160 NOKIA IN 2017

 Financial statements

16. Impairment
Goodwill
Based on the current operational and reporting structure (refer to Note , Segment information), the Group allocated goodwill to the
operating segments within Nokia’s Networks business and to the Digital Health cash generating unit within Nokia Technologies corresponding
to groups of cash generating units and cash generating unit (“CGU”), respectively.
Allocation of goodwill
The following table presents the allocation of goodwill to groups of CGUs and the CGU as of the annual impairment testing date October :
EURm 2017 2016
Mobile Networks(1) 950 2 298
Fixed Networks 812 896
Global Services(1) 1 288 –
IP/Optical Networks 1 847 1 970
Nokia Software 405 240
Digital Health (Nokia Technologies) – 141
(1) In 2017, the Group’s former Mobile Networks operating segment was separated into two distinct operating segments: Mobile Networks and Global Services (refer to Note 4., Segment Information).
The affected goodwill was allocated based on the relative fair value of the Group’s Mobile Networks and Global Services operating segments.

Recoverable amounts
The recoverable amounts of the groups of CGUs and the CGU were based on fair value less costs of disposal that was determined using a
level  fair value measurement based on a discounted cash flow calculation. The cash flow projections used in calculating the recoverable
amounts were based on financial plans approved by management covering an explicit forecast period of three years.
Seven additional years of cash flow projections subsequent to the explicit forecast period reflect a gradual progression towards the steady
state cash flow projections modeled in the terminal year. The terminal growth rate assumptions reflect long-term average growth rates for
the industries and economies in which the groups of CGUs and the CGU operate. The discount rates reflect current assessments of the time
value of money and relevant market risk premiums reflecting risks and uncertainties for which the future cash flow estimates have not been
adjusted. Other key variables in future cash flow projections include assumptions on estimated sales growth, gross margin and operating
margin. All cash flow projections are consistent with market participant assumptions.
The results of the impairment testing indicate adequate headroom for each group of CGUs. The key assumptions applied in the impairment
testing analysis for the groups of CGUs and the CGU as of the annual impairment testing date October :
2017 2016 2017 2016
Key assumption % Terminal growth rate Post-tax discount rate
Mobile Networks 1.1 0.9 8.9 9.2
Fixed Networks 1.1 0.9 8.6 8.6
Global Services 1.0 – 8.9 –
IP/Optical Networks 1.3 1.4 9.3 8.9
Nokia Software 1.7 1.8 8.2 9.0
Digital Health (Nokia Technologies) – 2.1 – 12.7

Impairment charges by asset category

EURm 2017 2016 2015
Goodwill 141 – –
Other intangible assets 33 9 –
Property, plant and equipment 25 – –
Available-for-sale investments 45 116 11
Total 244  

NOKIA IN 2017 161

Notes to consolidated financial statements continued

Goodwill
In , as a result of challenging business conditions, the Group recorded an impairment charge of EUR  million on its Digital Health
CGU. The impairment charge was allocated in its entirety to reduce the goodwill carrying amount of the Digital Health CGU to zero.
Other intangible assets
In , the Group recognized an impairment charge within other operating expenses of EUR  million, mainly related to certain
technology-based assets acquired with Eden Rock LLC. The results of Eden Rock LLC. are reported within the IP Networks and Applications
reportable segment.
In , the Group recognized an impairment charge within other operating expenses of EUR  million following the discontinuation of
certain technology-related assets acquired with Mesaplexx Pty Ltd. The results of Mesaplexx Pty Ltd. are reported within the Ultra Broadband
Networks reportable segment.
Property, plant and equipment
In relation to its product portfolio strategy, the Group recognized an impairment charge within other operating expenses of EUR  million
for excess machinery and equipment.
Available-for-sale investments
The Group recognized an impairment charge of EUR  million (EUR  million in  and EUR  million in ) primarily related to the
performance of certain private funds investing in IPR that are included in non-current available-for-sale equity investments at cost less
impairment. These charges are recorded in other expenses and financial income and expenses.

17. Inventories
EURm 2017 2016
Raw materials, supplies and other 271 268
Work in progress 1 166 1 159
Finished goods 1 209 1 079
Total 2 646 2 506

The cost of inventories recognized as an expense during the year and included in the cost of sales is EUR   million (EUR   million in
 and EUR   million in ).
Movements in allowances for excess and obsolete inventory for the years ended December :
EURm 2017 2016 2015
As of January 1 456 195 204
Charged to income statement 100 354 71
Deductions(1) (124) (93) (80)
As of December 31 432 456 195
(1) Deductions include utilization and releases of allowances.

18. Allowances for doubtful accounts

Movements in allowances for doubtful accounts for the years ended December :
EURm 2017 2016 2015
As of January 1 168 62 103
Transfer to Discontinued operations – – (7)
Charged to income statement 61 126 13
Deductions(1) (37) (20) (47)
As of December 31 192 168 62
(1) Deductions include utilization and releases of allowances.

162 NOKIA IN 2017

 Financial statements

19. Prepaid expenses and accrued income

Non-current assets
EURm 2017 2016
R&D tax credits and other indirect tax receivables 174 254
Deposits 77 –
Other 117 74
Total 368 328

Current assets
EURm 2017 2016
Social security, R&D tax credits, VAT and other indirect taxes 552 560
Deposits 28 118
Accrued revenue 232 101
Divestment-related receivables 79 90
Other 368 427
Total 1 259 1 296

20. Shares of the Parent Company

Shares and share capital
Nokia Corporation (“Parent Company”) has one class of shares. Each share entitles the holder to one vote at General Meetings. As of December ,
, the share capital of Nokia Corporation is EUR   . and the total number of shares issued is    . As of December ,
, the total number of shares includes    shares owned by Group companies representing .% of share capital and total voting
rights. Under the Nokia Articles of Association, Nokia Corporation does not have minimum or maximum share capital or share par value.
Authorizations
Authorization to issue shares and special rights entitling to shares
At the Extraordinary General Meeting held on December , , the shareholders authorized the Board of Directors to issue, in deviation
from the shareholders’ pre-emptive right, a maximum of   million shares through one or more share issues. The authorization includes
the right for the Board of Directors to resolve on all the terms and conditions of such share issuances. The authorization may be used to
issue Parent Company shares to the holders of Alcatel Lucent shares, American Depositary Shares and convertible bonds as well as to
beneficiaries of Alcatel Lucent employee equity compensation arrangements for the purpose of implementing the transaction with Alcatel
Lucent, including the consummation of the public exchange offers made to Alcatel Lucent shareholders as well as other transactions
contemplated by the memorandum of understanding between the Group and Alcatel Lucent, and/or otherwise to effect the combination.
The authorization is effective until December , .
At the Annual General Meeting held on June , , the shareholders authorized the Board of Directors to issue a maximum of
  million shares through one or more issues of shares or special rights entitling to shares. The Board of Directors was authorized to
issue either new shares or shares held by the Parent Company. The authorization included the right for the Board of Directors to resolve
on all the terms and conditions of such share and special rights issuances, including issuance in deviation from the shareholders’ pre-emptive
rights. The authorization may be used to develop the Parent Company’s capital structure, diversify the shareholder base, finance or carry out
acquisitions or other arrangements, settle the Parent Company’s equity-based incentive plans, or for other purposes resolved by the Board
of Directors. The authorization that would have been effective until December ,  was terminated by a resolution of Annual General
Meeting on May , .
At the Annual General Meeting held on May , , the shareholders authorized the Board of Directors to issue a maximum of  million
shares through one or more issues of shares or special rights entitling to shares. The Board of Directors is authorized to issue either new
shares or shares held by the Parent Company. The authorization included the right for the Board of Directors to resolve on all the terms
and conditions of such share and special rights issuances, including issuance in deviation from the shareholders’ pre-emptive rights.
The authorization may be used to develop the Parent Company’s capital structure, diversify the shareholder base, finance or carry out
acquisitions or other arrangements, settle the Parent Company’s equity-based incentive plans, or for other purposes resolved by the
Board of Directors. The authorization is effective until November , .
In , under the authorization held by the Board of Directors, the Parent Company issued   new shares following the holders
of stock options issued in ,  and  exercising their option rights.
In , the Parent Company issued    new shares without consideration to the Parent Company to fulfil the company’s obligation
under the Nokia Equity Programs.

NOKIA IN 2017 163

Notes to consolidated financial statements continued

In , under the authorization held by the Board of Directors, the Parent Company issued    treasury shares to employees,
including certain members of the Group Leadership Team, as settlement under equity-based incentive plans and the employee share
purchase plan. The shares were issued without consideration and in accordance with the plan rules.
As of December , , 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 June , , the shareholders authorized the Board of Directors to repurchase a maximum
of  million shares. The amount corresponded to less than % of the total number of Parent Company’s shares. The shares may be
repurchased in order to optimize the capital structure of the Parent Company. In addition, the shares may be repurchased in order to finance
or carry out acquisitions or other arrangements, to settle the Parent Company’s equity-based incentive plans or to be transferred for other
purposes. The authorization that would have been effective until December ,  was terminated by a resolution of the Annual General
Meeting on May , .
At the Annual General Meeting held on May , , the shareholders authorized the Board of Directors to repurchase a maximum
of  million shares. The amount corresponds to less than % of the total number of Parent Company’s shares. The shares may be
repurchased in order to optimize the capital structure of the Company. In addition, shares may be repurchased in order to meet obligations
arising from debt financial instruments that are exchangeable into equity instruments, to settle equity-based incentive plans for employees
of the Group or of its associated companies, or to be transferred for other purposes such as financing or carrying out acquisitions. The
authorization is effective until November , .
Under the authorization held by the Board of Directors and in line with the capital structure optimization program, the Parent Company
repurchased    shares in  representing approximately .% of share capital and total voting rights as of December , .
In , the Parent Company had repurchased    shares. The price paid for the shares was based on the current market price
of the Nokia share on the securities market at the time of the repurchase. On February ,  the Parent Company announced that the
Board of Directors had decided to cancel    treasury shares repurchased under the capital structure optimization program.
The cancellation of the shares does not have an impact on the Parent Company’s share capital.

21. Fair value and other reserves

Translation Pension Hedging Available-for-sale
EURm differences remeasurements reserve investments
As of January 1, 2015 1 099 () 2 284
Foreign exchange translation differences 672 – – –
Net investment hedging losses (207) – – –
Remeasurements of defined benefit plans – 84 – –
Net fair value (losses)/gains – – (53) 225
Transfer to income statement (1 268) – 49 (131)
Disposal of businesses – 8 – –
Movement attributable to non-controlling interests (4) – – –
As of December 31, 2015 292 () () 378
Foreign exchange translation differences 265 – – –
Net investment hedging losses (83) – – –
Remeasurements of defined benefit plans – 343 – –
Net fair value losses – – (13) (10)
Transfer to income statement (14) – 25 (63)
Acquisition on non-controlling interest (15) (2) – –
Movement attributable to non-controlling interests 38 4 – –
As of December 31, 2016 483 173 10 305
Foreign exchange translation differences (1 830) – – –
Net investment hedging gains 352 – – –
Remeasurements of defined benefit plans – 662 – –
Net fair value gains – – 103 18
Transfer to income statement 12 – (75) (104)
Other increase/(decrease) 1 3 (1) –
Movement attributable to non-controlling interests 50 – – –
As of December 31, 2017 () 838 37 219

164 NOKIA IN 2017

 Financial statements

Translation differences consist of translation differences arising from translation of foreign Group companies’ assets and liabilities into euro,
the presentation currency of the consolidated financial statements, as well as gains and losses related to hedging of net investments in
foreign operations. On disposal of all or a part of a foreign Group company, the cumulative amount of translation differences and related
accumulated changes in fair value of qualifying net investment hedges are recognized as income or expense on the consolidated income
statement when the gain or loss on disposal is recognized. Refer to Note , Significant accounting policies.
The Group has defined benefit plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
for these defined benefit plans are charged or credited to the pension remeasurements reserve. Refer to Note , Significant accounting
policies and Note , Pensions and other post-employment benefits.
The Group applies hedge accounting on certain forward foreign exchange contracts that are designated as cash flow hedges. The change in
fair value that reflects the change in spot exchange rates is deferred to the hedging reserve to the extent that the hedge is effective. Refer
to Note , Significant accounting policies.
The Group invests a portion of cash needed to cover the projected cash needs of its ongoing business operations in highly liquid, interest-
bearing investments and certain equity instruments. Changes in the fair value of these available-for-sale investments are recognized in the
fair value and other reserves as part of other comprehensive income, with the exception of interest calculated using the effective interest
method and foreign exchange gains and losses on current available-for-sale investments recognized directly in the consolidated income
statement. Refer to Note , Significant accounting policies.

22. Other comprehensive income

2017 2016 2015
EURm Gross Tax Net Gross Tax Net Gross Tax Net
Pension remeasurements
Remeasurements of defined benefit plans 723 (58) 665 613 (269) 344 112 (28) 84
Net change during the year 723 () 665 613 () 344 112 () 84
Translation differences
Exchange differences on translating
foreign operations (1 831) 1 (1 830) 265 – 265 673 – 673
Transfer to income statement 12 – 12 (14) – (14) (1 727) – (1 727)
Net change during the year ( ) 1 ( ) 251 – 251 ( ) – ( )
Net investment hedging
Net investment hedging gains/(losses) 440 (88) 352 (103) 20 (83) (260) 53 (207)
Transfer to income statement – – – – – – 582 (123) 459
Net change during the year 440 () 352 () 20 () 322 (70) 252
Cash flow hedges
Net fair value gains/(losses) 129 (26) 103 (16) 3 (13) (66) 13 (53)
Transfer to income statement (94) 19 (75) 30 (5) 25 61 (12) 49
Net change during the year 35 (7) 28 14 () 12 () 1 ()
Available-for-sale investments
Net fair value gains/(losses) 19 (1) 18 (9) (1) (10) 246 (21) 225
Transfer to income statement on impairment 14 (1) 13 25 (4) 21 11 – 11
Transfer to income statement on disposal (121) 4 (117) (91) 7 (84) (144) 2 (142)
Net change during the year () 2 () () 2 () 113 (19) 94
Other (decrease)/ increase, net (1) – (1) (6) – (6) 2 – 2
Total () () () 694 () 445 () () ()

NOKIA IN 2017 165

Notes to consolidated financial statements continued

23. Interest-bearing liabilities

Carrying amount EURm
Issuer/borrower Instrument Currency Nominal (million) Final maturity 2017 2016
Nokia Corporation 6.75% Senior Notes(1) EUR 231 February 2019 241 527
Nokia Corporation 5.375% Senior Notes(2) USD 581 May 2019 487 961
Nokia Corporation 1.00% Senior Notes(1) EUR 500 March 2021 498 –
Nokia Corporation 3.375% Senior Notes(2) USD 500 June 2022 406 –
Nokia Corporation 2.00% Senior Notes(1) EUR 750 March 2024 744 –
Nokia Corporation 4.375% Senior Notes(2) USD 500 June 2027 404 –
Nokia of America
Corporation 6.5% Senior Notes(1)(2) USD 74 January 2028 62 287
Nokia of America
Corporation 6.45% Senior Notes(1)(2) USD 206 March 2029 174 1 306
Nokia Corporation 6.625% Senior Notes USD 500 May 2039 424 482
Nokia Corporation Revolving Credit Facility EUR 1 579 June 2020 – –
Nokia Corporation and
various subsidiaries Other liabilities(3) 326 464
Total 3 766 4 027
(1) In March 2017, the Group issued EUR 500 million 1.00% Senior Notes due 2021 and EUR 750 million 2.00% Senior Notes due 2024 under the 5 billion Euro Medium-Term Note Programme. The proceeds
of the new notes were used to redeem (nominal amounts) EUR 269 million of the 2019 Euro Notes, USD 86 million of the 2028 USD Notes and USD 401 million of the 2029 USD Notes and for general
corporate purposes.
(2) In June 2017, the Group issued USD 500 million 3.375% Senior Notes due 2022 and USD 500 million 4.375% Senior Notes due 2027 under U.S. Securities Act of 1933, as amended. The proceeds of the
new notes were used to redeem (nominal amounts) USD 419 million of the 2019 USD Notes, USD 140 million of the 2028 USD Notes and USD 753 million of the 2029 USD Notes and for general
corporate purposes.
(3) Includes liabilities related to the French research and development tax credits (Crédits d’Impôt Recherche) of EUR 62 million (EUR 132 million in 2016) that have been sold to banks on a recourse basis
and hence remain on the consolidated statement of financial position.

All borrowings presented above are senior unsecured and have no financial covenants.
Changes in interest-bearing liabilities arising from financing activities:
Derivatives held to
Long-term interest- Short-term interest- hedge long-term
bearing liabilities bearing liabilities borrowings Total
As of January 1, 2017 3 657 370 () 3 997
Cash flows 132 (40) (49) 43
Non-cash changes:
Acquisitions – 4 – 4
Translation differences (291) (12) 199 (104)
Changes in fair value (46) – 15 (31)
Other 5 (13) – (8)
As of December 31, 2017 3 457 309 135 3 901

166 NOKIA IN 2017

 Financial statements

24. Fair value of financial instruments

Financial assets and liabilities recorded at fair value are categorized based on the amount of unobservable inputs used to measure their fair
value. Three hierarchical levels are based on an increasing amount of judgment associated with the inputs used to derive fair valuation for
these assets and liabilities, level  being market values for exchange traded products, level  being primarily based on quotes from third-
party pricing services, and level  requiring most management judgment. At the end of each reporting period, the Group categorizes its
financial assets and liabilities to appropriate level of fair value hierarchy. Items carried at fair value in the following table are measured at
fair value on a recurring basis.
Carrying amounts Fair value(1)
Fair value
EUR million Amortized cost Level 1 Level 2 Level 3 Total Total
2017
Non-current available-for-sale investments 119 16 137 544 816 816
Other non-current financial assets 108 – 99 8 215 195
Other current financial assets including derivatives 106 – 196 – 302 302
Accounts receivable 6 880 – – – 6 880 6 880
Available-for-sale investments, liquid assets – – 911 – 911 911
Cash and cash equivalents 7 369 – – – 7 369 7 369
Total financial assets 14 582 16 1 343 552 16 493 16 473
Long-term interest-bearing liabilities 3 457 – – – 3 457 3 574
Short-term interest bearing liabilities 309 – – – 309 309
Other financial liabilities including derivatives 44 – 268 672 984 984
Accounts payable 3 996 – – – 3 996 3 996
Total financial liabilities 7 806 – 268 672 8 746 8 863

Carrying amounts Fair value(1)

Fair value
EUR million Amortized cost Level 1 Level 2 Level 3 Total Total
2016
Non-current available-for-sale investments 202 – 164 674 1 040 1 040
Other non-current financial assets 143 – 111 – 254 228
Other current financial assets including derivatives 60 – 236 – 296 296
Accounts receivable 6 972 – – – 6 972 6 972
Investments at fair value through profit and loss, liquid
assets – – 327 – 327 327
Available-for-sale investments, liquid assets – – 1 502 – 1 502 1 502
Cash and cash equivalents 7 497 – – – 7 497 7 497
Total financial assets 14 874 – 2 340 674 17 888 17 862
Long-term interest-bearing liabilities 3 657 – – – 3 657 3 821
Short-term interest bearing liabilities 370 – – – 370 370
Other financial liabilities including derivatives 34 – 236 14 284 284
Accounts payable 3 781 – – – 3 781 3 781
Total financial liabilities 7 842 – 236 14 8 092 8 256
(1) The following fair value measurement methods are used for items not carried at fair value: the fair value is estimated to equal the carrying amount for available-for-sale investments carried at cost
less impairment for which it is not possible to estimate fair value reliably. These assets are tested for impairment using a discounted cash flow analysis if events or changes in circumstances indicate
that the carrying amounts may not be recoverable. The fair values of long-term interest bearing liabilities are primarily based on quotes from third-party pricing services (level 2). The fair values of
other assets and liabilities, including loans receivable and loans payable are primarily based on discounted cash flow analysis (level 2). The fair value is estimated to equal the carrying amount for short-
term financial assets and financial liabilities due to limited credit risk and short time to maturity. Refer to Note 2, Significant accounting policies.

The level  category includes financial assets and liabilities that are measured in whole by reference to published quotes in an active market.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, and
those prices represent actual and regularly occurring market transactions on an arm’s-length basis. This category includes only exchange
traded products.

NOKIA IN 2017 167

Notes to consolidated financial statements continued

The level  category includes financial assets and liabilities measured using a valuation technique based on assumptions that are supported
by prices from observable current market transactions. These include assets and liabilities with fair values based on quotes from third-party
pricing services, financial assets with fair values based on broker quotes and assets that are valued using the Group’s own valuation models
whereby the material assumptions are market observable. The majority of the Group’s listed bonds and other securities, over-the-counter
derivatives and certain other products are included within this category.
The level  financial assets category includes a large number of investments in unlisted equities and unlisted venture funds, including
investments managed by Nokia Growth Partners specializing in growth-stage investing and by BlueRun Ventures focusing on early stage
opportunities. The fair value of level  investments is determined using one or more valuation techniques where the use of the market
approach generally consists of using comparable market transactions, while the use of the income approach generally consists of calculating
the net present value of expected future cash flows. For unlisted funds, the selection of appropriate valuation techniques by the fund
managing partner may be affected by the availability and reliability of relevant inputs. In some cases, one valuation technique may provide
the best indication of fair value while in other circumstances multiple valuation techniques may be appropriate.
The inputs generally considered in determining the fair value of level  investments include the original transaction price, recent transactions
in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers,
subsequent rounds of financing, recapitalizations or other transactions undertaken by the issuer, offerings in the equity or debt capital
markets, and changes in financial ratios or cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors. The level
 investments are valued on a quarterly basis taking into consideration any changes, projections and assumptions, as well as any changes in
economic and other relevant conditions. The fair value may be adjusted to reflect illiquidity and/or non-transferability, with the amount of
such discount estimated by the managing partner in the absence of market information. Assumptions used by the managing partner due
to the lack of observable inputs may impact the resulting fair value of individual investments, but no individual input has a significant impact
on the total fair value of the level  investments.
Level  Financial liabilities include conditional obligation to China Huaxin as part of the Nokia Shanghai Bell definitive agreements where China
Huaxin obtained the right to fully transfer its ownership interest in Nokia Shanghai Bell to the Group in exchange for a future cash settlement.
The fair value of the liability is calculated using the net present value of the expected future cash settlement. Most significant unobservable
valuation inputs include certain financial performance metrics of Nokia Shanghai Bell. No individual input has a significant impact on the total
fair value of the level  financial liability. Refer to Note , Significant partly-owned subsidiaries.
Reconciliation of the opening and closing balances on level  financial assets and liabilities:

Level 3 Financial Level 3 Financial

EURm Assets Liabilities
As of January 1, 2016 688 –
Net gains in income statement 52 –
Net loss recorded in other comprehensive income (48) –
Acquisitions through business combination – (14)
Purchases 72 –
Sales (101) –
Other movements 11 –
As of December 31, 2016 674 ()
Net gains in income statement 89 79
Net loss recorded in other comprehensive income (89) –
Acquisitions of non-controlling interest – (737)
Purchases 89 –
Sales (182) –
Other movements (29) –
As of December 31, 2017 552 ()

The gains and losses from venture fund and similar investments categorized in level  are included in other operating income and expenses in
cases where the investment and disposal objectives for these investments are business driven. In other cases the gains and losses from level
 financial assets and liabilities are included in financial income and expenses. A net gain of EUR  million (net gain of EUR  million in )
related to level  financial instruments held as of December ,  is recognized in the consolidated income statement.

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 Financial statements

25. Derivative financial instruments

Assets Liabilities
EURm Fair value(1) Notional(2) Fair value(1) Notional(2)
2017
Hedges on net investment in foreign subsidiaries
Forward foreign exchange contracts 38 3 491 (2) 773
Cash flow hedges
Forward foreign exchange contracts 56 1 305 (6) 465
Fair value hedges
Forward foreign exchange contracts 1 165 (1) 79
Firm commitments 17 133 (24) 229
Cash flow and fair value hedges(3)
Cross-currency interest rate swaps – – (141) 1 512
Derivatives not designated in hedge accounting relationships
carried at fair value through profit and loss
Forward foreign exchange contracts 73 5 858 (88) 7 002
Currency options bought 12 664 – –
Currency options sold – – (4) 163
Interest rate swaps – – – –
Other derivatives – – (2) 100
Total 197 11 616 () 10 323
2016
Hedges on net investment in foreign subsidiaries
Forward foreign exchange contracts 20 1 829 (1) 255
Cash flow hedges
Forward foreign exchange contracts 12 382 (9) 185
Fair value hedges
Interest rate swaps 42 300 – –
Forward foreign exchange contracts 21 350 (51) 689
Firm commitments 34 633 (6) 311
Cash flow and fair value hedges(3)
Cross-currency interest rate swaps 42 1 002 – –
Derivatives not designated in hedge accounting relationships
carried at fair value through profit and loss
Forward foreign exchange contracts 61 3 777 (135) 7 526
Currency options bought 3 569 – –
Interest rate swaps – – (29) 329
Other derivatives – – (5) 157
Total 235 8 842 () 9 452
(1) Included in other financial assets and other financial liabilities in the consolidated statement of financial position.
(2) Includes the gross amount of all notional values for contracts that have not yet been settled or cancelled. 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) Cross-currency interest rate swaps have been designated partly as fair value hedges and partly as cash flow hedges.

NOKIA IN 2017 169

Notes to consolidated financial statements continued

26. Share-based payment

The Group has several equity-based incentive programs for executives and other eligible employees. The programs consist of performance
share plans, restricted share plans and employee share purchase plans. The equity-based incentive grants are generally conditional on
continued employment as well as the fulfillment of the performance, service and other conditions determined in the relevant plan rules. The
share-based payment expense for all equity-based incentive grants included in Continuing operations in the consolidated income statement
amounts to EUR  million (EUR  million in  and EUR  million in ).
Active share-based payment plans by instrument
Performance shares outstanding at target Restricted shares outstanding
Number of Weighted average grant Number of Weighted average grant
performance date fair value restricted date fair value
shares at target EUR(1) shares outstanding EUR(1)
As of January 1, 2015 17 234 066 7 595 405
Granted 13 553 992 5.78 342 200 6.22
Forfeited (7 859 208) (3 880 221)
Vested – (1 952 910)
As of December 31, 2015 22 928 850 2 104 474
Granted 23 110 479 4.70 5 406 682 4.73
Forfeited (1 489 070) (255 023)
Vested (1 132 709) (1 286 596)
As of December 31, 2016 43 417 550 5 969 537
Granted 29 983 190 5.08 2 366 008 4.90
Forfeited (2 589 904) (807 556)
Vested(2) (10 294 593) (1 959 287)
As of December 31, 2017(3) 60 516 243 5 568 702
(1) The fair values of performance and restricted shares are estimated 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.
(2) Vested performance shares at target are multiplied by the confirmed payout (% of target) to calculate the total number of Nokia shares settlement.
(3) Includes 10 167 021 performance shares for the Performance Share Plan 2015 and 204 419 Restricted Shares that vested on January 1, 2018.

Performance shares
In , the Group administered four global performance share plans, the Performance Share Plans of , ,  and . The
performance shares represent a commitment by the Group to deliver Nokia shares to eligible participants at a future point in time, subject
to the fulfillment of predetermined performance criteria. The number of performance shares at target is the amount of performance shares
granted to an individual that will be settled if the target performance, with respect to the performance criteria, is achieved. Any additional
payout beyond the minimum amount will be determined based on the financial performance against the established performance criteria
during the two-year performance period. At maximum performance, the settlement amounts to two times the amount at target. Until
the Nokia shares are delivered, the participants do 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 with the Group terminates prior
to vesting.
The Performance Share Plan  includes a minimum payout guarantee for performance shares granted to non-executive participants,
such that % of the performance shares granted will settle after the restriction period, regardless of the satisfaction of the applicable
performance criteria. Performance shares granted to executive participants under the Performance Share Plan  do not include a
minimum payout guarantee.
Global performance share plans as of December , :
Performance shares Confirmed payout Performance Restriction Settlement
Plan outstanding at target (% of target) period period(1) year
2014 – 126 2014–2015 2016 2017
2015 10 167 021 124 2015–2016 2017 2018
2016 20 717 300 46 2016–2017 2018 2019
2017 29 631 922 2017–2018 2019 2020
(1) The restriction period will be no less than one year from the end of the performance period.

170 NOKIA IN 2017

 Financial statements

Performance criteria for the  Plan for the year ended December :
Threshold performance Maximum performance Weight
Performance criteria(1) EUR EUR %
Average annual net sales 2017–2018 22 842 million 26 280 million 50
Average annual diluted EPS 2017–2018 0.26 0.38 50
(1) Excludes costs related to the acquisition of Alcatel Lucent and related integration, goodwill impairment charges, intangible asset amortization and other purchase price fair value adjustments,
restructuring and associated charges and certain other items.

Restricted shares
In , the Group administered four global restricted share plans: the Restricted Share Plans , ,  and . Restricted shares
are granted on a limited basis for purposes related to retention and recruitment of individuals deemed critical to the Group's future success.
The vesting schedule for the  Plans was  months following the grant quarter. All other plans follow a tranche vesting schedule
whereby each plan vests in three equal tranches on the first, second and the third anniversary of the award subject to continued employment
with the Group. Restricted Share Plan participants do not have any shareholder rights, such as voting or dividend rights, until the Nokia shares
are delivered. The restricted share grants are generally forfeited if the employment relationship with the Group terminates prior to vesting of
the applicable tranche or tranches.
Employee share purchase plan
The Group offers a voluntary Employee Share Purchase Plan to its employees. Participating employees make contributions from their net
salary to purchase Nokia shares on a monthly basis during a -month savings period. The Group intends to deliver one matching share for
every two purchased shares the employee holds as of the end of the Plan cycle. In ,    matching shares were issued as a
settlement to the participants of the Employee Share Purchase Plan  (   matching shares issued under the  Plan and 
 free shares issued under the  plan in ,   matching shares issued in  under the  Plan).
Legacy equity compensation programs
Stock options
In , the Group administered one global stock option plan, the Stock Option Plan . The last stock options under this Plan were
granted in . Each stock option entitles the holder to subscribe for one new Nokia share. The stock options are non-transferable and
may be exercised for shares only. Shares will be eligible for dividends for the financial year in which the share subscription takes place.
Other shareholder rights will commence on the date on which the subscribed shares are entered in the Trade Register. The stock option
grants are generally forfeited if the employment relationship with the Group is terminated.
Reconciliation of stock options outstanding and exercisable:
Weighted Weighted Weighted
average exercise average share Number of average exercise
Number price price options price
Shares under option of shares EUR EUR exercisable EUR
As of January 1, 2015 7 344 023 4.81 1 913 537 10.43
Exercised (1 242 381) 3.79 6.44
Forfeited (2 215 216) 2.48
Expired (246 140) 8.07
As of December 31, 2015 3 640 286 4.67 2 318 911 5.97
Exercised (832 900) 2.52 4.87
Forfeited (17 875) 2.57
Expired (1 188 490) 7.81
As of December 31, 2016 1 601 021 3.34 1 197 771 3.56
Exercised (415 750) 2.13 4.93
Forfeited (215 000) 2.71
Expired (522 771) 5.65
As of December 31, 2017 447 500 2.07 447 500 2.07

NOKIA IN 2017 171

Notes to consolidated financial statements continued

27. Pensions and other post-employment benefits

The Group maintains a number of post-employment plans in various countries including both defined contribution and defined benefit plans.
The Group’s defined benefit plans comprise significant pension schemes, as well as material other post employment benefit (“Opeb”) plans
providing post-retirement healthcare and life insurance coverage to certain employee groups. Defined benefit plans expose the Group to
actuarial risks such as investment risk, interest rate risk, and life expectancy risk. The characteristics and associated risks of the defined
benefit plans vary depending on the legal, fiscal, and economic requirements in each country. These characteristics and risks are further
described below and relate to the plans included as part of the Group’s Continuing operations.
The total net defined benefit liability is EUR  million (EUR   million in ) consisting of net pension and other post-employment
benefit liabilities of EUR   million (EUR   million in ) and net pension and other post-employment benefit assets of
EUR   million (EUR   million in ).
Defined benefit plans
The Group’s most significant defined benefit pension plans are in the United States, Germany, and the United Kingdom. Together they
account for % (% in ) of the Group’s total defined benefit obligation and % (% in ) of the Group’s total plan assets.
The defined benefit obligations, the fair value of plan assets, the effects of the asset ceiling and the net defined benefit balance as of
December :
2017 2016
Defined Net defined Defined Net defined
benefit Fair value Effects of benefit benefit Fair value Effects of benefit
EURm obligation of plan assets asset ceiling balance obligation of plan assets asset ceiling balance
United States (19 614) 20 499 (453) 432 (22 845) 22 880 (265) (230)
Germany (2 773) 1 203 – (1 570) (2 680) 1 160 – (1 520)
United Kingdom (1 276) 1 552 – 276 (1 265) 1 485 – 220
Other (1 834) 2 281 (46) 401 (1 873) 2 245 (40) 332
Total ( ) 25 535 () () ( ) 27 770 () ( )

United States
The Group has significant defined benefit pension plans and a significant post-retirement welfare benefit plan, providing post-retirement
healthcare benefits and life insurance coverage, in the United States. The pension plans include both traditional service-based programs as
well as cash-balance plans. The principal non-represented plan for salaried, non-union member employees was closed to new entrants after
December ,  and fully frozen on December , . The Group, then Alcatel Lucent, adopted a new cash-balance program, a cash
balance plan, for salaried, non-union member employees effective January , . The new program was extended to all United States-
based salaried employees, except the employees of Nokia Technologies, effective January , . For active union-represented employees
and for former employees who, when active, were represented by a union, the Group maintains two represented defined benefit plans, both
of which are traditional service-based pension programs. The larger of the two, which represents % of the obligation, is a closed plan.
Post-retirement welfare benefits are maintained for certain retired former employees. An agreement was made with the Communications
Workers of America (“CWA”) and the International Brotherhood of Electrical Workers (“IBEW”) unions to continue to provide post-retirement
healthcare benefits and life-insurance coverage for employees formerly represented by these two unions. The current union agreement
expires on December , .
The defined benefit obligations, the fair value of plan assets, the effects of the asset ceiling and the net defined benefit balance for United
States defined benefit plans as of December :
2017 2016
Defined Net defined Defined Net defined
benefit Fair value Effects of benefit benefit Fair value Effects of benefit
EURm obligation of plan assets asset ceiling balance obligation of plan assets asset ceiling balance
Pension benefits
Management (13 750) 15 263 (2) 1 511 (15 855) 16 861 (2) 1 004
Occupational (2 995) 4 704 (451) 1 258 (3 528) 5 440 (263) 1 649
Supplemental (351) – – (351) (401) – – (401)
Total ( ) 19 967 () 2 418 ( ) 22 301 () 2 252
Post-retirement benefits
Health (non-union represented) (76) – – (76) (126) – – (126)
Health (formerly union represented) (1 026) 264 – (762) (1 343) 270 – (1 073)
Group life (non-union represented) (929) 186 – (743) (1 040) 220 – (820)
Group life (formerly union represented) (486) 82 – (404) (551) 89 – (462)
Other (1) – – (1) (1) – – (1)
Total ( ) 532 – ( ) ( ) 579 – ( )

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 Financial statements

Germany
The Group maintains two primary plans in Germany which cover the majority of active employees: the cash balance plan Beitragsorientierter
Alterversorgungs Plan (“BAP”) and a similar cash balance program for the Group’s former Alcatel Lucent employees. Individual benefits are
generally dependent on eligible compensation levels, ranking within the Group and years of service. These plans are partially funded defined
benefit pension plans, the benefits being subject to a minimum return guaranteed by the Group. The funding vehicle for the BAP plan is the
NSN Pension Trust e.V. The funding vehicle for the former Alcatel Lucent cash balance plan is the Alcatel SEL Unterstützungs-GmbH. The
trusts are legally separate from the Group and manage the plan assets in accordance with the respective trust agreements.
All other plans have been previously frozen and replaced by the cash balance plans. Benefits are paid in annual installments, as monthly
retirement pension, or as a lump sum on retirement in an amount equal to accrued pensions and guaranteed interest. The risks specific to
the German defined benefit plans are related to changes in mortality of covered members, return on investment on plan assets, and volatility
in interest rates.
United Kingdom
The Group has two pension Trusts in the United Kingdom. The Nokia Trust has a money purchase section with Guaranteed Minimum Pension
(“GMP”) underpin and final salary sections, all closed to future benefit accrual on April , . The legacy Alcatel-Lucent Trust has a money
purchase section with GMP underpin, this section is closed to future benefit accrual; it also has final salary sections, the final salary sections
are closed to new joiners but currently open to future benefit accrual. Both Trusts manage all investments for their respective pension plans.
Individual benefits for final salary sections are dependent on eligible compensation levels and years of service. For the money purchase
sections with GMP underpin, individual benefits are dependent on the greater of the value of GMP at retirement date or the pension value
resulting from the individual’s invested funds.
Impact on the consolidated financial statements
Movements in the defined benefit obligation, fair value of plan assets and the impact of the asset ceiling
The movements in the present value of the defined benefit obligation for the years ended December :
2017 2016
United States United States Other United States United States Other
EURm pension Opeb pension Total pension Opeb pension Total
As of January 1 ( ) ( ) ( ) ( ) () – ( ) ( )
Current service cost (75) – (105) (180) (63) – (92) (155)
Interest expense (652) (98) (112) (862) (711) (111) (150) (972)
Past service cost and gains
on curtailments (39) (1) 43 3 (13) – 11 (2)
Settlements 13 – 10 23 5 – 6 11
Total (753) (99) (164) (1 016) (782) (111) (225) (1 118)
Remeasurements:
Gain/(loss) from change in demographic
assumptions 141 33 (38) 136 79 15 (13) 81
Loss from change in financial
assumptions (747) (141) (148) (1 036) (301) (60) (593) (954)
Experience gain/(loss) 60 204 3 267 227 205 (74) 358
Total(1) (546) 96 (183) (633) 5 160 (680) (515)
Translation differences(1) 2 422 370 123 2 915 (615) (91) 166 (540)
Contributions from plan participants – (111) (24) (135) – (124) (20) (144)
Benefit payments from plans 1 555 303 246 2 104 1 595 366 243 2 204
Acquisitions through business
combinations – – – – (19 919) (3 243) (3 431) (26 593)
Other 10 (16) (63) (69) (10) (18) (89) (117)
Total 3 987 546 282 4 815 (18 949) (3 110) (3 131) (25 190)
As of December 31 ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )
(1) Includes CTA due to translation differences.

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Notes to consolidated financial statements continued

The movements in the fair value of plan assets for the years ended December :
2017 2016
United States United States Other United States United States Other
EURm pension Opeb pension Total pension Opeb pension Total
As of January 1 22 301 579 4 890 27 770 57 – 1 394 1 451
Interest income 738 16 101 855 774 18 135 927
Administrative expenses and interest
on asset ceiling (17) – (1) (18) (19) – (1) (20)
Settlements (12) – (11) (23) (5) – (6) (11)
Total 709 16 89 814 750 18 128 896
Remeasurements:
Return on plan assets, excluding amounts
included in interest income 1 369 37 183 1 589 947 6 387 1 340
Total 1 369 37 183 1 589 947 6 387 1 340
Translation differences (2 725) (71) (111) (2 907) 709 16 (207) 518
Contributions:
Employers 28 3 129 160 32 10 74 116
Plan participants – 111 24 135 – 124 20 144
Benefit payments from plans (1 555) (303) (158) (2 016) (1 595) (366) (164) (2 125)
Acquisitions through business combinations – – – – 21 571 599 3 182 25 352
Section 420 Transfer(1) (160) 160 – – (172) 172 – –
Other – – (10) (10) 2 – 76 78
Total (4 412) (100) (126) (4 638) 20 547 555 2 981 24 083
As of December 31 19 967 532 5 036 25 535 22 301 579 4 890 27 770
(1) Section 420 Transfer. Refer to ‘Future Cash Flow’ section below.

The movements in the funded status for the years ended December :
2017 2016
United States United States Other United States United States Other
EURm pension Opeb pension Total pension Opeb pension Total
As of January 1 2 517 ( ) () () () – () ()
Current service cost (75) – (105) (180) (63) – (92) (155)
Interest income/(expense) 69 (82) (12) (25) 44 (93) (16) (65)
Past service cost and gains on curtailments (39) (1) 43 3 (13) – 11 (2)
Settlements 1 – (1) – – – – –
Total (44) (83) (75) (202) (32) (93) (97) (222)
Remeasurements:
Return on plan assets, excluding amounts
included in interest income 1 369 37 183 1 589 947 6 387 1 340
Gain/(loss) from change in demographic
assumptions 141 33 (38) 136 79 15 (13) 81
Loss from change in financial assumptions (747) (141) (148) (1 036) (301) (60) (593) (954)
Experience gain/(loss) 60 204 3 267 227 205 (74) 358
Total(1) 823 133 – 956 952 166 (293) 825
Translation differences(1) (303) 299 12 8 94 (75) (41) (22)
Employer contributions 28 3 129 160 32 10 74 116
Benefit payments from plans – – 88 88 – – 79 79
Acquisitions through business combinations – – – – 1 652 (2 644) (249) (1 241)
Section 420 Transfer(2) (160) 160 – – (172) 172 – –
Other 10 (16) (73) (79) (8) (18) (13) (39)
Total (425) 446 156 177 1 598 (2 555) (150) (1 107)
As of December 31 2 871 ( ) () 38 2 517 ( ) () ()
(1) Includes CTA due to translation differences.
(2) Section 420 Transfer. Refer to ‘Future Cash Flow’ section below.

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 Financial statements

The movements in the impact of the asset ceiling limitation for the years ended December :
2017 2016
United States United States Other United States United States Other
EURm pension Opeb pension Total pension Opeb pension Total
As of January 1 (265) – () () – – () ()
Interest expense (11) – (1) (12) (1) – (1) (2)
Remeasurements:
Change in asset ceiling, excluding amounts
included in interest expense (224) – (9) (233) (251) – (7) (258)
Acquisitions through business combinations – – – – – – (22) (22)
Translation differences 47 – 4 51 (13) – (1) (14)
As of December 31 () – () () () – () ()

Net balances as of December :

2017 2016
United States United States Other United States United States Other
EURm pension Opeb pension Total pension Opeb pension Total
As of December 31 2 418 ( ) () () 2 252 ( ) () ( )

Present value of obligations includes EUR   million (EUR   million in ) of wholly funded obligations, EUR   million
(EUR   million in ) of partly funded obligations and EUR   million (EUR   million in ) of unfunded obligations.
Recognized in the income statement
Recognized in personnel expenses in the consolidated income statement for the years ended December :
EURm 2017 2016 2015
Current service cost 180 155 46
Past service cost and gains on curtailments (3) 2 (5)
Interest expense 37 65 9
Other – – 1
Total 214 222 51
Of which relates to:
United States pensions 55 32 1
United States Opeb 83 92 –
Other pensions 76 98 50

Recognized in comprehensive income

Recognized in other comprehensive income for the years ended December :
EURm 2017 2016 2015
Return on plan assets, excluding amounts included in interest income 1 589 1 340 2
Gain from change in demographic assumptions 136 81 –
(Loss)/gain from change in financial assumptions (1 036) (954) 114
Experience gain 267 358 –
Change in asset ceiling, excluding amounts included in interest expense (233) (259) (6)
Total 723 566 110
Of which relates to:
United States pensions 599 701 –
United States Opeb 133 166 –
Other pensions (9) (301) 110

NOKIA IN 2017 175

Notes to consolidated financial statements continued

Actuarial assumptions and sensitivity analysis

Actuarial assumptions
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each
country.
The discount rates and mortality tables used for the significant plans:
2017 2016 2017
Discount rate % Mortality table
RP–2014 w/MP–2017
mortality projection
United States 3.3 3.7 scale
Germany 1.3 1.6 Heubeck 2005G
United Kingdom(1) 2.5 2.7 S2PA Light
Total weighted average for all countries 2.9 3.3
(1) Tables are adjusted with 1.5% long-term rate of improvement.

The principal actuarial weighted average assumptions used for determining the defined benefit obligation:
% 2017 2016
Discount rate for determining present values 2.9 3.3
Annual rate of increase in future compensation levels 1.9 1.9
Pension growth rate 0.4 0.3
Inflation rate 2.1 2.0
Weighted average duration of defined benefit obligations 11 yrs 11 yrs

United States defined benefit plans

Actuarial assumptions used for determining the defined benefit obligation:
% 2017 2016
Benefit obligation, discount rate
Pension 3.3 3.7
Post-retirement healthcare and other 3.1 3.4
Post–retirement group life 3.4 3.8
Annual rate of increase in future compensation levels 2.06 2.08
Assumed healthcare cost trend rates
Healthcare costs trend rate assumed for next year 11.5 7.5
Healthcare cost trend rate assumed for next year (excluding post-retirement dental benefits) 11.8 7.7
Terminal growth rate 4.9 4.9
Year that the rate reaches the terminal growth value 2028 2028

176 NOKIA IN 2017

 Financial statements

Sensitivity analysis
The sensitivity of the defined benefit obligation to changes in the principal assumptions:
Increase in assumption(1) Decrease in assumption(1)
Change in assumption EURm EURm
Discount rate for determining present values 1.0 % 2 441 (2 961)
Annual rate of increase in future compensation levels 1.0 % (117) 103
Pension growth rate 1.0 % (557) 468
Inflation rate 1.0 % (533) 437
Healthcare cost trend rate 1.0 % (47) 43
Life expectancy 1 year (899) 846
(1) Positive movement indicates a reduction in the defined benefit obligation; a negative movement indicates an increase in the defined benefit obligation.

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant and may not be
representative of the actual impact of changes. If more than one assumption is changed simultaneously, the combined impact of changes
would not necessarily be the same as the sum of the individual changes. If the assumptions change to a different level compared with that
presented above, the effect on the defined benefit obligation may not be linear. The methods and types of assumptions used in preparing
the sensitivity analyses are the same as in the previous period.
When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the present value of the defined benefit
obligation is calculated with the projected unit credit method. Increases and decreases in the discount rate, rate of increase in future
compensation levels, pension growth rate and inflation, which are used in determining the defined benefit obligation, do not have a
symmetrical effect on the defined benefit obligation primarily due to the compound interest effect created when determining the net
present value of the future benefit.
Investment strategies
The overall investment objective of the Group is to preserve or enhance the pension plans’ funded status through the implementation of an
investment strategy that maximizes return within the context of minimizing surplus risk. In formulating the asset allocation for the Plans,
multiple factors are considered, including, but not limited to the long-term risk and return expectations for a variety of asset classes as well
as current and multi-year projections of the pension plans’ demographics, benefit payments, contributions and funded status. Local trustee
boards are responsible for conducting asset liability studies, when appropriate; overseeing the investment of plan assets; and monitoring and
managing associated risks under company oversight and in accordance with local law. The results of the Asset-Liability framework are
implemented on a plan level.
The Group’s investment managers may use derivative financial instruments including futures contracts, forward contracts, options and
interest rate swaps to manage market risk. The performance and risk profile of investments is regularly monitored on a stand-alone basis as
well as in the broader portfolio context. One risk is a decline in the plan’s funded status as a result of the adverse performance of plan assets
and/or defined benefit obligations. The application of the Asset-Liability Model study focuses on minimizing such risks.
Disaggregation of plan assets
2017 2016
EURm Quoted Unquoted Total % Quoted Unquoted Total %
Equity securities 1 857 1 1 858 7 2 777 – 2 777 10
Debt securities 17 810 44 17 854 70 18 329 – 18 329 66
Insurance contracts – 1 013 1 013 4 – 833 833 3
Real estate – 1 350 1 350 5 – 1 389 1 389 5
Short-term
investments 709 14 723 3 1 110 – 1 110 4
Other – 2 737 2 737 11 – 3 332 3 332 12
Total 20 376 5 159 25 535 100 22 216 5 554 27 770 100

Most short-term investments including cash, equities and fixed-income securities have quoted market prices in active markets. Equity
securities represent investments in equity funds and direct investments, which have quoted market prices in an active market. Debt
securities represent investments in government and corporate bonds, as well as investments in bond funds, which have quoted market prices
in an active market. Debt securities may also comprise investments in funds and direct investments. Insurance contracts are customary
pension insurance contracts structured under domestic law in the respective countries. Real estate investments are investments in
commercial properties or real estate funds which invest in a diverse range of real estate properties. Short-term investments are liquid assets
or cash which are being held for a short period of time, with the primary purpose of controlling the tactical asset allocation. Other includes
commodities as well as alternative investments, including derivative financial instruments.

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Notes to consolidated financial statements continued

United States plan

United States plan asset target and actual allocation range of the pension and post-retirement trust by asset category as of
December , :
Pension target Percentage of Post-retirement Percentage of post-
% allocation range plan assets target allocation employment plan assets
Equity securities 5–9 6 44 44
Fixed income securities 68–88 78 15 15
Real estate 4-8 6 – –
Private equity and other 6–13 10 – –
Cash – – 41 41
Total 100 100 100

The majority of the Group’s United States pension plan assets are held in a master pension trust. The post-retirement plan assets are held in
two separate trusts in addition to the amount set aside in the master pension trust for retiree healthcare. The Pension & Benefits Investment
Committee formally approves the target allocation ranges every few years on the completion of the Asset-Liability Model study by external
advisors and internal investment management. The overall United States pension plan asset portfolio reflects a balance of investments split
of approximately / between equity, including alternative investments for this purpose, and fixed income securities.
United States pension plan assets included EUR . million of Nokia ordinary shares and EUR . million of Nokia bonds as of December ,
 (EUR  million of Nokia bonds in ).
Asset ceiling limitation
IAS, Employee benefits, limits the amount of pension fund surplus that an entity may recognize to the amount of economic benefit
that the entity can realize, either through refunds, or as reductions in future contributions. The Group recognized an asset ceiling limitation
in  in the amount of EUR  million, reducing the total gross asset value from EUR   million to the recognized value of
EUR   million.
The most significant limitation of asset recognition for the Group is from the United States formerly represented pension plan. For the plans
in the United States, the surplus is owned by the plan and therefore cannot be recognized by the Group as a recoverable pension asset.
However, Section  of the Internal Revenue code (“Section ”) allows for the transfer of pension assets in excess of specified thresholds
(“excess pension assets”) over the plan’s funding obligation to be used to fund healthcare benefits and life insurance coverage (Opeb) of
retired employees entitled to pension benefits under the plan. Section  requires employers making such transfers to continue to provide
healthcare benefits or life insurance coverage to those retirees for a certain period of time (“cost maintenance period”), at levels prescribed
by regulations.
For retirees who were represented by the CWA and IBEW, the Group expects to fund the current retiree healthcare and group life insurance
obligations with Section  transfers from the United States formerly represented pension plan’s pension surplus. This is considered as a
refund from the pension plan when setting the asset ceiling.
Annual valuation of funded status of the pension plans in the United States has established that the ability to utilize the Section  transfer
of excess assets is limited to the United States formerly represented pension plan. Based on a calculated valuation of related Opeb liabilities
to which the asset transfer is applicable, EUR   million asset may be recognized. This results in an asset ceiling limitation reducing the
total funding surplus of this plan by EUR  million from a funded status of EUR   million to EUR   million as of December , .
Significant events in 2017
Plan amendments
United States Special Voluntary Termination Program (“SVTP”) benefits offered to certain eligible participants
Effective January , , the Group amended the represented pension plan to reflect additional offers under the SVTP to provide for
enhanced benefits to certain eligible employees. The SVTP benefits resulted in an expense of EUR  million, recognized as past service costs
in the consolidated income statement.
French AUXAD pension plan amendment
AUXAD is a French supplemental pension plan for the portion of income that exceeds eight times the annual French social security pension
limit, beyond which there is no legal or contractual pension scheme. In , the Group amended this plan to close the plan to future
accruals from January , . This change resulted in a gain of EUR  million, recognized as income related to past service in the
consolidated income statement.
Curtailments
In , the Group recognized curtailments in a number of countries following continued integration efforts to achieve cost savings. In
France, restructuring activities resulted in a gain on curtailment of EUR  million following the release of liabilities. In the United States,
restructuring activities resulted in a loss on curtailment of EUR  million driven by severance-related pension benefit enhancement.

178 NOKIA IN 2017

 Financial statements

Future cash flows

Contributions
Group contributions to the pension and other post-retirement benefit plans are made to facilitate future benefit payments to plan
participants. The funding policy is to meet minimum funding requirements as set forth in the employee benefit and tax laws, as well as any
such additional amounts as the Group may determine appropriate. Contributions are made to benefit plans for the sole benefit of plan
participants. Employer contributions expected to be made in  are EUR  million.
United States pension plans
Funding methods
Funding requirements for the three major United States qualified pension plans are determined by the applicable statutes, namely the
Employee Retirement Income Security Act of  (“ERISA”), the Internal Revenue Code of , and regulations issued by the Internal
Revenue Service (“IRS”).
In determining funding requirements, ERISA allows assets to be either market value or an average value over a period of time; and liabilities
to be based on spot interest rates or average interest rates over a period of time. A preliminary assessment indicates that no funding is
required for the non-represented and represented pension plans until, at least . For the formerly represented pension plan, the Group
does not foresee any future funding requirement for regulatory funding purposes, given the plan’s asset allocation and the level of assets
compared to liabilities.
Section 420 transfer
As described in the ‘Asset Ceiling’ section, Section  allows for the funding of certain Opeb liabilities by utilizing certain excess pension
assets. Section  is currently set to expire on December , . On December , , the Group made EUR  million Section 
transfer of excess pension assets from the formerly represented pension plan to fund healthcare benefits and life insurance coverage for
retirees who, when actively employed, were represented by CWA and IBEW. The Group expects to make a further Section  transfer during
 from the formerly represented pension plan to fund healthcare benefits and group life insurance coverage.
Contributions
The following table summarizes expected contributions to the pension and post-retirement plans until . These figures include the
reimbursements the Group will receive from the coverage provided to plan participants eligible for the Medicare Prescription drug benefit.
The Group did not make contributions to its qualified pension plans in , nor does it expect to make any contributions in . Actual
contributions may differ from expected contributions due to various factors, including performance of plan assets, interest rates and
legislative changes.
Pension Post-retirement
Medicare subsidy for
EURm Non-qualified plans Non-represented Other benefit plans formerly union represented(1)
2018 25 9 3 (16)
2019 25 9 3 (15)
2020 24 9 3 (14)
2021 24 9 3 (14)
2022 23 8 3 (13)
2023–2027 110 35 233 (57)
(1) Medicare Subsidy is recorded within other movements in the reconciliation of the present value of the defined benefit obligation.

Certain actuarial assumptions used to determine whether pension plan funding is required differ from those used for accounting purposes,
which may cause significant differences in volatile markets. While the basis for developing discount rates in both cases is by corporate bond
yields, for accounting purposes, a yield curve developed by CitiGroup is used as of the close of the last business day of the financial year;
whereas the ERISA funding rules allow the use of either a daily average yield curve for the last month of the financial year, or a two-year
average yield curve. When measuring assets, fair values of plan assets as of the last business day of the financial year are used for accounting
purposes; whereas ERISA funding rules allow for “asset smoothing” that averages fair values over periods as long as two years with limited
expected returns included in the averaging. The approach applied by ERISA for the regulatory funding valuation minimizes the impact of
sharp changes in asset values and corporate bond yields in volatile markets.
Healthcare benefits for both management and formerly union represented retirees’ benefits are capped for those who retired after
February , . The benefit obligation associated with this group of retirees is approximately % of the total United States retiree
healthcare obligation as of December , . Medicare is the primary payer for those aged  and older, comprising almost all of
uncapped retirees.

NOKIA IN 2017 179

Notes to consolidated financial statements continued

Benefit payments
The following table summarizes expected benefit payments from the pension and post-retirement plans and other post-employment
benefit plans until . Actual benefit payments may differ from expected benefit payments. The amounts for the United States plans are
net of expected plan participant contributions, as well as the annual Medicare Part D subsidy of approximately EUR  million.
United States direct benefit payments Other countries Total
Pension Post-retirement
Qualified Qualified Non-qualified Formerly union Non-union
EURm management occupational plans represented represented
2018 1 237 286 25 125 51 273 1 997
2019 1 073 265 25 118 52 261 1 794
2020 1 041 253 24 147 53 267 1 785
2021 1 006 242 24 141 54 280 1 747
2022 971 230 23 133 55 279 1 691
2023-2027 4 294 980 110 539 281 1 515 7 719

Benefit payments are paid from plan assets where plans are fully funded. Funding mechanisms, such as the Section  transfer, are further
utilized to minimize direct benefit payments for underfunded United States Opeb liabilities. Direct benefit payments expected to be paid in
 total EUR  million.

28. Accrued expenses, deferred revenue and other liabilities

Non-current liabilities
EURm 2017 2016
Advance payments and deferred revenue(1) 2 204 1 171
Discounted non-interest-bearing liabilities(2) 690 23
Salaries, wages and social charges 59 138
Other 33 121
Total 2 986 1 453

Current liabilities
EURm 2017 2016
Advance payments and deferred revenue(1) 3 513 3 178
Salaries, wages and social charges 1 551 1 576
VAT and other indirect taxes 453 362
Other 1 149 1 296
Total 6 666 6 412
(1) Non-current deferred revenue includes EUR 924 million (EUR 1 080 million in 2016) and current deferred revenue includes EUR 155 million (EUR 155 million in 2016) prepayment relating to a ten-year
mutual patent license agreement with Microsoft.
(2) Includes EUR 672 million financial liability related to the conditional obligation to China Huaxin as part of the Nokia Shanghai Bell definitive agreements where China Huaxin obtained the right to fully
transfer its ownership interest in Nokia Shanghai Bell to the Group in exchange for a future cash settlement. Refer to Note 33, Significant partly-owned subsidiaries.

Other accruals include accrued royalties, research and development expenses, marketing expenses and interest expenses, as well as various
amounts which are individually insignificant.

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 Financial statements

29. Provisions
Project Divestment- Material
EURm Restructuring Warranty Litigation Environmental losses related liability Other Total
()
As of January ,  194 94 69 16 62 129 29 225 818
Acquisitions through business
combinations 291 135 100 114 180 26 31 366 1 243
Translation differences 2 1 22 4 – 9 2 1 41
Reclassification – – 8 – – (2) 1 (7) –
Charged to income statement:
Additional provisions 874 121 75 28 44 16 57 330 1 545
Changes in estimates (123) (38) (31) (2) (31) (24) (21) (104) (374)
Total charged to income
statement 751 83 44 26 13 (8) 36 226 1 171
Utilized during year(2) (525) (106) (60) (26) (124) (44) (22) (288) (1 195)
As of December , () 713 207 183 134 131 110 77 523 2 078
Acquisitions through business
combinations – – – – – – – 6 6
Translation differences (13) (10) (9) (11) (6) (8) (4) (23) (84)
Reclassification – – 7 (12) – (4) 15 (2) 4
Charged to income statement:
Additional provisions 577 146 56 14 8 15 56 261 1 133
Changes in estimates (55) (56) (30) (1) (1) (7) (38) (52) (240)
Total charged to income
statement 522 90 26 13 7 8 18 209 893
Utilized during year(3) (500) (77) (77) (17) (56) (30) (40) (212) (1 009)
As of December 31, 2017 722 210 130 107 76 76 66 501 1 888

(1) Following the IFRS Interpretations Committee agenda decision in September 2017 on interest and penalties related to income taxes, the Group no longer accounts for these items as income taxes.
Accordingly, the Group has retrospectively revised the presentation of interest and penalties related to income taxes from current income tax liabilities to provisions in the consolidated statement
of financial position. The impact of the revision was EUR 98 million as of December 31, 2016 and EUR 93 million as of December 31, 2015.
(2) The utilization of restructuring provision includes items transferred to accrued expenses, of which EUR 62 million remained in accrued expenses as of December 31, 2016. The utilization of project
losses includes EUR 7 million transferred to inventory write-downs. The utilization of other provisions includes items transferred to accrued expenses, of which EUR 7 million remained in accrued
expenses as of December 31, 2016.
(3) The utilization of restructuring provision includes items transferred to accrued expenses, of which EUR 56 million remained in accrued expenses as of December 31, 2017.

As of December , , the restructuring provision amounted to EUR  million including personnel and other restructuring related
costs, such as real estate exit costs. The provision consists of EUR  million global provision related to the announcement on April , 
and EUR  million relating to the restructuring provisions recognized due to previously announced restructuring programs. The majority
of the restructuring-related cash outflows is expected to occur over the next two years.
The warranty provision relates to sold products. Cash outflows related to the warranty provision are generally expected to occur within the
next  months.
The litigation provision includes estimated potential future settlements for litigation. Cash outflows related to the litigation provision are
inherently uncertain and generally occur over several periods.
The environmental provision includes estimated costs to sufficiently clean and refurbish contaminated sites, to the extent necessary, and
where necessary, continuing surveillance at sites where the environmental remediation exposure is less significant. Cash outflows related
to the environmental liability are inherently uncertain and generally occur over several periods.
The project loss provision relates to onerous customer contracts. Cash outflows related to the project loss provision are generally expected
to occur over the next  months.
The divestment-related provision relates to the sale of businesses, and includes certain liabilities where the Group is required to indemnify
the buyer. Cash outflows related to the divestment-related provision are inherently uncertain.
The material liability provision relates to non-cancellable purchase commitments with suppliers, in excess of forecasted requirements as of
each reporting date. Cash outflows related to the material liability provision are expected to occur over the next  months.
Other provisions include provisions for various contractual obligations and other obligations. Cash outflows related to other provisions are
generally expected to occur over the next two years.

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Notes to consolidated financial statements continued

Legal matters
A number of Group companies are and will likely continue to be subject to various legal proceedings and investigations that arise from
time to time, including proceedings regarding intellectual property, product liability, sales and marketing practices, commercial disputes,
employment, and wrongful discharge, antitrust, securities, health and safety, environmental, tax, international trade, and privacy matters.
As a result, the Group may incur substantial costs that may not be covered by insurance and could affect business and reputation. While
management does not expect any of these legal proceedings to have a material adverse effect on the Group’s financial position, litigation
is inherently unpredictable and the Group may in the future incur judgments or enter into settlements that could have a material adverse
effect on the results of operations and cash flows.
Litigation and proceedings
Vertu
The Group divested the United Kingdom-based luxury handset business, Vertu, to Crown Bidco Ltd in . In , Crown Bidco Ltd served
a claim in the Commercial Court in London alleging breach of contract in relation to the transfer of IT assets and breach of warranties under
the sale agreement. In July , Crown Bidco and the Group resolved the dispute on terms confidential to the parties and without any
admission of liability on the part of any entity.
Mass labor litigation Brazil
The Group is defending against a substantial number of labor claims in various Brazilian labor courts. Plaintiffs are former employees whose
contracts were terminated after the Group exited from certain managed services contracts. The claims mainly relate to payments made
under, or in connection with, the terminated labor contracts. The Group has closed the majority of the court cases through settlement or
judgement. Closure of most of the remaining open cases is expected to occur within the next couple of years.
Asbestos litigation in the United States
The Group is defending approximately  asbestos-related matters, at various stages of litigation. The claims are based on premises
liability, products liability, and contractor liability. The claims also involve plaintiffs allegedly diagnosed with various diseases, including
but not limited to asbestosis, lung cancer, and mesothelioma.
Intellectual property rights litigation
Apple
On December , , the Group commenced patent infringement proceedings against Apple in Asia, Europe and the United States.
On May , , the parties settled all pending patent litigation between them, and entered into a patent license and business collaboration
agreement. The Group received an up-front cash payment from Apple, with additional revenues during the term of the agreement.
LG Electronics
In , LG Electronics agreed to take a royalty-bearing smartphone patent license from Nokia Technologies with the royalty payment
obligations subject to commercial arbitration. In September , the International Court of Arbitration of the International Chamber
of Commerce issued its award for that arbitration between the Group and LG Electronics. The parties have since reached an agreement
on a license for a longer term than was set out in the arbitration.

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 Financial statements

30. Commitments and contingencies

Contractual obligations
Payments due for contractual obligations as of December ,  by due date:
EURm Within 1 year 1 to 3 years 4 to 5 years More than 5 years Total
Purchase obligations(1) 1 983 471 67 5 2 526
Operating leases(2) 255 335 185 186 961
Total 2 238 806 252 191 3 487
(1) Includes inventory purchase obligations, service agreements and outsourcing arrangements.
(2) Includes leasing costs for office, manufacturing and warehouse space under various non-cancellable operating leases. Certain contracts contain renewal options for various periods of time.

Guarantees and other contingent commitments

EURm 2017 2016
Collateral for own commitments
Assets pledged 5 5
Contingent liabilities on behalf of Group companies(1)
Guarantees issued by financial institutions 1 678 1 805
Other guarantees 487 794
Contingent liabilities on behalf of associated companies and joint ventures
Financial guarantees – 11
Contingent liabilities on behalf of other companies
Other guarantees 27 135
Financing commitments
Customer finance commitments(2) 495 223
Financing commitments to associated companies 20 –
Venture fund commitments(3) 396 525

(1) In contingent liabilities on behalf of Group companies, the Group reports guarantees that have been given to third parties in the normal course of business. These are mainly guarantees given by
financial institutions to the Group’s customers for the performance of the Group’s obligations under supply agreements, including tender bonds, performance bonds, and warranty bonds issued by
financial institutions on behalf of the Group. Additionally, the Group has issued corporate guarantees with primary obligation given directly to customers with these guarantees amounting to EUR 1 114
million (EUR 1 608 million in 2016). In Other guarantees, the Group reports guarantees related to non-commercial contracts that support business activities. As a result of internal policies and active
management of outstanding guarantee exposure, the Group has not been subject to any material guarantee claims during recent years.
(2) Customer finance commitments are available under loan facilities negotiated with customers. Availability of the facility is dependent upon the borrower’s continuing compliance with the agreed
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 equipment and services. Refer to Note 36, Risk management.
(3) In 2016, Nokia Growth Partners announced the closing of a new USD 350 million fund for investments in Internet of Things companies. The fund is sponsored by the Group and will serve to identify new
opportunities to grow the ecosystem in these solutions. As a limited partner in Nokia Growth Partners and certain other funds making technology-related investments, The Group is committed to
capital contributions and entitled to cash distributions according to the respective partnership agreements and underlying fund activities.

The amounts represent the maximum principal amount for commitments and contingencies.

NOKIA IN 2017 183

Notes to consolidated financial statements continued

31. Notes to the consolidated statement of cash flows

EURm 2017 2016 2015
Adjustments for(1)
Depreciation and amortization 1 591 1 594 320
Share-based payment 92 113 49
Impairment charges 244 125 11
Restructuring charges(2) 522 751 48
Profit on sale of property, plant and equipment and available-for-sale investments (121) (82) (132)
Transfer from hedging reserve to sales and cost of sales – 27 61
Share of results of associated companies and joint ventures (Note 34) (11) (18) (29)
Financial income and expenses 402 308 211
Income tax expense/(benefit) 937 (429) 338
Gain on the sale of businesses (5) (14) (1 178)
Other income and expenses (68) 32 40
Total 3 583 2 407 ()
Change in net working capital
(Increase)/decrease in receivables (421) 18 (728)
(Increase)/decrease in inventories (296) 533 341
Increase/(decrease) in interest-free liabilities 1 314 (2 758) (990)
Total 597 ( ) ( )
(1) Includes Continuing and Discontinued operations. Refer to Note 6, Disposals treated as Discontinued operations.
(2) Adjustments represent the non-cash portion of the restructuring charges recognized in the consolidated income statement.

The Group did not engage in any material non-cash investing or financing activities in . In , the purchase consideration in relation to
the acquisition of Alcatel Lucent comprised the issuance of new Nokia shares in addition to cash payments. Refer to Note , Acquisitions. In
, the Group exercised its option to redeem EUR  million convertible bonds at their principal amount outstanding plus accrued
interest. Virtually all bondholders elected to convert their convertible bonds into Nokia shares before redemption. The conversion did not
have a cash impact.

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 Financial statements

32. Principal Group companies

The Group’s significant subsidiaries as of December , :
Parent Group ownership
Country of incorporation holding interest
Company name and place of business Primary nature of business % %
Nokia Solutions and Networks B.V. The Hague, Netherlands Holding company – 100.0
Nokia Solutions and Networks Oy Helsinki, Finland Sales and manufacturing company  100.0
Nokia of America Corporation(1) Delaware, USA Sales company – 100.0
Nokia Solutions and Networks India
Private Limited New Delhi, India Sales and manufacturing company – 100.0
Nokia Solutions and Networks System
Technology (Beijing) Co., Ltd. Beijing, China Sales company – 100.0
Nokia Technologies Oy Helsinki, Finland Sales and development company 100.0 100.0
Nokia Bell NV Antwerp, Belgium Sales company – 100.0
Alcatel-Lucent Participations SA Nozay, France Holding company – 100.0
Alcatel-Lucent Canada Inc. Ottawa, Canada Sales company – 100.0
Nokia Shanghai Bell Co., Ltd(2)(4) Shanghai, China Sales and manufacturing company – 50.0
Nokia Solutions and Networks Branch
Operations Oy Helsinki, Finland Sales company – 100.0
Nokia Solutions and Networks Japan Corporation Tokyo, Japan Sales company – 100.0
Alcatel Submarine Networks SAS Nozay, France Sales and manufacturing company – 100.0
Nokia Spain, S.A. Madrid, Spain Sales company – 100.0
Alcatel-Lucent Italia S.p.A. Milan, Italy Sales company – 100.0
Alcatel Lucent SAS(3) Nozay, France Holding company – 100.0
Nokia UK Limited Bristol, UK Sales company – 100.0
Nokia Solutions and Networks Taiwan Co., Ltd. Taipei, Taiwan Sales company – 100.0
Nokia Solutions and Networks GmbH & Co. KG Munich, Germany Sales company – 100.0
Alcatel-Lucent International SAS Nozay, France Sales company – 100.0
Nokia Services Limited New South Wales, Australia Sales company – 100.0
Nokia Finance International B.V. Haarlem, Netherlands Holding company 100.0 100.0
(1) Alcatel-Lucent USA Inc. was renamed as Nokia of America Corporation, effective January 1, 2018.
(2) Alcatel-Lucent Shanghai Bell Co., Ltd. was renamed as Nokia Shanghai Bell Co., Ltd., effective June 1, 2017.
(3) Company form of Alcatel Lucent SA was changed to Alcatel Lucent SAS, effective February 28, 2017.
(4) The Group owns 50% plus one share in Nokia Shanghai Bell Co., Ltd, the other shareholder being China Huaxin, an entity controlled by the Chinese government. Refer to Note 33, Significant partly-
owned subsidiaries.

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Notes to consolidated financial statements continued

33. Significant partly-owned subsidiaries

As part of the acquisition of Alcatel Lucent on January , , the Group acquired a partly-owned consolidated subsidiary, Alcatel-Lucent
Shanghai Bell Co., Ltd. On May , , the Group announced the signing of definitive agreements with the China Huaxin Post &
Telecommunication Economy Development Center ("China Huaxin") related to the integration of Alcatel-Lucent Shanghai Bell Co,. Ltd.
and the Group's China business into a new joint venture branded as Nokia Shanghai Bell.
As part of the definitive agreements, the Group transferred it’s China business and subsidiaries to Nokia Shanghai Bell in exchange for a cash
payment. As the transfer of the Group’s China business consisted of a transaction between two Group subsidiaries, all gains or losses that
arose from the transaction were fully eliminated within the Group’s consolidated financial statements. Further, the transfer of cash from
Nokia Shanghai Bell to the wholly-owned parent entity of the Group’s China business did not impact the cash nor net cash balances in the
Group’s consolidated financial statements.
On July , , the Group and China Huaxin commenced operations of the new Nokia Shanghai Bell joint venture. The Group holds an
ownership interest of % plus one share in the Nokia Shanghai Bell’s parent company, Nokia Shanghai Bell Co., Ltd., with China Huaxin
holding the remaining ownership interests. The definitive agreements provide China Huaxin with the right to fully transfer its ownership
interest in Nokia Shanghai Bell to the Group and the Group with the right to purchase China Huaxin’s ownership interest in Nokia Shanghai Bell
in exchange for a future cash settlement. As a result, the Group derecognised the non-controlling interest balance related to Nokia Shanghai
Bell of EUR  million partly offset by the recognition of a related financial liability of EUR  million with the difference of EUR  million
recorded as a gain within retained earnings as a transaction with the non-controlling interest.
The financial liability is measured based on the present value of the expected future cash settlement to acquire the non-controlling interest
in Nokia Shanghai Bell. In , an interest expense of EUR  million was recorded to reflect the recognition of the present value discount
on the financial liability. The Group decreased the value of the financial liability in  to reflect a change in estimate of the future cash
settlement resulting in the recognition of a EUR  million gain in financial income and expenses in the consolidated income statement.
Financial information for the Nokia Shanghai Bell Group():
EURm 2017 2016
Summarized income statement
Net sales(2) 2 276 1 806
Operating profit/(loss) 83 (136)
Profit/(loss) for the year 52 (89)
Profit/(loss) for the year attributable to:
Equity holders of the parent 15 (45)
Non-controlling interests(3) 37 (45)
Summarized statement of financial position
Non-current assets 589 424
Non-current liabilities (130) (128)
Non-current net assets 459 296
Current assets(4) 3 888 2 841
Current liabilities (2 765) (1 657)
Current net assets 1 123 1 184
Net assets() 1 582 1 480
Non-controlling interests(6) – 775
Summarized statement of cash flows
Net cash from/(used in) operating activities 438 (182)
Net cash (used in)/from investing activities (184) 89
Net cash used in financing activities (442) (24)
Net decrease in cash and cash equivalents () ()
(1) Financial information in 2017 is not fully comparable to financial information in 2016: the new Nokia Shanghai Bell joint venture commenced operations on July 3, 2017 and includes, in addition to the
Alcatel Lucent Shanghai Bell Group entities previously reported as material partly-owned subsidiaries, the Group’s China business, which were previously fully owned subsidiaries. Financial information
for the Nokia Shanghai Bell Group is presented before eliminations of intercompany transactions with the rest of the Group but after eliminations of intercompany transactions between entities within
the Nokia Shanghai Bell Group.
(2) Includes EUR 328 million (EUR 483 million in 2016) net sales to other Group entities.
(3) In 2017, profit for the year is attributed to non-controlling interests until July 3, 2017.
(4) Includes a total of EUR 1 001 million (EUR 1 284 million in 2016) of cash and cash equivalents and available-for-sale investments, liquid assets.
(5) The distribution of the profits of Nokia Shanghai Bell Co., Ltd requires the passing of a special resolution by more than two-thirds of its shareholders, subject to a requirement that at least 50% of the
after-tax distributable profits are distributed as dividends each year.
(6) In 2017, the non-controlling interest balance was derecognized and partially offset by the recognition of the related financial liability of EUR 737 million.

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 Financial statements

34. Investments in associated companies and joint ventures

EURm 2017 2016
Net carrying amount as of January 1 116 84
Translation differences (8) (1)
Acquisitions through business combinations 1 20
Additions 9 ‒
Disposals ‒ (4)
Share of results 11 18
Dividends (1) (1)
Net carrying amount as of December 31 128 116

Shareholdings in associated companies and joint ventures comprise investments in unlisted companies.

35. Related party transactions

The Group has related party transactions with a pension fund, associated companies, joint ventures and other entities where the Group has
significant influence, as well as the management and the Board of Directors. Transactions and balances with companies over which the Group
exercises control are eliminated on consolidation. Refer to Note , Significant accounting policies, and Note , Principal Group companies.
Transactions with pension fund
The Group has borrowings of EUR  million (EUR  million in ) from Nokia Unterstützungsgesellschaft mbH, the Group’s German
pension fund, a separate legal entity. The loan bears interest at the rate of % per annum and its duration is pending until further notice by
the loan counterparties even though they have the right to terminate the loan with a -day notice. The loan is included in short-term
interest-bearing liabilities in the consolidated statement of financial position.
Transactions with associated companies, joint ventures and other entities where the Group has significant influence
EURm 2017 2016 2015
Share of results 11 18 29
Dividend income 1 1 2
Share of shareholders' equity 128 116 84
Sales 117 62 (1)
Purchases (252) (322) (233)
Receivables 41 13 –
Payables (19) (38) (37)

The Group has financial commitments of EUR  million (guaranteed a loan of EUR  million in ) for an associated company.
Management compensation
Compensation information for the President and CEO:
EUR 2017 2016 2015
Base salary/fee 1 050 000 1 049 044 1 000 000
Cash incentive payments 997 369 780 357 1 922 195
Share-based payment expenses(1) 2 606 613 5 296 960 4 604 622
Pension expenses 338 787 469 737 491 641
Total 4 992 769 7 596 098 8 018 458
(1) Represents the expense for all outstanding equity grants recorded during the year.

Total remuneration awarded to the Group Leadership Team for their time as members of the Group Leadership Team:
EURm 2017 2016 2015
Short-term benefits 22 26 9
Post-employment benefits(1) 1 1 1
Share-based payment 7 15 9
Termination benefits(2) 4 1 3
Total 34 43 22
(1) The members of the Group Leadership Team participate in the local retirement programs applicable to employees in the country where they reside.
(2) Includes both termination payments and payments made under exceptional contractual arrangements for lapsed equity awards.

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Notes to consolidated financial statements continued

Board of Directors’ compensation

The annual remuneration paid to the members of the Board of Directors, as decided by the Annual General Meetings in the respective years:
2017 2016 2015
Gross annual Shares Gross annual Shares Gross annual Shares
fee(1) received(2) fee(1) received(2) fee(1) received(2)
EUR number EUR number EUR number
Risto Siilasmaa, Chair 440 000 30 497 440 000 35 001 440 000 29 339
Olivier Piou, Vice Chair(3) 199 000 12 823 255 082 19 892 – –
Vivek Badrinath – – 175 000 13 921 140 000 9 333
Bruce Brown(4) 209 000 13 169 190 000 15 114 155 000 10 333
Jeanette Horan(5) 175 000 12 129 – – – –
Elisabeth Doherty – – – – 140 000 9 333
Louis R. Hughes(6) 194 000 12 129 240 410 18 752 – –
Simon Jiang – – – – 130 000 8 666
Jouko Karvinen – – – – 175 000 11 667
Edward Kozel(7) 175 000 12 129 – – – –
Jean C. Monty(8) 174 000 11 090 225 410 17 558 – –
Elizabeth Nelson(9) 207 000 13 169 190 000 15 114 140 000 9 333
Carla Smits-Nusteling(10) 195 000 12 129 175 000 13 921 – –
Kari Stadigh(11) 170 000 11 090 160 000 12 727 130 000 8 666
Total 2 138 000 2 050 902 1 450 000
(1) The meeting fees for the term that ended at the close of the Annual General meeting in 2017 were paid in cash in 2017 and are included in the table. The meeting fees for the current term as
resolved by the Annual General Meeting in 2017 will be paid in cash in 2018 and are not included in the table.
(2) Approximately 40% of each Board member’s annual compensation is paid in Nokia shares purchased from the market, and the remaining approximately 60% is paid in cash.
(3) Consists of EUR 185 000 for services as the Vice Chair of the Board and meeting fees of EUR 14 000.
(4) Consists of EUR 160 000 for services as a member of the Board and EUR 30 000 for services as a Chair of the Personnel Committee and meeting fees of EUR 19 000.
(5) Consists of EUR 160 000 for services as a member of the Board and EUR 15 000 for services as member of the Audit Committee.
(6) Consists of EUR 160 000 for services as a member of the Board and EUR 15 000 for services as member of the Audit Committee and meeting fees of EUR 19 000.
(7) Consists of EUR 160 000 for services as a member of the Board and EUR 15 000 for services as a member of the Audit Committee.
(8) Consists of EUR 160 000 for services as a member of the Board and meeting fees of EUR 14 000.
(9) Consists of EUR 160 000 for services as a member of the Board and EUR 30 000 for services as a Chair of the Audit Committee and meeting fees of EUR 17 000.
(10) Consists of EUR 160 000 for services as a member of the Board and EUR 15 000 for services as a member of the Audit Committee and meeting fees of EUR 20 000.
(11) Consists of EUR 160 000 for services as a member of the Board and meeting fees of EUR 10 000.

Transactions with the Group Leadership Team and the Board of Directors
No loans were granted to the members of the Group Leadership Team and the Board of Directors in ,  or .
Terms of termination of employment of the President and CEO
The President and CEO, Rajeev Suri, may terminate his service contract at any time with six months’ prior notice. The Group may terminate
his service contract for reasons other than cause at any time with an  months’ notice period. If there is a change of control event as
defined in Mr. Suri’s service contract and the service contract is terminated either by the Group or its successor without cause, or by him for
“good reason”, he would be entitled to a severance payment equaling up to  months of compensation and cash payment of the pro-rated
value of his outstanding unvested equity awards, if he is dismissed within  months of the change in control event.

36. Risk management

General risk management principles
The Group has a systematic and structured approach to risk management across business operations and processes. Key risks and
opportunities are identified primarily against business targets either in business operations or as an integral part of financial planning. Key
risks and opportunities are analyzed, managed, monitored and identified as part of business performance management with the support of
risk management personnel. The Group’s overall risk management concept is based on managing the key risks that would prevent the Group
from meeting its objectives, rather than solely focusing on eliminating risks. The principles documented in the Nokia Enterprise Risk
Management Policy, approved by the Audit Committee of the Board of Directors, require risk management and its elements to be integrated
into key processes. One of the main principles is that the business or function head is also the risk owner, although all employees are
responsible for identifying, analyzing and managing risks as appropriate to their roles and duties. Risk management covers strategic,
operational, financial and hazard risks. Key risks and opportunities are reviewed by the Group Leadership Team and the Board of Directors in
order to create visibility on business risks as well as to enable prioritization of risk management activities. In addition to the principles defined
in the Nokia Enterprise Risk Management Policy, specific risk management implementation is reflected in other key policies.

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Financial risks
The objective for treasury activities is to guarantee sufficient funding at all times and to identify, evaluate and manage financial risks.
Treasury activities support this aim by mitigating the adverse effects on the profitability of the underlying business caused by fluctuations
in the financial markets, and by managing the capital structure by balancing the levels of liquid assets and financial borrowings. Treasury
activities are governed by the Nokia Treasury Policy approved by the Group President and CEO which provides principles for overall financial
risk management and determines the allocation of responsibilities for financial risk management activities. Operating procedures approved
by the Group CFO cover specific areas such as foreign exchange risk, interest rate risk, credit and liquidity risk as well as the use of derivative
financial instruments in managing these risks. The Group is risk averse in its treasury activities.
Financial risks are divided into market risk covering foreign exchange risk, interest rate risk and equity price risk; credit risk covering business-
related credit risk and financial credit risk; and liquidity risk.
Market risk
Foreign exchange risk
The Group operates globally and is exposed to transaction and translation foreign exchange risks. Transaction risk arises from foreign
currency denominated assets and liabilities together with foreign currency denominated future cash flows. Transaction exposures are
managed in the context of various functional currencies of Group companies. Material transactional foreign exchange exposures are hedged,
unless hedging would be uneconomical due to market liquidity and/or hedging cost. Exposures are defined using transaction nominal values.
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 a duration of less than a year. The Group does not hedge forecast
foreign currency cash flows beyond two years.
As the Group has entities where the functional currency is other than the euro, the shareholders’ equity is exposed to fluctuations in foreign
exchange rates. Equity changes caused by movements in foreign exchange rates are shown as currency translation differences in the
consolidated financial statements. The Group may use forward foreign exchange contracts, foreign exchange options and foreign currency
denominated loans to hedge its foreign exchange exposure arising from foreign net investments.
Currencies that represent a significant portion of the currency mix in outstanding financial instruments as of December  are as follows:
EURm USD JPY CNY INR
2017
Foreign exchange derivatives used as cash flow hedges, net(1) (803) (230) – –
Foreign exchange derivatives used as fair value hedges, net(2) (84) – – –
Foreign exchange derivatives used as net investment hedges, net(3) (2 839) – (728) (403)
Foreign exchange exposure from statement of financial position items, net (3 365) 196 (765) (352)
Foreign exchange derivatives not designated in a hedge relationship, carried at fair
value through profit and loss, net(4) 1 777 (411) 577 446
Cross-currency/interest rate hedges 1 377 – – –
2016
Foreign exchange derivatives used as cash flow hedges, net(1) – (158) – –
Foreign exchange derivatives used as fair value hedges, net(2) (397) – – –
Foreign exchange derivatives used as net investment hedges, net(3) (1 418) – – (104)
Foreign exchange exposure from statement of financial position items, net (2 172) 434 (227) (236)
Foreign exchange derivatives not designated in a hedge relationship, carried at fair
value through profit and loss, net(4) 1 747 (174) (587) 104
Cross-currency/interest rate hedges 1 051 (328) – –
(1) Used to hedge the foreign exchange risk from forecasted highly probable cash flows related to sales, purchases and business acquisition activities. In some currencies, especially the U.S. dollar, the
Group has substantial foreign exchange risks in both estimated cash inflows and outflows. The underlying exposures for which these hedges are entered into are not presented in the table as they are
not financial instruments.
(2) Used to hedge foreign exchange risk from contractual firm commitments. The underlying exposures for which these hedges are entered into are not presented in the table as they are not financial
instruments.
(3) Used to hedge net investment exposure. The underlying exposures for which these hedges are entered into are not presented in the table as they are not financial instruments.
(4) Items on the statement of financial position and some probable forecasted cash flows denominated in foreign currencies are hedged by a portion of foreign exchange derivatives not designated in a
hedge relationship and carried at fair value through profit and loss.

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Notes to consolidated financial statements continued

The methodology for assessing market risk exposures: Value-at-risk

The Group uses the Value-at-Risk (“VaR”) methodology to assess exposures to foreign exchange risks. The VaR-based methodology provides
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. The Group calculates the foreign exchange VaR using the Monte Carlo method which
simulates random values for exchange rates in which the Group has exposures and takes the non-linear price function of certain derivative
instruments into account. The VaR is determined using volatilities and correlations of rates and prices estimated from a sample of historical
market data, at a % 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 % of possible outcomes. In the remaining % of possible 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 which
include the following: risks are measured under average market conditions, changes in market risk factors follow normal distributions, future
movements in market risk factors are in line with estimated parameters and the assessed exposures do not change during the holding
period. Thus, it is possible that, for any given month, the potential losses at a % confidence level are different and could be substantially
higher than the estimated VaR.
The VaR figures for the Group’s financial instruments which are sensitive to foreign exchange risks are presented in the table below. The
VaR calculation includes foreign currency denominated monetary financial instruments, such as available-for-sale investments, loans and
accounts receivable, investments at fair value through profit and loss, cash, loans and accounts payable; foreign exchange derivatives carried
at fair value through profit and loss which are not in a hedge relationship and are mostly used to hedge the statement of financial position
foreign exchange exposure; and foreign exchange derivatives designated as forecasted cash flow hedges and net investment hedges. Most
of the VaR is caused by these derivatives as forecasted cash flow and net investment exposures are not financial instruments as defined in
IFRS , Financial Instruments: Disclosures, and thus not included in the VaR calculation.
2017 2016
EURm VaR from financial instruments
As of December 31 144 83
Average for the year 205 111
Range for the year 144–267 73–149

Interest rate risk

The Group is exposed to interest rate risk either through market value fluctuations of items on the consolidated statement of financial
position (“price risk”) or through changes in interest income or expenses (“refinancing” or “reinvestment risk”). Interest rate risk mainly arises
through interest-bearing liabilities and assets. Estimated future changes in cash flows and the structure of the consolidated statement of
financial position also expose the Group to interest rate risk. The objective of interest rate risk management is to mitigate adverse impacts
arising from interest rate fluctuations on the consolidated income statement, cash flow, and financial assets and liabilities while taking into
consideration the Group’s target capital structure and the resulting net interest rate exposure.
Interest rate profile of interest-bearing assets and liabilities as of December :
2017 2016
EURm Fixed rate Floating rate(1) Fixed rate Floating rate(1)
Assets 889 7 581 2 107 7 410
Liabilities (3 637) (57) (3 845) (113)
Assets and liabilities before derivatives ( ) 7 524 ( ) 7 297
Interest rate derivatives 1 371 (1 371) 1 358 (1 328)
Assets and liabilities after derivatives ( ) 6 153 () 5 969
(1) All investments and credit support-related liabilities with initial maturity of three months or less are considered floating rate for the purposes of interest rate risk management.

Interest rate exposure is monitored and managed centrally. The Group uses selective sensitivity analyses to assess and measure interest rate
exposure arising from interest-bearing assets, interest-bearing liabilities and related derivatives. Sensitivity analysis determines an estimate
of potential fair value changes in market risk-sensitive instruments by varying interest rates in currencies in which the Group has material
amounts of financial assets and liabilities while keeping all other variables constant. The Group’s sensitivity to interest rate exposure in the
investment and debt portfolios is presented in the table below. Sensitivities to credit spreads are not reflected in the numbers.
2017 2016
Impact on Impact Impact Impact on Impact Impact
EURm fair value on profit on OCI fair value on profit on OCI
Interest rates – increase by 100 basis points 126 2 (1) 181 (3) (2)
Interest rates – decrease by 50 basis points (67) (1) – (99) 2 1

190 NOKIA IN 2017

 Financial statements

Equity price risk

In  and , the Group did not have exposure to equity price risk from publicly listed equity shares as it does not have significant
investments. The private funds where the Group has investments are investing primarily in private equity and may, from time to time,
have investments also in public equity. Such investments have not been included in this disclosure.
Other market risk
In certain emerging market countries there are local exchange control regulations that provide for restrictions on making cross-border
transfers of funds as well as other regulations that impact the Group’s ability to control its net assets in those countries.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk
arises from credit exposures to customers, including outstanding receivables, financial guarantees and committed transactions, as well as
financial institutions, including bank and cash, fixed income and money-market investments, and derivative financial instruments. Credit risk
is managed separately for business-related and financial credit exposures.
The maximum exposure to credit risk for outstanding customer finance loans is limited to the book value of financial assets as included in the
consolidated statement of financial position:
EURm 2017 2016
Loan commitments given but not used 495 223
Outstanding customer finance loans(1) 160 129
Total 655 352
(1) Includes acquired customer loans on a fair value basis. Excludes EUR 33 million (EUR 33 million in 2016) which are considered to be uncollectible and have been provisioned.

Business-related credit risk

The Group aims to ensure the highest possible quality in accounts receivable as well as customer- or third party loan receivables. The Credit
Risk Management Standard Operating Procedure, approved by the Group CFO, lays out the framework for the management of the business-
related credit risks. The Credit Risk Management Standard Operating Procedure sets out that credit decisions are based on credit evaluation
in each business, including credit rating and limits for larger exposures, according to defined principles. Group level limit approvals are
required for material credit exposures. Credit risks are monitored in each business and, where appropriate, mitigated on case by case basis
with the use of letters of credit, collaterals, sponsor guarantees, credit insurance, and sale of selected receivables.
Credit exposure is measured as the total of accounts receivable and loans outstanding from customers and committed credits. Accounts
receivable do not include any major concentrations of credit risk by customer. The top three customers account for approximately
.%, .% and .% (.%, .% and .% in ) of accounts receivable and loans due from customers and other third parties as of
December , . The top three credit exposures by country account for approximately .%, .% and .% (.%, .% and
.% in ) of the Group’s accounts receivable and loans due from customers and other third parties as of December , .
The .% credit exposure relates to accounts receivable in China (.% in ).
The Group has provided allowances for doubtful accounts on accounts receivable and loans due from customers and other third parties not
past due based on an analysis of debtors’ credit ratings and credit histories. The Group establishes allowances for doubtful accounts that
represent an estimate of expected losses at the end of the reporting period. All receivables and loans due from customers are considered
on an individual basis to determine the allowances for doubtful accounts. The total of accounts receivable and loans due from customers
is EUR   million (EUR   million in ). The gross carrying amount of accounts receivable, related to customer balances for which
valuation allowances have been recognized, is EUR   million (EUR   million in ). The allowances for doubtful accounts for these
accounts receivable as well as amounts expected to be uncollectible for acquired receivables are EUR  million (EUR  million in ).
Aging of past due receivables not considered to be impaired as of December :
EURm 2017 2016
Past due 1–30 days 67 102
Past due 31–180 days 94 141
More than 180 days 117 223
Total 278 466

NOKIA IN 2017 191

Notes to consolidated financial statements continued

Financial credit risk

Financial instruments contain an element of risk resulting from changes in the market price due to counterparties becoming less
creditworthy or risk of loss due to counterparties being unable to meet their obligations. Financial credit risk is measured and monitored
centrally by Treasury. Financial credit risk is managed actively by limiting counterparties to a sufficient number of major banks and financial
institutions, and by monitoring the creditworthiness and the size of exposures continuously. Additionally, the Group enters into netting
arrangements with all major counterparties, which give the right to offset in the event that the counterparty would not be able to fulfill its
obligations. The Group enters into collateral agreements with certain counterparties, which require counterparties to post collateral against
derivative receivables.
Investment decisions are based on strict creditworthiness and maturity criteria as defined in the Treasury-related policies and procedures.
As a result of this investment policy approach and active management of outstanding investment exposures, the Group has not been subject
to any material credit losses in its financial investments in the years presented.
Breakdown of outstanding fixed income and money-market investments by sector and credit rating grades ranked as per Moody’s rating
categories as of December :
Due within Due between 3 Due between Due between Due beyond
EURm Rating(1) 3 months and 12 months 1 and 3 years 3 and 5 years 5 years Total(2)(3)(4)
2017
Banks Aaa 607 – – – – 607
Aa1-Aa3 398 74 69 – – 541
A1-A3 1 808 247 240 191 45 2 531
Baa1-Baa3 455 232 125 – – 812
Ba1-B3 35 – 2 – – 37
Non-rated 38 – – – – 38
Governments A1-A3 1 2 – – – 3
Other Aa1-Aa3 24 10 39 – – 73
A1-A3 10 53 78 – – 141
Total 3 376 618 553 191 45 4 783
2016
Banks Aaa 1 054 – – – – 1 054
Aa1-Aa3 410 201 35 – – 646
A1-A3 1 405 211 387 116 – 2 119
Baa1-Baa3 893 728 – – – 1 621
Ba1-Ba3 15 – – – – 15
Non rated 42 – – – – 42
Governments A1-A3 – – 274 53 – 327
Other Aa1-Aa3 45 30 1 – – 76
A1-A3 52 61 13 – – 126
Baa1-Baa3 6 13 5 – – 24
Total 3 922 1 244 715 169 – 6 050
(1) Bank Parent Company ratings are used here for bank groups. In some emerging markets countries, actual bank subsidiary ratings may differ from the Parent Company rating.
(2) Fixed income and money-market investments include term deposits, structured deposits, investments in liquidity funds and investments in fixed income instruments classified as available-for-sale
investments and investments at fair value through profit and loss. Liquidity funds invested solely in government securities are included under Governments. Other liquidity funds are included
under Banks.
(3) Instruments that include a call feature have been presented at their final maturities, if any. Instruments that are contractually due beyond 3 months include EUR 701 million (EUR 566 million in 2016)
of instruments that have a call period of less than 3 months.
(4) Includes EUR 5 million of restricted investments (EUR 5 million in 2016) within fixed income and money-market investments. These are restricted financial assets under various contractual
or legal obligations.

192 NOKIA IN 2017

 Financial statements

% (% in ) of the Group’s cash at bank of EUR   million (EUR   million in ) is held with banks of investment grade
credit rating.
Financial assets and liabilities subject to offsetting under enforceable master netting agreements and similar arrangements as of
December :
Gross amounts of Net amounts of Related amounts not set off in the
financial liabilities/ financial assets/ statement of financial position
Gross amounts of (assets) set off in the (liabilities) presented
financial assets/ statement of financial in the statement of Financial instruments Cash collateral
EURm (liabilities) position financial position assets/(liabilities) received/(pledged) Net amount
2017
Derivative assets 197 – 197 135 38 24
Derivative liabilities (268) – (268) (145) (100) (23)
Total () – () () () 1
2016
Derivative assets 235 – 235 153 73 9
Derivative liabilities (236) – (236) (128) (96) (12)
Total () – () 25 () ()

The financial instruments subject to enforceable master netting agreements and similar arrangements are not offset in the consolidated
statement of financial position where there is no intention to settle net or realize the asset and settle the liability simultaneously.
Liquidity risk
Liquidity risk is defined as financial distress or extraordinarily high financing costs arising from a shortage of liquid funds in a situation where
outstanding debt needs to be refinanced or where business conditions unexpectedly deteriorate and require financing. Transactional liquidity
risk is defined 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.
The Group aims to secure sufficient liquidity at all times through efficient cash management and by investing in short-term liquid interest-
bearing securities and money-market investments. Depending on its overall liquidity position, the Group may pre-finance or refinance
upcoming debt maturities before contractual maturity dates. The transactional liquidity risk is minimized by entering into transactions
where proper two-way quotes can be obtained from the market.
Due to the dynamic nature of the underlying business, the Group aims to maintain flexibility in funding by maintaining committed and
uncommitted credit lines. As of December ,  committed revolving credit facilities totaled EUR   million (EUR   million
in ).
Significant current long-term funding programs as of December , :
Issuer: Program: Issued
Nokia Corporation Euro Medium-Term Note Program, totaling EUR 5 000 million 1 250

Significant current short-term funding programs as of December , :

Issuer: Program: Issued
Nokia Corporation Local commercial paper program in Finland, totaling EUR 750 million 

NOKIA IN 2017 193

Notes to consolidated financial statements continued

The following table presents an undiscounted cash flow analysis for financial liabilities and financial assets that are presented on the
consolidated statement of financial position, and “off-balance sheet” instruments such as loan commitments, according to their remaining
contractual maturity. The line-by-line analysis does not directly reconcile with the consolidated statement of financial position.
Due within Due between 3 Due between Due between Due beyond
EURm Total 3 months and 12 months 1 and 3 years 3 and 5 years 5 years
2017
Non-current financial assets
Long-term loans receivable 112 21 – 77 4 10
Current financial assets
Short-term loans receivable 92 6 86 – – –
Available-for-sale investments, including cash equivalents(1) 4 797 3 381 621 558 192 45
Bank and cash 3 497 3 497 – – – –
Cash flows related to derivative financial assets gross settled:
Derivative contracts—receipts 11 484 10 249 1 235 – – –
Derivative contracts—payments ( ) (10 108) (1 222) – – –
Accounts receivable(2) 5 633 4 297 1 208 107 21 –
Non-current financial liabilities
Long-term interest-bearing liabilities ( ) (44) (95) (938) (1 098) (2 482)
Other long-term liabilities () – – (748) – (6)
Current financial liabilities
Short-term borrowings () (215) (98) – – –
Cash flows related to derivative financial liabilities gross
settled:
Derivative contracts—receipts 10 278 8 265 280 573 486 674
Derivative contracts—payments ( ) (8 366) (243) (568) (467) (601)
Accounts payable ( ) (3 731) (251) (9) (3) (2)
Contingent financial assets and liabilities
Loan commitments given undrawn(3) () (71) (172) (174) (78) –
Loan commitments obtained undrawn(4) 1 566 (1) (3) 1 570 – –
(1) Instruments that include a call feature have been presented at their final maturities, if any. Instruments that are contractually due beyond 3 months include EUR 701 million of instruments that have
a call period of less than 3 months.
(2) Accounts receivable maturity analysis does not include accrued receivables of EUR 1 247 million.
(3) Loan commitments given undrawn have been included in the earliest period in which they could be drawn or called.
(4) Loan commitments obtained undrawn have been included based on the period in which they expire. These amounts include related commitment fees.

194 NOKIA IN 2017

 Financial statements

Due within Due between 3 Due between Due between Due beyond
EURm Total 3 months and 12 months 1 and 3 years 3 and 5 years 5 years
2016
Non-current financial assets
Long-term loans receivable 150 – 2 86 32 30
Current financial assets
Short-term loans receivable 62 32 28 2 – –
Investments at fair value through profit and loss 326 – 1 272 53 –
Available-for-sale investments, including cash equivalents(1) 5 753 3 935 1 248 453 117 –
Bank and cash 3 276 3 276 – – – –
Cash flows related to derivative financial assets net settled:
Derivative contracts ̶ receipts 42 18 (6) 30 – –
Cash flows related to derivative financial assets
gross settled:
Derivative contracts ̶ receipts 8 221 6 473 492 1 038 13 205
Derivative contracts ̶ payments ( ) (6 404) (440) (962) (5) (131)
Accounts receivable(2) 5 895 4 430 1 354 106 5 –
Non-current financial liabilities
Long-term interest-bearing liabilities ( ) (85) (140) (1 955) (269) (3 358)
Current financial liabilities
Short-term borrowings () (255) (116) (1) – –
Cash flows related to derivative financial liabilities
gross settled:
Derivative contracts ̶ receipts 8 948 7 727 925 248 48 –
Derivative contracts ̶ payments ( ) (7 867) (995) (272) (53) –
Accounts payable ( ) (3 600) (152) (29) – –
Contingent financial assets and liabilities
Loan commitments given undrawn(3) () (30) (83) (110) – –
Loan commitments obtained undrawn(4) 1 564 (1) (3) 1 568 – –
(1) Instruments that include a call feature have been presented at their final maturities, if any. Instruments that are contractually due beyond 3 months included EUR 566 million of instruments that have
a call period of less than 3 months in 2016.
(2) Accounts receivable maturity analysis did not include accrued receivables of EUR 1 077 million.
(3) Loan commitments given undrawn have been included in the earliest period in which they could be drawn or called.
(4) Loan commitments obtained undrawn have been included based on the period in which they expire. These amounts include related commitment fees.

NOKIA IN 2017 195

Parent Company income statement

2017 2016
For the year ended December 31 Notes EURm EURm
()
Net sales 723 836
Cost of sales (8) (7)
Gross profit 715 829
Selling, general and administrative expenses (85) (28)
Other income 4 7 7
Other expenses 4 (33) (23)
Operating profit 604 695
Financial income and expenses
Income from long-term investments 5 – 3
Interest and other financial income 5 358 
Foreign exchange gains/(losses), net  (48)
Impairment on investments in subsidiaries and other shares (7) (54)
Interest and other financial expenses 5 (427) (25)
Gain from sale of shares and businesses 3 7
Total financial income and expenses 13 ()
Profit before appropriations and tax 617 474
Appropriations
Group contributions  (24) (0)
Profit before tax 353 414
Income tax expense 7 () (3)
Profit for the year 284 321
() Nokia Technologies segment net sales

The notes are an integral part of these financial statements.

196 196 NOKIA IN 2017

 Financial statements

Parent Company statement

of financial position

2017 2016
As of December 31 Notes EURm EURm
ASSETS
Non-current assets
Intangible assets
Intangible rights 2 3
Total intangible assets 2 3
Property, plant and equipment
Land and water areas 8 8 8
Buildings 8  
Machinery and equipment 8 3 3
Other tangible assets 8 3 4
Advance payments and assets under construction 8  
Total property, plant and equipment  22
Investments
Investments in subsidiaries  8 5 8 5
Investments in associated companies   
Available-for-sale investments , 5 27 5
Total investments 8  8 2
Other non-current assets
Other non-current receivables 0 2 77
Long-term loan receivables from Group companies 5  50 37
Long-term loan receivables from other companies 5 7 7
Deferred tax assets 7 2 3
Total other non-current assets 2 70 80
Total non-current assets 21 446 19 647
Current assets
Accounts receivable from Group companies 5 353 552
Accounts receivable from other companies 5 7 54
Current loans receivable from Group companies 5   3 735
Other financial assets from Group companies 5 30 
Other financial assets from other companies 5 7 55
Prepaid expenses and accrued income from Group companies  48 4
Prepaid expenses and accrued income from other companies  72 8
Other current receivables from Group companies , 5 43 40
Short-term investments 5 80  25
Cash and cash equivalents 5 3 44 2 32
Total current assets 14 968 9 229
Total assets 36 414 28 876
The notes are an integral part of these financial statements.

NOKIA IN 2017 19 197

Parent Company statement
of financial position continued

2017 2016
As of December 31 Notes EURm EURm
SHAREHOLDERS’ EQUITY AND LIABILITIES
Capital and reserves
Share capital 2 24 24
Share issue premium 2 4 4
Treasury shares 2, 3 ( 473) (874)
Fair value and other reserves 2, 3, 4 (7) 7
Reserve for invested non-restricted equity 2, 3 5 207 5 322
Retained earnings 2, 3 4 27 4 85
Profit for the year 2, 3 284 32
Total equity 18 520 19 937
Provisions 7 7 04
Non-current liabilities
Long-term interest-bearing liabilities 5, 8 3 225  72
Other non-current financial liabilities 5 55 –
Advance payments from other companies 25  080
Total non-current liabilities 4 70 3 052
Current liabilities
Current interest-bearing liabilities to Group companies 5  4 4 08
Current interest-bearing liabilities to other companies 5 50 2
Current liabilities to Group companies 5 700 700
Other financial liabilities to Group companies 5 5 
Other financial liabilities to other companies 5 24 44
Advance payments from other companies 8 7
Accounts payable to Group companies 5 333 3
Accounts payable to other companies 5 43 4
Accrued expenses to Group companies  5 3
Accrued expenses and other liabilities to other companies  37 54
Total current liabilities 3 2 5 783
Total liabilities 17 894 8 939
Total shareholders’ equity and liabilities 36 414 28 876
The notes are an integral part of these financial statements.

198 19 NOKIA IN 2017

 Financial statements

Parent Company statement

of cash flows

2017 2016
For the year ended December 31 Notes EURm EURm
Cash flow from operating activities
Profit for the year 284 32
Adjustments, total 22 388 40
Change in net working capital 22 (455) ()
Cash from operations 27 570
Interest received 07 70
Interest paid () (5)
Other financial income and expenses, net paid (2) (2)
Income taxes, net paid (48) (83)
Net cash (used in)/from operating activities () 246
Cash flow from investing activities
Purchases of shares in subsidiary companies and available-for-sale investments () (4)
Purchases of property, plant and equipment and intangible assets (2) ()
Proceeds from/(payments of) disposal of shares and business 2 (2)
Proceeds from sale of property, plant and equipment and other intangible assets – 
Payments of other long-term receivables ( 33) (44)
(Payments of)/proceeds from short-term receivables (4 04) 438
Dividends received and other proceeds from Group companies – 3
Purchase of short-term investments, liquid assets (2 28) (3 43)
Proceeds from short-term investments, liquid assets 3 48 4 74
Net cash (used in)/from investing activities ( ) 347
Cash flow from financing activities
Purchase of treasury shares (785) (2)
Stock option exercise  3
Proceeds from/(payments of) long-term borrowings 7 304 ()
Proceeds from/(payments of) short-term borrowings  03 (2 84)
Dividends paid (3) ( 503)
Group contributions (0) 82
Net cash from/(used in) financing activities 7 400 ( )
Net increase/(decrease) in cash and cash equivalents 1 512 ( )
Cash and cash equivalents as of January  2 32  033
Cash and cash equivalents as of December  3 644 2 132
The notes are an integral part of these financial statements.

NOKIA IN 2017 199 199

Notes to Parent Company financial statements

. Accounting principles Investments

Investments in subsidiaries are stated at cost less accumulated
Basis of presentation impairment. Majority of non-current available-for-sale investments
The Parent Company financial statements are prepared in are carried at cost less accumulated impairment. Available-for-sale
accordance with the Finnish Accounting Standards (“FAS”). investments are technology-related investments in private equity
The Parent Company is responsible for arranging group internal shares and unlisted funds for which fair value cannot be measured
financing. Changes in the internal and external financing needs reliably due to non-existent public markets or reliable valuation
arising from changes in operative and organizational models affect methods.
the Parent Company’s financial position. Loans receivable
Revenue recognition Loans receivable include loans to customers and suppliers and are
Revenue for the Parent Company arises from contracts to license measured initially at fair value and subsequently at amortized cost
intellectual property. Revenue on license fees is recognized in less impairment using the effective interest method. Loans are
accordance with the substance of the relevant agreements. In the subject to regular review as to their collectability and available
majority of cases, the Parent Company retains obligations related collateral. An allowance is made if a loan is deemed not to be fully
to the licensed assets after the initial licensing transaction, and as recoverable. The related cost is recognized in other expenses or
a result revenue is recognized over a period of time during which financial expenses, depending on the nature of the receivable to
the Parent Company is expected to perform. Where the Parent reflect the shortfall between the carrying amount and the present
Company has no remaining obligations to perform subsequent value of the expected future cash flows. Interest income on loans
to the initial licensing transaction, and licensing fees are non- receivable is recognized in financial income and expenses by applying
refundable, revenue is recognized after the customer has been the effective interest rate.
provided access to the underlying assets. In some multiple element Short-term investments
licensing transactions, the Parent Company applies the residual Short-term investments primarily consist of highly liquid, fixed-
method in the absence of reference information. income and money-market investments that are readily convertible
Foreign currency translation to known amounts of cash with maturities at acquisition of longer
Receivables and payables denominated in foreign currencies are than three months.
converted into euro using the exchange rate prevailing on the Cash and cash equivalents
statement of financial position date. Cash and cash equivalents consist of cash at bank and in hand and
Share-based payment available-for-sale investments, cash equivalents. Available-for-sale
The Parent Company offers three types of equity-settled share- investments, cash equivalents consist of highly liquid, fixed-income
based compensation plans for employees: performance shares, and money-market investments that are readily convertible to known
restricted shares and the employee share purchase plan. Share- amounts of cash with maturities at acquisition of three months or
based compensation is recognized as an expense in the income less, as well as bank deposits with maturities or contractual call
statement of the parent entity when the shares are delivered. periods at acquisition of three months or less. Due to the high credit
The settlement covers taxes and similar charges occurred. quality and short-term nature of these investments, there is an
insignificant risk of change in value. Investments in money market
Pensions funds that have a risk profile consistent with the aforementioned
Contributions to pension plans are expensed in the income criteria are also classified as cash equivalents.
statement in the period to which the contributions relate.
Accounts receivable
Intangible assets and property, plant and equipment Accounts receivable include both amounts invoiced to customers and
Intangible assets and property, plant and equipment are stated at amounts revenue recognition criteria have been fulfilled but the
cost less accumulated depreciation according to plan. Depreciation customers have not yet been invoiced, and amounts where the
and amortizations according to plan is recorded on a straight-line contractual rights to the cash flows have been confirmed but the
basis over the expected useful lives of the assets as follows: customers have not yet been invoiced. Billed accounts receivable are
carried at the amount invoiced to customers less allowances for
Intangible assets 3–7 years doubtful accounts. Allowances for doubtful accounts are based on a
Buildings 20–33 years periodic review of all outstanding amounts, including an analysis of
Machinery and equipment –0 years historical bad debt, customer concentrations, customer
creditworthiness, past due amounts, current economic trends and
Land and water areas are not depreciated. The accumulated changes in customer payment terms. Impairment charges on
depreciation and amortization according to plan comply with the receivables identified as uncollectible are included in other operating
Finnish Business Tax Act. expenses. The Parent Company derecognizes an accounts receivable
balance only when the contractual rights to the cash flows from the
asset expire or it transfers the financial asset and substantially all the
risks and rewards of the asset to another entity.

200  NOKIA IN 2017

 Financial statements

Loans payable Fair value hedges

Loans payable are recognized at nominal value. Transaction costs are The Parent Company applies fair value hedge accounting to reduce
initially recognized as accruals and amortized over the life of the exposure to fair value fluctuations of interest-bearing liabilities due
instrument. Transaction cost and loan interest are recognized in the to changes in interest rates and foreign exchange rates. Changes in
income statement as financial expenses over the life of the the fair value of derivatives designated and qualifying as fair value
instrument. hedges, together with any changes in the fair value of hedged
liabilities attributable to the hedged risk, are recognized in financial
Accounts payable income and expenses. If the hedged item no longer meets the
Accounts payable are carried at invoiced amount which is considered criteria for hedge accounting, hedge accounting ceases and any fair
to be the fair value due to the short-term nature of the Parent value adjustments made to the carrying amount of the hedged item
Company’s accounts payable. while the hedge was effective are recognized in financial income and
Derivative financial instruments expenses based on the effective interest method.
Interest income or expense on interest rate derivatives is accrued in Deferred tax
the income statement during the financial year. In the financial Deferred tax liabilities and deferred tax assets are calculated for
statements, outstanding interest rate forward contracts, interest temporary differences between book values and tax bases using an
rate future contracts, interest rate option contracts and interest rate enacted or substantively enacted tax rate at each statement of
swap contracts are stated at market values and included in the financial position date that are expected to apply in the period when
income statement. the asset is realized or the liability is settled. Non-current and current
Forward foreign exchange contracts are valued using the forward deferred tax liabilities and deferred tax assets are presented
exchange rate of the statement of financial position date. The separately on statement of financial position. Deferred tax assets are
exchange differences arising from outstanding derivative contracts recognized at the probable amount estimated to be received.
are reported in financial income and expenses. Foreign exchange Deferred tax assets and deferred tax liabilities are offset for
option contracts are valued using an option valuation model on the presentation purposes, because the Parent Company has a legally
statement of financial position date and reported in financial income enforceable right to set off current tax assets against current tax
and expense. For derivatives not designated under hedge accounting liabilities.
but hedging identifiable exposures such as anticipated foreign
currency denominated sales and purchases, the gains and losses are
recognized in other income or expenses.
Fair values of forward rate agreements, interest rate options, futures
contracts and exchange traded options are calculated based on
quoted market rates at each statement of financial position date.
Discounted cash flow analyses are used to value interest rate and
cross-currency interest rate swaps.
Hedge accounting
The Parent Company applies hedge accounting on certain forward
foreign exchange contracts, certain options or option strategies, and
certain interest rate derivatives. Qualifying options and option
strategies have zero net premium or a net premium paid. For option
structures, the critical terms of the bought and sold options are the
same and the nominal amount of the sold option component is no
greater than that of the bought option.

NOKIA IN 2017 1 201

Notes to Parent Company financial statements continued

2. Personnel expenses
EURm 2017 2016
Salaries and wages 3 47
Share-based payment expense 20 28
Pension expense 5 4
Other social expenses  2
Total 57 81

Average number of employees 2017 2016

Marketing 7 70
Administration 77 2
Total average 248 281
As of December  235 273

Management compensation
Refer to Note , Related party transactions in the consolidated financial statements.

3. Auditor’s fees
EURm 2017 2016
Audit of financial statements 4 4
Total 4 4

In 1, PricewaterhouseCoopers Oy provided non-audit services to Group entities in total for EUR 1 9 thousand. These services
included auditors’ statements of EUR 6 thousand and other services of EUR 1  thousand.
Total annual group fees paid to the auditor are EUR  million in 1 (EUR  million in 16), including audit fees of EUR  million
(EUR 1 million in 16).

4. Other income and expenses

EURm 2017 2016
Other income
Rental income 2 2
Interest income from customer receivables and overdue payments 5 4
Other – 
Total 7 17
Other expenses
Foreign exchange loss on hedging forecasted sales and purchases (2) –
Divestment-related expenses (3) (0)
Other (8) (3)
Total () ()

202  NOKIA IN 2017

 Financial statements

5. Financial income and expenses

EURm 2017 2016
Income from long-term investments
Dividend income from Group companies – 3
Total – 3
Interest and other financial income
Interest income from Group companies 30 55
Interest income from other companies  
Other financial income from other companies 48 40
Total 358 96
Interest and other financial expenses
Interest expenses to Group companies (7) (0)
Interest expenses to other companies (320) (73)
Other financial expenses (3) (42)
Total () ()

Financial income and expenses includes EUR  million expenses for derivative financial instruments designated in hedge accounting
relationships (EUR 1 million in 16) and EUR  million income for liabilities under fair value hedge accounting (EUR 11 million in 16).

. Group contributions
EURm 2017 2016
Granted (700) (700)
Received 43 40
Total () ()

7. Income taxes
EURm 2017 2016
Current tax (43) (5)
Deferred tax (2) (28)
Total () ()
Income tax from operations (3) (3)
Income tax from appropriations 53 2
Income tax relating to previous financial years  (2)
Total () ()

Deferred taxes
2017 2016
EURm Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities
Total before netting 132 () 146 ()
Netting of deferred tax assets and liabilities ()  (7) 7
Total after netting 126 – 139 –

NOKIA IN 2017  203

Notes to Parent Company financial statements continued

8. Property, plant and equipment

Advance
payments and
Land and Machinery and Other tangible assets under
EURm water areas Buildings equipment assets construction Total
Acquisition cost as of January , 20 8 5 2 5  204
Additions – 4 – – – 4
Disposals and retirements – () () – – (2)
Acquisition cost as of December ,  8 162 20 15 1 206
Accumulated depreciation as of January , 20 – () (8) – – (7)
Disposals and retirements – –  – – 
Depreciation() – (5) – () – ()
Accumulated depreciation as of December ,  – () () () – ()
Net book value as of January , 20 8 8 3 5  25
Net book value as of December ,  8 96 3 14 1 122
Acquisition cost as of January , 207 8 2 20 5  20
Additions –  – –  2
Disposals and retirements – () () – – (2)
Reclassifications –  – – () –
Acquisition cost as of December ,  8 163 19 15 1 206
Accumulated depreciation as of January , 207 – () (7) () – (84)
Disposals and retirements – –  – – 
Depreciation() – () – () – (7)
Accumulated depreciation as of December ,  – () () () – ()
Net book value as of January , 207 8  3 4  22
Net book value as of December ,  8 91 3 13 1 116
() Recognized in selling, general and administrative expenses.

. Investments
EURm 2017 2016
Investments in subsidiaries
Net carrying amount as of January  8 5  22
Additions() (2) 2 30 2 304
Disposals() (2 34) –
Net carrying amount as of December  18 591 18 596
Investments in associated companies
Net carrying amount as of January   3
Impairment charges – (2)
Net carrying amount as of December  1 1
Available-for-sale investments
Net carrying amount as of January  5 32
Additions – 5
Impairment charges (7) ()
Other changes – 3
Disposals (2) ()
Net carrying amount as of December  27 65
() In 207, additions and disposals relate to share transactions made to optimize the legal structure of the Group following the acquisition of Alcatel Lucent in 20.
(2) In 20, the Parent Company acquired 00% of the shares in Alcatel Lucent SA, a parent company to the Alcatel Lucent Group, partially through a share exchange and partially in cash.

Investments in associated companies

Ownership Carrying amount
Associated company % EURm
Sapura-Nokia Telecommunication Sdn Bhd 40 –
Noksel A.S 20 
Sapura Nokia Software Sdn Bhd 50 –

204  NOKIA IN 2017

 Financial statements

0. Other non-current receivables

EURm 2017 2016
Expected future cash settlement to acquire non-controlling interest in Nokia Shanghai Bell() 55 –
Other 70 77
Total 626 77
() Refer to Note 33, Significant partly-owned subsidiaries in the consolidated financial statements.

. Prepaid expenses and accrued income

EURm 2017 2016
Prepaid and accrued royalty income 7 08
Divestment-related receivables 3 44
Accrued interest 2 0
Other from Group companies 25 2
Other from other companies 0 3
Total 220 167

2. Shareholders’ equity

Reserve
Fair value for invested
Share issue Treasury and other non-restricted Retained
EURm Share capital premium shares reserves equity earnings Total
As of January ,  246 46 () 25 3 805 6 362 9 773
Settlement of performance and restricted shares – – 8 – (52) – 
Stock options exercised – – – – 3 – 3
Acquisition of treasury shares – – (23) – – – (23)
Acquisition of Alcatel Lucent shares – – – –  5 –  5
Fair value reserve, decrease – – – (8) – – (8)
Dividends – – – – – ( 503) ( 503)
Profit for the year – – – – – 32 32
As of December ,  246 46 () 17 15 322 5 180 19 937
Settlement of performance and restricted shares – – 70 – () – 54
Stock options exercised – – – –  – 
Acquisition of treasury shares – – (7) – – – (7)
Fair value reserve, decrease – – – (24) – – (24)
Dividends – – – – – (3) (3)
Profit for the year – – – – – 284 284
As of December ,  246 46 ( ) () 15 207 4 501 18 520

NOKIA IN 2017  205

Notes to Parent Company financial statements continued

3. Distributable earnings

EURm 2017 2016
Reserve for invested non-restricted equity 5 207 5 322
Retained earnings 4 27 4 85
Profit for the year 284 32
Non-restricted equity 19 708 20 502
Treasury shares ( 473) (874)
Fair value and other reserves (7) –
Total 18 229 19 628

4. Fair value and other reserves

Hedging reserve Available for sale investments Total
EURm       Gross Tax Net Gross Tax Net Gross Tax Net
As of January ,  9 () 7 22 () 18 31 () 25
Cash flow hedges
Net fair value losses () – () – – – () – ()
Available-for-sale investments
Net fair value losses – – – ()  – ()  –
Transfer to income statement on disposal – – – () 2 (7) () 2 (7)
As of December ,  8 () 6 12 () 11 20 () 17
Cash flow hedges
Net fair value losses (2) 5 () – – – (2) 5 ()
Available-for-sale investments
Net fair value losses – – – (4) () (5) (4) () (5)
Transfer to income statement on disposal – – – (4)  (3) (4)  (3)
As of December ,  () 3 () 4 () 3 () 2 ()

206 6 NOKIA IN 2017

 Financial statements

5. Fair value of financial instruments

Carrying amounts Fair value(1)
EURm Amortized cost Fair value Total
As of December , 
Available-for-sale investments 27 ‒ 27 27
Long-term loan receivable from Group companies  50 ‒  50 2 054
Long-term loan receivables from other companies 7 ‒ 7 7
Accounts receivable from Group companies 353 ‒ 353 353
Accounts receivable from other companies 7 ‒ 7 7
Current loans receivable from Group companies(2)   ‒    
Other financial assets from Group companies, derivatives ‒ 30 30 30
Other financial assets from other companies, derivatives ‒ 7 7 7
Other current receivables from Group companies 43 ‒ 43 43
Short-term investments ‒ 80 80 80
Cash and cash equivalents 3 44 ‒ 3 44 3 44
Total financial assets 15 713 1 019 16 732 16 836
Long-term interest-bearing liabilities to other companies(3) 3 225 ‒ 3 225 3 30
Current interest-bearing liabilities to Group companies(2)  4 ‒  4  4
Current interest-bearing liabilities to other companies 50 ‒ 50 50
Current liabilities to Group companies, other 700 ‒ 700 700
Other financial liabilities to Group companies, derivatives ‒ 5 5 5
Other financial liabilities to other companies, derivatives ‒ 24 24 24
Other non-current financial liabilities(4) ‒ 55 55 55
Accounts payable to Group companies 333 ‒ 333 333
Accounts payable to other companies 43 ‒ 43 43
Total financial liabilities 15 545 948 16 493 16 569
As of December , 
Available-for-sale investments 5 ‒ 5 5
Long-term loan receivable from Group companies 37 ‒ 37 37
Long-term loan receivables from other companies 7 ‒ 7 7
Accounts receivable from Group companies 552 ‒ 552 552
Accounts receivable from other companies 54 ‒ 54 54
Current loans receivable from Group companies 3 735 ‒ 3 735 3 735
Other financial assets from Group companies, derivatives ‒   
Other financial assets from other companies, derivatives ‒ 55 55 55
Other current receivables from Group companies 40 ‒ 40 40
Short-term investments  28 327  25  25
Cash and cash equivalents 2 32 ‒ 2 32 2 32
Total financial assets 9 220 551 9 771 9 771
Long-term interest-bearing liabilities to other companies(3)  72 ‒  72 2 080
Current interest-bearing liabilities to Group companies 4 08 ‒ 4 08 4 08
Current interest-bearing liabilities to other companies 2 ‒ 2 2
Current liabilities to Group companies, other 700 ‒ 700 700
Other financial liabilities to Group companies, derivatives ‒   
Other financial liabilities to other companies, derivatives ‒ 44 44 44
Accounts payable to Group companies 3 ‒ 3 3
Accounts payable to other companies 4 ‒ 4 4
Total financial liabilities 7 249 163 7 412 7 520
() The fair value is based on quoted prices from third party pricing services (level 2) for items carried at fair value except for other non-current liabilities, where discounted cash flow analysis (level 3) is
used. The following fair value measurement methods are used for items not carried at fair value: the fair value is estimated to equal the carrying amount for available-for-sale investments carried at
cost less impairment for which it is not possible to estimate fair value reliably as there is no active market for these private fund investments. These assets are tested for impairment annually using a
discounted cash flow analysis. The fair value of loans receivable and loans payable is estimated based on the current market values of similar instruments (level 2). The fair values of long-term interest-
bearing liabilities are primarily based on quotes from third-party pricing services (level 2). The fair value is estimated to equal the carrying amount for short-term financial assets and financial liabilities
due to limited credit risk and short time to maturity.
(2) Centralization of Group financing activities to Parent Company was finalized during 207.
(3) The fair values of long-term interest-bearing liabilities to other companies are based on quoted prices from third party pricing services (level 2).
(4) Other non-current financial liabilities include conditional obligation to China Huaxin as part of the Nokia Shanghai Bell definitive agreements where China Huaxin obtained the right to fully transfer its
ownership interest in Nokia Shanghai Bell to the Group in exchange for a future cash settlement. Refer to Note 24, Fair value of financial instruments and Note 33, Significant partly-owned subsidiaries
in the consolidated financial statements.

NOKIA IN 2017  207

Notes to Parent Company financial statements continued

Financial assets and liabilities recorded at fair value are categorized based on the amount of unobservable inputs used to measure their fair
value. Three hierarchical levels are based on an increasing amount of judgment associated with the inputs used to derive fair valuation for
these assets and liabilities, level 1 being market values for exchange traded products, level  being primarily based on quotes from third-
party pricing services, and level  requiring most management judgment. At the end of each reporting period, the Group categorizes its
financial assets and liabilities to appropriate level of fair value hierarchy.

. Derivative financial instruments

Assets Liabilities
EURm Fair value(1) Notional(2) Fair value(1) Notional(2)
As of December , 
Cash flow and fair value hedges()
Cross-currency interest rate swaps – – (4)  52
Derivatives not designated in hedge accounting relationships carried
at fair value through profit and loss
Forward foreign exchange contracts, Group companies 2 2 22 (3) 8 222
Forward foreign exchange contracts, other companies 7 0 85 () 8 37
Currency options bought, Group companies 4  – –
Currency options bought, other companies 2 4 – –
Currency options sold, Group companies – – (2) 5
Currency options, other companies – – (4) 3
Total 209 13 937 (392) 18 879
As of December , 
Fair value hedges
Interest rate swaps 42 300 – –
Cash flow and fair value hedges()
Cross-currency interest rate swaps 42  002 – –
Derivatives not designated in hedge accounting relationships carried
at fair value through profit and loss
Forward foreign exchange contracts, Group companies  5 80 ()  458
Forward foreign exchange contracts, other companies 8 5 88 (5) 7 804
Currency options bought 3 5 – –
Currency options sold, Group companies – – (3) 48
Interest rate swaps – – (2) 324
Total 224 13 545 () 10 084
() Included in other financial assets and other financial liabilities in the statement of financial position.
(2) Includes the gross amount of all notional values for contracts that have not yet been settled or cancelled. 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) Cross-currency interest rate swaps have been designated partly as fair value hedges and partly as cash flow hedges.

Derivative financial instrument designation to hedging relationships in the table above presents the use of and accounting for derivative
financial instruments from the perspective of the Parent Company’s standalone financial statements, which may differ from the designation
in the consolidated financial statements. Refer to Note , Derivative financial instruments in the consolidated financial statements.

7. Provisions
EURm 2017 2016
Divestment-related 4 2
Other 2 2
Total 76 104

208  NOKIA IN 2017

 Financial statements

8. Long-term interest-bearing liabilities

Nominal value Nominal interest 2017 2016
million % EURm EURm
Bonds
200-20 () 23 EUR .750 242 527
200-20 (2) 58 USD 5.375 488 2
207-202 () 500 EUR .000 500 –
207-2022 (2) 500 USD 3.375 40 –
207-2024 () 750 EUR 2.000 750 –
207-2027 (2) 500 USD 4.375 408 –
200-203 500 USD .25 428 ൯൳൮
Total 3 225 1 972
() In March 207, the Parent Company issued EUR 500 million .00% Senior Notes due 202 and EUR 750 million 2.00% Senior Notes due 2024 under our 5 billion Euro Medium-Term Note Programme.
The proceeds of the new notes were used to redeem (nominal amounts) EUR 2 million of the 20 Euro Notes, USD 8 million of the 2028 USD Notes and USD 40 million of the 202 USD Notes and
for general corporate purposes.
(2) In June 207, the Parent Company issued USD 500 million 3.375% Senior Notes due 2022 and USD 500 million 4.375% Senior Notes due 2027 under U.S. Securities Act of 33, as amended. The
proceeds of the new notes were used to redeem (nominal amounts) USD 4 million of the 20 USD Notes, USD 40 million of the 2028 USD Notes and USD 753 million of the 202 USD Notes and for
general corporate purposes.

All these borrowings are senior unsecured and have no financial covenants.

. Accrued expenses and other liabilities

EURm 2017 2016
VAT and other indirect taxes 5 47
Accrued interest 3 4
Salaries and social expenses 4 5
Divestment-related 2 2
Other to Group companies 5 3
Other to other companies 2 ൮൴
Total 232 167

20. Commitments and contingencies

EURm 2017 2016
Contingent liabilities on behalf of Group companies
Leasing guarantees 78 4
Other guarantees  445 87
Contingent liabilities on behalf of associated companies
Financial guarantees – 
Contingent liabilities on behalf of other companies
Other guarantees 27 3

Certain India related accounts receivable are under payment restrictions due to ongoing tax proceedings.
As of December 1, 1 operating lease commitments amounted to EUR 1 million (EUR  million in 16).

2. Loans granted to the management of the company

There were no loans granted to the members of the Group Leadership Team and Board of Directors as of December 1, 1 or 16.

NOKIA IN 2017 9 209

Notes to Parent Company financial statements continued

22. Notes to the statement of cash flows

EURm 2017 2016
Adjustments for
Depreciation and amortization 7 8
Income tax expense  3
Financial income and expenses (27) 72
Impairment charges  54
Loss on sale of shares and businesses 3 7
Asset retirements  –
Share-based payment 54 
Other income and expenses, net 25 0
Total 388 410
Change in net working capital
(Increase)/decrease in accounts receivable (0) 28
Decrease in interest-free short-term liabilities (24) (343)
(Decrease)/increase in interest-free long-term liabilities () 54
Total () ()

In 1, following the acquisition of Alcatel Lucent, various intra-group subsidiary share transfers were made to enable consolidation of legal
entities. Transfers were made through share exchanges with no cash impact.
In 16, the Parent Company acquired 1% of the shares in Alcatel Lucent SA, a parent company of the Alcatel Lucent Group, partially
through a share exchange offer and partially in cash. The fair value of the shares issued by the Parent Company as a purchase consideration
amounted to EUR 11 66 million and was recognized as an increase in reserve for invested non-restricted equity.

23. Principal Group companies

Refer to Note , Principal Group companies in the consolidated financial statements.
The full list of Group companies is included in the Financial statements filed with the Registrar of Companies.

24. The shares of the Parent Company

Refer to Note , Shares of the Parent Company in the consolidated financial statements.

25. Risk Management

The Group has a systematic and structured approach to risk management across business operations and processes. Risk management
policies and procedures are Group-wide, there are no separate or individual risk management policies or procedures for the Parent Company.
Hence, internal and external risk exposures and transactions are managed only in the context of the Group risk management strategy.
The Parent Company is the centralized external dealing entity in the Group. The Parent Company executes all significant external financial
transactions with banks based on the Group’s risk management strategy, and executes identical opposite internal financial transactions
with Group Companies as required. Refer to Note 6, Risk management in the consolidated financial statements.

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 Financial statements

Signing of the Annual Accounts 2017

and proposal by the Board of Directors
for distribution of profits

The distributable funds in the statement of financial position of the Parent company at December 31, 2017 amounted to EUR 18 229 million.
The Board proposes to the Annual General Meeting that from the retained earnings a dividend of EUR 0,19 per share be paid out on the shares
of the company. At December 31, 2017 the total number of the shares of the company was 5 839 404 303, based on which the maximum
amount to be distributed as dividend would be EUR 1 109 million.
The proposed dividend is in line with the company’s distribution policy.

March 22, 2018

Risto Siilasmaa Bruce Brown

Chair of the Board

Jeanette Horan Louis R. Hughes

Edward Kozel Jean C. Monty

Elizabeth Nelson Olivier Piou

Carla Smits-Nusteling Kari Stadigh

Rajeev Suri
President and CEO

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Auditor’s report

To the Annual General Meeting of Nokia Oyj Our audit approach

Overview
Report on the audit of the financial statements
■■ Overall group materiality: EUR 125 million,
Opinion which represents 0.5% of consolidated
In our opinion: net sales
■■ The consolidated financial statements give a true and fair view of Materiality ■■ We performed specific audit procedures
the group’s financial position and financial performance and cash at 39 reporting components, in addition
flows in accordance with International Financial Reporting Standards to group level procedures over specific
(IFRS) as issued by the International Accounting Standards Board consolidated accounts and analytical
and as adopted by the European Union; and, Group procedures to assess unusual
scoping movements across all entities
■■ The financial statements give a true and fair view of the parent
company’s financial performance and financial position in ■■ Valuation of goodwill
accordance with the laws and regulations governing the ■■ Revenue recognition on complex
preparation of the financial statements in Finland and comply Key audit contracts
with statutory requirements. matters
■■ Valuation of deferred tax assets
Our opinion is consistent with our additional report to the
Audit Committee. ■■ Fair value of pension and post-retirement
plan assets
What we have audited
We have audited the financial statements of Nokia Oyj (business
identity code 0112038-9) for the year ended 31 December 2017. As part of designing our audit, we determined materiality and
The financial statements comprise: assessed the risks of material misstatement in the financial
statements. In particular, we considered where management made
■■ The consolidated statement of financial position, income statement, subjective judgements; for example, in respect of significant
statement of comprehensive income, statement of changes in accounting estimates that involved making assumptions and
shareholders’ equity and statement of cash flows, and notes to considering future events that are inherently uncertain.
the consolidated financial statements including a summary of
significant accounting policies; and Materiality
The scope of our audit was influenced by our application of materiality.
■■ The parent company’s statement of financial position, income An audit is designed to obtain reasonable assurance whether
statement, statement of cash flows and notes to the financial the financial statements are free from material misstatement.
statements. Misstatements may arise due to fraud or error. They are considered
Basis for opinion material if individually or in aggregate, they could reasonably be
We conducted our audit in accordance with good auditing practice expected to influence the economic decisions of users taken on
in Finland. Our responsibilities under good auditing practice are the basis of the financial statements.
further described in the Auditor’s Responsibilities for the Audit Based on our professional judgement, we determined certain
of the Financial Statements section of our report. quantitative thresholds for materiality, including the overall group
We believe that the audit evidence we have obtained is sufficient materiality for the consolidated financial statements as set out in the
and appropriate to provide a basis for our opinion. table below. These, together with qualitative considerations, helped us
to determine the scope of our audit and the nature, timing and extent
Independence of our audit procedures and to evaluate the effect of misstatements
We are independent of the parent company and of the group on the financial statements as a whole.
companies in accordance with the ethical requirements that are
applicable in Finland and are relevant to our audit, and we have Overall group materiality EUR 125 million (previous year
fulfilled our other ethical responsibilities in accordance with EUR 125 million)
these requirements.
How we determined it 0.5% of consolidated net sales
To the best of our knowledge, the non-audit services that we have Rationale for The Group‘s loss before tax was
provided to the parent company and to the group companies are the materiality substantial, in part as a result of significant
in accordance with the applicable law and regulations in Finland and benchmark applied charges recorded that relate to the
we have not provided non-audit services that are prohibited under continued integration of the Alcatel Lucent
Article 5(1) of Regulation (EU) No 537/2014. The non-audit services acquisition and therefore we assessed that
that we have provided are disclosed in Auditor fees and services an earnings based measure was not the
in Note 3 to the parent company financial statements. most appropriate basis to determine
our materiality.
In light of the loss for the year, we chose
net sales as a most appropriate measure
of the operating results of the company.
We chose 0.5% of revenue which is based
on perspectives and expectations of the
users of the financial statements in the
context of our understanding of the entity
and the environment in which it operates.

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 Financial statements

How we tailored our group audit scope We also performed targeted audit procedures at an additional 30 less
We tailored the scope of our audit in order to perform sufficient significant reporting components in order to provide further coverage
work to enable us to provide an opinion on the consolidated financial over the Group’s revenue and consolidation process. None of the
statements as a whole, taking into account the structure of the Group, remaining reporting components individually contributed greater
the accounting processes and controls, and the industry in which the than 1% of either Group net sales or Group total assets. In addition
Group operates. to the audit work performed on internal controls which operate
on a Group-wide basis, we performed analytical procedures over
The Group operates in a significant number of legal entities or these components, which corroborated our assessment that
“reporting components” globally. We determined the nature, timing these components did not present a reasonable risk of material
and extent of audit work that needed to be performed at reporting misstatement. By performing the procedures above at reporting
components by us, as the group engagement team, or component components, combined with additional procedures at the Group level,
auditors from other PwC network firms operating under our we have obtained sufficient and appropriate evidence regarding the
instruction. Where the work was performed by reporting component financial information of the Group as a whole to provide a basis for
auditors, we issued specific instructions to those auditors which our opinion on the consolidated financial statements.
included our risk analysis, materiality and global audit approach
to centralized processes and systems. We visited all significant Key audit matters
reporting components and communicated regularly with the Key audit matters are those matters that, in our professional judgment
reporting component auditors throughout our audit. We performed were of most significance in our audit of the financial statements of
audits of reporting component financial information at each of the the current period. These matters were addressed in the context of our
9 reporting components which are considered significant based on audit of the financial statements as a whole, and in forming our opinion
our overall risk assessment and materiality. thereon, and we do not provide a separate opinion on these matters.
As in all of our audits, we also addressed the risk of management
override of internal controls, including among other matters
consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.

Key audit matter in the audit of the group How our audit addressed the key audit matter

Valuation of goodwill
Refer to Note 3, Use of estimates and critical accounting judgments, We designed our audit procedures to be responsive to this risk.
Note 14, Intangible assets of the consolidated financial statements,
and Note 16 Impairment We obtained an understanding of management’s goodwill impairment
At December 31, 2017, the total carrying value of goodwill amounted assessment process, evaluated the design and tested the operating
to EUR 5,3 billion, representing 13% of the group’s total assets. effectiveness of internal controls in this area with a focus on the
controls in place over the modelling of the fair value of CGU’s.
Goodwill is tested for impairment when indicators of impairment
exist or, at least annually. Goodwill impairment testing is conducted Our detailed audit work over the fair value of CGU’s with the
by assessing the fair value of cash generating units (CGU) (to which involvement of our valuation specialists included:
goodwill is allocated) against the carrying amount of those cash ■■ Evaluation of the methodology adopted by management for
generating units. Management estimates the fair value of the cash calculating fair values;
generating units using a discounted cash flow model.
■■ Reconciliation of management’s expected cash flows to the Group’s
We focus on this area given the significant judgements and estimates most recent business plan, which reflected management’s current
required to be made in applying the discounted cash flow approach to expectations of market trends and was consistent with information
determine fair value. Specifically, estimates relating to future business provided to Board of Directors;
operations that impact operating cash flows, anticipated future tax
payments, changes in working capital and other estimates such as the ■■ Validating and challenging key inputs and data used in valuation
discount rate used in the modelling exercise may significantly impact models such as revenue growth, discount rates, and cash flow
management’s assessment of the fair value of a CGU. projections by reference to historical data and our expectations
based on observable data; and,
We have determined that this area constitutes a significant risk of
material misstatement referred to in Article 10(2c) of Regulation (EU) ■■ Performing sensitivity analysis by stress testing key assumptions in
No 537/2014. the model to consider the degree to which these assumptions
would need to change before an impairment would have to be
recognized.
We also assessed the adequacy of the Company’s disclosure as
included in Note 14, Intangible assets and Note 16, Impairment.

NOKIA IN 2017 213

Auditor’s report continued

Key audit matter in the audit of the group How our audit addressed the key audit matter

Revenue recognition on complex contracts

Refer to Note 3, Use of estimates and critical accounting We designed our audit procedures to be responsive to this risk.
judgments, and Note 7, Revenue recognition of the consolidated
financial statements We obtained an understanding of management’s revenue recognition
Certain revenue contracts in the Networks business and at Nokia process and evaluated the design and tested the operating
Technologies involve multiple deliverables or elements; for example, effectiveness of controls over revenue recognition, with particular
a revenue arrangement may combine the delivery of hardware, focus on the controls executed globally for the initial identification
software, licensing of intellectual property and rendering of of multiple elements within revenue contracts and determination
services. Such agreements require management to identify all of of the timing of recognition for each revenue element.
the deliverables in the arrangement and record revenue based on Audit procedures were performed over revenue recognition at the
the fair value of the deliverables at the appropriate time, generally Group level and at each of the reporting components that were in
upon delivery of equipment or acceptance of products and services. scope for the Group audit.
These complex contracts give rise to the risk of material We completed detailed testing procedures over revenue arrangements
misstatement due to the incorrect identification of revenue elements that we selected based on size and complexity to assess the
and timing of revenue recognition for each element. We have appropriateness of judgements made by management regarding
determined that this area constitutes a significant risk of material revenue elements, the determination of fair value of deliverables
misstatement referred to in Article 10(2c) of Regulation (EU) and the appropriateness of recognition triggers.
No 537/2014.
We tested a sample of revenue transactions recorded during the year
at each component by tracing them to supporting evidence of delivery
and acceptance and assessed the revenue recorded in the period by
comparing it to contractual terms.
We assessed the Group’s revenue recognition accounting policies for
compliance with IFRS.
Valuation of deferred tax assets
Refer to Note 3, Use of estimates and critical accounting We designed our audit procedures to be responsive to this risk.
judgments, and Note 12, Income taxes of the consolidated
financial statements We obtained an understanding of process that management has
At December 31, 2017, the Group had recognized net deferred tax implemented for accounting for deferred tax assets. We also evaluated
assets of EUR 4.2 billion. The Group also had temporary differences the design and tested the operating effectiveness of controls in this area.
of EUR 1.9 billion and tax losses carried forward of EUR 18.4 billion We performed substantive audit procedures to validate the deferred tax
which were not recognized due to uncertainty of utilization. balances which are recorded with a consideration of enacted tax laws in
each jurisdiction in accordance with IFRS.

The analysis of the recoverability of the deferred tax assets was Our audit work on the valuation of deferred tax assets, with the
significant to our audit as the amounts are material, the assessment involvement of our tax specialists, included:
process is judgemental and is based on assumptions that are ■■ Validating the completeness and accuracy of tax attributes;
impacted by expected future market conditions, specifically as it
relates to future performance in United States and the Eurozone ■■ Confirming the appropriate application of tax rules for utilizing
where the majority of the Group’s deferred tax assets reside. deferred tax assets, including expiry of those attributes;

We have determined that this area constitutes a significant risk ■■ Evaluating the Company’s ability to generate sufficient taxable
of material misstatement referred to in Article 10(2c) of Regulation income to utilize deferred tax assets. This evaluation takes into
(EU) No 537/2014. account the Company’s historical profitability and future
projections; and,
■■ Reviewing the adequacy of the disclosures made by the company in
accordance with IFRS.
In addition, we assessed the Group’s accounting for compliance with IFRS.

214 NOKIA IN 2017

 Financial statements

Key audit matter in the audit of the group How our audit addressed the key audit matter

Fair value of pension and post-retirement plan assets

Refer to Note 3, Use of estimates and critical accounting judgments, We designed our audit procedures to be responsive to this risk.
and Note 27, Pensions and other post-employment benefits
The fair value of the Group’s pension and post-retirement plan We obtained an understanding of process that management has
assets is EUR 25.5 billion, primarily in the United States and includes related to the preparation and review of plan asset valuations.
EUR 5.2 billion in unquoted investments for which the valuation We also evaluated the design and tested the operating effectiveness
requires the use of estimates and significant judgement. A small of controls in this area.
change in the assumptions used could have a material impact on We tested the existence of a sample of unquoted investments
the consolidated financial statements. by obtaining confirmations from investment custodians including
We considered valuation of the unquoted plan assets as a key audit administrators, investment managers, and trustees. Our audit work
matter due to materiality of the related balances and judgments on the valuation of these investments, with the involvement of our
involved in these estimates. valuation specialists, included:
■■ Assessing the appropriateness of the valuation method, estimates
and judgements used by the Group to value these investments;
■■ Testing the inputs used in the valuations; and,
■■ Confirming the valuation of net asset value of investment funds
with the investment custodian.
Finally, we reviewed the adequacy of the disclosures made by the
company in accordance with IFRS.

There are no key audit matters to report or significant risks of material misstatement referred to in Article 10(2c) of Regulation (EU) No 537/2014
with respect to the parent company financial statements.

Responsibilities of the Board of Directors and the Managing Director As part of an audit in accordance with good auditing practice, we
for the Financial Statements exercise professional judgment and maintain professional skepticism
The Board of Directors and the Managing Director are responsible throughout the audit. We also:
for the preparation of consolidated financial statements that give a
true and fair view in accordance with International Financial Reporting ■■ Identify and assess the risks of material misstatement of the
Standards (IFRS) as adopted by the EU, and of financial statements financial statements, whether due to fraud or error, design and
that give a true and fair view in accordance with the laws and perform audit procedures responsive to those risks, and obtain
regulations governing the preparation of financial statements in audit evidence that is sufficient and appropriate to provide a basis
Finland and comply with statutory requirements. The Board of for our opinion. The risk of not detecting a material misstatement
Directors and the Managing Director are also responsible for such resulting from fraud is higher than for one resulting from error,
internal control as they determine is necessary to enable the as fraud may involve collusion, forgery, intentional omissions,
preparation of financial statements that are free from material misrepresentations, or the override of internal control;
misstatement, whether due to fraud or error. ■■ Obtain an understanding of internal control relevant to the audit
In preparing the financial statements, the Board of Directors and the in order to design audit procedures that are appropriate in the
Managing Director are responsible for assessing the parent company’s circumstances, but not for the purpose of expressing an opinion
and the group’s ability to continue as a going concern, disclosing, on the effectiveness of the parent company’s or the group’s
as applicable, matters relating to going concern and using the going internal control;
concern basis of accounting. The financial statements are prepared ■■ Evaluate the appropriateness of accounting policies used and the
using the going concern basis of accounting unless there is an reasonableness of accounting estimates and related disclosures
intention to liquidate the parent company or the group or to made by management;
cease operations, or there is no realistic alternative but to do so.
■■ Conclude on the appropriateness of the Board of Directors’ and the
Auditor’s Responsibilities for the Audit of the Financial Statements Managing Director’s use of the going concern basis of accounting
Our objectives are to obtain reasonable assurance about whether the and based on the audit evidence obtained, whether a material
financial statements as a whole are free from material misstatement, uncertainty exists related to events or conditions that may cast
whether due to fraud or error, and to issue an auditor’s report significant doubt on the parent company’s or the group’s ability
that includes our opinion. Reasonable assurance is a high level to continue as a going concern. If we conclude that a material
of assurance, but is not a guarantee that an audit conducted in uncertainty exists, we are required to draw attention in our auditor’s
accordance with good auditing practice will always detect a material report to the related disclosures in the financial statements or,
misstatement when it exists. Misstatements can arise from fraud or if such disclosures are inadequate, to modify our opinion. Our
error and are considered material if, individually or in the aggregate, conclusions are based on the audit evidence obtained up to the
they could reasonably be expected to influence the economic date of our auditor’s report. However, future events or conditions
decisions of users taken on the basis of these financial statements. may cause the parent company or the group to cease to continue
as a going concern;

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Auditor’s report continued

■■ Evaluate the overall presentation, structure and content of the Other reporting requirements
financial statements, including the disclosures, and whether
Appointment
the financial statements represent the underlying transactions
We were first appointed as auditors by the annual general meeting
and events so that the financial statements give a true and fair
on 25 March 1987. Our appointment represents a total period of
view; and,
uninterrupted engagement of 31 years.
■■ Obtain sufficient appropriate audit evidence regarding the financial
Other Information
information of the entities or business activities within the group to
The Board of Directors and the Managing Director are responsible
express an opinion on the consolidated financial statements. We are
for the other information. The other information comprises the report
responsible for the direction, supervision and performance of the
of the Board of Directors and the information included in the Annual
group audit. We remain solely responsible for our audit opinion.
Report, but does not include the financial statements and our
We communicate with those charged with governance regarding, auditor’s report thereon.
among other matters, the planned scope and timing of the audit
Our opinion on the financial statements does not cover the
and significant audit findings, including any significant deficiencies
other information.
in internal control that we identify during our audit.
In connection with our audit of the financial statements, our
We also provide those charged with governance with a statement
responsibility is to read the other information and, in doing so,
that we have complied with relevant ethical requirements regarding
consider whether the other information is materially inconsistent
independence, and to communicate with them all relationships
with the financial statements or our knowledge obtained in the audit,
and other matters that may reasonably be thought to bear on
or otherwise appears to be materially misstated. With respect to the
our independence, and where applicable, related safeguards.
report of the Board of Directors, our responsibility also includes
From the matters communicated with those charged with considering whether the report of the Board of Directors has been
governance, we determine those matters that were of most prepared in accordance with the applicable laws and regulations.
significance in the audit of the financial statements of the current
In our opinion:
period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes ■■ the information in the report of the Board of Directors is consistent
public disclosure about the matter or when, in extremely rare with the information in the financial statements; and,
circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences ■■ the report of the Board of Directors has been prepared in
of doing so would reasonably be expected to outweigh the public accordance with the applicable laws and regulations.
interest benefits of such communication. If, based on the work we have performed, we conclude that there
is a material misstatement of the other information, we are required
to report that fact. We have nothing to report in this regard.
Other Statements
We support that the financial statements and the consolidated
financial statements should be adopted. The proposal by the Board
of Directors regarding the use of 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 22, 2018

PricewaterhouseCoopers Oy
Authorised Public Accountants

Pasi Karppinen
Authorised Public Accountant (KHT)

216 NOKIA IN 2017

 Other information

Other information

Contents
Forward-looking statements 218
Glossary of terms 220
Investor information 223
Contact information 224

NOKIA IN 2017 217

Forward-looking statements

It should be noted that Nokia and its businesses are exposed to These statements are based on management’s best assumptions and
various risks and uncertainties and certain statements herein that beliefs in light of the information currently available to it. Because they
are not historical facts are forward-looking statements, including, involve risks and uncertainties, actual results may differ materially
without limitation, those regarding: from the results that we currently expect. Factors, including risks
and uncertainties that could cause these differences include, but are
A) our ability to integrate acquired businesses into our operations not limited to:
and achieve the targeted business plans and benefits, including
targeted benefits, synergies, cost savings and efficiencies; 1) our strategy is subject to various risks and uncertainties and we
may be unable to successfully implement our strategic plans,
B) expectations, plans or benefits related to our strategies and sustain or improve the operational and financial performance
growth management; of our business groups, correctly identify or successfully pursue
C) expectations, plans or benefits related to future performance business opportunities or otherwise grow our business;
of our businesses; 2) general economic and market conditions and other developments
D) expectations, plans or benefits related to changes in in the economies where we operate;
organizational and operational structure; 3) competition and our ability to effectively and profitably invest in
E) expectations regarding market developments, general economic new competitive high-quality products, services, upgrades and
conditions and structural changes; technologies and bring them to market in a timely manner;

F) expectations and targets regarding financial performance, results, 4) our dependence on the development of the industries in which we
operating expenses, taxes, currency exchange rates, hedging, cost operate, including the cyclicality and variability of the information
savings and competitiveness, as well as results of operations technology and telecommunications industries;
including targeted synergies and those related to market share, 5) our dependence on a limited number of customers and large
prices, net sales, income and margins; multi-year agreements;
G) expectations, plans or benefits related to any future collaboration 6) our ability to maintain our existing sources of intellectual
or to business collaboration agreements or patent license property-related revenue, establish new sources of revenue and
agreements or arbitration awards, including income to be received protect our intellectual property from infringement;
under any collaboration or partnership, agreement or award;
7) our global business and exposure to regulatory, political or other
H) timing of the deliveries of our products and services; developments in various countries or regions, including emerging
I) expectations and targets regarding collaboration and partnering markets and the associated risks in relation to tax matters and
arrangements, joint ventures or the creation of joint ventures, and exchange controls, among others;
the related administrative, legal, regulatory and other conditions, 8) our ability to achieve the anticipated benefits, synergies, cost
as well as our expected customer reach; savings and efficiencies of acquisitions, including the acquisition
J) outcome of pending and threatened litigation, arbitration, of Alcatel Lucent, and our ability to implement changes to
disputes, regulatory proceedings or investigations by authorities; our organizational and operational structure efficiently;

K) expectations regarding restructurings, investments, capital 9) our ability to manage and improve our financial and operating
structure optimization efforts, uses of proceeds from performance, cost savings, competitiveness and synergies
transactions, acquisitions and divestments and our ability to generally and after the acquisition of Alcatel Lucent;
achieve the financial and operational targets set in connection 10) exchange rate fluctuations, as well as hedging activities;
with any such restructurings, investments, capital structure
optimization efforts, divestments and acquisitions; and 11) our ability to successfully realize the expectations, plans or
benefits related to any future collaboration or business
L) statements preceded by or including “believe”, “expect”, collaboration agreements and patent license agreements or
“anticipate”, “foresee”, “sees”, “target”, “estimate”, “designed”, arbitration awards, including income to be received under any
“aim”, “plans”, “intends”, “focus”, “continue”, “project”, “should”, collaboration, partnership, agreement or arbitration award;
“is to”, “will” or similar expressions.
12) our dependence on IPR technologies, including those that we have
developed and those that are licensed to us, and the risk of
associated IPR-related legal claims, licensing costs and restrictions
on use;
13) our exposure to direct and indirect regulation, including economic
or trade policies, and the reliability of our governance, internal
controls and compliance processes to prevent regulatory penalties
in our business or in our joint ventures;
14) our reliance on third-party solutions for data storage and service
distribution, which expose us to risks relating to security, regulation
and cybersecurity breaches;

218 NOKIA IN 2017

 Other information

15) inefficiencies, breaches, malfunctions or disruptions of Introduction and use of certain terms
information technology systems;
Nokia Corporation is a public limited liability company incorporated
16) Nokia Technologies’ ability to generate net sales and profitability under the laws of the Republic of Finland. In this annual report,
through licensing of the Nokia brand, technology licensing and the any reference to “we,” “us,” “the Group,” “the company” or “Nokia”
development and sales of products and services for instance in means Nokia Corporation and its consolidated subsidiaries and
digital health, as well as other business ventures, which may not generally to Nokia’s Continuing operations, except where we separately
materialize as planned; specify that the term means Nokia Corporation or a particular
subsidiary or business segment only or our Discontinued operations.
17) our exposure to various legal frameworks regulating corruption, References to “our shares” matters relating to our shares or matters
fraud, trade policies, and other risk areas, and the possibility of of corporate governance refer to the shares and corporate governance
proceedings or investigations that result in fines, penalties or of Nokia Corporation.
sanctions;
Nokia Corporation has published its consolidated financial statements
18) adverse developments with respect to customer financing or in euro for periods beginning on or after January 1, 1999. In this
extended payment terms we provide to customers; annual report, references to “EUR,” “euro” or “€” are to the common
19) the potential complex tax issues, tax disputes and tax obligations currency of the European Economic and Monetary Union, and
we may face in various jurisdictions, including the risk of references to “dollars”, “U.S. dollars”, “USD” or “$” are to the currency
obligations to pay additional taxes; of the United States. Solely for the convenience of the reader, this
annual report contains conversions of selected euro amounts into U.S.
20) our actual or anticipated performance, among other factors, dollars at specified rates or, if not so specified, at the year-end rate
which could reduce our ability to utilize deferred tax assets; of 1.1993 U.S. dollars per euro, which was the European Central Bank
reference rate on December 29, 2017. No representation is made
21) our ability to retain, motivate, develop and recruit appropriately
that the amounts have been, could have been or could be converted
skilled employees;
into U.S. dollars at the rates indicated or at any other rates.
22) disruptions to our manufacturing, service creation, delivery,
logistics and supply chain processes, and the risks related to our
geographically-concentrated production sites;
23) the impact of litigation, arbitration, agreement-related disputes
or product liability allegations associated with our business;
24) our ability to re-establish investment grade rating or maintain
our credit ratings;
25) our ability to achieve targeted benefits from, or successfully
implement planned transactions, as well as the liabilities
related thereto;
26) our involvement in joint ventures and jointly-managed companies;
27) the carrying amount of our goodwill may not be recoverable;
28) uncertainty related to the amount of dividends and equity return
we are able to distribute to shareholders for each financial period;
29) pension costs, employee fund-related costs, and healthcare
costs; and
30) risks related to undersea infrastructure, as well as the risk
factors specified under “Operating and financial review and
prospects—Risk factors” of this annual report and in our other
filings or documents furnished with the U.S. Securities and
Exchange Commission. Other unknown or unpredictable factors or
underlying assumptions subsequently proven to be incorrect could
cause actual results to differ materially from those in the forward-
looking statements. We do 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.

NOKIA IN 2017 219

Glossary of terms

3G (Third Generation Mobile Communications): The third generation Bandwidth: The width of a communication channel, which affects
of mobile communications standards designed for carrying both transmission speeds over that channel.
voice and data generally using WCDMA or close variants. Base station: A network element in a mobile network responsible
4G (Fourth Generation Mobile Communications): The fourth for radio transmission and reception to or from the mobile station.
generation of mobile communications standards based on LTE, Broadband: The delivery of higher bandwidth by using transmission
offering IP data connections only and providing true broadband channels capable of supporting data rates greater than the primary
internet access for mobile devices. Refer also to LTE. rate of 9.6 Kbps.
4.5G Pro: Our next step in a technology path that will optimize the BSS (Business Support Systems): The components that a
journey to 5G. Powered by the 5G-ready AirScale, 4.5G Pro delivers telecommunications service provider uses to run its business
ten times the speeds of initial 4G networks, enabling operators to operations towards customers.
offer gigabit peak data rates to meet growing demands from the
programmable world. Using extended carrier aggregation techniques CDMA (Code Division Multiple Access): A technique in which radio
across up to five frequency bands, operators will be able to leverage transmissions using the same frequency band are coded in a way
their diverse paired (FDD) and unpaired (TDD) licensed spectrum as that a signal from a certain transmitter can be received only by
well as unlicensed spectrum. certain receivers.
4.9G: Our evolutionary step to enable future service continuity with Churn: Churn rate is a measure of the number of customers or
5G network fabric. 4.9G will provide significant increases in capacity subscribers who leave their service provider, e.g. a mobile operator,
and several gigabits of speed-per-second on the path to 5G. This during a given time period.
will include allowing additional numbers of carriers to be aggregated, Cloud: Cloud computing is a model for enabling ubiquitous,
opening the door to additional licensed and unlicensed spectrum, convenient, on-demand network access to a shared pool of
and advancing the radio systems to allow highly directional antennas configurable computing resources (e.g., networks, servers, storage,
to be used and to allow signals sent via multiple transmit/receive applications and services) that can be rapidly provisioned and released
paths to be added together. with minimal management effort.
5G (Fifth Generation Mobile Communications): The next major CloudBand: Our Cloud management and orchestration solutions
phase of mobile telecommunications standards. 5G will be the set enabling a unified Cloud engine and platform for NFV.
of technical components and systems needed to handle new
requirements and overcome the limits of current systems. Cloud Native Core: Optimizes Cloud core applications and
architecture to support massive IoT, mobile broadband and the
5G FIRST: Nokia’s end-to-end 5G solution that incorporates AirScale 5G programmable world.
and AirFrame technology, including AirScale massive MIMO Adaptive
Antenna, Cloud Packet Core and mobile transport to bring new Continuing operations: Refers to the Continuing operations following
capabilities to operators. the acquisition of Alcatel Lucent, the Sale of the HERE Business in 2015
and the Sale of the D&S Business in 2014. Our Continuing operations
Access network: A telecommunications network between a local in 2017 included two businesses: our Networks business and
exchange and the subscriber station. Nokia Technologies.
AirFrame: Our 5G-ready, end-to-end data center solution that Convergence: The coming together of two or more disparate
combines the benefits of Cloud computing technologies with the disciplines or technologies. Convergence types are, for example,
requirements of the core and radio telecommunications world. It is IP convergence, fixed-mobile convergence and device convergence.
available in Rackmount and Open Compute Project (OCP) form factors.
This enables the solution to be very scalable: from small distributed Core network: A combination of exchanges and the basic transmission
latency-optimized data centers, all the way to massive centralized equipment that together form the basis for network services.
hyper scale data center deployment. CSPs: Communications service providers.
AirScale Radio Access: A 5G-ready complete radio access generation Customer Experience Management: Software suite used to manage
that helps operators address the increasing demands of today and and improve the customer experience, based on customer, device and
tomorrow. The solution comprises: Nokia AirScale Base Station with network insights.
multiband RF elements and system modules; Nokia AirScale Active
Devices & Services: Our former mobile device business, substantially
Antennas; Cloud RAN with Nokia AirScale Cloud Base Station Server
all of which was sold to Microsoft.
and the Cloud-based AirScale RNC for 3G; Nokia AirScale Wi-Fi;
common software; and services which use intelligent analytics and DevOps: An agile software engineering culture and practice that aims
extreme automation to maximize the performance of hybrid networks. at unifying software development (Dev) and software operation (Ops).
Altiplano: Nokia’s cloud-native software platform, Altiplano, is Discontinued operations: Mainly refers to the divestment of our HERE
uniquely designed for the SDN/NFV space, renewing operators’ ability business to an automotive consortium and the sale of substantially all
to scale by centralizing and virtualizing network functionality that of our Devices & Services business to Microsoft.
was traditionally embedded in the access equipment. Altiplano offers Ecosystem: An industry term to describe the increasingly large
intuitive business logic to cut across traditional network management communities of mutually beneficial partnerships that participants
silos and auto-align the network. Leveraging open interfaces, open such as hardware manufacturers, software providers, developers,
data models and open industry initiatives, Altiplano allows operators publishers, entertainment providers, advertisers and ecommerce
to integrate Nokia SDAN easily in a multivendor environment. specialists form in order to bring their offerings to market. At the heart
API (Application Programming Interface): A set of routines, protocols, of the major ecosystems in the mobile devices and related services
and tools for building software applications, specifying how software industry is the operating system and the development platform upon
components should interact. which services are built.
AVA: Nokia AVA cognitive services platform that integrates Engine: Hardware and software that perform essential core functions
cloud-based delivery, intelligent analytics and extreme automation for telecommunication or application tasks.
to deliver instant and flawless personalized services.

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 Other information

EPON: Ethernet Passive Optical Network. IPR licensing: Generally refers to an agreement or an arrangement
ETSI (European Telecommunications Standards Institute): Standards where a company allows another company to use its intellectual property
produced by the ETSI contain technical specifications laying down the (such as patents, trademarks or copyrights) under certain terms.
characteristics required for a telecommunications product. IP/Optical Networks: Our IP/Optical Networks business group
Fixed Networks: Our Fixed Networks business group provides copper provides the key IP routing and optical transport systems, software
and fiber access products, solutions, and services. and services to build high capacity network infrastructure for the
internet and global connectivity.
FP4: Nokia FP4 is the world’s first 2.4 Tb/s network processor. It builds
Lightspan: The Nokia Lightspan family delivers programmable
on three generations of Nokia’s leading-edge network processors
access nodes, specifically designed for SDAN use cases, which bring
and sets a new standard in IP routing silicon design.
data center practices to the central office and introduce cloud and
Future X: A network architecture—a massively distributed, cognitive, operational agility to the copper/fiber outside plant. The innovative
continuously adaptive, learning and optimizing network connecting and compact Lightspan hardware comes with powerful processing,
humans, senses, things, systems, infrastructure, processes. increased throughput and power-efficient design. It features the
Gainspeed: California-based start-up specializing in Distributed Lightspan SX-16F, the world’s first 16-port reverse-powered G.fast
Access Architecture solutions for the cable industry. Acquired by micro-node which can be safely reverse-powered from the home.
Nokia in 2016. It also includes the Lightspan CF-24W, a stackable software-defined
optical line terminal (OLT) that delivers the industry’s highest
G.fast: A fixed broadband technology able to deliver up to 1Gbps next-generation PON (NG-PON) capacity in a single one-rack unit.
over very short distances (for example, for in-building use, also
called “Fiber-to-the-Building”). Launched in 2014, G.fast uses more LTE (Long-Term Evolution): 3GPP radio technology evolution
frequencies and G.fast Vectoring techniques to achieve higher speeds. architecture and a standard for wireless communication of high-speed
data. Also referred to as 4G, refer to 4G above.
Global Delivery Center: A remote service delivery center with a pool
of services experts, automated tools and standardized processes to LTE-M: An IoT radio technology addressing demanding IoT applications
ensure that services across the entire network life cycle are delivered needs with low to mid-volume data use of up to about 1Mbps.
to operators globally. The technology also simplifies modems by about 80%.
Global Services: Our Global Services business group provides mobile MIKA: Multi-purpose Intuitive Knowledge Assistant, a customized
operators with a broad range of services, including professional digital assistant, powered by the Nokia AVA cognitive services platform,
services, network implementation and customer care services. that improves telecom operators’ efficiency by providing engineers
faster access to critical information.
GPON (Gigabit Passive Optical Networking): A fiber access
technology that delivers 2.5Gbps over a single optical fiber to multiple MIMO: Multiple-input and multiple-output, or MIMO, is a method for
end points including residential and enterprise sites. multiplying the capacity of a radio link using multiple transmit and
receive antennas.
GSM (Global System for Mobile Communications): A digital system for
mobile communications that is based on a widely-accepted standard Mobile broadband: Refers to high-speed wireless internet connections
and typically operates in the 900 MHz, 1800 MHz and 1900 MHz and services designed to be used from arbitrary locations.
frequency bands. Mobile Networks: Our Mobile Networks business group offers an
HERE: A former Nokia company focused on mapping and location industry-leading portfolio of end-to-end mobile networking solutions
intelligence services, which was divested to an automotive consortium comprising hardware, software, and services for telecommunications
in 2015. operators, enterprises, and related markets/verticals such as public
safety and IoT.
IFRS (International Financial Reporting Standards): International
Financial Reporting Standards as issued by the International Networks business: Comprised the Mobile Networks, Fixed Networks,
Accounting Standards Board and in conformity with IFRS as adopted Global Services, Nokia Software, and IP/Optical Networks business
by the European Union. groups in 2017.

Implementation patents: Implementation patents include technologies NFV (Network Functions Virtualization): Principle of separating
used to implement functionalities in products or services which are network functions from the hardware they run on by using virtual
not covered by commitments to standards-setting organizations, hardware abstraction.
so they typically offer product differentiation by giving competitive Nokia Bell Labs: Our research arm discovering and developing the
advantage, such as increased performance, smaller size or improved technological shifts needed for the next phase of human existence as
battery life, and the patent owner has no obligation to license them well as exploring and solving complex problems to radically redefine
to others. networks.
Internet of Things (IoT): All things such as cars, the clothes we wear, Nokia Networks: Our former business focused on mobile network
household appliances and machines in factories connected to the infrastructure software, hardware and services.
Internet and able to automatically learn and organize themselves. Nokia Software: Our business group offering carrier-grade software
Internet Protocol (IP): Principal communications protocol in the applications and platforms to provide operations and business
Internet protocol suite for relaying packets across network boundaries. support systems, build, deliver, and optimize services, enable their
monetization, and to improve customer experience. On February 1,
Intellectual Property: Intellectual property results from original
2018, we announced that we would rename our Applications &
creative thought, covering items such as patents, copyright material
Analytics business group as Nokia Software.
and trademarks, as well as business models and plans.
NSN (Nokia Solutions and Networks): The former name of our Networks
IP Multimedia Subsystem (IMS): Architectural framework designed
business. From 2007, NSN was known as Nokia Siemens Networks
to deliver IP-based multimedia services on telecommunications
until we acquired Siemens’ 50% stake in the joint venture in 2013.
networks; standardized by 3GPP.
Nokia Technologies: Our business group focused on advanced
IPR (Intellectual Property Right): Legal right protecting the economic
technology development and licensing.
exploitation of intellectual property, a generic term used to describe
products of human intellect, for example patents, that have an
economic value.

NOKIA IN 2017 221

Glossary of terms continued

Operating system (OS): Software that controls the basic operation of TD-LTE (Time Division Long-Term Evolution, also known as TDD
a computer or a mobile device, such as managing the processor and (Time Division Duplex)): An alternative standard for LTE mobile
memory. The term is also often used to refer more generally to the broadband networks. Time Division means that a single connection
software within a device, including, for instance, the user interface. is used alternately to carry data from the base station to the mobile
Operational Support Systems (OSS): Computer systems used by device (“downlink”) and then from the mobile device to the base
telecommunications service providers to manage their networks. station (“uplink”).
They support management functions such as network inventory, Technology licensing: Generally refers to an agreement or
service provisioning, network configuration and fault management. arrangement where under certain terms a company provides another
OZO: Our professional Virtual Reality camera, crafted by Nokia company with its technology and possibly know-how, whether
Technologies, that is no longer in production. protected by intellectual property or not, for use in products or
services offered by the other company.
Packet: Part of a message transmitted over a packet switched network.
Telco Cloud: Applying Cloud computing, SDN and NFV principles in
Picocell: A small cellular base station typically covering a small area telecommunications environment, e.g. separating application software
typically up to 200 meters wide. Typically used to extend coverage from underlying hardware with automated, programmable interfaces
to indoor areas or to add network capacity in areas with very dense while still retaining telecommunications requirements such as high
phone usage, such as train stations. availability and low latency.
Platform: Software platform is a term used to refer to an operating Transmission: The action of conveying signals from one point to one
system or programming environment, or a combination of the two. or more other points.
PON (Passive Optical Networking): A fiber access architecture in TWDM-PON (Time Wavelength Division Multiplexing Passive Optical
which unpowered Fiber Optic Splitters are used to enable a single Network): The latest generation fiber access technology, which uses
optical fiber to serve multiple end-points without having to provide multiple wavelengths to deliver up to 40Gbps total capacity to homes,
individual fibers between the hub and customer. businesses, and base stations. Also known as NG-PON2.
Programmable World: A world where connectivity will expand TXLEs (Technical extra-large enterprises): Technically sophisticated
massively, linking people as well as billions of physical objects—from companies, such as banks, that invest heavily in their own network
cars, home appliances and smartphones, to wearables, industrial infrastructures to gain a key competitive advantage.
equipment and health monitors. What distinguishes the
Programmable World from the Internet of Things is the intelligence vDAA: Virtualized Distributed Access Architecture.
that is added to data to allow people to interpret and use it, rather VDSL2 (Very High Bit Rate Digital Subscriber Line 2): A fixed
than just capture it. broadband technology, the successor of ADSL. Launched in 2007, it
RAN (Radio Access Network): A mobile telecommunications system typically delivers a 30Mbps broadband service from a street cabinet
consisting of radio base stations and transmission equipment. (also called a “Fiber-to-the-Node” deployment) over existing
telephone lines.
SDAN: Software Defined Access Network
VDSL2 Vectoring: A fixed broadband technology launched in 2011,
SDN (Software Defined Networking): An approach to computer able to deliver up to 100Mbps over a VDSL2 line by applying noise
networking that decouples the network control and forwarding cancellation techniques to remove cross-talk between neighboring
functions enabling the network control to become programmable VDSL2 lines.
and the underlying hardware to be abstracted.
Virtual Reality (VR): The simulation of a three-dimensional image or
SD-WAN: Software-defined networking in a wide area network (WAN). environment that can be interacted with in a seemingly real or physical
An SD-WAN simplifies the management and operation of a WAN by way by a person using special electronic equipment, such as a helmet
decoupling the networking hardware from its control mechanism. with a screen inside or gloves fitted with sensors.
SEPs (Standard-Essential Patents): Generally, patents needed VoLTE (Voice over LTE): Required to offer voice services on an all-IP
to produce products which work on a standard, which companies LTE network and generally provided using IP Multimedia Subsystem.
declare as essential and agree to license on fair, reasonable and
non-discriminatory (FRAND) terms. Vplus: A fixed broadband technology, between VDSL2 Vectoring and
G.fast in terms of bandwidth and distances, typically used in FTTN
Service Delivery Hub: Smaller service delivery centers, typically (ode) deployments. Launched in 2015, it delivers up to 300Mbps
focused on specific technology or language. and has been standardized as VDSL2 35b.
Shared Data Layer (SDL): A highly reliable, scalable and readily-available WAN (Wide Area Networking): A geographically distributed private
data store in the Cloud. Moving subscribers and session data to SDL telecommunications network that interconnects multiple local area
and using this shared data in an open ecosystem enable rapid networks.
innovations of services and faster revenue growth due to better
insight into subscriber behavior. WCDMA (Wideband Code Division Multiple Access): A third-generation
mobile wireless technology that offers high data speeds to mobile
Single RAN: Single RAN allows different radio technologies to be and portable wireless devices.
provided at the same time from a single base station, using a
multi-purpose platform. Webscales: Companies—such as Google, Microsoft, and Alibaba—which
are investing in Cloud technology and network infrastructure on an
Small cells: Low-powered radio access nodes (micro cells or picocells) increasing scale to fulfill their needs for massive, mission-critical networks.
that are a vital element in handling very dense data traffic demands.
3G and LTE small cells use spectrum licensed by the operator; WiFi uses WLAN (Wireless Local Area Network): A local area network using
unlicensed spectrum which is therefore not under the operator’s wireless connections, such as radio, microwave or infrared links,
exclusive control. in place of physical cables.

SON (Self-Organizing Network): An automation technology designed XG-FAST: A Nokia Bell Labs extension of G.fast technology, using even
to make the planning, configuration, management, optimization and higher frequencies. Capable of delivering over 10Gbps, over 2 bonded
healing of mobile radio access networks simpler and faster. telephone lines, over very short distances.

222 NOKIA IN 2017

 Other information

Investor information

Information on the internet

www.nokia.com
Available on the internet: financial reports, members of the Group
Leadership Team, other investor-related materials and events
and press releases as well as environmental and social information,
including our Sustainability Report, Code of Conduct, Corporate
Governance Statement and Remuneration Statement.

Investor Relations contacts

investor.relations@nokia.com

Annual General Meeting

Date: May 30, 2018
Place: Helsinki, Finland

Dividend
The Board proposes to the Annual General Meeting a dividend
of EUR 0.19 per share for the year 2017.

Financial reporting
Our interim reports in 2018 are planned to be published on April 26,
2018, July 26, 2018 and October 25, 2018. The full-year 2018 results
are planned to be published in February 2019.

Information published in 2017

All our global press releases and statements published in 2017
are available on the internet at www.nokia.com/en_int/news/releases.

Stock exchanges
The Nokia Corporation share is quoted on the following stock exchanges:

Symbol Trading currency

Nasdaq Helsinki (since 1915) NOKIA EUR
New York Stock Exchange (since 1994) NOK USD
Euronext Paris (since 2015) NOKIA EUR

NOKIA IN 2017 223

Contact information

Nokia Head Office

Karaportti 3
FI-02610 Espoo, Finland
FINLAND
Tel. +358 (0) 10 44 88 000
Fax +358 (0) 10 44 81 002

224 NOKIA IN 2017

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