NOKIA 1999

no limits
www.nokia.com
Contents
4 Strategic intent
5 Key data
6 Letter to our shareholders
10 Nokia in brief
12 Moving life in to digital space
16 The invisible links that make life better
18 Making more of life with the mobile phone
22 Pushing beyond the limits of current business
26 The machinery of knowledge creation
28 Cooperation eases the path to the future
32 Keeping the creativity flowing
35 Building a sustainable future
38 Board of Directors
40 Management
42 Nokia shares
50 Contact us
51 Investor information
52 Abbreviations

This document is Nokia's Business Review 1999.

Together with Nokia's financial statements it
forms Nokia's Annual Report 1999. If not
accompanied by this document, the financial
statements can be ordered from Nokia Corporate
Communications, tel. +358 9 1807 379.

Please see the information regarding certain forward

looking statements on page 52 of this review.
Nokia highlights 1999
operating profit up 57% to EUR 3.9 billion
sales increased by 48% to EUR 19.8 billion
dividend EUR 0.80, up 67%
market capitalization EUR 209.4 billion

no limits to the future

There are no limits to the human imagination.
There are no limits to our capacity for change.
There are no limits to our capability to improve.
There are no limits to our willingness to achieve.
There are no limits to our dedication to serve.
There are no limits except those we set ourselves.
There are no limits.
Strategic intent
Nokia’s strategic intent is to take a leading, brand-recognized role
in creating the Mobile Information Society by
combining mobility and the Internet
stimulating the creation of new services

4
Key data
Nokia 1999, EURm 1998, EURm Change, %

Net sales 19 772 13 326 48

Operating profit 3 908 2 489 57
Profit before taxes 3 845 2 456 57
Profit from continuing operations 2 577 1 680 53
Research and development 1 755 1 150 53
Capital expenditure 1 358 761 78
Market capitalization 209 371 59 796 250

1999, % 1998, %

Return on capital employed 55.7 50.2

Net debt to equity (gearing), % -41 -36

1999, EUR 1998, EUR Change, %

Earnings per share from continuing operations,

basic, split adjusted 2.24 1.48 51
Dividend per share, split adjusted 0.80* 0.48 67
Average number of shares (1 000 shares), split adjusted 1 148 440 1 138 341
Business Groups 1999, EURm 1998, EURm Change, %

Nokia Networks
Net sales 5 673 4 390 29
Operating profit 1 082 960 13
Research and development 777 564 38
Nokia Mobile Phones
Net sales 13 182 8 070 63
Operating profit 3 099 1 540 101
Research and development 835 522 60
Other Operations
Net sales 995 1 014 -2
Operating profit -273 -11
Research and development 143 64 123

Personnel, Dec. 31 1999 1998 Change, %

Nokia Networks 23 718 20 638 15

Nokia Mobile Phones 23 775 18 627 28
Other Operations 7 767 5 278 47

Nokia Group 55 260 44 543 24

10 Major markets, net sales 1999, EURm 1998, EURm

USA 3 360 1 996

China 2 332 1 753
UK 1 855 1 205
Germany 1679 1 135
Main currencies,
Italy 968 752
rates at the end
France 951 776 of 1999
Brazil 600 250 1 EUR
Netherlands 544 269
USD 1.008
Finland 479 465
GBP 0.628
Australia 437 293
SEK 8.599
*Board’s proposal JPY 103.07

The key data is based on financial statements according to International Accounting Standards, IAS.

5
Letter to our shareholders
This is the third consecutive year in which we have exceeded our overall growth
and profitability targets. In part, we can thank this success to our ability to have
continued to develop our sound competitive position, comprehensive product
portfolio, innovative solutions, appealing brand and efficient global operations.
But there is another increasingly important factor.

In 1999, we have again been able to substantially

increase our profits, sales and earnings per share,
and comfortably exceed our targets for the year.
Our operating profits grew by 57% to 3 908 million
on net sales up 48% at 19 772 million euros.
Our operating margin was also once again well
above the industry average at 19.8% and our earn-
ings per share increased by 51% to 2.24 euros. As
a result of this excellent performance, the Board of
Directors has been able to propose a record dividend
of 0.80 euros per share, up by 67% over 1998.

New era
We are at the beginning of something very signifi-
cant. Not just for our company. Not just for our in-
dustry. But for everyone. And for all aspects of our
lives. We are using the twin drivers of the Internet
and mobility to break through the limits of time
and place. These are very powerful forces. And at
this stage no one can say precisely where they will
lead us to. But we are sure that it will be a very
special time.
A time when people can connect with each
other no matter where they may be. When distance becomes increasingly irrelevant. When we
can gain access to the facilities and services we need whenever we need them, not just when they
happen to be available. When our activities no longer limit us to a particular place. When the
links that bind our various communities are strengthened. When new links create new communi-
ties. And when nature is served by enterprise, not destroyed by it.
This is what we mean by the Mobile Information Society. It is a concept which is evolving
and gaining in magnitude all of the time. It is our intent to play a leading role in developing the
potential of the Mobile Information Society.

Putting people in control

Today, when most people talk about information they think in terms of the information of
which they are conscious – watching a movie, reading a book, browsing the Web or buying or
selling on-line. But there is also a completely different kind of information. Information we don’t
necessarily see, but from which we still benefit.
The kind of information that allows us to master the technology and control our environ-
ment. Information that enhances our security. Information that means that when you approach
your car, that it not only recognizes you to let you in, but also sets up the seat and car controls to
suit your preferences. And then goes on to do everything else possible to make your journey more
efficient, safer and more comfortable. Or it could be a camera with built-in communications that
would let you share your experiences with family and friends.

6
 An intelligent wallet could make sure you don’t spend beyond your means – or at least
arrange credit when needed.
What the Mobile Information Society really achieves for us is that it helps us increase our
quality of life by making the most of our limited supply of time. It helps to boost our efficiency.
It allows us to do more. To achieve more. It empowers us to make more of ourselves. Shopping
becomes more fun because shopping out of necessity is automated, leaving us more time to do
the more interesting stuff. We are put in greater control of our leisure time. Entertainment is
what we want when we want it. Our variety of choice is increased.
The Mobile Information Society is giving us the
opportunities to really improve our lives. To make
many aspects of our lives more convenient and more
flexible. To make many tasks more secure, private
and reliable. To establish new trusted relationships
and further enhance some old ones. The services
and products we use can be made more personal,
more comfortable and more closely tailored to our
precise needs.

Real benefits
It is all about making technology work for us
– seamlessly and effectively, and often invisibly
– to create real benefits which we all crave. At the
end of the day people don’t care about the technol-
ogy. They want their lives to be richer, more pleasur-
able and more effective.
We are the ones who want to make all this
happen. That is why we try as hard as we do.
Why we realize we have to constantly re-evaluate
ourselves, check our course and change it if neces-
sary. It is why we place such importance on under-
standing the needs of our customers.
It is also why we strive for excellence in every-
thing we do. Why we feel we have to focus so much
on the value added aspects of our markets. And why we cannot compromise on the operational
efficiency which gives us our flexibility and creates our strong positive cash flow.

The will to succeed

We believe we have what it takes to break through many of the remaining limits that constrain
us. We have the global presence, the key core competences in mobility and other enabling
technologies to make it happen. We have the culture to cope with the scale of change this will
require. A culture which tolerates mistakes and allows people to learn and develop. An accepting
culture. A no fears culture. And we have the vision to point us in the right direction.
Our culture and our vision have taken us this far. But this is only the beginning. We recog-
nize that there is still a long way to go. We believe that we are well positioned to meet the chal-
lenges. To meet what others may see as confusion and uncertainty with confidence and leader-
ship. To adapt and evolve as required. And to bring the benefits of change to all of our lives.
Life is about to change forever. And we want to be a driving force in that change. We know
that there are no limits to what can be achieved with will, vision and determination. And we
have all three in abundance.

Jorma Ollila Pekka Ala-Pietilä

Chairman and CEO President

7
Nokia in brief
Nokia comprises three business groups: Nokia Networks, Nokia Mobile Phones
and Nokia Communications Products. In addition, Nokia includes a separate Nokia
Ventures Organization and the corporate research unit, Nokia Research Center.

At the end of 1999, Nokia had sales to over 130 countries, research and development in
14 countries, production in 10 countries and a global network of distribution, sales, customer
services and other operational units. Headquartered in Finland, Nokia is listed on the New
York, Helsinki, Stockholm, London, Frankfurt and Paris stock exchanges and employs more
than 55 000 people.

Nokia Networks
is a leading supplier of data, video and voice network solutions for the Mobile Information
Society, meeting the needs of operator customers and Internet Service Providers. In addition,
Nokia Networks is a world-leading supplier of mobile and fixed access solutions, and broad-
band and IP network solutions. Nokia Networks also provides service creation, network
management, systems integration and customer services.

Nokia Mobile Phones

is the world’s largest mobile phone manufacturer. With its comprehensive product port-
folio covering all consumer segments and standards, Nokia is in a strong position to
lead the development towards the Mobile Information Society. Our mission is to enable
people to connect with one another and to information regardless of time or place.
Nokia’s technology and applications are designed for human needs and are based on
solutions that function seamlessly and effectively together.

10
Nokia Communications Products
comprises Nokia Multimedia Terminals, a pioneer in digital multimedia terminals for digital
TV and interactive services via satellite, cable or terrestrial networks.

Nokia Ventures Organization

explores new business areas facilitating future growth and boosting Nokia’s product and long
term business development. Nokia Internet Communications offers Enterprises and Managed
Internet Service Providers strategic IP oriented products and solutions. Nokia Home Commu-
nications develops digital platforms and communications solutions for the home environment
and Nokia Mobile Display Appliances focuses on new mobile devices for Internet-based,
visually rich communications. Nokia Ventures Fund focuses on start-up businesses and tech-
nologies which are not in the natural scope of Nokia’s current business units and has a global
investment scope.

Nokia Research Center

interacts closely with all Nokia business units to enhance the company’s technological
competitiveness. The center covers the full range of activities from exploration of new
technologies and concepts to their exploitation in actual product development undertaken
in the business units.
To keep up to date with the latest technological developments and to influence them,
the center maintains strong global contacts. It actively participates in the work of standard-
ization bodies and various international research and development projects in cooperation
with universities, research institutes and other telecommunications companies.

11
Moving life in to
digital space
Never before has the environment in which we operate been so stimulating.
Never before have there been so many things coming together. Never before have
there been such opportunities. This is an exciting time for the information and
communications industry. We really have the chance to change life for the better.

People will look back on this period and say it was

the time the Mobile Information Society was created
just as they look back on the 18th century and see it
as the time of the creation of the Industrial Society.
This, they will say, is the period when life moved
into digital space.
Digital technologies are fundamentally changing
the way we live. Keeping in touch is easier than ever
before. Distance and time no longer pose the barri-
ers they once did. Correspondence cycles that used
Kent Elliott
to take weeks can now be sorted out in days thanks Senior Vice President and
to e-mail and other messaging services. Mobile General Manager
phones keep us in contact with friends and family, Nokia Internet Communications
work colleagues or business associates, wherever we
may be. And portable information tools such as Internet Protocol or IP is just a com-
laptop computers keep us productive in a world puter communication protocol. But it is
where we are spending increasing amounts of time changing the world we live in. It has
on the move. become the ubiquitous protocol for all
types of data transmission whether from
my desktop PC to one across the hall,
Breaking through or around the globe.
Convergence, the Internet, pervasive computing and
mobile communications are shrinking our world.
They are removing our limitations.
The effects of this change go well beyond information and communications technology
to affect many aspects of our lives. Increasingly, we live and work in a single global knowledge
based economy. In this new world investment capital no longer simply means money. In a world
where everybody carries the means of production around in their heads, the best investment
capital could be learning.
There will be many ways of making a success from the new opportunities. And there will be
many successful companies. But one thing they all share in common is that they understand that
this new world brings not only new opportunities, but also new challenges. Only those individuals
and organizations with the flexibility of mind and body to change and adapt to the challenges
have a chance of profiting by them.

Understanding
We believe we are in a good position to benefit from this trend. We believe we understand the
needs of users. We understand services and how they are created. We appreciate the value of
diversity. And we have a unique way of viewing new challenges: to us uncertainties are the greatest
opportunities of all. As the world changes faster and faster, this attitude becomes more important.
We believe we understand the Internet. 1999 saw Nokia’s long held view of the emergence of
a mobile Internet being adopted by the industry in general. At Nokia, the Internet is not the prop-
erty of any one part of the organization. It is ubiquitous throughout all parts of the organization.

12
 The impact of the Internet can hardly be overstated. It provides us with a global and univer-
sal platform to create major new applications and services of real benefit to people. Combined
with mobility, we believe it will be especially powerful. Mobility brings the power of the Internet
to wherever it is needed.
For the benefits of the mobile Internet to be truly realized, we must make sure that services
– no matter how complex or feature rich – are
available to end users in a familiar way wherever
they may be. Our experiences in mobile telephony
It is IP that allows me, when in a hotel have shown that it is possible to create worldwide
room and I happen to see on the TV seamless services. Global roaming and network
that a stock I own is moving very interoperability for both voice communications
quickly, to do something about it. It lets and text messaging are already standard features
me work closely with my colleagues, no of GSM, for example.
matter where I – or they – may be. And
soon it may even allow me to see my Global IP Mobility The mobile phone has already had
son score a goal at the school football
Global IP Mobility is our strategy for achieving a profound impact on many areas
game I couldn’t attend. of our lives. But new technologies
our aims of facilitating a proliferation of innovative such as Third Generation cellular
Work is no longer a place; it is where applications and allowing ubiquitous service avail- radio, offering wider bandwidths
I am. Home is no longer a place; it is ability. Its objective is to facilitate very large scale and equally adept at handling voice
where I am. My community is no longer and non-voice communications, will
delivery of WWW and IP based applications and change the way we do things still
a place; it is where I am. Communica-
services over a wide range of wireless and wireline further. More and more of life will
tions is helping me break through the move into digital space. And the
connections including broadband and narrowband mobile phone will be at the center
limits to my life. And that’s largely
medias. of this revolution.
thanks to IP, a humble computer
communication protocol. We believe that the products and services
that we develop, based on our Global IP Mobility
strategy, will create the applications platform of
choice for a wide range of communications, mobile
commerce and entertainment services.
To date, technology has been driving much of
the growth. Every new technology market is initially
driven by the technology itself. But soon we will enter a new phase. Applications will drive
growth. Eventually, applications will become independent of the technologies. We are moving
from a technology centric approach to a user centric view of the world.

Usefulness
Satisfying the needs of consumers is what at the end of the day drives any market. The Internet
provides us with a wealth of tools to create applications. If they are to be successful, however,
they will have to be created with their usefulness to people in mind. With the right approach, the
combination of mobility and the Internet promises to provide a fertile base for creating the kinds
of applications and services people will want.
This is only the beginning. Global IP Mobility will change our world a lot more yet. We have
only just begun to move into digital space. We have only just begun to push the limits. More and
more services will go digital. They will become more available to more people. And in a greater
variety of situations. The new ways of doing things will become the norm and not the exception.
Many activities will be transformed. Buying and selling will be increasingly via e-commerce or
m-commerce. At Nokia we believe there are no limits.

13
The invisible links that
make life better
In today’s communications business it is not technologies but end-user needs that
drive the market. People want to communicate. But they do not want to care about
the technologies behind the links. They do, however, expect their communications,
information and services to follow them wherever they go.

Our challenge is to provide people with invisible in-

frastructure and seamless connectivity, wherever
they want it, whenever they want it and for what-
ever reason they want it. And to do it in a way that
makes the most of the investments by carriers and
service providers, both financially and in terms of
offering the highest standards and flexibility and
variety of services to their customers.
Pekka Pohjakallio
Profound change Director, Mobile Internet
The telecommunications business is experiencing
profound change. Communications is not just about Today’s mobile communications is all
covering great distances. It can be across a room or about adding value. The whole business
even across a desk just as easily as across a city or is changing from one dominated by
across the globe. And it can be between people or technology to one where applications
between machines or between people and machines. and content count more. I suspect that
Data, graphics and video are continuing to one day – perhaps not too far away
claim an ever greater share of traffic. Increasingly – the added value components of their
communications sessions combine more than one services will be worth more to operators
than their basic bearer services.
of these. We believe that this will become even more
prevalent as people demand that their electronic
communications become more similar to the way
they communicate in person.
The ways of creating connections are changing. Circuit switching – where the information
is routed over individual and physical links – is giving way to packet switching – where physical
links are shared and the information is routed according to address. The Internet Protocol or IP
is playing a key role in creating this new communications world.
The role of network operators is changing. And as a consequence, so is our service to them.
Operators are having to concentrate more and more of their efforts on marketing and customer
care. At the same time networks are getting more complicated so that they can address user needs
more precisely. The result is a growing need for systems integration.
Renaming Nokia Telecommunications as Nokia Networks reflects our recognition of these
trends. So does our Global IP Mobility strategy.

Net effect
The trend in people’s usage of communications is towards higher bandwidth applications. This
requires additional capacity in the networks. This is making itself felt on the demand for our
products. In particular we are witnessing the take-off of broadband systems in the fixed network
and the increase of data and multimedia services in wireless networks.
Nokia is playing leading roles in both arenas. On the fixed network side we are deploying
Digital Subscriber Line (DSL) technology. DSL supports fast access to the Internet and the deliv-
ery of a range of information and entertainment services over fixed networks for both homes and

16
offices. This helps pave the way for a whole new generation of feature rich mass market
Internet services. By the end of 1999 we had already gained orders for three million DSL lines.
On the wireless side we have taken major steps towards Third Generation cellular radio
systems and the support of mobile multimedia services. Nokia is leading the way in bringing
the Internet Protocol to mobile networks through its General Packet Radio Service (GPRS) offer-
ings. GPRS offers mobile phone users the same kind
of data rates and “always-on” simplicity previously
only enjoyed by the users of private networks.
It is not surprising therefore that people 1999 was a significant year for GPRS. A year in
have been busy searching for new killer which Nokia was able to demonstrate its leadership
applications that will drive this market. in GPRS, with 16 announced core GPRS deals.
Personally, I’m not sure they will ever We believe our success in GPRS positions us well
find any. Because we are already sur- for future success in Third Generation.
rounded by them. They are already out
there on the Internet. What we have to
do is see what further value mobility
Mobile Internet
Making sure you have sufficient
In 1999, we saw a distinct quickening of the pace network capacity is a key factor
can add.
of development of the mobile Internet. Voice has in keeping end-users of mobile
I think that the services that will have phone networks satisfied. The usage
gone wireless. Data is very clearly going wireless. in dense metropolitan areas is
the best likelihood of success will be During the coming years, we at Nokia believe the so high that microcellular networks
those most carefully tailored to an are required. Nokia's MetroSite is a
Internet will go wireless. We are making rapid
individual’s needs at a given time and complete site and system solution
progress in many key areas that will make the offering ten-fold capacity of a
place. They must be Here - in other
Internet experience even more compelling. conventional macrocellular network
words take the location of the user into and this at only half the cost.
account, Now - current and up to date, 1999 saw the introduction of the first mobile
and For Me - personalized to my tastes Internet services based on Wireless Application
and preferences. Then they will provide Protocol or WAP. We launched both a WAP phone
real added value to end-users. and a WAP server during the year. WAP greatly
simplifies the creation and raises the desirability of
mobile Internet applications. It draws on the wealth
of information and services already on the Internet.
We expect WAP to become the launch platform for
a range of e-commerce, entertainment and information services with the potential to really
change the way we live our lives and conduct our business.
During 1999, we also established for the first time an organization focusing on the system
integration needs of the Mobile Internet. Before the end of the year it had achieved its first cus-
tomer contracts.

Lead in 3G and IP
We are a leader in the development of Enhanced Data Rates for Global Evolution (EDGE).
EDGE offers users data rates of up to ten times these available on today’s fixed networks.
We are also a leader in the development of Third Generation cellular radio systems based on
Wideband Code Division Multiple Access (WCDMA).
In September 1999, we introduced our first Third Generation product, the triple mode
Nokia UltraSite base station and site solution. It offers operators a smooth migration from
today’s Second Generation cellular radio systems to tomorrow’s Third Generation networks
based on technologies such as EDGE and WCDMA. It also offers those operators who do not
introduce Third Generation services, greatly enhanced GSM capabilities.
IP is becoming increasingly important in all our products and services. During the year we
have had significant advances in its implementations. This is a time of great opportunity.
We want to welcome the world to the Mobile Information Society.

17
Making more of life
with the mobile phone
The way we interact and communicate is entering a new era of exciting
possibilities and opportunities. We are entering the era of the Mobile Information
Society. An era of anything, anytime, anywhere. An era of unprecedented freedom.
And the mobile phone is at the center of this revolution.

The Mobile Information Society is having a dra-

matic impact on our lives. It removes many of the
limits we currently face. It helps us make the most
of our time. It allows us to do things quickly and
with less effort than before. It allows us to do com-
pletely new things that we had difficulties even to
imagine before. It gives us much needed flexibility
in a world that moves faster with each day.
Frank Nuovo
Human dimension Vice President
The technologies on which the Mobile Information Chief Designer, Nokia Mobile Phones
Society is being built are advancing rapidly. Nokia is
The mobile phone is still in its relatively
a leader in their development. But these technologies
early formation stages. This has been and
have no value in themselves. They only attain value
continues to be an exciting environment
in the context of fulfilling human needs. People in which to be a designer.
must gain real benefits from them. That is what our
challenge is all about: understanding peoples’ needs At Nokia, we have a very good idea of
and using our technology competences to come up where things are going. We have a
strong vision of the future. But much
with applications that make their lives better.
can change by the time the future
Most of the new services, features and functions
arrives. So it’s important for us to
will be based on software – and much of it user-
configurable. Software will play an increasingly
important role in the coming years. That’s why we
are taking a leading role in the development of software platforms – like Symbian´s EPOC
operating system – for future mobile devices.
During 1999, we developed a number of joint initiatives launched in 1998. In particular,
we started to deliver the world´s first WAP 1.1 compliant media phone, the Nokia 7110. WAP,
the Wireless Application Protocol, is creating a really important shift in speeding up develop-
ments in mobile data. It has also helped to ensure that in 1999 our vision of the Mobile Informa-
tion Society has penetrated more deeply not only in to our own but in to other industries.

Mobile Internet
Nothing exemplifies our commitment to the Mobile Information Society more than our
activities in creating the mobile Internet. It’s about wireless, it’s about the Internet, and it’s
about the synergies from combining the two. But most of all it’s about giving people what they
want, when and where they need it. We believe the mobile phone is the natural vehicle for put-
ting the Internet into everybody’s pocket.
We believe that the mobile phone will be at the heart of the Mobile Information Society.
There are three simple reasons to support this claim: first, most people will have a mobile phone.
Second, they were designed specifically for connectivity. And thirdly, they are personal.
The number of mobile phone users continues to grow significantly. By the end of 1999 there
were about 480 million mobile phone users worldwide, over 50% higher than in the previous

18
year when there were 310 million. By the end of 2002 we expect there to be over a billion
– more than double the number of today in only three years.
From the outset, mobile phones were created with information transmission in mind – be it
in the form of voice, text, data, images or multimedia. For other wireless electronic devices con-
nectivity comes as an add-on. In our view it is less challenging to add different kinds of personal
information management functionalities to a device
built to support communications features than the
other way around.
continually question and update our Connectivity is the single key factor that sets the
thinking. mobile phone apart from all other electronic devices.
It adds value and quality to the lives of its users by
That’s why it’s important to be a part of
allowing them to connect to other people and to During 1999 we launched 18 new
a team. Teamwork gives birth to new ideas. mobile phone models. These ranged
various sources of information, entertainment and from feature-rich and data centric
You cannot fall in love with your first idea. services – when and where they want it. devices such as the Nokia 7110 media
You have to be able to explore openly and phone (in the picture) launched in
accept input from lots of people. It is very February, to exceptionally designed
It’s personal mobile phones and statements of
important to be flexible. style, such as the Nokia 3210
The third and final argument placing the mobile
launched in March or the Nokia
There are many influences to our work, phone at the heart of Mobile Information Society 8210 launched in October.
but we do not follow trends at Nokia. is the fact that it is amongst the most personal
We try to set them. accessories that we carry around with us these days.
So where does the inspiration for inspired Already today we can choose between various
designs come from? It can be anything models that match our changing usage needs, differ-
from a beautiful tree to a motor car or a ing lifestyles and individual preferences.
building. But the most inspiration comes A mobile phone also contains a lot of our
from working in a good creative team most important personal information: contact lists,
with plenty of interaction. calendar bookings, notes, messages. In the not-too-
distant future it might be possible to integrate
credit cards, social security data, health records,
ID numbers, keys etc., transforming mobile phones
into Personal Trusted Devices.
In the near future this trend towards more numerous personalization possibilities will multiply
– not just in terms of design but increasingly in terms of services, features and functionality.
That’s why we are constantly deepening our understanding of consumer segmentation, developing
new product categories and definitive new products for the segments.

Enhanced leadership
In 1998, we became the world’s largest supplier of mobile phones. During 1999, we were able to con-
tinue to strengthen our global market position. The mobile phone market grew by over 60% during
1999. We estimate that about 275 million mobile phones were sold worldwide during the year, com-
pared to about 168 million in the previous year. Nokia’s sales volume growth exceeded that of the
market with sales during 1999 of 78.5 million units, up 92% on the previous year’s 40.8 million.
As the market develops its dynamics are also changing. As well as an increasing number of people
buying their first phone, there is also a growing upgrade market. A third evolving market is that for
multiple handset ownership. We estimate that upgrades accounted for some 40% of unit sales in 1999.
This share is likely to rise to about 50% in 2000 and to around 70–80% in the next few years.
It is hard to imagine an industry that will be more exciting than ours in the next few years.
The mobile phone will become the device which people will carry with them everywhere.
It makes lives easier. It makes choices possible. It removes the limits.

19
Pushing beyond the limits
of current business
To push the limits of Nokia’s growth beyond the scope of current businesses,
it is important to introduce and develop new business ideas. This is the mission of
Nokia Ventures Organization. It is a place where new business ideas both inside of
and outside Nokia can be discovered and developed.

At the end of 1999, Nokia Ventures Organization

consisted of five main parts: Nokia Internet
Communications, Nokia Home Communications,
Nokia Mobile Display Appliances, the Nokia
Ventures Fund and the Venturing Unit.
Nokia Internet Communications, Nokia
Home Communications and Nokia Mobile Display
Appliances are all designed to take advantage of
the opportunities offered by the emerging Mobile
Information Society. Here the worlds of wide area
mobile communications and local area computing Helmut Stein
are merging to create a new realm of innovative Chief Technical Officer
types of high speed, mobile, multimedia and Nokia Multimedia Terminals
seamless services, at work, at home, wherever.
We've been talking about convergence
for years. Now we're really doing it.
Home focus That's very exciting.
In the office a combination of wireless and wired
networks will link a variety of computer and Convergence allows us to bring to-
computer-based devices. The idea of networked gether different media to create com-
pletely new services and products. Not
devices will also gradually take hold at home.
just once, but over and over again.
Even while travelling away from our fixed bases
we expect access to the information, resources and
services we have grown to rely on. The unifying
aspect of all this will be the Internet. The Internet will link all of these networks and its protocols
will eventually become the dominant protocols over all networks.
Nokia Internet Communication’s strategic target is the Enterprise and Managed Internet
Service Provider markets. Created in October 1999, it combines a number of developments
already taking place throughout Nokia. Nokia Internet Communications’ target is to build a
powerful channel to the enterprise market through offering world class Internet Virtual Private
Networks and e-business products and solutions. These market segments will be key to delivering
Nokia Internet
Communications the new connectivity infrastructure required to enable secure, reliable, and scalable solutions
for the enterprise.
Security solutions
IP network appliances Despite its short time in operation, the company already has a number of successes to its
credit. It is already a leading player in secure Virtual Private Networks, for example. Its com-
Mobility
management bined IP Network appliance VPN/firewall offering has proven particularly popular – especially
IP telephony infrastructure,
with larger, more security conscious customers, such as banks and airlines. The new company’s
terminals and applications heritage also includes Internet Protocol or IP telephony products and know-how.
Unified messaging Nokia Internet Communications is also emerging as an early leader in creating the
platforms for Wireless Application Protocol or WAP applications. WAP is allowing companies
WAP client/server software
to offer existing and new Internet or Intranet based services to their own employees and to their
IP Clustering
customers. By the end of 1999, over 10 000 software developers and companies were piloting
services with the Nokia WAP server. In December, Nokia announced availability of the Nokia

22
WAP Server 1.0, a product which allows business to leverage securely the Internet in mobile envi-
ronments and empower employees on the move.
Nokia Home Communications was created in November 1999. Its brief is to develop digital
home platforms and communications solutions for the home environment, in particular IP resi-
dential gateways for homes supporting not just Internet access but also access to broadcasting
and other entertainment services. The unit combines
Nokia’s strong expertise in technologies such as
Wireless Local Area Networks, Internet Protocol
In the past many good services have not and digital broadcasting.
been developed simply because of the Nokia Mobile Display Appliances focuses on
The Nokia WAP Server 1.0 allows
artificial limits we set ourselves. That's the development of mobile display devices that will businesses to fully leverage the
entertainment, this is information and enable Internet-based visually rich communications. power and functionality of existing
that over there is communications. It is The unit aims at exploiting Nokia’s know-how in and new service offerings in a
now clear that we can break through mobile environment. It is an open
high performance displays, Internet Protocol server platform for mobile
those limits. All we have to do is allow technologies and mobility to offer customers applications that lets companies
our minds to grasp the opportunities. maintain control over end-to-end
completely new communications solutions. security of access to data and
Why not communicate via our TV. customer traffic between the
Or watch TV on our communicator. Venturing wireless network and the Internet
or their own internal networks.
Or access information from either. Nokia Venturing Unit’s mission is to see what
It's quite a challenge. We're used to the world will look like in three to five years time.
thinking about ourselves as being in TV, It explores new business areas for Nokia. If the
in telecoms or in computing. We have business case stands up, the company creates a new
to rethink those roles. We can no longer venture.
afford to let ourselves be trapped by our The Venturing Unit provides a greenhouse for
histories. new business ideas. At first, one or two people are
asked to investigate a new idea. If the idea has merit,
a larger team could be assembled to turn it into a
business. Nokia Venturing Unit also runs pilots and
other early stage venturing, often together with one
or more partners.
The Nokia Ventures Fund, based in Menlo Park, California, has the mission to invest in
interesting start-ups. With an initial capital allocation of $100 million, it is constantly on the
lookout for disruptive technologies and new emerging business models: ones which will enable
significant new market opportunities. Investments are not dependent on strategic relationships
with Nokia. The knowledge gained of interesting new technologies and markets is more
important.

Investments so far
Examples of Nokia Venture Capital Fund investments so far include eVoice, Pogo.com, Confinity,
FusionOne and Informative. EVoice is an IP telephony company dedicated to providing conve-
nient messaging solutions via the Internet. Pogo.com is the first service to target the emerging
market of family Internet game players. Confinity is concentrating on meeting the rapidly grow-
ing demand for strong cryptography on hand-held computers and other small devices. FusionOne
is developing Internet synchronization software and services that make information access seam-
less across multiple communications and computing device. Informative is the leading provider of
web-based, real-time information solutions.
But none of this is rigid. The whole idea of Nokia Ventures Organization is to promote Nokia’s
development. The main thing is that the best use is made of the company’s know-how in different
technologies, its competences and its capabilities.

23
The machinery of
knowledge creation
We are moving swiftly towards a knowledge-based economy in which growth can
be explosive and the key raw material – the human imagination – is infinite.
Harnessing the power of the imagination is what Nokia’s research and
development activities are all about.

It is an exhilarating experience to be at the fore-

front of these developments. But change creates
uncertainty as well as new opportunities. We believe
the best way to master the uncertainty and make the
most of new opportunities is to possess the top
expertise. That is why we have put research and
development and continuous company-wide learning
at the core of our strategy.

Integrated approach
1999 was a landmark year in Nokia’s research and
development activities. Over the year we invested Juhani Kuusi
Senior Vice President,
over 1 750 million euros into research and develop-
Nokia Research Center
ment, up by 53% over the previous year. By the end
of 1999, about one third of Nokia’s workforce of How do you ensure that your research
over 55 000 worked in research and development and development remains focussed on
activities. And of that group of more than 17 000 the needs of the real world while at
research and development experts, just over 1 000 the same time staying ahead of the
worked at the Nokia Research Center, the corporate competition in such a fast changing
research center with sites in 6 countries. environment? That’s the big question
At Nokia we place great emphasis in ensuring facing today’s hi-tech companies.
that research and development is not an isolated
function but is integrated into the whole corporate
process. Research and development work takes place both within the individual business units
and at the Nokia Research Center. And all research and development sites interact on a daily
basis, not only with each other, but with all other parts of the company, including the various
Nokia’s Research and strategic planning, production, sales and marketing functions.
Development
• More than 17 000 employees
Research and Technologies
within R&D Different parts of the company may approach research and development in different ways, but in
• 52 R&D centers in 14 ways most suited to their business processes and business objectives. For example, in some parts
countries of the company the research and development process chain starts with what we call Research
Australia
Canada and Technologies. This allows research on a more generic level than pure product development.
China
Denmark
The researchers are given a considerable amount of freedom.
Finland The next step in this approach is Technology and Platforms. Here we have focussed projects
Germany
Hungary with defined goals which look beyond the requirements of immediate product development.
Italy Things developed here may well be incorporated into several product designs of the future. The
Japan
Malaysia actual product development takes place in a phase we call Concurrent Engineering. Here all the
Rep. of Korea
Sweden
effort is focussed into creating products which fulfil customer needs.
UK In other parts of the company, however, the separation between the ideas generation and
USA
product development stages is not as pronounced. Work is based on programs aimed at making
the various product families.

26
 Also, depending on a particular product, research and development team members can be
from all of the business units of Nokia or from one or more.
The activities of the Nokia Research Center are closely aligned with those of the business
units. In fact, around 70% of the Research Center’s funding comes from the business units in the
form of contracted research and development projects.
Nokia Research Center personnel are actively
involved with business unit projects – not just over
the longer term but also in cases when their skills
I believe the answer lies in collabora- may be needed more acutely. And we encourage the
tion, internally and with the outside rotation of personnel between research and develop-
world. And in not allowing research to ment and other functions.
become some sort of isolated activity.
At Nokia, research and development
Global operations
work takes place in a number of differ-
To date, we have research and development centres Nokia Research Center’s new main
ent places. And there is continuous per- building in Helsinki was opened on
sonnel exchange and interaction between in 14 countries. These facilities allow us to adapt our June 1, 1999. The 24,400 square
all of them as well as with other func- products to meet local market requirements. But far meter building has been designed
with maximizing the contact and
tions of the business. more valuable in our rapidly changing world is that information exchange between its
we really do our research and development from start inhabitants in mind. Its town center
This all helps us to keep fresh and location and proximity to major
to finish at all sites in parallel. This way we have
receptive to new ideas and influences. universities should also help to
access to the best talent the world has to offer, and provide a stimulating environment.
It is part of our continuous self-renewal
process. Of course, there is always a to share the latest knowledge from around the world.
need for industrial basic research. In 1999, we decided to expand significantly
And we conduct plenty of it both inter- our research and development activities around
nally and with external organizations. the world. In China, Denmark, Hungary, Japan
But at the end of the day, there always and the USA, for example, we raised our investment
has to be some worthwhile benefit to in research and development personnel by between
our customers. They are, after all, the 50% and 200%. And we set up or acquired new
ones who pay our salaries. research and development units in Canada, Italy
and Korea and started activities in Spain.
All of these are an integral part of Nokia’s
global research and development structure. As well as applying the latest technology to products
and solutions for local markets, the units cooperate with the general research and development
communities in their home countries and globally. And, of course, by developing our local
facilities we are enriching and adding value to our research and development activities worldwide.

Investment in the future

Knowledge is fast becoming the driving force of economic growth, social development and
employment and also the primary source of competitiveness in the world market. Research
and development is all about investing in the future. By improving our knowledge we push the
envelope that restrains us. When it comes to our desire for knowledge, there are no limits.

27
Cooperation eases the
path to the future
The keys to success in research and development are to be early, experiment,
learn fast, correct direction whenever necessary and execute with excellence.
And in an industry which is moving as fast as ours, it does not make sense
to do it all alone.

Cooperation and collaboration are playing increasingly

important roles in research and development, both
within our organisation but also with others. Only in
this way can we ensure the timely creation of not only
new telecommunications standards but of the fast paced
de facto standards of the Internet age.

Internet gateway
On the terminals side, for example, the Wireless
Application Protocol or WAP effectively allows every
mobile phone to become a mobile information terminal
by offering a gateway between the Internet and mobile
phones. The first WAP compatible terminals began to
emerge in 1999, as did the first WAP software develop-
ment kits.
WAP will be a real driver for the development
of value added services for mobile devices. With WAP
everyone can download the specification from the
Internet and simply start building applications and ser-
vices for mobile terminal users. If an application can be
put on the Internet, the chances are that it can be made
available to mobile terminal users through WAP.
Bluetooth helps the mobile phone continue its
evolution from a communications device to a personal trusted device. It defines a device-to-device
interface which will significantly extend the usefulness of terminals by allowing them to invoke
actions in other devices, such as printers or scanners, as required by applications. Links are set
up as needed by applications without any need for human involvement. And because it is small,
low cost and low power it is perfect for mobile devices from intelligent wristwatches to laptop
computers. More than a thousand companies are now committed to making their applications
compatible with Bluetooth.

Inspiration to create
Symbian provides an operating system which can be common to a whole range of portable
handheld devices ranging from mobile phones to personal digital assistants. By creating a high
degree of conformance developers of software and hardware should be inspired to create new
and innovative products and functions, and, at the same time, consumers should be given the
confidence to use the new generations of devices.
The General Packet Radio Service or GPRS supports peak data rates similar to those of dial-
up connections over fixed networks. Its always open packet switched communications channels
allow almost instant access to data services, making the data experience more rewarding and less
frustrating. Because of its completely transparent support of the Internet Protocol or IP, GPRS
effectively gives the mobile terminal the same status as IP hosts on a fixed network. In other
words each GPRS compatible phone will become another node on the net.

28
 There are, however, still applications where circuit switched data retains an advantage over
packet switched data. Examples include real-time applications that demand a constant bit rate –
such as mobile video telephony or time-critical wireless imaging. Circuit switched data is also
much more suited to supporting mobile access to the large installed base of circuit switched fixed
network telephone modems and ISDN terminals. High Speed Circuit Switched Data or HSCSD is
an important development in this arena. It raises circuit
switched data rates from 9.6 Kbit/s to 57.6 Kbit/s.

Personal multimedia
Enhanced Data Rates for Global Evolution or EDGE
offers a foretaste of Third Generation but over today’s
Second Generation cellular networks. The data rates
supported by EDGE will allow a whole host of
advanced personal multimedia services to be offered Research and development at
Nokia is truly integrated with the
using still and moving images, sounds and text as well company’s other functions. Every
as voice. year around 10% of the staff at the
EDGE also has the effect of conserving network Nokia Research Center migrate into
other areas of the company. And
capacity. A particularly attractive aspect of EDGE is there is on-going close communica-
that it does not require new network infrastructure. tion between those with a reasearch
function – whether in the Research
It is merely a modification of existing systems. The ma- Center on within the business units
jor change is a new modulation system, known as 8PSK – and those with other functions
(Phase Shift Keying). This co-exists with the existing such as marketing, sales or
production.
modulation. And it also offers the prospect of merging
the evolution of the European originated GSM and US
originated Time Division Multiple Access (TDMA)
Second Generation digital cellular radio standards.
All of these initiatives, both on the terminals and
systems side, are in anticipation of Third Generation
cellular radio which is expected to come into service
from 2002 onwards. Nokia’s WCDMA radio technol-
ogy, with its combined packet-switched and high-capacity circuit-switched functionality, will
support the entire range of value-added services on the horizon. This technology provides cost-
efficient, wide area coverage with data rates up to 384 Kbit/s and localized data rates up to
2 Mbit/s.
Nokia started the development of a WCDMA test bed in 1992 and demonstrated the
viability of WCDMA for multimedia applications on that test bed in 1996. In September 1998,
the first call using a Third Generation Nokia terminal was made on a test network in Japan.
And in 1999, Nokia completed the first WCDMA full-system call over a public telephone net-
work using a WCDMA terminal, WCDMA base station subsystem and GSM Mobile Switching
Centres.

Enlightened management
The Mobile Information Society will not be built by any one organization alone. It requires
extensive cooperation between entities which may also be competitors. Such complex collabo-
rations must be managed in an intelligent and enlightened way to ensure that the benefits outweigh
the drawbacks. If successful, however, it will mean that together we will break through the limits
that restrain progress much faster than we ever could alone.

29
Keeping the creativity
flowing
In a knowledge intensive industry such as ours, success relies on attracting,
developing and retaining the most talented people. We also need to provide an
environment in which our employees can be creative and turn their ideas into
collective actions.

These are the primary goals of all of our human

resources activities at Nokia. And they are likely Eri Kuwabara
to take on even greater significance over the coming Product Manager
years as the competition for talented people gets – a Japanese national working in the UK
even tougher.
Despite our growing size our culture remains Nokia is a very open company. It does
that of an independent, innovative and creative not matter who you are talking to, no
start-up. We aim to maintain this culture no matter matter how senior they may be, if you
how large we may become. We believe that the best have any ideas, questions, concerns,
comments, you can say them. When it
way to achieve this is less through traditional man-
comes to openness I have found that
agement and more through leadership.
there really are no limits.

Values
Leadership starts with imparting Nokia’s values Wang Jing
to everyone in the organization: a drive to achieve Marketing Communications Assistant
customer satisfaction, respect for the individual, working in China
willingness to achieve and belief in continuous learn-
ing. It is also about encouraging sharing – shared Nokia offers a very good working
information and shared responsibility – and open- environment and facilities. There are
ness – to each other and to new ideas. plenty of training opportunities for me
At end of 1999, Nokia employed 55 260 people
in 50 countries. That compares to 44 543 in 45
countries at the end of 1998. A third of Nokia
people have been working at the company for less than two years. As the company continues
its global and corporate expansion the workforce is becoming increasingly diverse. There are 30
nationalities working at the Nokia Research Center alone.
This, of course, presents a challenge to our corporate culture and our values based manage-
ment system. We feel that it is therefore important to gain regular feedback from everyone at
Nokia to make sure we are achieving our aims. We do this through our annual “Listening To
You Survey”, which is undertaken by an independent survey company.

Response
In 1999, overall response to the survey grew to 73%, compared to a typical response rate to
surveys of this sort of 65%. The main areas of improvement were in staff perceptions of
recognition, reward and organizational integrity. Training and development scores were also
improved placing Nokia 12% above the norm for global high-tech companies.
Belief in the company’s commitment to customer satisfaction was 18% above the global
high-tech norm. Other key areas which scored well above the high tech norm were employee
motivation and involvement and satisfaction with career opportunities. The number of staff
reporting that they were satisfied with Nokia as a company to work for grew by 5%.
Respect for the individual, one of Nokia’s key values, was up 6% over the previous year.
Scores for achievement remained high at 66% and continuous learning was up 5% to 63%.

32
 In Nokia we believe in using the technology we create to encourage a more innovative way
of working. Our corporate network reaches into all corners of the organization supporting open
and frequent comunication and promoting a mobile, flexible and strongly socially networked cul-
ture. Because of our emphasis on leadership rather than traditional management, we do not have
to see everyone sitting at a desk to know that they are working.
Nokia has a well developed intranet. The vast
majority of Nokia’s workforce has a personal e-mail
address. Internal publishing is increasingly taking
to improve myself. And I know that place on the intranet. Company magazines such as
if I work hard and do well I will be Nokia People and Advance have intranet as well as
recognised for my efforts. printed versions. Some publications, such as The IP
Edge and various special publications linked to ma-
Wayne Brittingham
Human Resources Director and former jor events, are intranet only. A lot of Human Re-
marine working in the USA sources material is made available over the intranet.

Nokia revels in its diversity. In just Using the Web

a very few years it has transformed Nokia is keen on exploiting the interactive nature
itself into a global business. To many of both the Internet and the intranet. Close to half
organizations this would have brought (48%) of the responses to the 1999 internal “Listen-
unbearable strains. But at Nokia there ing To You Survey” came via the Web, for example.
is broad recognition that melting
And a substantial number of job applications made
different cultures together brings
during 1999 arrived at Nokia via the Web. Many
genuine business benefits.
of them via local Nokia job websites.
There are a number of advantages to using the
Web for human resources purposes. It considerably
boosts our efficiency and enables us to do new
things. Nokia’s Global Employment Management
System (GEMS), for example, allows any manager
looking for someone with particular skills to find
them quickly. He or she simply puts the list of
attributes being looked for into GEMS and back comes a list of suitable candidates. And in
our increasingly global business, the search area is not restricted to any one country or area
of Nokia’s operations but can be as narrow or wide as required.

Managing change
Nokia has generally had very good relations with its people. Nevertheless 1999 saw a number
of efforts to further improve our performance in this key area. For example, we further devel-
oped our performance management initiative, Investing In People (IIP), under which all staff have
regular discussions with their managers to set objectives and review skills and development needs.
During 1999 we continued our general shift towards performance based compensation.
The stock options scheme was extended from 2 000 to 5 000 individuals. And under the Nokia
Connecting People Bonus Plan a total of 70 million euros will be paid out based on 1999
performance.
There are also various other incentive plans where incentives are linked to performance.
These include the Individual Incentive Plan, the Program/Project Incentive Plan and the Team/
Production Incentive Plan. There are also incentive plans for production personnel as well as
research and development and other work teams. In addition there is a special Achievement
Award given to individuals or teams in recognition of outstanding contributions, significant

33
 achievements or exceptionally good performance. Some 90 million euros was paid out in 1999
under these schemes.

Talent competition
Part of the company’s effort to address this emerging challenge is its university program. Nokia
maintains relationships with over 100 universities and higher learning establishments worldwide.
These range from the sponsorship of research to the encouragement of Nokia employees to take
on part-time teaching or other roles.
During 1999 we decided to increase significantly the number of places in our International
Student Exchange Program and to mount a number of special events targetting the top technol-
ogy universities worldwide.
Maintaining and improving the attractiveness of Nokia’s working environment is becoming
increasingly important as the competition for talent grows. This company is very mindful of the
fact that it is the individual contributors who make the results. Nokia’s goal is to be the employer
of choice for the world’s most talented people. Together, there are no limits to what we can achieve.

Number of employees
by country
31 Dec. 1999 1998

Finland 23 267 21 093

United States 7 441 5 226

Germany 4 660 3 695

China 4 375 3 487

UK 2 822 2 417

Hungary 2 034 1 481

Mexico 1 392 936

Brazil 1 233 491

Denmark 1 110 747

South Korea 694 568

Efficient operations
1999 1998

Net sales
per person,
EUR* 386 343 324 297

Operating
profit
per person,
EUR* 76 357 60 573

Number of
patent over over
applications 1 000 700

Number of
invention nearly nearly
reports 3 000 2 000

* calculated with average

number of employees

34
Building a sustainable future
Success in today’s globalizing economy is not just based search programs taking place
around the world.
on the efficient use of financial capital. It is also important
to build, sustain and effectively develop human, social and Standards
natural capital. Nokia also actively supports the
ISO 14001 international environ-
mental management standard. At
The communications and informa- In 1999 Nokia Networks’ the end of 1999, 17 production
tion business has the potential to Customer Services introduced sites in six countries had a certified
transform man’s impact on the recycling services for infrastructure or internally verified environmental
environment. Many activities products. Depending on customer system. A further seven had started
requiring large amounts of energy needs, Nokia offers services cover- the certification process.
or raw materials, could be trans- ing disassembly, transportation,
ferred into digital space where their selection of an authorized recycler
negative environmental impact and contracts with the recycler.
could be reduced. This potential Nokia Mobile Phones is also
opens up great opportunities. actively addressing the question
But it also brings responsibilities. of end-of-life management of its
A commitment to environmen- products. It has participated in
tal issues is integral to Nokia’s cor- the mobile phone takeback pilots
porate culture. It is our goal to de- organized by ECTEL, the body
velop advanced human technology, representing the European tele-
products and services that have no communications equipment indus-
undue environmental impact, are try. And it actively assists in
efficient in their consumption of national and local programs for the
Nokia’s Suzhou factory started trial
energy and natural resources, or recovery and disposal of batteries. operations in 1998, began deliveries in
even help to conserve them. January 1999 and has already earned the
ISO 9001 quality and ISO 14001
Electromagnetic fields environmental certificates.
Life cycles One aspect of the environmental
Nokia focuses its environmental impact of information and commu-
work on what it has identified as nications equipment that has
key phases of product life cycles. received a lot of press attention,
These include an environmentally is that of the possible health effects Nokia is also piloting an envi-
sound supply chain, environmental of electromagnetic fields. ronmental management system for
management systems, environmen- A substantial amount of scien- office-only sites. 40% of Nokia’s sites
tally conscious packaging and recy- tific research to date has indicated are office facilities occupied mainly
cling and other end-of-life practices. that radio signals, at levels within by research and development, sales,
Environmental objectives and the limits prescribed by safety stan- marketing and administration.
considerations are systematically dards and recommendations around The choices of each individual
integrated into the design of prod- the world, present no adverse effect will determine the links between the
ucts, processes and services through to human health. Nokia products emerging Mobile Information Soci-
Nokia’s Design for Environment meet all relevant standards. Never- ety and environmentally sustainable
(DFE) program. The goal of DFE theless, in response to our custom- development. This is already the
is to minimize the use of materials ers’ concerns, we at Nokia support subject of public debate. Nokia is
and energy and maximize reuse the development of an even better actively following the debate and
and recycling while maintaining or scientific and public understanding intends to contribute to the devel-
improving cost, performance and of these issues and are contributing opment of an environmentally
quality standards. to a number of high quality re- sustainable information society.

35
 Board of Directors February 1, 2000

Chairman Chairman and CEO Member of the Board of Directors of Ford Motor Company,
Jorma Ollila, 49 and Chairman of the Group Executive Board of Nokia Corporation. ICL plc, Otava Books and Magazines Group Ltd and UPM-
Member since 1995, Chairman since 1999. Kymmene Corporation. Deputy Chairman of the Board of
President and CEO, and Chairman of the Group Executive the Confederation of Finnish Industry and Employers and
Board of Nokia Corporation 1992–1999, President of member of The European Round Table of Industrialists.
Nokia Mobile Phones 1990–1992, Senior Vice President, Holdings in Nokia: 3 784 shares and stock options for
Finance of Nokia 1986–1989. 1 252 000 shares.

Vice Chairman President and CEO of Pohjola Group Insurance Corporation. Vice Chairman of the Board of Directors of UPM-Kymmene
Iiro Viinanen, 55 Member and Vice Chairman since 1996. Corporation and member of the Board of Directors of Kone
Member of the Finnish Parliament 1983–1996, Finland’s Corporation.
Minister of Finance 1991–1996. Holdings in Nokia: 518 shares.

Pirkko Alitalo, 50 Senior Executive Vice President of Pohjola Group Insurance Member of the Board of Directors of Alma Media Corpora-
Corporation, Investments. tion and Skandia Insurance Company Ltd.
Member since 1992. Holdings in Nokia: 372 shares.

Dr Edward Andersson, 66 Prof. emer. Chairman of the Board of Directors of Neomarkka plc,
Member since 1973. member of the Board of Directors of Suomi Mutual Life
Assurance Company and MeritaNordbanken Plc.
Holdings in Nokia: 84 000 shares.

Paul J. Collins, 63 Vice Chairman of Citigroup Inc. and Director of Citicorp and Director of Kimberly-Clark Corporation.
Citibank N.A. Holdings in Nokia: 20 372 shares.
Member since 1998.
Vice Chairman and member of the Board of Directors of
Citicorp and Citibank N.A. 1988–1998.

Dr Bengt Holmström, 50 Paul A. Samuelson Professor of Economics at MIT, joint appointment Member of the Board of Directors of Kuusakoski Oy.
at the MIT Sloan School of Management. Member of the American Academy of Arts and Sciences.
Member since 1999. Holdings in Nokia: 532 shares.
Edwin J. Beinecke Professor of Management Studies at Yale
University 1985–1994.

Jouko K. Leskinen, 56 President and CEO of Sampo Group and member of the Board of Vice Chairman of the Board of Directors of UPM-Kymmene
Directors of Sampo Insurance Company plc. Corporation and member of the Board of Directors of
Member since 1994. Finnlines Plc. Vice Chairman of the Board of Federation of
Vice Chairman of the Board of Directors of Neste Oy Finnish Insurance Companies and member of the Board of
1989–1992, member of the Board of Directors of Neste Oy Employers’ Confederation of Service Industries.
1987–1989 and Senior Executive Director of Neste Oy Holdings in Nokia: 372 shares.
1987–1992.

Robert F. W. van Oordt, 63 CEO of Rodamco Continental Europe N.V. Member of the Board of Directors of Schering-Plough Inc.
Member since 1998. and N.V. Union Minière S.A. and member of the Supervi-
Chairman of the Supervisory Board of NKF Holding N.V. sory Board of Draka Holding N.V. and Greenfield Capital
1986–1999, Chairman of the Executive Board of NV Partners.
Koninklijke KNT BT 1993–1996, Chairman of the Execu- Holdings in Nokia: 372 shares.
tive Board of Bührmann-Tetterode N.V. 1990–1993, Execu-
tive Vice President and COO, and member of the Board of
Directors of Hunter Douglas Group N.V. 1979–1989.

Vesa Vainio, 57 Vice Chairman of the Board of Directors of MeritaNordbanken Plc, Vice Chairman of the Board of Directors of Metra Corpora-
President and member of the Board of Directors of Merita Plc and tion and member of the Board of Directors of UPM-
Vice Chairman of the Board of Directors of Nordbanken Holding AB Kymmene Corporation. Chairman of the Board of The Cen-
(publ). Member since 1993. tral Chamber of Commerce of Finland.
Chairman of the Board of Management and CEO of Merita Holdings in Nokia: 2 672 shares.
Bank Ltd and CEO of Merita Ltd 1992–1997, President of
Kymmene Corporation 1991–1992.

Secretary General Counsel.

Ursula Ranin

38
Corporate Governance
The Board of Directors
The Board decides on matters which in relation to the Group’s activities are of significant nature.
Such matters include confirmation of the strategic guidelines, approval of the periodic plans and
decisions on major investments and divestments.
The Board appoints the CEO, the President, the Chairman and the members of the Group
Executive Board of the company. The Board also determines their remuneration.
The roles of the Board, its Chairman and its subcommittees are defined in the Board’s Rules
of Procedure.

Election and term of members of the Board of Directors

According to the Articles of Association the company has a Board of Directors composed of a mini-
mum of seven and a maximum of ten members. In 1999, the Board was composed of nine members.
The members are elected at the Annual General Meeting convening annually in March–April.
The term of the Board members is one year at a time.
The Board elects a Chairman and a Vice Chairman from among its members for one term at a
time. In 1999, Casimir Ehrnrooth acted as the Chairman until the Annual General Meeting. After his
resignation Jorma Ollila was elected to chair the Board. Iiro Viinanen acted as Vice Chairman of the
Board throughout the year.

Committees of the Board of Directors in 1999

The Personnel Committee monitors the personnel policy of the Group and oversees its implementation
and development. The Committee also prepares matters concerning personnel issues, including the
salaries and principles for the remuneration of top executives, prior to their submission to the Board.
As of March 17, 1999, the Personnel Committee was composed of the following members of the Board:
Iiro Viinanen (Chairman), Paul J. Collins, Bengt Holmström, Jorma Ollila and Vesa Vainio.
The Audit Committee consists of non-executive directors. Its responsibilities include the consideration
of the financial statements and the internal control systems and the internal audit. The Committee meets
in the presence of external auditors, the CFO and the Group Controller and, upon invitation, other senior
executives. As of March 17, 1999, the Audit Committee was composed of the following members of the
Board: Dr Edward Andersson (Chairman), Pirkko Alitalo, Jouko K. Leskinen and Robert F.W. van Oordt.
The Nomination Committee prepares proposals for the General Meeting concerning the composi-
tion of the Board and the remunerations and remuneration principles of the members of the Board.
It further monitors issues and practises related to Corporate Governance and proposes necessary
actions in respect thereof. The Nomination Committee was composed of the following members of
the Board: Iiro Viinanen (Chairman), Paul J. Collins and Jouko K. Leskinen.

Meetings of the Board of Directors

The Board met eight times in 1999. One of the meetings was held in a form of conference call.

The CEO and the President

The Chairman of the Board Jorma Ollila acts as the Chief Executive Officer of the Group. He was
the President and CEO until March 17, 1999 as of which date Pekka Ala-Pietilä has served as the
President of the company.

Remuneration
The Annual General Meeting on March 17, 1999 resolved that the annual retainers to the board
members be 109 000 euros for the Chairman, 85 000 euros for the Vice Chairman and 61 000 euros
for each of the members. It further resolved that the retainers be partly paid in company’s stock to
be acquired from the market. In line with this the Chairman received 664 shares, the Vice Chairman
518 shares and the members 372 shares each. The remainders of the annual retainers along with the
meeting fees 420 euros per meeting were paid in cash.
In 1999, the remuneration paid to Jorma Ollila for his services as President and CEO was in
aggregate 1 106 000 euros including a bonus for 1998 of 214 000 euros. The remuneration paid to
Pekka Ala-Pietilä for his services as Deputy to the CEO and as President was in aggregate 607 000
euros including a bonus for 1998 of 111 000 euros.

Insiders’ Trading with Securities

The Board has established a Policy in respect of trading with securities. The Policy is in line with the Guidelines
for Insiders issued by the Helsinki Exchanges.

39
 Management February 1, 2000
Group Executive Board

Chairman Jorma Ollila, 49 Member of the Board of Directors of Ford Motor

Chairman and CEO of Nokia Corporation. Company, ICL plc, Otava Books and Magazines Group Ltd
Group Executive Board member since 1986, Chairman since 1992. and UPM-Kymmene Corporation. Deputy Chairman of the
Joined Nokia 1985. Board of the Confederation of Finnish Industry and Em-
President and CEO, and Chairman of the Group ployers and member of The European Round Table of In-
Executive Board of Nokia Corporation 1992–1999, dustrialists.
President of Nokia Mobile Phones 1990–1992, Holdings in Nokia: 3 784 shares and stock options for
Senior Vice President, Finance of Nokia 1986–1989. 1 252 000 shares.

Pekka Ala-Pietilä, 43 Member of the Board of Directors of Alma Media Corpora-

President of Nokia Corporation, tion. Member of the Board of Economic Information Bu-
President of Nokia Communications Products. reau and Finnish-Japanese Chamber of Commerce.
Member since 1992. Joined Nokia 1984. Holdings in Nokia: 2 400 shares and stock options for
Executive Vice President and Deputy to the CEO of 556 000 shares.
Nokia Corporation and President of Nokia Communica-
tions Products 1998–1999, President of Nokia Mobile
Phones 1992–1998, Vice President, Product Marketing of
Nokia Mobile Phones 1991–1992, Vice President, Strategic
Planning of Nokia Mobile Phones 1990–1991.

Dr Matti Alahuhta, 47 Chairman of the Board of Federations of Finnish Electrical

President of Nokia Mobile Phones. and Electronics Industry, Vice Chairman of the Board of the
Member since 1993. Federation of Finnish Metal, Engineering and Electrotech-
Joined Nokia 1975–1982 and 1984. nical Industries and of the Technology Development Centre,
President of Nokia Telecommunications 1993–1998, Ministry of Trade and Industry, and member of the Board
Executive Vice President of Nokia Telecommunications of The Central Chamber of Commerce of Finland and the
1992, Senior Vice President, Public Networks of Nokia Advisory Board of the International Institute for Manage-
Telecommunications 1990–1992. ment Development (IMD).
Holdings in Nokia: Stock options for 476 000 shares.

Sari Baldauf, 44 Member of the Board of Technical Research Centre of Fin-

President of Nokia Networks. land and Finland-China Trade Association, and member of
Member since 1994. the National Committee for the Information Society Issues.
Joined Nokia 1983. Holdings in Nokia: Stock options for 476 000 shares.
Executive Vice President of Nokia APAC 1997–1998,
President, Cellular Systems of Nokia Telecommunications
1988–1996, Vice President, Business Development of Nokia
Telecommunications 1987–1988.

Mikko Heikkonen, 50 Holdings in Nokia: Stock options for 358 000 shares.
Executive Vice President and General Manager,
Customer Operations of Nokia Networks.
Member since 1998.
Joined Nokia 1975.
President, Network Systems of Nokia Telecommunications
1997–1999, President, Network and Access Systems of
Nokia Telecommunications 1995–1996, Senior Vice Presi-
dent, Area Management of Nokia Telecommunications
1993–1995, Senior Vice President, Cellular Systems of
Nokia Telecommunications 1988–1992.

40
Olli-Pekka Kallasvuo, 46 Chairman of the Board of Directors of Nextrom Holding
Executive Vice President, CFO of Nokia Corporation. S.A. and Nokian Tyres plc, member of the Board of Direc-
Member since 1990. tors of F-Secure Corporation and Finnish Broadcasting
Joined Nokia 1980. Company. Member of the Board of Telecommunications
Executive Vice President of Nokia Americas and President Industry Association (USA).
of Nokia Inc. 1997–1998, Executive Vice President, Holdings in Nokia: Stock options for 488 000 shares.
CFO of Nokia 1992–1996, Senior Vice President, Finance
of Nokia 1990–1991.

Dr Yrjö Neuvo, 56 Vice Chairman of the Board of Directors of Vaisala Corpo-

Executive Vice President, CTO of Nokia Mobile Phones. ration. Member of Finnish Academy of Technical Sciences,
Member since 1993. member of the Finnish Academy of Science and Letters and
Joined Nokia 1993. Academiae Europae, Foreign member of Royal Swedish
Senior Vice President, Technology of Nokia 1993–1994, Academy of Engineering Sciences, and Fellow of the Insti-
National Research Professor of the Academy of Finland tute of Electrical and Electronics Engineers. Holdings in
1984–1992, Professor of Tampere University of Technology Nokia: 4 160 shares and stock options for 489 180 shares.
1976-1992, Visiting Professor of University of California,
Santa-Barbara 1981–1982.

Veli Sundbäck, 53 Chairman of the Board of Directors of Huhtamäki Van

Executive Vice President, Corporate Relations and Trade Policy of Leer Oyj and member of the Board of Directors of Nextrom
Nokia Corporation. Holding S.A. Vice Chairman of the Board of the Interna-
Member since 1996. tional Chamber of Commerce, Finnish Section, and Chair-
Joined Nokia 1996. man of the Trade Policy Committee of the Confederation
Secretary of State at the Ministry for Foreign Affairs of Finnish Industry and Employers.
1993–1995, Under-Secretary of State for External Economic Holdings in Nokia: 400 shares and stock options for
Relations at the Ministry for Foreign Affairs 1990–1993. 436 000 shares.

Anssi Vanjoki, 43 Holdings in Nokia: 8 000 shares and stock options for
Executive Vice President, Europe & Africa of Nokia Mobile Phones. 294 000 shares.
Member since 1998.
Joined Nokia 1991.
Vice President, Sales of Nokia Mobile Phones 1991–1994,
Suomen 3M Oy 1980–1990.

Of Nokia’s strategic countries, Matti Alahuhta is responsible for Nokia’s operations in Japan, Sari Baldauf in China and
Olli-Pekka Kallasvuo in the U.S.

As of December 31, 1999, only some of the stock options mentioned above were exercisable. In addition, the subscription price had not been determined
to all of them.

Auditors
Eric Haglund, 65 Lars Blomquist, 56
Authorized Public Accountant (KPMG) Authorized Public Accountant (PricewaterhouseCoopers)

Deputies
KPMG Wideri Oy Ab SVH PricewaterhouseCoopers Oy
Authorized Public Accountant (Deputy to Eric Haglund) Authorized Public Accountant (Deputy to Lars Blomquist)

41
 Nokia shares
Shares and voting rights
At the Annual General Meeting held on March 17, 1999 Nokia shareholders resolved to consoli-
date the two classes of shares, A shares and K shares, into one class of shares. The consolidation
of the classes of shares is effective as of April 9, 1999 whereafter Nokia has one class of shares
only.1 Each share entitles to one (1) vote at General Meetings of Nokia, and to a fixed annual
dividend amounting to 10 per cent of the nominal value of the share. Should it be impossible in
any year to distribute such dividend, the shares are entitled to the remainder in the following year.2
At the Annual General Meeting held on March 17, 1999 Nokia shareholders resolved to
convert the share capital and the nominal value of the share into euros, to split the nominal value
of the share on a two-for-one basis, and to increase the share capital through a bonus issue by
rounding up the nominal value of each share to an appropriate two decimal number. With effect
from April 9, 1999 the nominal value of the share is EUR 0.24.
Upon resolution by Nokia shareholders at the Annual General Meeting held on March 17,
1999, the minimum share capital stipulated in the Articles of Association is EUR 170 million
and the maximum share capital EUR 680 million. The share capital may be increased or
reduced within these limits without amending the Articles of Association. On December 31,
1999, the share capital was EUR 279 243 831.84 and the total number of votes 1 163 515 966.

Authorizations
At the Annual General Meeting held on March 17, 1999 Nokia shareholders authorized the
Board of Directors to issue a maximum of 120 million shares to finance business acquisitions or
corresponding arrangements. A total of 529 530 shares were issued in 1999 under the authoriza-
tion. The authorization is valid until March 17, 2000.
At the Extraordinary General Meeting held on December 13, 1999 Nokia shareholders
authorized the Board of Directors to repurchase a maximum of 56 million Nokia shares and
to resolve on disposal of such shares. No shares were repurchased or disposed in 1999 under
the authorizations. These authorizations are valid until December 13, 2000.

Changes to be proposed to Annual General Meeting 2000

The Board of Directors proposes to the Annual General Meeting on March 22, 2000, that the
nominal value of the share be split on a four-for-one basis and amended to EUR 0.06, the num-
ber of auditors be reduced to one ordinary auditor the term of which is the fiscal year, and the
authorizations held by the Board to issue new shares, repurchase Nokia shares and dispose
Nokia shares, be renewed until March 22, 2001, at the latest.

Attending and voting at General Meeting

The shares of Nokia are registered in the Finnish book-entry system. By December 31, 1999,
a total number of 99.9 per cent of Nokia shares had been transferred to this system.3
If an international depositary receipt (e.g. ADR) has been issued for a book-entry share or
the share is owned by a foreign person or legal entity, the custodian commissioned to administer
the book-entry shares may be entered as a nominee in the register of shareholders. The custodian
may be e.g. a Finnish book-entry register or a corresponding foreign organization approved by
Finnish Central Securities Depositary Ltd to act as a custodian.

1 Before the consolidation, the Articles of Association contained a provision permitting a conversion of K shares to an equivalent number of A shares,
within the limits set for the minimum and maximum numbers of shares in each class of shares. By March 17, 1999, a total of 63.5% of all the K shares
had been converted into A shares and only 154 120 shares could still have been converted.
2 The rights presently related to all Nokia shares correspond to the rights of the previous class A shares. The rights of the previous class K shares entitled
to ten (10) votes at General Meetings but no fixed annual dividend.
3 At the Extraordinary General Meeting held on December 13, 1999, Nokia shareholders resolved to sell the shares that have not been transferred into
the book-entry system to the benefit of holders of such shares. The resolution concerned 416 672 shares corresponding to 0.01% of all the shares.
These shares were not sold by December 31, 1999.

42
Share capital and shares, Dec 31 1

1999 1998 1997 1996 1995

Share capital, EURm

K (common) *) 54 66 84 92
A (preferred) 201 186 168 160
Total 279 255 252 252 252

Shares
(1 000, nominal value EUR 0.24)
K (common) *) 254 061 314 750 398 851 437 508
A (preferred) 957 132 884 659 799 349 760 692
Total 1 163 516 1 211 193 1 199 409 1 198 200 1 198 200

Shares owned by the Group

at the year end (1 000) 346 64 322 64 322 65 122 60 722
Number of shares excl. shares
owned by the Group at the
year end (1 000) 1 163 170 1 146 871 1 135 087 1 133 078 1 137 478
Average number of shares excl. shares
owned by the Group during
the year (1 000) 1 148 440 1 138 341 1 133 128 1 134 244 1 138 268
Number of registered shareholders2 48 771 30 339 28 596 26 160 27 466

*) As of April 9, 1999, only one class of shares.

Key Ratios Dec. 31, IAS

1999 1998 1997 1996 1995

Earnings per share from

continuing operations, basic, EUR 2.24 1.48 0.89 0.45 0.61

P/E Ratio
K (common) *) 35.3 18.4 24.8 12.0
A (preferred) 80.4 35.3 18.3 24.9 11.9

(Nominal) dividend per share, EUR 0.80 3 0.48 0.31 0.15 0.13
Total dividends paid, EURm 931 3 586 378 176 151
Payout ratio 0.36 0.33 0.35 0.33 0.21

Dividend yield, %
K (common) *) 0.9 1.9 1.3 1.7
A (preferred) 0.4 0.9 1.9 1.3 1.8

Shareholders’ equity per share, EUR 6.34 4.45 3.19 2.36 2.04
4
Market capitalization, EURm 209 371 59 796 18 503 12 706 8 195

*) As of April 9, 1999, only one class of shares.

1
Figures have been recalculated to correspond the nominal value of EUR 0.24 of the shares.
2
Each nominee register is included in the figure as only one registered shareholder.
3
Proposed by the Board of Directors.
4
Shares owned by the Group are excluded.

43
 On December 31, 1999, Nokia shares registered in the name of a nominee accounted for
85.6 per cent of the total number of shares and voting rights.
To attend and vote at a General Meeting, a shareholder must be registered in the register
of shareholders. Voting rights at a General Meeting may not be exercised by a shareholder if his
shares are registered in the name of a nominee. This is the case also when the holding consists of
ADRs. In order to attend and vote at a General Meeting, a beneficial owner of shares registered
in the name of a nominee (including a beneficial owner of ADRs) must arrange to have his name
entered in the register of shareholders as of the record date of the Meeting until the day of the
Meeting.

Dividend policy
Dividends are paid by Nokia within the limits set by the Finnish Companies Act. The amount of
dividend is based upon and calculated in relation to the level of Nokia’s annual profit. There is,
however, no formula according to which the amount of dividend is determined.
The intention of Nokia is that the dividend paid should, over the long term, reflect the devel-
opment of the Group’s earnings per share.

Effect of imputation system

The imputation system (avoir fiscal) will apply to the 1999 dividends payable by Nokia. Any
Finnish company, when paying dividends to its shareholders, is required to pay tax amounting
to a minimum of 7/18 of the dividend. A resident of Finland, receiving dividends from a Finnish
company, is entitled to tax credit amounting to 7/18 of the dividend. As the dividend for 1999
is proposed by the Board of Directors to be EUR 0.80 per share, the tax credit thus amounts to
EUR 0.31 thereby increasing the shareholder’s profit to EUR 1.11 taxable at 29 per cent.
The credit is granted to non-resident shareholders only when an existing tax treaty between
Finland and the shareholder’s resident country specifically includes a provision of the credit. Ac-
cording to a tax treaty, a resident of the Republic of Ireland is entitled to a partial tax credit.

Listing and turnover on stock exchanges

Nokia shares are listed on the Helsinki Exchanges since 1915. The shares are also listed in
Stockholm (since 1983), London (since 1987), Paris (since 1988), Frankfurt am Main (since
1988) and New York (since 1994)1. Nokia shares are traded on the New York Stock Exchange
(NYSE) in the form of American Depositary Shares (ADSs) and evidenced by American Deposi-
tary Receipts (ADRs). The ADRs are issued by Citibank, N.A., acting as the Depositary Bank,
upon deposit of shares or evidence of rights to receive shares with the Depositary. Each ADS rep-
resents one share.2

1 As a result of the consolidation of the classes of shares resolved by Nokia shareholders at the Annual General Meeting held on March 17, 1999, all Nokia
shares are listed on each of these stock exchanges. Before the consolidation, the class K shares were listed on the Helsinki Exchanges only.
2 Before the consolidation of the classes of shares resolved by Nokia shareholders at the Annual General Meeting held on March 17, 1999, only Nokia A
shares were traded on NYSE in the form of ADSs, each ADS representing one A share.

44
45
 Nokia Dividend Reinvestment and Direct Purchase Plan
A Dividend Reinvestment and Direct Purchase Plan (the Plan) for ADSs of Nokia was imple-
mented in December 1997. The Plan is designed to provide owners of ADSs and other interested
investors who participate in the Plan a convenient way to accumulate and increase their invest-
ment in ADSs and to reinvest all or a portion of their cash dividends or optional cash investments
in additional ADSs. The Plan is not available to persons located outside the United States.
The Plan is sponsored and administrated by the Depositary Bank, Citibank, N.A. Nokia has
consented to the establishment of the Plan by the Depositary Bank, but does not, and should not
be deemed to, sponsor or administer the Plan. Nokia assumes no obligation or liability for the
operation of the Plan.

Nokia Stock Option Plans

As part of its incentive schemes to the management and key personnel at the end of 1999 Nokia
had four global stock option plans.
In 1994 the Annual General Meeting approved an issue of bonds with warrants to certain
members of the Nokia management (Nokia Stock Option Plan 1994). Each warrant attached to
the bonds is exercisable at FIM 374 for sixteen shares from December 1, 1998 to January 31,
2000. The Nokia Stock Option Plan 1994 was offered to approximately 50 persons.
In 1995 the Annual General Meeting approved an issue of bonds with A and B warrants to
certain members of the management of the Nokia Group (Nokia Stock Option Plan 1995). Each
warrant attached to the bonds is exercisable at FIM 168 for four shares during certain periods of
time between December 1, 1997 and January 31, 2001. Nokia Stock Option Plan 1995 covers
approximately 350 persons. The B warrants are listed on the Helsinki Exchanges as of December
1, 1999.
In 1997 the Annual General Meeting approved an issue of bonds with A, B and C warrants
to key personnel of the Nokia Group (Nokia Stock Option Plan 1997). Each warrant attached to
the bonds is exercisable at FIM 307 for four shares during certain periods of time between
December 1, 1997 and January 31, 2003. Nokia Stock Option Plan 1997 covers approximately
2 000 persons. The A and B warrants are listed as one security on the Helsinki Exchanges as of
November 1, 1999.
In 1999 the Annual General Meeting approved an issue of A, B and C stock options to key
personnel of the Nokia Group (Nokia Stock Option Plan 1999). Each stock option A is exercis-
able at EUR 67.55 for one share. The subscription prices for stock options B and C will be deter-
mined in 2000 and 2001. The exercise periods will be during certain periods of time between
April 1, 2001 and December 31, 2004. Nokia Stock Option Plan 1999 presently covers approxi-
mately 5 000 persons.
By December 31, 1999 the exercise of 6 680 576 warrants in aggregate under the Stock Op-
tion Plans resulted in the issue of 29 067 200 new shares in aggregate and increase of Nokia
share capital with EUR 6 976 128 in aggregate.
In addition to the global stock option plans, Nokia introduced in 1999 a complementary
stock option plan for employees in the US and Canada (The Nokia Holding Inc. 1999 Stock
Option Plan). An exercise of stock options under this plan does not result in increase of Nokia
share capital but the participants are entitled to purchase upon exercise of each stock option one
Dividends paid Nokia ADS on a predetermined price. The plan presently covers approximately 600 persons.
on Nokia shares
Year of Amount Amount Further information
payment (FIM)* (EUR)* Please see section Nokia shares and shareholders in Nokia’s Financial Statement on pages 30–34
1990 0.175 0.03 for further details.
1991 0.175 0.03
1992 0.125 0.02
1993 0.125 0.02
1994 0.175 0.03
1995 0.625 0.11
1996 0.750 0.13
1997 0.875 0.15
1998 1.875 0.31
1999 2.875 0.48
2000 - 0.80 **

Split adjusted*
Proposed by the Board**

46
Share issues and bonus issues 1995 - 19991
Type of Issue Subscription Subscription Number of Date of Net New share
date price or amount new shares payment proceeds capital
of bonus issue EURm EURm
EUR

Nokia Stock Option

Plan 1994 1998 3.93 67 008 1998 0.26 0.01
1999 3.93 3 059 520 1999 12.03 0.73

Nokia Stock Option

Plan 1995 1997 7.06 581 600 1997 4.11 0.12
1998 7.06 7 576 000 1998 53.52 1.59
1999 7.06 4 650 380 1999 32.85 1.12

Nokia Stock Option

Plan 1997 1997 12.91 627 104 1997 8.09 0.13
1998 12.91 4 141 496 1998 53.46 0.87
1999 12.91 8 364 092 1999 107.97 2.01

Bonus issue 1999 0.03 N/A 1999 36.05 36.05

Share issue to stockholders

of Rooftop Communications
Corporation 1999 80.17 529 530 1999 42.45 0.13

Reductions of the share capital 1995 –1999

Type of reduction Number of Amount of reduction Amount of reduction Amount of reduction Date of
shares affected of the share of the restricted of the retained reduction
(1 000, nominal value capital capital earnings
EUR 0.24) EURm EURm EURm

Cancellation of shares 64 281 15.43 – 3 435.27 1999

Splits of the nominal value of Nokia shares

Nominal value before Split ratio Nominal value after Effective date
in public trading

1986 FIM 100 (EUR 16.82) 5:1 FIM 20 (EUR 3.36) January 2, 1987
1995 FIM 20 (EUR 3.36) 4:1 FIM 5 (EUR 0.84) April 24, 1995
1998 FIM 5 (EUR 0.84) 2:1 FIM 2.5 (EUR 0.42) April 16, 1998
1999 FIM 2.5 (EUR 0.42) 2:1 EUR 0.24 April 12, 1999

1
Prices and numbers of shares have been recalculated to correspond the nominal value of EUR 0.24 of the shares.

47
 Contact us
Nokia
Keilalahdentie 4
P.O. Box 226
FIN-00045 NOKIA GROUP
Tel. +358 9 180 71
Fax +358 9 652 409
e-mail: communications.corporate@nokia.com

Nokia Networks
Keilalahdentie 4
P.O. Box 300
FIN-00045 NOKIA GROUP
Tel. +358 9 511 21
Fax: +358 9 5112 5560

Nokia Mobile Phones

Keilalahdentie 4
P.O. Box 100
FIN-00045 NOKIA GROUP
Tel. +358 10 5051
Fax +358 10 505 5768

Nokia Communications Products

Keilalahdentie 4
P.O. Box 226
FIN-00045 NOKIA GROUP
Tel. +358 9 180 71
Fax +358 9 180 7803
More about Nokia
on the Internet Nokia Ventures Organization
www.nokia.com
Heikkiläntie 7
(main site) P.O. Box 207
www.nokia.com/investor FIN-00045 NOKIA GROUP
(Investor relations main page) Tel. +358 9 511 21
www.nokia.com/environment Fax +358 9 5116 2590
(Nokia and the environment)

www.nokia.com/safety Nokia Research Center

(Health and mobile telephony)
Itämerenkatu 11–13
www.nokia.com/press P.O. Box 407
(Press releases and other news
material) FIN-00045 NOKIA GROUP
Tel. +358 9 43 761
Other sites of interest Fax +358 9 4376 6227
www.bluetooth.com/
(Information on the
Bluetooth technology.)

www.symbian.com/
(The joint venture of the leading
mobile communications products
manufacturers and the
developments of their EPOC
technology.)

www.wapforum.org/
(Information on the Wireless
Application Protocol which is
an open, global specification
bringing Internet into mobile
terminals.)

50
Investor information
Annual general meeting
Date: Wednesday, March 22, 2000, at 3 p.m.
Place: the Helsinki Fair Centre, Congress Hall C 1, Rautatieläisenkatu 3, Helsinki, Finland.

Dividend
Dividend proposed by the Board of Directors for 1999 is EUR 0.80. The dividend record date is
March 27, 2000 and the dividend will be paid after April 4, 2000.

Stock exchanges
The shares of Nokia Corporation are quoted on the following stock exchanges:

Trading
Symbol currency

Helsingin Pörssi (quoted since 1915) NOK1V EUR

Stockholms Fondbörs (1983) NOKI SEK
London Stock Exchange (1987) NOKA EUR
Frankfurter Wertpapierbörse (1988) NOA3 EUR
Bourse de Paris (1988) NOK EUR
New York Stock Exchange (1994) NOK USD

List of indices
NOK1V NOKI NOK

HEX HEX General Index OMX Stockholm NYANYSE Composite

HEXTELE HEX Telecommunications Index GENX Swedish General NNA NYSE Utilities
HEX20 HEX 20 Index GENX04 Swedish Engineer NNNYSE Utilities
BE500 Bloomberg Europe GENX16 Swedish SX 16 Index CTNGSFO Technology
BETECH BBG Europe Technology MLO Merrill Lynch 10
SX5E DJ Euro STOCXX 50
SX5P DJ Europe STOXX
SX__ Various Other DJ Indices
E300 FTSE Eurotop 300

Financial reporting
Nokia’s quarterly interim reports in 2000 are due on April 27, July 27 and October 26. The
2000 results will be published in January/February 2001 and the Annual Report for 2000 in
March 2001. The reports are published in English, Finnish and Swedish.

Investor relations contacts

Nokia Investor Relations Nokia Investor Relations
6000 Connection Drive P.O. Box 226
IRVING, Texas 75039 FIN-00045 NOKIA GROUP
USA Finland
tel. +1 972 894 4880 tel. +358 9 180 7289
fax +1 972 894 4831 fax +358 9 176 406

Information via the internet

Internet World Wide Web users can access Nokia’s annual reports and quarterly reports, as well
as other financial information and press releases on Nokia through www.nokia.com/investor

The Nokia Annual Report is available also on CD-ROM.

51
 Abbreviations
3G Third Generation
DFE Design for Environment
DSL Digital Subscriber Line
EDGE Enhanced Data Rates for Global Evolution
GPRS General Packet Radio Service
HSCSD High Speed Circuit Switched Data
GEMS Global Employment Management System
GPS Global Positioning System
IP Internet Protocol
MIS Mobile Information Society
LAN Local Access Network
PSK Phase Shift Keying
TETRA Terrestrial Trunked Radio
TDMA Time Division Multiple Access
VPN Virtual Private Network
WAP Wireless Application Protocol
WCDMA Wideband Code Division Multiple Access

It should be noted that certain statements herein which are not historical facts, including, without limitation those regarding 1) the timing of
product deliveries; 2) Nokia’s ability to develop new products and technologies; 3) expectations regarding market growth and developments;
4) Nokia’s positioning and ability to take advantage of market and technological development and trends; 5) Nokia’s role in developing the Mobile
Information Society; 6) expectations for growth and profitability; and 7) statements preceded by “believes”, “expects”, “anticipates”, foresees”, or
similar expressions, are forward-looking statements. Because such statements involve risks and uncertainties, actual results may differ materially
from the results currently expected by the Company. Factors that could cause such differences include, but are not limited to 1) general economic
conditions, such as the rate of economic growth in the Company’s principal geographic markets or fluctuations in exchange rates; 2) industry
conditions, such as the strength of product demand, the intensity of competition, pricing pressures, the acceptability of new product introductions,
the introduction of new products by competitors, changes in technology or the ability of the Company to source components from third parties
without interruption and at reasonable prices and the financial condition of the Company’s customers; 3) operating factors, such as continued
success of manufacturing activities and the achievement of efficiencies therein, continued success of products development or inventory risks due
to shifts in market demand; as well as 4) the risk factors specified in the Company’s Form 20-F for the years ended December 31, 1998 and 1999.

C ECOLA
DI B
R
NO

EL

Printed on Galerie Art Silk 130 g/m2.

Cover Galerie Art Silk 250 g/m2.

® Nokia 2000. Nokia and Nokia Connecting People are registered trademarks of Nokia Corporation.
Design: Pauffley. Layout: HardWorkingHouse Advertising Oy. Photographs: Charlie Westerman. Print: Sävypaino ISO 9002 , 2000.

52
 Nokia’s
Financial Statements
1999
 Table of contents

3 Review by the Board of Directors

6 Consolidated profit and loss account, IAS

7 Consolidated balance sheet, IAS

8 Consolidated cash flow statement, IAS

9 Statement of changes in shareholders’ equity, IAS

10 Notes to the consolidated financial statements

24 Profit and loss account, parent company, FAS

24 Cash flow statement, parent company, FAS

25 Balance sheet, parent company, FAS

26 Notes to the financial statements of the parent company

30 Nokia shares and shareholders

35 Nokia 1995-1999, IAS, key ratios and economic indicators

36 Nokia 1995-1999, IAS

38 Proposal by the Board of Directors to the Annual General Meeting

39 Auditors´ report

40 U.S. GAAP

42 Calculation of key ratios

2
Review by the Board of Directors

Nokia´s net sales in 1999 increased by 48% compared creased by 53% (by 50% in 1998) and totaled EUR
to 1998 and totaled EUR 19 772 million (EUR 13 326 1 755 million (EUR 1 150 million in 1998), represent-
million in 1998). Sales in Nokia Networks grew by ing 8.9% of net sales (8.6% of net sales in 1998).
29% to EUR 5 673 million (EUR 4 390 million) and in
Nokia Mobile Phones by 63% to EUR 13 182 million Expanding operational capabilities
(EUR 8 070 million). Sales decreased in Other Opera- To meet the growing demand for its mobile phones,
tions by 2% to EUR 995 million (EUR 1 014 million). Nokia continued to expand its handset manufacturing
Operating profit (IAS, International Accounting capabilities globally. Nokia´s operations in Fort Worth,
Standards) grew by 57% and totaled EUR 3 908 mil- Texas, are increasing mobile phone capacity gradually
lion (EUR 2 489 million in 1998). Operating margin during the first half of 2000. Also during the first half of
improved to 19.8% (18.7% in 1998). Operating profit 2000, mobile phone manufacturing facilities in Brazil are
in Nokia Networks increased to EUR 1 082 million being expanded, and the mobile phone plant in Mexico
(EUR 960 million) and in Nokia Mobile Phones to EUR is expected to be ready for additional production.
3 099 million (EUR 1 540 million). Operating margin Construction of the new mobile phone manufactur-
in Nokia Networks was 19.1% (21.9% in 1998) while ing and distribution centre in Komárom, Hungary, pro-
the operating margin in Nokia Mobile Phones was ceeded well and the factory is expected to reach full
23.5% (19.1% in 1998). Other Operations showed an capacity during the first half of this year. Investments
operating loss of EUR 273 million (loss of EUR 11 were also made at the two existing mobile phone joint
million) primarily due to low profits at Nokia Com- ventures in China, and at the plants in Finland and
munications Products, and substantial investments re- Germany. The base station factory in Suzhou, China,
lated to new business opportunities at Nokia Ventures started operations in early 2000.
Organization. At the end of 1999, Nokia´s global production com-
Net interests and financial expenses totaled EUR 58 prised 12 infrastructure manufacturing facilities in 5
million (EUR 39 million 1998). Profit before tax and countries and 10 mobile phone manufacturing facilities
minority interests totaled EUR 3 845 million (EUR in 8 countries.
2 456 million). Taxes amounted to EUR 1 189 million
(EUR 737 million). Profit from continuing operations Investing in People
was EUR 2 577 million (EUR 1 680 million). Net profit In 1999, Nokia increased its personnel by a total of
was EUR 2 577 million (EUR 1 750 million). 12 367 new employees (9 819 in 1998), excluding the
Earnings per share from continuing operations was businesses sold in 1999. The average number of person-
EUR 2.24 (basic) and EUR 2.17 (diluted) compared to nel for 1999 was 51 177 (41 091 for 1998). At the end
EUR 1.48 (basic) and EUR 1.43 (diluted) in 1998. of 1999, Nokia employed 55 260 people worldwide
At December 31, 1999, net debt to equity ratio (44 543 at year-end 1998).
(gearing) was -41% (-36% at the end of 1998). Total Nokia continued to develop motivating and perfor-
capital expenditures in 1999 amounted to EUR 1 358 mance-based compensation and benefit programs to its
million (EUR 761 million). employees. In 1999, the 51% rise in earnings per share
resulted in the maximum 5% bonus, based on annual
Increasing global market presence base salary being paid to Nokia’s personnel participat-
The global mobile phone market continued to grow ing in the global Nokia Connecting People Bonus plan.
rapidly, and the ensuing strong increase in the sales of
Nokia Mobile Phones further consolidated Nokia’s Focusing on key technologies
number one position in mobile handsets. In infrastruc- To expand its competencies in new emerging business
ture, Nokia continued to be the world’ s largest GSM areas, Nokia carried out several acquisitions in 1999. A
1800 supplier and one of the two largest GSM 900 sup- number of partnerships with operators, content and
pliers, with increasing focus in broadband and IP net- service providers and IT players were formed to facili-
work solutions. tate development of the market for mobile Internet.
In 1999, Europe accounted for 53% of Nokia´s net In February, Nokia acquired Diamond Lane Com-
sales (58% in 1998), the Americas 25% (21 % in 1998) munications Corporation to enhance its fast Internet
and Asia Pacific 22% (21% in 1998). The 10 largest access expertise. To strengthen its capabilities in wire-
markets were the U.S., China, the UK, Germany, Italy, less broadband access technologies, Nokia acquired
France, Brazil, the Netherlands, Finland and Australia, Rooftop Communications Corporation in September.
together representing 67% of total sales. A 40% stake of the UK-based AIRCOM International
was acquired in June to further strengthen Nokia’s PC-
Intensive research and development based network planning system competence.
To enable the future growth of the company, Nokia To develop its wireless LAN offering, Nokia acquired
continued to invest in its worldwide research and devel- InTalk Corporation in February. In October, Nokia ac-
opment network and cooperation. At year-end, Nokia quired Telekol Corporation, a company specializing in
had 52 R&D centers in 14 countries and 17 134 R&D intelligent corporate communications solutions.
employees, approximately 31% of Nokia’s total per- In a move to focus on its core technologies, Nokia
sonnel. Investments in research and development in- sold its wholly-owned subsidiary Salcomp Oy to EQT

3
 Scandinavia II in October. In addition, Nokia divested expected to take place in Europe and Asia. The Nokia
its SDH/DWDM transport equipment business to Mar- Broadband IP Access Solution, a complete solution
coni Communications in December. Nokia decided to aimed at revolutionizing access to IP-based services,
discontinue its display manufacturing and sold its plant integrates ADSL (Asymmetric Digital Subscriber Line)
in Hungary to Elcoteq effective January 1, 2000. technology with IP technology to provide operators an
advanced, end-to-end Internet access system. Nokia
Nokia Networks gained a sound market position in DSL technology,
Nokia Networks strengthened its offering by introduc- with orders amounting to approximately 3 million DSL
ing several key elements for high capacity and indoor lines at year-end.
solutions, future data and third generation mobile net-
works. Launches in 1999 included Nokia InSite, the Nokia Mobile Phones
world’s smallest base station, and the Nokia third gen- The mobile phone market growth continued in 1999 at
eration system solution, including Nokia UltraSite, a a rate exceeding 60% globally. Nokia estimates that
triple mode base station supporting GSM, EDGE (En- approximately 275 million mobile phones were sold
hanced Data Rates for Global Evolution) and WCDMA worldwide in 1999, compared to 168 million units in
(Wideband Code Division Multiple Access). Nokia also the previous year. Of the total market volume in 1999,
launched a complete network solution for GPRS (Gen- the share of upgrade sales was approximately 40%, and
eral Packet Radio Service). In wireless data, the new Nokia further estimates that this share will rise to
Nokia Artus Messaging Platform supporting WAP 1.1 around 50% this year.
for GSM and TDMA standards, and the Nokia Artus The growth of Nokia´s mobile phone sales volume
Picture Messaging Platform further broadened exceeded market growth throughout 1999. As a result,
Nokia’s portfolio. Nokia continued to gain market share and strengthen
In 1999, operators continued to invest in the capac- its market position as the world´s largest mobile phone
ity of their GSM networks. Nokia supplied significant manufacturer. Nokia´s total mobile phone sales volume
GSM network expansion to its customers in all market in 1999 was 78.5 million units, an increase of 92%
areas, with strongest growth in the Asia Pacific region from the previous year´s 40.8 million units.
and the U.S. Nokia won new GSM customers in China, Approximately 40% of the world´s mobile phone
Denmark, Hungary, Russia and Spain. users are based in Europe, the biggest mobile phone
Many operators strengthened their wireless data region in terms of cellular subscribers and annual sales
services with WAP and SMS applications, and prepared volumes. However, the country with the biggest mobile
their networks to deliver HSCSD (High Speed Circuit phone market is the United States, followed by Japan,
Switched Data) and GPRS. Nokia gained a strong mar- China and the United Kingdom.
ket position in HSCSD and GPRS and had signed con- During 1999 Nokia launched a total of 18 new
tracts involving these technologies with more than 20 mobile phone models. These included the Nokia 7110,
customers by year-end. 3210, 6090, 8850, Card Phone 2.0, 7190 and 8210 for
In professional mobile radio networks, Nokia deliv- GSM; the Nokia 6100i-models, 8860 and 7160 for
ered TETRA networks and expansions to operators in TDMA; and the Nokia 5170, 5180 and 6185 for
the U.K., China, France, Italy and Spain. CDMA. Nokia also introduced its first ultra-thin Lith-
In fixed networks, the market for broadband DSL ium Polymer (Li-Polymer) battery in September.
(Digital Subscriber Line) technologies experienced In October, Nokia and Palm Computing Inc., a
strong growth in the U.S., and a similar development is 3Com company, announced a joint development and

Net sales by business group 1999 % 1998 % Change

Jan. 1-Dec. 31 EURm EURm %
Nokia Networks 5 673 29 4 390 33 29.2
Nokia Mobile Phones 13 182 67 8 070 61 63.3
Other Operations 995 5 1 014 8 -1.9
Inter-business group eliminations -78 -1 -148 -2

Nokia Group 19 772 100 13,326 100 48.4

Operating profit, IAS, 1999 % of 1998 % of

Jan. 1-Dec. 31 EURm net sales EURm net sales
Nokia Networks 1 082 19.1 960 21.9
Nokia Mobile Phones 3 099 23.5 1 540 19.1
Other Operations -273 -27.4 -11 -1.1

Nokia Group 3 908 19.8 2 489 18.7

4
licensing agreement to create a new category of pen- Average personnel 1999 1998
based wireless communications devices integrating mo-
bile telephony with data applications, information Nokia Networks 22 804 19 280
management features and value-added services. Nokia Mobile Phones 20 975 16 064
Other Operations 7 398 5 747
Other Operations
Nokia Group 51 177 41 091
In order to strengthen Nokia’s ability to serve the busi-
ness communications market, a new unit, Nokia Inter-
net Communications, was formed in October. The aim Finland 23 155 20 978
is to build a powerful channel to the enterprise market Other European countries 12 939 9 381
through offering world-class VPN (Virtual Private Net- Americas 8 818 5 924
work) and e-business products and solutions. These Asia-Pacific 6 207 4 791
products will be crucial to delivery of secure, reliable,
Other countries 58 17
and scalable solutions and new connectivity infrastruc-
ture for enterprises. Parent Company 1 663 1 112
Two new ventures were established within the
Nokia Ventures Organization. Nokia Home Communi-
cations will focus on the development of digital home Research and development,
EURm 1999 1998
platforms and IP technology-based communications
solutions for the home environment. Nokia Mobile Nokia Networks 777 564
Display Appliances, in turn, will focus on the develop- Nokia Mobile Phones 835 522
ment of display-centric devices enabling Internet-based, Other Operations 143 64
visually rich communications.
In May, Nokia introduced a comprehensive Wire- Nokia Group 1 755 1 150
less LAN solution as part of its Global IP Mobility
strategy. Nokia’s Wireless LAN product portfolio com-
prises wireless access points, wireless LAN cards, and
sophisticated software providing seamless extension to
a fixed network. In December, Nokia announced com-
mercial availability of the Nokia WAP Server 1.0 soft-
ware product. On December 31, 1999, the Group companies
owned 346 194 Nokia shares. The shares have an ag-
Changes in share capital gregate nominal value of EUR 83 086.56 and represent
In 1999, Nokia’s share capital increased by EUR 0.03% of the total number of shares and the total vot-
3 857 758.08 as a result of the issue of 16 073 992 new ing rights.
shares upon exercise of warrants issued to key person-
nel in 1994, 1995 and 1997. Nokia’s share capital was Outlook
also increased in September by EUR 127 087.20 when Nokia´s strategic intent is to take a leading, brand-rec-
529 530 shares were issued to finance the acquisition of ognized role in the creation of the mobile information
Rooftop Communications Corporation. The shares society by combining mobility and the Internet and
were issued for a subscription price of EUR 80.17 per stimulating the creation of new services. In pursuing
share which was the average market price of the Nokia this, Nokia emphasizes speed in anticipating and fulfill-
ADS on the New York Stock Exchange for a 20 busi- ing evolving customer needs, quality in products and
ness-day period before the closing of the transaction. processes and openness with people and to new ideas
Due to the limited number of shares issued, this issuance and solutions. Based on its resources, including techno-
did not have any significant effect on the division of the logical know-how, market position and continuous
holdings or voting rights of other shareholders in Nokia. building of competencies, Nokia is well positioned to
In August, Nokiterra Oy, a 100% owned subsidiary, achieve its future goals.
merged into Nokia Corporation as a result of which the
parent company received 64 280 684 Nokia shares with Dividend
an aggregate nominal value of EUR 15 427 364.16. The Nokia Board of Directors will propose to the An-
These shares, representing 5.3% of the total number of nual General Meeting on March 22, 2000, that a divi-
shares and the total voting rights, were cancelled in dend of EUR 0.80 per share (EUR 0.48 per share for
December pursuant to resolution of the Extraordinary 1998, split adjusted) be paid.
General Meeting.
The total number of shares at December 31, 1999
was 1 163 515 966. As the result of the new share is-
sues, Nokia received a total of EUR 195 297 621.78
additional shareholders’ equity in 1999. In addition,
the share capital was increased by EUR 36 051 274.79
through a bonus issue in connection with the conver-
sion of the share capital into euros. The cancellation of
64 280 684 shares did not reduce the restricted capital.
At December 31, 1999, the share capital was EUR
279 243 831.84.

5
Consolidated financial statements according to
international accounting standards (IAS)

Consolidated profit and loss account, IAS

1999 1998
Financial year ended December 31 Notes* EURm EURm
Net sales 19 772 13 326
Cost of goods sold -12 227 -8 299
Research and development expenses -1 755 -1 150
Selling, general and administrative expenses -1 811 -1 368
Amortization of goodwill -71 -20

Operating profit 2, 3, 4, 5, 6, 7 3 908 2 489

Share of results of associated companies -5 6
Financial income and expenses 8 -58 -39

Profit before tax and minority interests 3 845 2 456

Tax 9 -1 189 -737
Minority interests -79 -39

Profit from continuing operations 2 577 1 680

Cumulative prior year net effect of change in accounting policies - 70

Net profit 2 577 1 750

1999 1998
Earnings per share 22 EUR EUR
Continuing operations
Basic 2.24 1.48
Diluted 2.17 1.43

Net Profit
Basic 2.24 1.54
Diluted 2.17 1.49

Average number of shares (1 000 shares) 22 1999 1998

Basic 1 148 440 1 138 341
Diluted 1 185 796 1 173 301

* Notes are shown on pages 10 to 23.

6
Consolidated balance sheet, IAS
1999 1998
December 31 Notes* EURm EURm
ASSETS

Fixed assets and other non-current assets

Intangible assets 10 838 484
Property, plant and equipment 11 2 031 1 331
Investments in associated companies 12 76 90
Investments in other companies 12 68 75
Deferred tax assets 19 257 196
Other assets 13 217 44

3 487 2 220

Current assets
Inventories 14 1 772 1 292
Receivables 15 4 861 3 631
Short-term investments 16 3 136 2 165
Bank and cash 1 023 726

10 792 7 814

Total assets 14 279 10 034

1999 1998
December 31 Notes* EURm EURm
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity
Share capital 279 255
Share issue premium 1 079 909
Treasury shares -24 -110
Translation differences 243 182
Retained earnings 17 5 801 3 873

7 378 5 109

Minority interests 122 63

Long-term liabilities 18
Long-term interest-bearing liabilities 269 257
Deferred tax liabilities 19 80 88
Other long-term liabilities 58 64

407 409

Current liabilities
Short-term borrowings 20 792 699
Current portion of long-term debt 18 1 61
Accounts payable 2 202 1 357
Accrued expenses 21 3 377 2 336

6 372 4 453

Total shareholders’ equity and liabilities 14 279 10 034

7
Consolidated cash flow statement, IAS
1999 1998
Financial year ended December 31 Notes* EURm EURm
Cash flow from operating activities
Operating profit 3 908 2 489
Adjustments, total 27 597 501
Operating profit before change in net working capital 4 505 2 990
Change in net working capital 27 -21 -451
Cash generated from operations 4 484 2 539
Interest received 189 134
Interest paid -212 -210
Other financial income and expenses -113 -3
Income taxes paid -1 246 -773

Net cash from operating activities 3 102 1 687

Cash flow from investing activities

Acquisition of Group companies, net of acquired cash -178 -76
Treasury shares acquired -25 -
Investments in other shares -37 -51
Additions in capitalized R&D costs -271 -182
Capital expenditures -1 302 -761
Proceeds from disposal of shares in Group companies,
net of disposed cash 27 85
Proceeds from sale of other shares 121 16
Proceeds from sale of fixed assets 318 182
Dividends received 6 7

Net cash used in investing activities -1 341 -780

Cash flow from financing activities

Share issue 152 108
Capital investment by minority shareholders 28 16
Proceeds from (+), payments of (-) long-term liabilities -6 66
Proceeds from (+), payments of (-) short-term borrowings -126 275
Proceeds from (+), payments of (-) long-term receivables -171 -8
Proceeds from (+), payments of (-) short-term receivables 128 -146
Dividends paid -597 -374

Net cash used in financing activities -592 -63

Net increase in cash and cash equivalents 1 169 844

Cash and cash equivalents at beginning of period 2 990 2 047

Cash and cash equivalents at end of period 4 159 2 891

The above figures cannot be directly traced from the balance sheet without additional information as a result of
acquisitions and disposals of subsidiaries and net foreign exchange differences arising on consolidation.
The schedule shown below reconciles cash and cash equivalents at the end of the previously reported period to
cash and cash equivalents reported for the beginning of the current period.

Reconciliation:
As previously reported for 1998 and 1997, respectively 2 891 2 060
Foreign exchange adjustment 99 -13
2 990 2 047

Net increase in cash and cash equivalents 1 169 844

As reported for 1999 and 1998 4 159 2 891
* Notes are shown on pages 10 to 23.

8
Statement of changes in shareholders’ equity, IAS
Share issue Treasury Translation Retained
Group, EURm Share capital premium shares differences earnings Total

Balance at Dec. 31, 1997 252 803 -110 182 2 493 3 620
Share issue 3 106 109
Dividend -378 -378
Dividend on treasury shares 20 20
Translation differences -
Other increase/decrease, net -12 -12
Net profit 1 750 1 750
Balance at Dec. 31, 1998 255 909 -110 182 3 873 5 109
Share issue 3 191 194
Bonus issue 36 -36 -
Cancellation of treasury shares -15 15 110 -110 -
Acquisition of treasury shares -24 24 -
Dividend -586 -586
Dividend on treasury shares 31 31
Translation differences 61 61
Other increase/decrease, net -8 -8
Net profit 2 577 2 577
Balance at Dec. 31, 1999 279 1 079 -24 243 5 801 7 378

9
Notes to the consolidated financial statements
1. Accounting principles loss account in accordance with the equity method of
accounting. The Group’s share of post acquisition re-
Basis of presentation serves (retained earnings and other reserves) is added to
The consolidated financial statements of Nokia Corpo- the cost of associated company investments in the con-
ration (“Nokia” or “the Group”), a Finnish limited lia- solidated balance sheet.
bility company with domicile in Helsinki, are prepared Profits realized in connection with the sale of fixed
in accordance with International Accounting Standards assets between the Group and associated companies are
(IAS). The financial statements are presented in euros eliminated in proportion to share ownership. Such
(EUR) and are prepared under the historical cost con- profits are deducted from the Group’s equity and fixed
vention. The notes to the financial statements also con- assets and released in the Group accounts over the same
form with Finnish Accounting legislation. period as depreciation is charged.
Investments in other companies (voting rights less
than 20%) and also some joint ventures in start-up
Use of estimates
phase are stated at cost; provision is made when there
The preparation of financial statements in conformity
has been an other than temporary decline in value.
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and Transactions in foreign currencies
disclosure of contingent assets and liabilities at the date Transactions in foreign currencies are recorded at the
of the financial statements and the reported amounts of rates of exchange prevailing at the dates of the transac-
revenues and expenses during the reporting period. tions. For practical reasons, a rate that approximates
Actual results could differ from those estimates. the actual rate at the date of the transaction is often
used. At the end of the accounting period the unsettled
balances on foreign currency receivables and liabilities
Principles of consolidation
are valued at the rates of exchange prevailing at the
The consolidated financial statements include the ac-
year-end. Foreign exchange gains and losses related to
counts of the parent company, Nokia Corporation, and
normal business operations are treated as adjustments
each of those companies in which it owns, directly or
to cost of goods sold. Foreign exchange gains and losses
indirectly through subsidiaries, over 50% of the voting
associated with financing are entered as a net amount
rights. The accounts of certain companies in which
under financial income and expenses.
Nokia has management control are also consolidated.
Certain real estate and housing companies, as well as
small companies which had no operations during the Foreign Group companies
financial year, have, however, been left out of the con- In the consolidated accounts all items in the profit and
solidated financial statements. The effect of these com- loss accounts of foreign subsidiaries are translated into
panies on the Group’s result and shareholders’ equity is euro at the average exchange rates for the accounting
immaterial. The companies acquired during the finan- period. The balance sheets of foreign Group companies
cial period have been consolidated from the date the are translated into euro at the rates of exchange ruling
responsibility for their operations was transferred to at the year-end. Exchange differences arising from the
the Group. Similarly the result of a Group company application of the purchase method are treated as an
divested during an accounting period is included in the adjustment affecting consolidated shareholders’ equity.
Group accounts only to the date of disposal. Differences resulting from the translation of profit and
All inter-company transactions are eliminated as loss account items at the average rate and the balance
part of the consolidation process. Minority interests are sheet items at the closing rate are taken to retained
presented separately in arriving at the profit from con- earnings. On the disposal of a foreign group company,
tinuing operations. They are also shown separately the cumulative amount of the translation difference is
from shareholders’ equity and liabilities in the consoli- recognized as income or as expense in the same period
dated balance sheet. in which the gain or loss on disposal is recognized.
Acquisitions of companies are accounted for using The Group’s policy is to hedge a portion of foreign
the purchase method of accounting. Goodwill repre- subsidiaries’ shareholders’ equity to reduce the effects
sents the excess of the purchase cost over the fair value of exchange rate fluctuations on the Group’s net invest-
of assets less liabilities of acquired companies. Good- ments in foreign Group companies. Exchange gains and
will is amortized on a straight-line basis over its expect- losses resulting from the hedging transactions are offset
ed useful life. Useful lives vary between two and five against the translation differences arising from consoli-
years depending upon the nature of the acquisition, dation and recorded in shareholders’ equity.
unless a longer period not exceeding 20 years can be
justified. Expected useful lives are reviewed at each bal- Derivative financial instruments
ance sheet date and where these differ significantly The Group enters into derivative financial instruments
from previous estimates, amortization periods are such as forward foreign exchange and option contracts
changed accordingly. to hedge its exposure against foreign currency fluctua-
The Group’s share of profits and losses of associated tions on certain assets, liabilities and probable transac-
companies is included in the consolidated profit and tions denominated in foreign currencies. In accordance

10
with its Treasury policy, Nokia does not currently hold Research and development
or issue derivative financial instruments for trading Research and development costs are expensed in the fi-
purposes. Any deferred gains and losses arising from nancial period during which they are incurred, except
hedging transactions are shown as a part of the cost of for certain development costs which are capitalized
goods sold when the sale or purchase transactions are when it is probable that a development project will be a
recognized. Derivative contracts used for hedging for- success, and certain criteria, including commercial and
eign exchange exposure have high correlation with the technological feasibility, have been met. Capitalized
items being hedged, both at inception and throughout development costs are amortized on a systematic basis
the hedge period; and are designated to the underlying over their expected useful lives. The amortization peri-
exposure. The majority of derivative financial instru- od is between 2 and 5 years.
ments hedging foreign exchange exposures have a dura-
tion of less than a year. Written options are only used as Pensions and coverage of pension liabilities
part of combination strategies. The Group companies have various pension schemes in
Foreign exchange gains and losses on forward con- accordance with the local conditions and practices in
tracts are calculated by valuing the forward contract the countries in which they operate. The schemes are
with the spot exchange rate prevailing on the reporting generally funded through payments to insurance com-
date and comparing that with the original amount cal- panies or to trustee-administered funds as determined
culated by using the spot rate prevailing at the begin- by periodic actuarial calculations. Any deficits or bene-
ning of the contract. The interest rate differential of the fits requiring additional contributions are funded
forward contract is accrued over the life of the contract through payments allocated over a period of years not
as part of the financial income or expenses. exceeding the expected remaining working lives of the
Premiums paid for purchased foreign exchange op- participating employees. The Group has met minimum
tions are included in other current receivables and pre- funding requirements for the countries in which it
miums received for written options are included in oth- maintains pension schemes.
er current payables in the balance sheet. Option con-
tracts are valued at the balance sheet date by using the
Property, plant and equipment
Garman & Kohlhagen option valuation model. Foreign
Property, plant and equipment are stated at cost less
exchange gains or losses on the option contracts i.e. the
accumulated depreciation. Depreciation is recorded on
difference between the premium paid or received and
a straight-line basis over the expected useful lives of the
the market value of the options at the reporting date is
assets as follows:
shown as a part of the cost of goods sold when the sale
or purchase transaction is recognized. • Buildings and constructions 20 – 33 years
The Group enters into derivative financial instru- • Machinery and equipment 3 – 10 years
ments such as interest rate swaps, forwards, futures and
options to hedge its exposure to interest rate risk. Inter- Land and water areas are not depreciated.
est payable and receivable under interest rate swaps is Maintenance, repairs and renewals are generally
accrued and recorded as an adjustment to the interest charged to expense during the financial period in which
income or expense related to the designated hedged as- they are incurred. However, major renovations are cap-
set or liability. Amounts received or paid on cash settle- italized and depreciated over their expected useful lives.
ment, representing the gain or loss, of interest rate for- Gains and losses on the disposal of fixed assets are
ward contracts are deferred and recognized over the life included in operating profit/loss.
of the underlying financial instrument as an adjustment
to interest income or expense. Premiums paid for pur- Leasing
chased interest rate options are included in other cur- Operating lease payments are treated as rentals. Assets
rent receivables and premiums received for written op- acquired under finance leases are treated as fixed assets,
tions are included in other current payables in the bal- and the present value of the related lease payments is
ance sheet. Premiums are amortized to interest income recorded as a liability.
or expense over the life of the agreements. Amounts
receivable and payable under the agreements are recog- Inventories
nized as yield adjustments over the life of the contract. Inventories are stated at the lower of cost and net real-
izable value. Cost is determined on a first in first out
Revenue recognition (FIFO) basis. Net realizable value is the amount that
Sales are recorded upon shipment of products and cus- can be realized from the sale of the inventory in the
tomer acceptance, if any, or performance of services, normal course of business after allowing for the costs of
net of sales taxes and discounts. Revenues from large realization.
long-term contracts are recognized on the percentage of In addition to the cost of materials and direct labor,
completion method. Provisions are made to cover an appropriate proportion of production overheads is
anticipated losses on contracts. included in the inventory values.

11
 Cash and cash equivalents Dividends
Cash and cash equivalents consist of cash on hand and Dividends proposed by the Board of Directors are not
balances with banks and short-term investments. recorded in the financial statements until they have
been approved by the shareholders at the Annual Gen-
Income taxes eral Meeting.
Current taxes are based on the results of the Group com-
panies and are calculated according to local tax rules. Earnings per share
Deferred tax assets and liabilities are determined, The Group calculates both basic and diluted earnings
using the liability method, for all temporary differences per share in accordance with IAS 33, Earnings per
arising between the tax basis of assets and liabilities and Share. Under IAS 33, basic earnings per share is com-
their carrying values for financial reporting purposes. puted using the weighted average number of shares
Currently enacted tax rates are used in the determina- ourstanding during the period. Diluted earnings per
tion of deferred income tax. share is computed using the weighted average number
Under this method the Group is required, in relation of shares outstanding during the period plus the dilutive
to an acquisition, to make provision for deferred taxes effect of warrants and stock options outstanding during
on the difference between the fair values of the net as- the period. Share and per share data presented reflect
sets acquired and their tax base. the two-for-one stock split effective on April 12, 1999.
The principal temporary differences arise from in-
tercompany profit in inventory, depreciation on proper-
ty, plant and equipment, untaxed reserves and tax loss-
es carried forward. Deferred tax assets relating to the
carryforward of unused tax losses are recognized to
the extent that it is probable that future taxable profit
will be available against which the unused tax losses
can be utilised.

12
2. Segment information
Nokia Total
Nokia Mobile Other reportable Elimina-
1999, EURm Networks Phones Operations segment tions Group

Income Statement Information

Net sales to external customers 5 670 13 168 934 19 772 19 772
Net sales to other segments 3 14 61 78 -78 -
Depreciation and amortization 286 300 79 665 665
Operating profit 1 082 3 099 -273 3 908 3 908
Share of result of associated
companies - -3 -2 -5 -5

Balance Sheet Information

Capital expenditure 395 682 281 1 358 1 358
Segment assets 1 3 822 4 486 1 837 10 145 -962 9 183
of which:
Investments in associated companies 1 41 34 76 76
Unallocated assets 4 667
Total assets 2 13 850
3
Segment liabilities 1 588 3 722 1 097 6 407 -1 156 5 251
Unallocated liabilities 1 318
Total liabilities 4 6 569

1998, EURm

Income Statement Information

Net sales to external customers 4 384 8 050 892 13 326 13 326
Net sales to other segments 6 20 123 149 -149 -
Depreciation and amortization 207 263 39 509 509
Operating profit 960 1 540 -11 2 489 2 489
Share of result of associated
companies - -1 7 6 6

Balance Sheet Information

Capital expenditure 217 488 56 761 761
Segment assets 1 2 940 2 944 1 435 7 319 -705 6 614
of which:
Investments in associated companies 1 40 49 90 90
Unallocated assets 3 202
Total assets 2 9 816
Segment liabilities 3 1 152 2 195 762 4 109 -750 3 359
Unallocated liabilities 1 154
Segment liabilities 4 4 513

1
Comprises intangible assets, property, plant and equipment, investments, inventories and accounts receivable as well as prepaid expenses and accrued
income except those related to interest and taxes.
2
Total assets excluding prepaid expenses and accrued income related to taxes and deferred tax assets.
3
Comprises accounts payable and prepaid income and accrued expenses except those related to interest and taxes.
4
Liabilities excluding prepaid income and accrued expenses related to taxes and deferred tax liabilities.

13
 Net sales The most significant pension plans are in Finland.
to external customers 1999 1998 The Finnish TEL-system is a state plan in accordance
by market area EURm EURm with IAS and should be considered as a defined contri-
Europe 10 614 7 673 bution plan. Material share of foreign plans are defined
contributon plans.
Americas 4 909 2 815
Asia-Pacific 4 249 2 838
Total 19 772 13 326 5. Selling and marketing expenses,
administration expenses and other
Segment assets 1999 1998 operating income and expenses
by location of assets EURm EURm 1999 1998
Europe 9 058 6 737 EURm EURm
Americas 2 448 1 599 Selling and marketing expenses -1 220 -905
Asia-Pacific 2 344 1 480 Administration expenses -759 -462
Total 13 850 9 816 Other operating expenses -234 -94
Other operating income 331 73
Total -1 882 -1 388
Capital expenditure 1999 1998
by market area EURm EURm
Other operating income for 1999 includes gains from
Europe 831 573 the divestments of Salcomp and the SDH transport
Americas 381 126 business (EUR 80 million and EUR 56 million, respec-
Asia-Pacific 146 62 tively), and for 1998 a gain of EUR 30 million from the
Total 1 358 761 sale of LK-Products. Other operating expenses for 1999
include a charge of EUR 70 million related to exit from
the display business.

3. Percentage of completion method

Profit on large long-term contracts is recognized when 6. Acquisitions
sale is recorded on part-delivery of products or part In October 1999 Nokia acquired Telekol Corporation,
performance of services, provided that the outcome of a company specializing in intelligent corporate commu-
the contract can be assessed with reasonable certainty. nications solutions, for EUR 45 million. The fair value
Most of the Group’s net sales arise from businesses oth- of net assets acquired was EUR 2 million giving rise to
er than those of a long-term project nature. Project de- a goodwill of EUR 43 million.
liveries occur in Nokia Networks’ Network Systems In September 1999 Nokia strengthened its capabili-
division, where part of its net sales (EUR 1.1 billion in ties in IP wireless bypass technology with an agreement
1999 and EUR 1.0 billion in 1998) was of a long-term to acquire Rooftop Communications Corporation for
project nature. EUR 48 million, of which EUR 42 million was paid in
Nokia stock and EUR 6 million in cash. The fair value
of net assets acquired was EUR 0.2 million giving rise
4. Personnel expenses to a goodwill of EUR 48 million.
1999 1998 In February 1999 Nokia acquired Diamond Lane
EURm EURm
Communications for EUR 112 million in cash. The
Wages and salaries 1 946 1 607 company has developed the market-leading multi-ser-
Pension expenses 127 139 vice digital subscriber line access multiplexer
Other social expenses 310 212 (DSLAM), a device that enables Internet access speeds
up to 125 times faster than current modems over exist-
Personnel expenses as per profit ing telecommunications networks. The fair value of net
and loss account 2 383 1 958 assets was EUR 5 million giving rise to a goodwill of
EUR 107 million.
Remuneration of the Chairman In December 1998 Nokia acquired Vienna Systems
and the other members Corporation, an Internet Protocol telephony company
based in Canada. The purchase price was EUR 72 mil-
of the Board of Directors,
lion paid in cash. The fair value of net assets acquired
the Group Executive Board
was EUR 2 million giving rise to goodwill of EUR 70
and the Presidents and the
million.
Managing Directors* 15 11

* Salaries include incentives 3 3

Pension commitments for the management:

The retirement age of the management of the Group
companies is between 60-65 years. For the Chief Exec-
utive Officer the retirement age is 60 years.

14
7. Depreciation 9. Income taxes
1999 1998 1999 1998
EURm EURm EURm EURm

Depreciation by asset category Current tax -1 250 -753

Intangible assets Deferred tax 61 16
Capitalized R&D costs 110 119 Total -1 189 -737
Intangible rights 34 25
Goodwill 71 20 Finland -740 -500
Other intangible assets 19 6 Other countries -449 -237
Property, plant and equipment
Total -1 189 -737
Buildings and constructions 18 19
Machinery and equipment 405 302
Other tangible assets 8 18 The differences between income tax expense computed
Total 665 509 at statutory rates (28% in Finland in 1999 and 1998)
and income tax expense provided on earnings are as
follows at December 31:
Depreciation by function
Cost of goods sold 201 158
Income tax expense at
R&D 241 223
statutory rate 1 078 706
Selling, marketing and
Deduction for write-down of
administration 101 80
investments in subsidiaries - -12
Other operating expenses 51 28
Amortization of goodwill 17 6
Goodwill 71 20
Provisions without income tax
Total 665 509 benefit/expense 35 48
Taxes for prior years 8 7
Taxes on foreign subsidiaries’
8. Financial income and expenses net income in excess of income
taxes at statutory rates 32 46
1999 1998 Operating losses with
EURm EURm
no current tax benefit 22 16
Income from long-term investments Group adjustments -4 15
Dividend income 6 7 Adjustments to opening
Interest income 2 1 balance accruals - -72
Other interest and financial income Cumulative adjustments;
Interest income from short-term change in accounting principle - -20
investments 194 163 Other 1 -3
Other financial income 5 1 Income tax expense 1 189 737
Exchange gains and losses -5 -7
Interest expenses and other Certain of the Group companies’ income tax returns for
financial expenses periods ranging from 1994 through 1998 are under
Interest expenses -254 -198 examination by tax authorities. The Group does not
Other financial expenses -6 -6 believe that any significant additional taxes will arise as
Total -58 -39 a result of the examinations.

15
 10. Intangible assets Other tangible assets
1999 1998 Acquisition cost Jan. 1 86 74
EURm EURm Additions 12 36
Disposals -52 -22
Capitalized R&D costs
Translation differences 7 -2
Acquisition cost Jan. 1 650 469
Accumulated depreciation Dec. 31 -44 -37
Additions 271 182
Disposals -110 -1 Net carrying amount Dec. 31 9 49
Accumulated depreciation Dec. 31 -398 -361
Advance payments and fixed assets under construction
Net carrying amount Dec. 31 413 289
Acquisition cost Jan. 1 151 26
Additions 352 163
Intangible rights
Disposals -32 -7
Acquisition cost Jan. 1 137 108
Transfers
Additions 50 38
Land and water areas -1 -
Disposals - -9
Buildings and constructions -13 -2
Accumulated depreciation Dec. 31 -103 -79
Machinery and equipment -162 -29
Net carrying amount Dec. 31 84 58 Translation differences 6 -

Goodwill Net carrying amount Dec. 31 301 151

Acquisition cost Jan. 1 347 267
Additions 210 80 12. Investments
Disposals -3 - 1999 1998
EURm EURm
Accumulated depreciation Dec. 31 -318 -247
Net carrying amount Dec. 31 236 100 Associated companies
Acquisition cost Jan. 1 91 57
Other intangible assets Additions 16 41
Acquisition cost Jan. 1 66 55 Disposals -33 -6
Additions 116 15 Share of results -6 -1
Disposals -20 -4 Translation differences 8 -
Translation differences 2 - Net carrying amount Dec. 31 76 91
Accumulated depreciation Dec. 31 -59 -29
Net carrying amount Dec. 31 105 37 Shareholdings in associated companies include listed
investments of EUR 11 million (EUR 22 million in
1998). At the balance sheet date, the fair value of these
11. Property, plant and equipment investments, based on quoted market prices, was EUR
1999 1998 15 million (EUR 85 million in 1998).
EURm EURm
1999 1998
Land and water areas EURm EURm
Acquisition cost Jan. 1 67 64
Other companies
Additions 48 12
Acquisition cost Jan. 1 75 76
Disposals -9 -7
Additions 21 10
Translation differences 5 -2
Disposals -19 -7
Net carrying amount Dec. 31 111 67 Write-downs -10 -4
Translation differences 1 -
Buildings and constructions
Net carrying amount Dec. 31 68 75
Acquisition cost Jan. 1 460 423
Additions 145 66
Disposals -85 -26 Shareholdings in other companies include listed invest-
Translation differences 20 -3 ments of EUR 44 million (EUR 50 million in 1998).
Accumulated depreciation Dec. 31 -104 -91 At the balance sheet date, the fair value of these invest-
ments was EUR 180 million (EUR 124 million in
Net carrying amount Dec. 31 436 369 1998).

Machinery and equipment

Acquisition cost Jan. 1 1 685 1 451
Additions 863 416
Disposals -207 -170
Translation differences 41 -12
Accumulated depreciation Dec. 31 -1 208 -990
Net carrying amount Dec. 31 1 174 695

16
13. Other assets 17. Distributable earnings
1999 1998 1999
EURm EURm EURm
Long-term loan receivables 20 10 Retained earnings 5 801
Other non-current assets 197 34 Treasury shares -24
Total 217 44 Non-distributable items -107
Distributable earnings Dec. 31 5 670

14. Inventories Retained earnings under IAS and Finnish Accounting

1999 1998 Standards (FAS) are substantially the same. Distribut-
EURm EURm able earnings are calculated based on Finnish legisla-
Raw materials, supplies and other 1 020 474 tion.
Work in progress 446 450
Finished goods 306 368
18. Long-term liabilities
Total 1 772 1 292 Repayment
Outstanding date beyond
Dec. 31, 1999 5 years
15. Receivables EURm EURm
1999 1998 Long-term loans are
EURm EURm
repayable as follows:
Accounts receivable 3 827 2 806 Loans from financial institutions 101 10
Short-term loan receivables 145 160 Pension loans 6 6
Prepaid expenses and Other long-term finance loans 162 -
accrued income 889 665 Other long-term liabilities 138 138
4 861 3 631 407 154

Current receivables falling due after one year amounted The long-term liabilities as of December 31, 1999
to EUR 16 million in 1999 (EUR 80 million in 1998). mature as follows:
Prepaid expenses and accrued income mainly consist of EURm
VAT receivables and other accruals. 2000 1 0.2%
2001 142 34.8%
2002 1 0.2%
16. Short-term investments
2003 31 7.6%
1999 1998
EURm EURm 2004 79 19.4%
Thereafter 154 37.8%
Government, long-term (bonds) 703 727
408
Government, short-term (bills) 383 973
Corporate, long-term (bonds) 131 6
Corporate, short-term (CP) 1 919 459 The currency mix of the Group long-term liabilities as
at December 31, 1999
Total 3 136 2 165
EUR GBP USD Others
64.6 % 24.2 % 3.0 % 8.2 %

Long-term loan portfolio includes a fixed-rate loan

with a face amount of 50 million British pound sterling
that matures in 2004. The loan is callable by the creditor
on a three-month notice basis beginning in 1994, al-
though the Group does not anticipate that the creditors
will request for repayment prior to the final maturity.
The Group has committed credit facilities totaling
USD 850 million and short-term uncommitted facilities.
At December 31, 1999, no Group borrowings were
collateralized by mortgages. Assets were pledged with a
net book value of EUR 3 million.
At December 31, 1999 and 1998 the weighted aver-
age interest rate of loans from financial institutions was
4.3% and 5.7%, respectively.

17
 1999 1998
Bonds Million Interest EURm EURm

1989-2004 50.0 GBP 11.375% 79 72

1993-2003 150.0 FIM Floating 25 25
1996-2001 300.0 FIM 7.000% 47 47
151 144

1999 1998
Convertible bonds Million Interest EURm EURm

Bonds issued with warrants

1995-2000 1.45 FIM 0.000% - 0.2
1997-2000 2.38 FIM 0.000% - 0.4
- 0.6
The remaining part of convertible bonds, EUR 0.6 million, expires in 2000 and is included in current liabilities on
line current portion of long-term debt.

19. Deferred taxes 20. Short-term borrowings

1999 1998 Short-term borrowings consist primarily of borrowings
EURm EURm from banks. The weighted average interest rate at De-
cember 31, 1999 and 1998 is 5.2% and 6.4%, respec-
In companies’ balance sheet
tively. The weighted average interest rate of short-term
Tax losses carried forward 40 17
borrowings derived from different foreign currency de-
Temporary differences 91 93
nominated loan amounts.
131 110

On consolidation 21. Accrued expenses

Intercompany profit in Accrued expenses and prepaid income mainly consist of
inventory 88 69 VAT liabilities, personnel expenses, discounts and other
Property, plant and equipment 6 6 accruals.
Other 1 3
95 78

Appropriations
Untaxed reserves -49 -80
-49 -80

Net deferred tax asset 177 108

of which in 1999 deferred tax assets amounted to EUR

257 million (EUR 196 million in 1998) and deferred
tax liabilities to EUR 80 million (EUR 88 million in
1998).
Beginning in January 1, 1998 the Group adopted
revised IAS 12, Income taxes. The cumulative prior
year net effect (EUR 70 million) has been included in
the cumulative prior year net effect of change in ac-
counting policies in the consolidated profit and loss
account for 1998.
Deferred income tax liabilities have not been estab-
lished for withholding tax and other taxes that would
be payable on the unremitted earnings of certain sub-
sidiaries, as such earnings are permanently reinvested.
At December 31, 1999 the Group had loss carryfor-
wards of EUR 84 million (EUR 112 million in 1998) for
which no deferred tax asset was recognised due to un-
certainty of utilisation of these losses. These losses will
expire in the years 2002 to 2005.

18
22. Earnings per share
1999 1998

Numerator/EURm
Basic/Diluted: Income available to
common shareholders 2 577 1 750

Denominator/1000 shares
Basic: Weighted average shares 1 148 440 1 138 341

Effect of dilutive securities:

warrants 37 356 34 960

Diluted: Adjusted weighted average

shares and assumed conversions 1 185 796 1 173 301

Under IAS 33, basic earnings per share is computed using the weighted average number of shares ourstanding
during the period. Diluted earnings per share is computed using the weighted average number of shares outstanding
during the period plus the dilutive effect of warrants and stock options outstanding during the period. Share and per
share data presented reflect the two-for-one stock split effective on April 12, 1999.

23. Commitments and contingencies 25. Loans granted to

1999 1998 top management
EURm EURm 1999 1998
EURm EURm
Collateral for own commitments
Mortgages 6 6 Loans granted to top management - 1
Assets pledged 3 9

Contingent liabilities on The loan period is generally between 5 and 10 years.

behalf of Group companies The interest rates vary between 3-8% depending on the
level of interest rate in the respective country.
Other guarantees 427 283

Contingent liabilities on behalf of

associated companies 26. Associated companies
Guarantees for loans - 1 1999 1998
EURm EURm
Contingent liabilities on behalf
Share of results of
of other companies
associated companies -5 6
Guarantees for loans 234 84
Dividend income 2 2

24. Leasing contracts Share of shareholders’ equity

The Group leases office, manufacturing and warehouse of associated companies 68 91
space under various non-cancellable operating leases.
Receivables from associated companies
Certain contracts contain renewal options for various
Current receivables 1 -
periods of time.
The future costs for finance lease contracts exceed- Liabilities to associated companies
ing one year and for non-cancellable leasing contracts Current liabilities 6 -
are as follows:
Finance Operating
1999 lease lease
Leasing payments, EURm
2000 10 132
2001 10 115
2002 10 81
2003 10 65
2004 10 61
and thereafter 10 106
Total 60 560

Rental expense amounted to EUR 216 million and EUR

106 million in 1999 and 1998, respectively.

19
 27. Notes to cash flow statement general, the appreciation of the base currency of Nokia
relative to other currencies has an adverse effect on
1999 1998 Nokia’s sales and operating profit in the medium to
EURm EURm long term, while depreciation of the base currency has a
positive effect in the medium to long term. The only
Adjustments for:
significant purchasing currency is JPY.
Depreciation 665 509
According to the foreign exchange policy guidelines
Other operating income
of the Group, material open foreign exchange expo-
and expenses -68 -8 sures are hedged. Exposures are mainly hedged with
Adjustments, total 597 501 derivative instruments such as forward foreign ex-
change contracts and foreign exchange options. The
majority of financial instruments hedging foreign ex-
Change in net working capital
change risk have a duration of less than a year.
Short-term trade receivables,
Nokia uses Value-at-Risk methodology (VaR) to
increase (-), decrease (+) -982 -1 573
assess the foreign exchange risk. VaR figure represents
Inventories,
the potential losses for a portfolio from adverse changes
increase (-), decrease (+) -362 -103 in market factors, for a specified time period and confi-
Interest-free short-term liabilities, dence level based on historical data. To correctly take
increase (+), decrease (-) 1 323 1 225 into account the non-linear value changes of certain
Change in net working capital -21 -451 derivative instruments Nokia uses Monte Carlo simula-
tion. Volatilities and correlations are calculated from a
one year set of daily data. The VaR based net foreign
28. Financial risk management exchange transaction risk figure after hedging transac-
The continuously evolving financial markets together tions in Nokia Group with a one week horizon and 99
with a rapidly changing business environment creates a % confidence level was EUR 8.5 million at December
challenging environment for Nokia’s Treasury function. 31, 1999 (EUR 11.0 million in 1998). The average VaR
The overall objective of Nokia Group Treasury is two- figure in 1999 was EUR 11.0 million. The VaR figure
fold: to guarantee cost efficient funding of the group fluctuated between EUR 4.9 million and EUR 18.4 mil-
and group companies, and to identify, evaluate and lion in 1999. In 1998 the average VaR figure was EUR
hedge financial risks in close co-operation with the 8.0 million, and it fluctuated between EUR 4.8 million
business groups. Nokia has Treasury Centers in Gene- and EUR 11.0 million.
va, Singapore and Dallas, and a Corporate Treasury Since Nokia has subsidiaries outside the Eurozone,
unit in Helsinki. This international organization of the the Euro denominated value of the equity of Nokia is
Treasury enables the company to provide Group com- also exposed to fluctuations in exchange rates. The eq-
panies with financial services according to local needs uity changes caused by movements in foreign exchange
and requirements. Treasury aims at minimizing the ad- rates are shown as a translation difference in the Group
verse effects caused by fluctuations in the financial mar- consolidation. Nokia uses foreign exchange contracts
kets on the profitability of the underlying businesses and foreign currency denominated loans to hedge its
and thus on the financial performance of Nokia. equity exposure arising from foreign net investments.
Treasury operations are controlled by policies ap- Exchange gains and losses resulting from the hedging
proved by the top management. Treasury Policy pro- transactions are offset against the translation differenc-
vides principles for overall financial risk management es arising from consolidation and are recorded in share-
in Nokia. Operating Policies cover specific areas such holders’ equity. The Board of Directors provides the
as foreign exchange risk, interest rate risk, use of deriv- framework for hedging decisions. Actual decisions on
ative financial instruments and liquidity and credit risk. the currency pairs to be hedged are supported by quan-
Business Groups have more detailed Standard Operat- titative methods based on mean – variance efficiency.
ing Procedures covering for example foreign exchange Foreign exchange translation risk is also measured by
exposure management. Value-at-Risk methodology. The VaR based risk figure
of the total net translation exposure using a one week
MARKET RISK target horizon and 99% confidence level was EUR 21.4
Foreign exchange risk million as at the end of the fiscal year (EUR 8.8 million
Nokia operates globally and is thus exposed to foreign in 1998). Translation risk was managed according to
exchange risk arising from various currency combina- same principles as during the previous year.
tions. Foreign currency denominated assets and liabili-
ties together with firm and probable purchase and sale Interest rate risk
commitments give rise to foreign exchange exposure. The Group is exposed to interest rate risk either
Foreign exchange exposures are managed against vari- through market value fluctuations of balance sheet
ous local currencies, since Nokia has an increasing items i.e. price risk or changes in the interest expenses
amount of production and sales outside the Eurozone. or revenues i.e. re-investment risk. Interest rate risk
Due to the rapid growth in the Group, currency combi- mainly arises through interest-bearing liabilities and
nations may also change within the financial year. From assets. Estimated future changes in cash flows and bal-
1.1.1999 the principal transaction exposure in Nokia ance sheet structure also expose the Group to interest
has been against Euro. The introduction of Euro has rate risk. Group companies are responsible for manag-
decreased Nokia’s transaction exposure. The most sig- ing their short term interest rate exposure. Long term
nificant sales currencies were USD, GBP and AUD. In interest rate exposure of the Group is monitored and

20
managed by Corporate Treasury. Due to the current risk related to vendor financing is systematically analy-
balance sheet structure of Nokia, emphasis is placed on sed and monitored by the Credit committee along the
managing the interest rate risk of investments. principles defined in the policy for Commercial Credit
The Group hedges its interest rate exposure by using Risk.The outstanding liabilities on long-term customer
derivative instruments, such as interest rate swaps, for- financing were on December 31, 1999, EUR 600 mil-
wards and options. The maturities of interest rate lion (EUR 259 million in 1998) out of which EUR 370
swaps are usually less than five years. Interest rate risk million were long-term receivables (EUR 178 million in
is managed by using duration based sensitivity analysis 1998) and EUR 230 million contingent liabilities (EUR
and by constantly monitoring the market value of the 81 million in 1998). No credit losses have occurred.
financial instruments. Investment portfolios are bench-
marked against one year investment horizon in order to LIQUIDITY RISK
facilitate internal performance measurement. Nokia guarantees a sufficient liquidity at all times by
The net interest rate sensitivity of the fixed income efficient cash management and by investing in liquid
investments, loan portfolio and interest rate derivatives fixed income instruments.Due to the dynamic nature of
of Nokia was at the end of 1999 EUR –19.2 million for the underlying business Group Treasury aims at main-
a 1% parallel interest rate rise ( EUR –15.1 million in taining flexibility in funding by keeping committed and
1998). Corresponding sensitivity for a 1% parallel in- uncommitted credit lines available. Nokia’s interna-
terest rate decline was EUR 20.0 million (EUR 15.0 tional creditworthiness facilitates the efficient use of
million in 1998). Interest rate risks are actively moni- international capital and loan markets. The ratings of
tored by the treasury units and the treasury manage- Nokia from credit rating agencies as at December 31,
ment. The increase in the sensitivity to interest rate 1999 were:
changes was mainly due to growth in the investment Short Standard & Poor’s A-1
portfolio compared with the previous year. Moody’s P-1
Long Standard & Poor’s A
Equity price risk
Nokia has some investments in publicly traded compa- The most significant existing funding programs in-
nies. These equity securities are held for purposes other clude:
than trading. During the year Nokia divested some of
Local commercial paper programs in Finland,
its holdings. The market value of the equity investments
totalling EUR 270 million
at December 31, 1999 was EUR 180 million (EUR 124
million in 1998). A 10 % adverse move in equity prices Euro Commercial Paper (ECP) – program,
would have decreased the market value of the invest- totalling USD 500 million
ments by EUR 18 million (EUR 12 million in 1998). US Commercial Paper (USCP) – program,
There are currently no outstanding derivative finan- totalling USD 500 million
cial instruments designated as hedges of these equity Revolving Credit Facility of USD 350 million,
investments. matures in 2004
In addition to the listed equity holdings, Nokia in-
Revolving Credit Facility of USD 500 million,
vests in private equity through Nokia Venture Fund.
matures in 2003
The value of these equity investments at December 31,
1999 was USD 42 million.
None of the above programs has been used to a signif-
icant degree in 1999.
CREDIT RISK
Financial credit risk
Financial instruments contain an element of risk that
Notional amounts of
the counterparties may be unable to meet their obliga- derivative financial instruments 1
tions. This risk is measured and monitored by the trea-
EURm 1999 1998
sury management. The Group minimizes this risk by
limiting its counterparties to a sufficient number of Foreign exchange
major banks and financial institutions. forward contracts 2, 3 9 473 15 638
Direct credit risk represents the risk of loss resulting Currency options bought 1 184 741
from counterparty default in relation to on-balance Currency options sold 978 876
sheet products. The fixed income and money market Interest rate forward and
investment decisions are based on high quality credit
futures contracts 2 598 -
criteria. The outstanding investments are also constant-
Interest rate swaps 250 67
ly monitored by the treasury management. Treasury
management does not expect the counterparties to de-
fault given their high credit ratings. 1
The notional amounts of derivatives summarized here do not represent
amounts exchanged by the parties and, thus are not a measure of the
exposure of Nokia caused by its use of derivatives.
Commercial credit risk 2
Notional amounts outstanding include positions, which have been
Vendor financing is an important means of competing closed off.
in the international trade of telecommunication net- 3
As at December 31, 1999 notional amount includes contracts
works. Nokia has maintained conservative financing amounting to EUR 0.6 billion used to hedge the shareholders’ equity of
foreign subsidiaries (December 31, 1998 EUR 1.3 billion).
policy in this area and aimed at close cooperation with
banks and financial institutions to support clients in
their financing of infrastructure investments. Credit

21
 29. Fair value of financial instruments
The following table presents the carrying amounts and
fair values of the Group’s financial instruments out-
standing at December 31, 1999 and 1998. The carrying
amounts in the table are included in the balance sheet
under the indicated captions, except for derivatives,
which are included in accounts receivable and accounts
payable and accrued liabilities. The fair value of a fi-
nancial instrument is defined as the amount at which
the instrument could be exchanged in a current transac-
tion between willing parties, other than in a forced or
liquidation sale.

1999 1998
Carrying Fair Carrying Fair
EURm amount value amount value
Financial assets
Cash and cash equivalents 4 159 4 166 2 891 2 906
Receivables 3 985 3 985 2 975 2 975
Investments in other shares 68 212 75 149
Other non-current assets 197 197 34 34

Financial liabilities
Accounts payable 2 404 2 404 1 317 1 317
Short-term borrowings 792 792 699 699
Long-term interest-bearing liabilities 269 285 257 283

Off-balance-sheet instruments
Currency options purchased 1, 2 25 25 22 22
Currency options written 2 -28 -28 -16 -16
Forward foreign exchange contracts 1, 2 -54 -54 147 147
Interest rate swaps 3 -2 -1 1 6

1
The carrying amount and fair value of forward foreign exchange contracts and currency options include unrealized gains and losses relating to hedges
of firm and anticipated commitments, which have been deferred.
2
Forward foreign exchange contracts and currency options used to hedge the shareholders’ equity of foreign subsidiaries are not included.
3
The carrying amount of interest rate swaps includes accrued interest.

Estimation of fair values Currency option and forward

Receivables, accounts payable, short-term borrowings foreign exchange contracts
The carrying amounts are a reasonable estimate of the The carrying amounts of currency option contracts and
fair values because of the short maturity of such instru- forward foreign exchange contracts are based on quot-
ments. ed market rates at year-end balance sheet dates. There-
fore, the carrying amounts approximate fair value.
Cash and cash equivalents, investments
and other non-current assets Interest rate and currency swaps
The carrying amounts of cash and certain other finan- Fair value of swap instruments have been estimated by
cial assets approximate fair values. The fair value of using discounted cash flow analyses.
publicly traded instruments is based on quoted market
values. All other instruments have been valued using Forward rate agreements,
discounted cash flow analyses. interest rate option and futures contracts
Fair value of FRA’s, interest rate option and futures
Long-term interest-bearing liabilities contracts have been estimated based on quoted market
The fair value of fixed rate and market-based floating rates at year-end balance sheet dates.
rate long-term debt is estimated using the expected fu-
ture payments discounted at market interest rates. The
carrying amount of non-market based floating rate
long-term loans, including pension loans, approximates
fair value.

22
30. Principal Nokia Group companies on December 31, 1999
Total
Net Number Parent Group nominal Book
sales of holding majority value in value
EURm shares % % 1 000 units EUR 1 000

FI Nokia Matkapuhelimet Oy 8 217 665 60.2 100.0 33 250 FIM 17 946

US Nokia Mobile Phones Inc. 4 066 1 300 100.0 1 USD 50 278
FI Nokia Networks Oy 3 579 226 000 100.0 100.0 226 000 FIM 63 239
DE Nokia GmbH 3 462 10 100.0 10 810 EUR 9 736
GB Nokia UK Limited 2 053 20 000 000 100.0 20 000 GBP 31 867
KR Nokia TMC Limited 1 329 232 080 100.0 100.0 2 320 800 KRW 27 701
CN Beijing Nokia Mobile
Telecommunications Ltd 1 035 2 50.0 10 000 USD 9 917
NL Nokia Finance
International B.V. 229 100.0 100.0 229 NLG 205 383

Shares in listed companies

Group holding more than 5% Group holding % Group voting %

Nextrom Holding S.A. 25.0 50.0
Nokian Renkaat Oyj/Nokian Tyres plc 19.2 19.2
Geoworks Inc. 5.7 5.7

A complete list of all shareholdings is included in Nokia’s Statutory Accounts.

23
 Profit and loss account, Cash flow statement,
parent company, FAS parent company, FAS

Financial year ended December 31 1999 1998 Financial year ended December 31 1999 1998
Notes* EURm EURm Notes* EURm EURm
Net sales 69 46
Cash flow from operating activities
Cost of goods sold -3 -
Operating loss -63 -44
Adjustments, total 16 -96 -2
Gross margin 66 46
Operating loss before change in
Marketing expenses -7 - net working capital -159 -46
Research and development expenses -138 -72 Change in net working capital 16 110 19
Administrative expenses -79 -26 Cash generated from operations -49 -27
Other operating expenses -21 -4 Interest received 86 51
Other operating income 116 12 Interest paid -40 -62
Other financial income and expenses -65 20
Operating loss 2, 3 -63 -44 Income taxes paid -663 -593
Cash flow before extraordinary items -731 -611
Financial income and expenses
Extraordinary income and expenses 1 794 1 011
Income from long-term investments
Dividend income from Group companies 34 3 478
Dividend income from other companies 8 7 Net cash from operating activities 1 063 400
Interest income from Group companies 5 9
Interest income from other companies 2 1 Cash flow from investing activities
Other interest and financial income Investments in shares -84 -33
Interest income from Group companies 57 42 Capital expenditures -65 -16
Interest income from other companies 31 30 Proceeds from sale of shares and
Other financial income from other companies 3 - discontinued operations, net 176 9
Exchange gains and losses -55 16 Proceeds from sale of fixed assets 20 1
Interest expenses and other financial expenses Dividends received 40 48
Interest expenses to Group companies -7 -15
Interest expenses to other companies -45 -37 Net cash from investing activities 87 9
Other financial expenses -2 -2
Financial income and expenses, total 31 3 529 Cash flow from financing activities
Share issue 152 108
Profit before extraordinary items, Proceeds from (+), payments of (-)
appropriations and taxes -32 3 485 long-term liabilities 7 -55
Proceeds from (+), payments of (-)
Extraordinary items short-term borrowings 142 133
Group contributions 2 238 1 795 Proceeds from (+), payments of (-)
Extraordinary items, total 2 238 1 795 long-term receivables -172 81
Proceeds from (+), payments of (-)
Profit before appropriations and taxes 2 206 5 280 short-term receivables -814 -44
Dividends paid -589 -380
Appropriations
Difference between actual and planned Net cash used in financing activities -1 274 -157
depreciation, increase (-)/decrease (+) 5 4
Income taxes Net increase (+) /decrease (-) in cash
for the year -602 -507 and cash equivalents -124 252
from previous years 5 -3 Cash and cash equivalents at beginning of period 622 370

Net profit 1 614 4 774 Cash and cash equivalents at end of period 498 622

* Notes are shown on pages 26 to 29.

24
Balance sheet,
parent company, FAS

December 31 1999 1998 December 31 1999 1998

Notes* EURm EURm Notes* EURm EURm

ASSETS SHAREHOLDERS’ EQUITY AND LIABILITIES

Fixed assets and other non-current assets Shareholders’ equity 7

Intangible assets 4
Share capital 279 255
Intangible rights 1 2
Share issue premium 1 065 895
Other intangible assets 4 3
Retained earnings 8 1 645 894
5 5 Net profit for the year 8 1 614 4 774

Tangible assets 5 4 603 6 818

Land and water areas 34 23
Buildings and constructions 75 72 Accumulated appropriations 9
Machinery and equipment 27 23
Other tangible assets 1 1 Accumulated depreciation in excess of plan 71 75
Advance payments and fixed assets
under construction 19 2 Liabilities

156 121
Long-term liabilities 10
Bonds 11 151 144
Investments
Convertible bonds 12 - 1
Investments in subsidiaries 6 836 768
Investments in associated companies 6 622 31 151 145
Investments in other shares 6 30 76 Short-term liabilities
Long-term loan receivables from Current finance liabilities from
Group companies 112 38 Group companies 821 532
Long-term loan receivables from Loans from financial institutions - 39
other companies 1 3 Current maturities of long-term loans 1 59
Other non-current assets 128 27 Advance payments from other companies 4 3
Trade creditors to Group companies 13 3
1 129 943
Trade creditors to other companies 10 3
Current assets Accrued expenses and prepaid income to
Group companies 1 2
Inventories and work in progress
Accrued expenses and prepaid income
Finished goods - 1
to other companies 263 146
Receivables 1 113 787
Trade debtors from Group companies 80 28
Trade debtors from other companies 1 1 Total liabilities 1 264 932
Short-term loan receivables from
Group companies 3 861 5 979
Short-term loan receivables from
other companies 7 6
Prepaid expenses and accrued income from
Group companies 30 20
Prepaid expenses and accrued income
from other companies 171 99
4 150 6 133

Short-term investments 487 581

Bank and cash 11 41

5 938 7 825 5 938 7 825

25
Notes to the financial statements of
the parent company
1. Accounting principles 4. Intangible assets
The Parent company Financial Statements are prepared 1999 1998
according to Finnish Accounting Standards - FAS. See EURm EURm
Group note no. 1.
Intangible rights
Appropriations Acquisition cost Jan. 1 5 5
In Finland companies are permitted to reduce or in- Additions - 1
crease taxable income by net charges or by income rep- Disposals - -1
resenting adjustments to untaxed reserve accounts, pro- Accumulated depreciation Dec. 31 -4 -3
vided that such amounts are reflected in the Group
companies’ financial statements. Net carrying amount Dec. 31 1 2

2. Personnel expenses Other intangible assets

1999 1998 Acquisition cost Jan. 1 4 3
EURm EURm Additions 2 1
Disposals -1 -
Wages and salaries 47 40 Accumulated depreciation Dec. 31 -1 -1
Pension expenses 7 7 Net carrying amount Dec. 31 4 3
Other social expenses 12 8
Personnel expenses as per
profit and loss account 66 55
5. Tangible assets
1999 1998
Remuneration of the Chairman and EURm EURm
the other members of the Board of
Directors and the President* 2 1
Land and water areas
* Salaries include incentives - - Acquisition cost Jan. 1 23 14
Additions 12 10
Pension commitments for the management:
Disposals -1 -1
For the Chief Executive Officer the retirement age
is 60 years. Net carrying amount Dec. 31 34 23

Personnel average 1999 1998 Buildings and constructions

Acquisition cost Jan. 1 84 82
Additions 9 2
Marketing 37 - Accumulated depreciation Dec. 31 -18 -12
R&D 1 198 886
Administration 428 226 Net carrying amount Dec. 31 75 72

1 663 1 112 Machinery and equipment

Acquisition cost Jan. 1 41 40
Additions 14 5
3. Depreciation
1999 1998 Disposals -1 -3
EURm EURm Accumulated depreciation Dec. 31 -27 -19
Net carrying amount Dec. 31 27 23
Depreciation by asset class category
Intangible assets Other tangible assets
Intangible rights 1 1 Acquisition cost Jan. 1 2 2
Property, plant and equipment Accumulated depreciation Dec. 31 -1 -1
Buildings and constructions 3 3 Net carrying amount Dec. 31 1 1
Machinery and equipment 9 8
Total 13 12 Advance payments and fixed assets under construction
Acquisition cost Jan. 1 2 -
Depreciation by function Additions 36 2
R&D 9 4 Transfers - -
Selling, marketing and administration 4 8 Disposals -19 -
Total 13 12 Net carrying amount Dec. 31 19 2

26
6. Investments
1999 1998 1999 1998
EURm EURm EURm EURm
Investments in subsidiaries Investments in other shares
Acquisition cost Jan. 1 768 770 Acquisition cost Jan. 1 76 53
Additions 105 4 Additions 21 29
Disposals -37 -6 Disposals -67 -6
Net carrying amount Dec. 31 836 768 Net carrying amount Dec. 31 30 76

Investments in associated companies Shareholdings in other companies include listed

Acquisition cost Jan. 1 31 31 investments of EUR 29 million (EUR 69 million in
Disposals -9 - 1998). At the balance sheet date, the fair value of these
Net carrying amount Dec. 31 22 31 investments was EUR 149 million (EUR 110 million in
1998).

Shareholdings in associated companies include listed

investments of EUR 18 million (EUR 22 million in
1998). At the balance sheet date, the fair value of these
investments, based on quoted market prices, was EUR
15 million (EUR 86 million in 1998).

7. Shareholders’ equity
Share
Share issue Contingency Retained
Parent Company, EURm capital premium reserve earnings Total

Balance at Dec. 31, 1997 252 790 21 1 254 2 317

Share issue 3 105 108
Dividend -378 -378
Reserved for public worthy
causes decided by the Board -3 -3
Other increase/decrease, net -21 21 -
Net profit 4 774 4 774
Balance at Dec. 31, 1998 255 895 - 5 668 6 818
Share issue 3 191 194
Bonus issue 36 -36 -
Cancellation of treasury shares -15 15 -
Dividend -586 -586
Reserved for public worthy -
causes decided by the Board -2 -2
Other increase/decrease, net -3 435 -3 435
Net profit 1 614 1 614
Balance at Dec. 31, 1999 279 1 065 - 3 259 4 603

27
 8. Distributable earnings 10. Long-term liabilities
1999 1998 Repayment
EURm EURm Outstanding date beyond
Dec. 31, 1999 5 years
EURm EURm
Retained earnings from
previous years 1 645 894
Net profit for the year 1 614 4 774 Long-term loans are repayable
Retained earnings, total 3 259 5 668 as follows:
Non-distributable items - -3 435 Bonds 151 -
Convertible bonds - -
Distributable earnings, Dec. 31 3 259 2 233
151 -

In August 1999, Nokiterra Oy, a 100% owned subsid-

iary, merged into Nokia Corporation as a result of The long-term liabilities as of December 31, 1999
which the parent company received 64 280 684 Nokia mature as follows:
shares. These shares were cancelled in December by res- EURm
olution of the Extraordinary General Meeting held on
December 13, 1999. The cancellation of these shares
2000 1 0.4%
diminished the retained earnings by EUR 3 435 million.
2001 47 30.9%
2002 - -
9. Accumulated appropriatons 2003 25 16.6%
Deferred tax liability for the accumulated appropria- 2004 79 52.1%
tions computed using the tax rate of 29% totalled EUR Thereafter - -
21 million (EUR 21 million in 1998, tax rate 28%). 152

11. Bonds
1999 1998
Million Interest EURm EURm

1989-2004 50.0 GBP 11.375% 79 72

1993-2003 150.0 FIM Floating 25 25
1996-2001 300.0 FIM 7.000% 47 47
151 144

12. Convertible bonds

1999 1998
Million Interest EURm EURm

Bonds issued with warrants

1995-2000 1.45 FIM 0.000% - 0.2
1997-2000 2.38 FIM 0.000% - 0.4
- 0.6

The remaining part of convertible bonds, EUR 0.6 million, expires in 2000 and is included in current liabilities on
line current portion of long-term debt.

28
13. Commitments and contingencies 16. Notes to cash flow statement
1999 1998 1999 1998
EURm EURm EURm EURm

Adjustments for:
Collateral for own commitments Depreciation 13 12
Assets pledged - 3 Other operating income
and expenses -109 -14
Contingent liabilities on behalf
of Group companies Adjustments, total -96 -2
Guarantees for loans 155 116
Other guarantees 90 113 Change in net working capital
Short-term trade receivables,
Contingent liabilities on behalf of increase (-), decrease (+) -108 69
assoicated companies Inventories,
Guarantees for loans - 1 increase (-), decrease (+) 1 -
Interest-free short-term liabilities,
Contingent liabilities on behalf of
increase (+), decrease (-) 217 -50
other companies
Guarantees for loans 178 75 Change in net working capital 110 19

During 1999 Nokia acquired Rooftop Communica-

14. Leasing contracts tions Corporation for EUR 48 million of which EUR 42
million was satisfied by issuing Nokia shares and the
At December 31, 1999 the leasing contracts of the Par-
remainder EUR 6 million was paid in cash.
ent Company amounted to EUR 41 million (EUR 41
million in 1998), of which EUR 5 million will fall due in
2000 (EUR 6 million in 1999).
17. Principal Nokia Group companies
on December 31, 1999
15. Loans granted to top management See Group note no. 30
There were no loans granted to top management at
December 31, 1999.
18. Nokia shares and shareholders
See Nokia shares and shareholders p. 30 – 34.

29
Nokia shares and shareholders
Shares and voting rights
At the Annual General Meeting held on March 17, With effect from April 9, 1999, the nominal value of
1999 Nokia shareholders resolved to consolidate the the share is EUR 0.24.
two classes of shares, A shares and K shares, into one The minimum share capital stipulated in the Arti-
class of shares. The consolidation of the classes of cles of Association is EUR 170 million and the maxi-
shares is effective as of April 9, 1999 whereafter Nokia mum share capital EUR 680 million upon the resolu-
has one class of shares only1 . Each share entitles to one tion by Nokia shareholders at the Annual General
(1) vote at General Meetings of Nokia, and to a fixed Meeting held on March 17, 1999. The share capital
annual dividend amounting to 10 per cent of the nom- may be increased or reduced within these limits with-
inal value of the share. Should it be impossible in any out amending the Articles of Association. On Decem-
year to distribute such dividend, the shares are entitled ber 31, 1999 the share capital of the Parent Company
to the remainder in the following year.2 was EUR 279 243 831.84 and the total number of
Nokia shareholders resolved at the Annual Gener- votes 1 163 515 966.
al Meeting held on March 17, 1999 to convert the On December 31, 1999 the total number of shares
share capital and the nominal value of the share into included 346 194 shares owned by the Group compa-
euros, to split the nominal value of the share on a two- nies with an aggregate nominal value of EUR 83 086.56
for-one basis, and to increase the share capital through representing 0.03 per cent of the total number of shares
a bonus issue by rounding up the nominal value of and voting rights.
each share to an appropriate two decimal number.

Share capital and shares, Dec. 313

1999 1998 1997 1996 1995

Share capital, EURm

*)
K (common) 54 66 84 92
A (preferred) 201 186 168 160

Total 279 255 252 252 252

Shares
(1000, nominal value EUR 0.24)
*)
K (common) 254 061 314 750 398 851 437 508
A (preferred) 957 132 884 659 799 349 760 692

Total 1 163 516 1 211 193 1 199 409 1 198 200 1 198 200

Shares owned by the Group at year-end (1 000) 346 64 322 64 322 65 122 60 722

Number of shares excl. shares owned by

the Group at year-end (1 000) 1 163 170 1 146 871 1 135 087 1 133 078 1 137 478

Average number of shares excl. shares owned by

the Group during the year (1 000) 1 148 440 1 138 341 1 133 128 1 134 244 1 138 268

Number of registered shareholders4 48 771 30 339 28 596 26 160 27 466

*)
As of April 9, 1999 one class of shares only

1
Before the consolidation, the Articles of Association contained a provision permitting a conversion of K shares to an equivalent number of A shares,
within the limits set for the minimum and maximum numbers of shares in each class of shares. By March 17, 1999, a total of 63.5 % of all the K shares
had been converted into A shares and only 154 120 shares could still have been converted.
2
The rights presently related to all Nokia shares correspond to the rights of the previous class A shares. The rights of the previous class K shares entitled
to ten (10) votes at General Meetings but no fixed annual dividend.
3
Figures have been recalculated to reflect the nominal value of EUR 0.24.
4
Each nominee register is included in the figure as only one registered shareholder.

30
Key Ratios Dec. 31, IAS (calculation see page 42)
1999 1998 1997 1996 1995

Earnings per share

from continuing operations, basic, EUR 2.24 1.48 0.89 0.45 0.61

P/E Ratio
*)
K (common) 35.3 18.4 24.8 12.0
A (preferred) 80.4 35.3 18.3 24.9 11.9

(Nominal) dividend per share, EUR 0.805 0.48 0.31 0.15 0.13
Total dividends paid, EURm 9315 586 378 176 151
Payout ratio 0.36 0.33 0.35 0.33 0.21

Dividend yield, %
*)
K (common) 0.9 1.9 1.3 1.7
A (preferred) 0.4 0.9 1.9 1.3 1.8

Shareholders’ equity per share, EUR 6.34 4.45 3.19 2.36 2.04
Market capitalization, EURm6 209 371 59 796 18 503 12 706 8 195

*) As of April 9, 1999 one class of shares only

Splits of the nominal value of Nokia shares

Nominal value Split Nominal value Effective date
before ratio after in public trading

1986 FIM 100 (EUR 16.82) 5:1 FIM 20 (EUR 3.36) January 2, 1987
1995 FIM 20 (EUR 3.36) 4:1 FIM 5 (EUR 0.84) April 24, 1995
1998 FIM 5 (EUR 0.84) 2:1 FIM 2.5 (EUR 0.42) April 16, 1998
1999 FIM 2.5 (EUR 0.42) 2:1 EUR 0.247 April 12, 1999

Authorizations
At the Annual General Meeting held on March 17, Convertible bonds and stock options8
1999 Nokia shareholders authorized the Board of Di- The Annual General Meeting held on April 7, 1994
rectors to decide on an increase of the share capital by approved the issue of up to 200 2 per cent bonds with
a maximum of EUR 28 800 000 million in one or more warrants due April 15, 1999, for up to an aggregate
issues offering a maximum of 120 000 000 new shares principal amount of FIM 200 000 to certain members
within one year as of the resolution of the Annual Gen- of Nokia’s management (Nokia Stock Option Plan
eral Meeting. The shares to be issued will be used to 1994). Each bond has a principal amount of FIM 1 000
finance possible business acquisitions or corresponding and carries 1 000 warrants, each of which is exercisable
arrangements in deviation from the shareholders’ pre- at FIM 374 for sixteen shares from December 1, 1998
emptive rights for share subscription. In 1999 the to January 31, 2000. The bonds were issued on April 15,
Board of Directors has increased the share capital on 1994 and they had been fully repaid by December 31,
the basis of the authorization by an aggregate EUR 1999. If exercised in full, the warrants would be exercis-
127 087.20 consisting of 529 530 shares, as a result of able for a total of 3 200 000 shares, whereby the share
which the unused authorization amounted up to EUR capital would be increased by a maximum amount of
28 672 912.80 corresponding to 119 470 470 shares on EUR 768 000 representing less than one per cent of the
December 31, 1999. outstanding share capital of Nokia9 . The stock option
At the end of 1999, the Board of Directors had no plan was offered to approximately 50 persons.
other unused authorizations to issue shares, convertible The Annual General Meeting held on March 30,
bonds, stock options or warrants. 1995 approved the issue of up to 1 450 non-interest
bearing bonds with warrants due May 31, 2000, for up

5
Proposed by the Board of Directors.
6
Shares owned by the Group companies is not included.
7
A bonus issue of EUR 0.03 per share in the same connection.
8
Figures have been recalculated to reflect the nominal value of EUR 0.24.
9
At the Annual General Meeting held on March 17, 1999 Nokia’s shareholders resolved to amend the terms and conditions of the Nokia Stock Option
Plan 1994 to reflect the nominal value of EUR 0.24.

31
 to an aggregate principal amount of FIM 1 450 000 to The Annual General Meeting held on March 17,
certain members of the management of the Nokia 1999 approved the issue of up to 36 000 000 stock
In 1999 Nokia introduced
Group (Nokia Stock Option Plan 1995). Each bond has options to key personnel of the Nokia Group (Nokia
a complementary stock
a principal amount of FIM 1 000 and carries 2 000 A Stock Option Plan 1999). Of these stock options
option plan available for
warrants and 2 000 B warrants. Each A warrant con- 12 000 000 have been marked with A, 12 000 000 with
Nokia employees in the
fers the right to subscribe for four shares during the B, and 12 000 000 with C. Each stock option confers
U.S. and Canada (The
period from December 1, 1997 to January 31, 2001, the right to subscribe for one share. A stock options
Nokia Holding Inc. 1999
and each B warrant during the period from December may be exercised from April 1, 2001 to December 31,
Stock Option Plan). Each
1, 1999 to January 31, 2001, respectively. The bonds 2004, the B stock options from April 1, 2002 to Decem-
stock option granted by
were issued on May 31,1995. If exercised in full, the ber 31, 2004, and the C stock options from April 1,
December 31, 1999 enti-
warrants would be exercisable for a total of 23 200 000 2003 to December 31, 2004. The subscription price for
tles to purchase of one
shares, whereby the share capital would be increased the A stock options is EUR 67.55, and for the B stock
Nokia ADS during certain
by a maximum amount of EUR 5 568 000 representing options the trade volume weighted average price of the
periods of time after April
approximately 2.0 per cent of the outstanding share share on the Helsinki Exchanges during the last five
1, 2001 until five years
capital of Nokia10 . The aggregate subscription price for trading days in March 2000, and for the C stock op-
from the date of grant for
four shares is FIM 168. The stock option plan covers tions the trade volume weighted average price of the
a price of USD 82 per
approximately 350 persons. The B warrants are listed share on the Helsinki Exchanges during the last five
ADS. On December 31,
on the Helsinki Exchanges as of December 1, 1999. trading days in March 2001. If exercised in full, the stock
1999 a total of 247 000
The Annual General Meeting held on March 25, options would be exercisable for a total of 36 000 000
stock options granted to
1997 approved the issue of up to 4 750 non-interest shares whereby the share capital would be increased by
approximately 600 em-
bearing bonds with warrants due April 16, 2000, for up a maximum amount of EUR 8 640 000 representing
ployees were outstanding
to an aggregate principal amount of FIM 2 375 000 to approximately 3.1 per cent of the outstanding share
under the Plan. An exer-
key personnel of the Nokia Group (Nokia Stock Op- capital of Nokia. The stock option plan presently cov-
cise of the stock options
tion Plan 1997). Each bond has a principal amount of ers approximately 5 000 persons.
under this Plan does not
FIM 500 and carries 500 A warrants, 500 B warrants Shares subscribed under the bonds will rank for div-
result in increase of the
and 1 000 C warrants. Each warrant confers the right idend for the financial year in which subscription oc-
share capital of Nokia
to subscribe for four shares. The A warrants may be curs. Other shareholder rights will commence on the
Corporation. The maxi-
exercised from December 1, 1997 to January 31, 2003, date on which the share subscription is entered in the
mum number of ADS that
the B warrants from November 1, 1999 to January 31, Finnish Trade Register.
may be issued under the
2003 and the C warrants from November 1, 2001 to Pursuant to the warrants and stock options issued
Plan is 825 000.
January 31, 2003. The bonds were issued on April 16, an aggregate maximum number of 71 332 800 new
1997. If exercised in full, the warrants would be exer- shares may be subscribed for representing 5.8 per cent
cisable for a total of 38 000 000 shares whereby the of votes. During 1999 the exercise of 3 444 838 war-
share capital would be increased by a maximum rants attached to the bonds resulted in the issue of 16
amount of EUR 9 120 000 representing approximately 073 992 new shares and the increase of share capital of
3.3 per cent of the outstanding share capital of Nokia11 . the parent company with EUR 3 857 758,08.
The aggregate subscription price for four shares is FIM There were no other bonds with warrants or stock
307. The plan covers approximately 2 000 persons. The options, and no convertible bonds outstanding during
A and B warrants are listed on the Helsinki Exchanges the year 1999.
as one security as of November 1, 1999.

Share issues and bonus issues 1995-199912

Subscription
price or
amount of Number of Date of Net New share
Type of Subscription bonus issue new shares payment proceeds capital
Issue date EUR EURm EURm

Nokia Stock Option Plan 1994 1998 3.93 67 008 1998 0.26 0.01
1999 3.93 3 059 520 1999 12.03 0.73

Nokia Stock Option Plan 1995 1997 7.06 581 600 1997 4.11 0.12
1998 7.06 7 576 000 1998 53.52 1.59
1999 7.06 4 650 380 1999 32.85 1.12

Nokia Stock Option Plan 1997 1997 12.91 627 104 1997 8.09 0.13
1998 12.91 4 141 496 1998 53.46 0.87
1999 12.91 8 364 092 1999 107.97 2.01

Bonus issue 1999 0.03 - 1999 36.05 36.05

Share issue to stockholders

of Rooftop Communications
Corporation 1999 80.17 529 530 1999 42.45 0.13

32
Reductions of share capital in 1999
Amount of reduction Amount of reduction Amount of reduction
Number of of share capital of the restricted capital of the retained earnings
Type of reduction shares affected EUR EUR EUR

Cancellation of
shares 64 280 684 15 427 364.16 - 3 435 269 906,47

Share turnover (all stock exchanges)13

1999*) 1998 1997 1996 1995

K share turnover (1000) 63 777 49 658 135 234 199 742

Total number of K shares (1000) 127 031 157 374 199 426 218 754
% of total number of K shares 50 32 68 91

A share turnover (1000) 1 982 653 1 282 039 1 303 052 1 520 758 1 285 426
Total number of A shares (1000) 1 163 516 478 566 442 330 399 674 380 346
% of total number of K shares 170 268 295 380 338

Share prices, EUR (Helsinki Exchanges)13

1999*) 1998 1997 1996 1995

K share
Low/high 15.47/53.65 10.93/22.96 6.14/11.29 5.80/14.30
Average14 41.12 14.80 7.90 9.33
Year-end 52.14 16.40 11.18 7.23

A share
Low/high 54.95/180 15.56/53.65 11.02/23.04 6.14/11.29 5.80/14.30
Average14 87.66 31.79 16.48 7.99 9.25
Year-end 180 52.14 16.31 11.27 7.14

*) As of April 9, 1999 one class of shares only. Consequently, the figures concern total number of all the shares.

Share prices, USD (New York Stock Exchange)15

1999 1998 1997 1996 1995
ADS
Low/high 63.75/191.06 17.03/62.41 13.94/25.44 7.94/14.59 8.19/19.09
Average16 93.89 34.15 18.41 9.94 11.88
Year-end 191.06 60.22 17.38 14.41 9.75

10
At the Annual General Meeting held on March 17, 1999 Nokia’s shareholders resolved to amend the terms and conditions of the Nokia Stock Option
Plan 1995 to reflect the nominal value of EUR 0.24.
11
At the Annual General Meeting held on March 17, 1999 Nokia’s shareholders resolved to amend the terms and conditions of the Nokia Stock Option
Plan 1997 to reflect the nominal value of EUR 0.24.
12
Prices and numbers of shares have recalculated to correspond the nominal value of EUR 0.24 of the shares.
13
Recalculated to reflect the nominal value of EUR 0.24 of the share.
14
Calculated by weighing average price of each day with daily trading volumes.
15
Recalculated to reflect the nominal value of EUR 0.24 of the share.
16
Calculated by weighing average price of each day with daily trading volumes.

33
 Largest registered shareholders
Registered shareholders represent 14.4 per cent of the total number of shares of the parent company. The largest
registered shareholders, without the shares registered in the name of a nominee, as of December 31, 1999 are as
follows:

Total Per cent of

all the shares
and voting rights

UPM-Kymmene Corporation 8 574 736 0.7

Pohjola Group Insurance Corporation 8 362 800 0.7
Industrial Insurance Company Ltd 7 090 000 0.6
Suomi Mutual Life Assurance Company 6 661 000 0.6
Svenska Litteratursällskapet i Finland r f 6 087 172 0.5
The Local Government Pensions Institution 5 530 976 0.5
Ilmarinen Mutual Pension Insurance Company 5 113 500 0.4
Juselius Sigrid stiftelse 4 286 944 0.4
Pohjola Life Assurance Company Ltd 3 749 000 0.3
The Pension Foundation of the Nokia Corporation 3 360 530 0.3

Janus Capital Corporation informed Nokia on Decem- Shares and warrants owned by the mem-
ber 9, 1999 that its holdings in Nokia shares had ex- bers of the Board of Directors and the
ceeded the limit of 5 per cent of the total voting rights
Group Executive Board
and the share capital of Nokia. Part of the holdings is in
Members of the Board of Directors and the Group Ex-
the form of ADRs, and part in ordinary shares.
ecutive Board owned on December 31, 1999 an aggre-
The number of registered shareholders was 48 771
gate of 127 954 shares representing 0.01 per cent of the
on December 31, 1998. Each nominee register (20) is
aggregate number of shares and voting rights, as well as
included in this figure as only one registered shareholder.
a number of warrants representing 6.4 per cent of the
total number of warrants issued. If exercised in full the
said warrants would be exercisable for 4 825 180
shares representing 0.41 per cent of the total number of
shares and total voting rights as of December 31, 1999.

Breakdown of share ownership on December 31, 1999

By number of shares owned
Number of Per cent of Total number Per cent of Average
shareholders shareholders of shares share capital holding

1-500 34 462 70.7 4 324 113 0.4 125

501-1 000 4 472 9.2 3 386 611 0.3 757
1 001-10 000 8 473 17.4 26 264 996 2.2 3 100
10 001-100 000 1 247 2.5 31 285 871 2.7 25 089
Over 100 000 97 0.2 102 832 804 8.8 1 060 132
Total 48 751 100.0 168 094 395 14.4 3 447
Shares registered in the name
of a nominee 995 421 571 85.6
Total 1 163 515 966 100.0

By shareholder category, Shares registered in the name of

per cent Shares
a nominee on December 31, 1999
1. Foreign shareholders1 7 86.0
2. Non-financial corporations 4.5 Shares Per cent of
shares and
3. Households 3.1
voting rights
4. Financial and insurance institutions 2.8
5. Non-profit organizations 2.1 Merita Bank Ltd 932 009 614 80.10
6. General government 1.5 Other nominees 63 411 957 5.45
Total 100.0

17
Includes the shares registered in the name of a nominee and the shares owned by Nokia Holding Inc.

34
Nokia 1995 – 1999, IAS
Key ratios and economic indicators
1999 1998 1997 1996 1995

Net sales, EURm 19 772 13 326 8 849 6 613 6 191

Change, % 48.4 50.6 33.8 6.8 22.0
Exports from Finland, EURm 9 334 7 038 5 408 3 946 2 983
Exports and foreign subsidiaries, EURm 19 293 12 861 8 419 6 203 5 648

Salaries and social expenses, EURm 2 383 1 958 1 317 899 1 092
Operating profit, EURm 3 908 2 489 1 422 717 843
% of net sales 19.8 18.7 16.1 10.8 13.6

Financial income and expenses, EURm -58 -39 -23 -68 -27
% of net sales -0.3 -0.3 -0.3 -1.0 -0.4

Profit before tax and minority interests, EURm 3 845 2 456 1 408 655 830
% of net sales 19.4 18.4 15.9 9.9 13.4

Profit from continuing operations, EURm 2 577 1 680 1 009 512 687
% of net sales 13.0 12.6 11.4 7.7 11.1

Taxes, EURm 1 189 737 382 144 130

Dividends, EURm 931 * 586 378 176 151

Capital expenditure, EURm 1 358 761 404 341 555

% of net sales 6.9 5.7 4.6 5.2 9.0
Gross investments**, EURm 1 914 1 072 668 514 703
% of net sales 9.7 8.0 7.6 7.8 11.4
R&D expenditure, EURm 1 755 1 150 767 591 426
% of net sales 8.9 8.6 8.7 8.9 6.9
Average personnel 51 177 41 091 35 490 31 766 31 948

Non-interest bearing liabilities, EURm 5 717 3 844 2 586 1 891 2 000

Interest bearing liabilities, EURm 1 062 1 017 781 1 022 1 117

Return on capital employed, % 55.7 50.2 38.3 22.7 29.1

Return on equity, % 41.3 38.5 32.0 20.5 31.2
Equity ratio, % 53.3 52.0 52.7 48.4 44.0
Net debt to equity, % -41 -36 -35 -9 17

* Board’s proposal
** Incl. acquisitions, investments in shares and R&D capitalization.

Calculation of Key Ratios, see page 42.

35
Nokia 1995 – 1999, IAS
1999 1998 1997 1996 1995

Profit and loss account, EURm

Net sales 19 772 13 326 8 849 6 613 6 191
Cost and expenses -15 864 -10 837 -7 427 -5 896 -5 348
Operating profit 3 908 2 489 1 422 717 843
Share of results of associated companies -5 6 9 6 14
Financial income and expenses -58 -39 -23 -68 -27
Profit before tax and minority interests 3 845 2 456 1 408 655 830
Tax -1 189 -737 -382 -144 -130
Minority interests -79 -39 -17 1 -13
Profit from continuing operations 2 577 1 680 1 009 512 687
Discontinued operations - - 44 37 -393
Profit from ordinary activities before
cumulative effect of change in accounting policies 2 577 1 680 1 053 549 294
Cumulative prior year effect (after tax)
of change in accounting policies - 70 - - 81
Net profit 2 577 1 750 1 053 549 375

Balance sheet items, EURm

Fixed assets and other non-current assets 3 487 2 220 1 589 1 414 1 522
Current assets 10 792 7 814 5 431 4 182 3 988
Inventories 1 772 1 292 1 230 1 080 1 679
Accounts receivable and prepaid expenses 4 861 3 631 2 141 1 833 1 601
Cash and cash equivalents 4 159 2 891 2 060 1 269 708
Shareholders’ equity 7 378 5 109 3 620 2 678 2 322
Minority shareholders’ interests 122 63 33 5 71
Long-term liabilities 407 409 276 406 434
Long-term interest-bearing liabilities 269 257 226 356 357
Deferred tax liabilities 80 88 - - -
Other long-term liabilities 58 64 50 50 77
Current liabilities 6 372 4 453 3 091 2 507 2 683
Short-term borrowings 792 699 506 573 729
Current portion of long-term loans 1 61 48 93 31
Accounts payable 2 202 1 357 818 599 686
Accrued expenses 3 377 2 336 1 719 1 242 959
Discontinuity/restructuring provision - - - - 278
Total assets 14 279 10 034 7 020 5 596 5 510

36
 1999 1998 1997 1996 1995

Net sales by business group, EURm

Nokia Networks 5 673 4 390 3 166 2 242 1 739
Nokia Mobile Phones 13 182 8 070 4 649 3 629 2 700
Other Operations* 995 1 014 1 218 874 1 876
Inter-business group eliminations -78 -148 -184 -132 -124
Nokia Group 19 772 13 326 8 849 6 613 6 191

Net sales by market area, EURm

Europe 10 614 7 673 5 212 4 070 4 197
of which Finland 479 465 430 410 543
Americas 4 909 2 815 1 601 1 065 793
Asia-Pacific 4 249 2 838 2 036 1 478 1 201
Total 19 772 13 326 8 849 6 613 6 191

Operating profit/loss, EURm

Nokia Networks 1 082 960 682 501 458
Nokia Mobile Phones 3 099 1 540 645 241 295
Other Operations** -273 -11 95 -25 90
Nokia Group 3 908 2 489 1 422 717 843

Average personnel
Nokia Networks 22 804 19 280 15 710 12 558 9 915
Nokia Mobile Phones 20 975 16 064 12 631 10 927 10 616
Other Operations* 7 398 5 747 7 149 8 281 11 417
Nokia Group 51 177 41 091 35 490 31 766 31 948

In Finland 23 155 20 978 19 342 17 999 17 821

Outside Finland 28 022 20 113 16 148 13 767 14 127

* “Other operations” include discontinued and divested operations as follows: Nokia Tyres and Machinery until the moment of disposal 1995, TV business
1995, NKF/Cable Industry until the moment of disposal 1995-1996 and Türkkablo/Cable Industry 1995-1996.
** “Other operations” include the operating profit/loss of discontinued and divested operations as follows: Nokia Tyres and Machinery until the moment
of disposal 1995, NKF/Cable Industry until the moment of disposal 1995-1996 and Türkkablo/Cable Industry 1995-1996.

37
 Proposal by the Board of Directors
to the Annual General Meeting
The distributable earnings in the balance sheet of the
Group amount to EUR 5 670 million and those of the
Company to EUR 3 259 million.

The Board proposes that from the funds at the disposal

of the Annual General Meeting, a dividend of EUR 0.80
per share is to be paid out on a total of 1 163 515 966
shares, amounting to EUR 931 million.

Espoo, February 1, 2000

Jorma Ollila Iiro Viinanen

Chairman and CEO

Pirkko Alitalo Edward Andersson Paul J. Collins

Bengt Holmström Jouko K. Leskinen Robert F.W. van Oordt Vesa Vainio

Pekka Ala-Pietilä
President

38
Auditors’ report
To the shareholders of Consolidated financial statements
Nokia Corporation In our opinion, the consolidated financial statements
We have audited the accounting records, the financial prepared in accordance with International Accounting
statements and the administration of Nokia Corpora- Standards (IAS) give a true and fair view of the consol-
tion for the year ended December 31, 1999. The finan- idated result of operations as well as of the financial
cial statements prepared by the Board of Directors and position. The financial statements are in accordance
the President include the report of the Board of Direc- with prevailing regulations in Finland and can be
tors, consolidated financial statements prepared in ac- adopted.
cordance with International Accounting Standards
(IAS), and parent company financial statements pre- Parent company’s financial statements
pared in accordance with prevailing regulations in Fin- and administration
land (FAS). Based on our audit we express an opinion on The financial statements have been prepared in accor-
the consolidated financial statements and on the parent dance with the Finnish Accounting Act and other rules
company’s financial statements and administration. and regulations governing the preparation of financial
We conducted our audit in accordance with Finnish statements in Finland. The financial statements give a
Generally Accepted Auditing Standards. Those stan- true and fair view, as defined in the Finnish Accounting
dards require that we plan and perform the audit in Act, of the parent company’s result of operations, as
order to obtain reasonable assurance about whether the well as the financial position. The financial statements
financial statements are free of material misstatement. can be adopted and the Chairman and the other mem-
An audit includes examining, on a test basis, evidence bers of the Board of Directors and the President of the
supporting the amounts and disclosures in the financial parent company can be discharged from liability for the
statements, assessing the accounting principles used period audited by us. The proposal by the Board of Di-
and significant estimates made by the management, as rectors concerning the disposition of the profit for the
well as evaluating the overall financial statement pre- year is in compliance with the Finnish Companies’ Act.
sentation. The purpose of our audit of the administra-
tion has been to examine that the Chairman and the
other members of the Board of Directors and the Pres-
ident have complied with the rules of the Finnish Com-
panies’ Act.

Espoo February 1, 2000

Eric Haglund Lars Blomquist

Authorized Public Accountant Authorized Public Accountant
(KPMG) (PricewaterhouseCoopers)

39
U.S. GAAP
The principal differences between IAS and U.S. GAAP are presented below together with explanations of certain
adjustments that affect consolidated net income and total shareholders’ equity as of and for the years ended Decem-
ber 31:

1999 1998
EURm EURm
Reconciliation of net income
Net income reported under IAS 2 577 1 750
U.S. GAAP adjustments:
Deferred income taxes - -70
Pension expense 9 16
Development costs -47 -18
Marketable securities -15 29
Sale-leaseback transaction 4 1
Deferred tax effect of U.S. GAAP adjustments 14 -19
Net income under U.S. GAAP 2 542 1 689

Reconciliation of shareholders’ equity

Total shareholders’ equity reported under IAS 7 378 5 109
U.S. GAAP adjustments:
Pension expense 54 45
Development costs -186 -138
Marketable securities 142 89
Sale-leaseback transaction - -4
Deferred tax effect of U.S. GAAP adjustments -4 1
Total shareholders’ equity under U.S. GAAP 7 384 5 102

40
Deferred income taxes
Beginning January 1, 1998 the Group has accounted holding gains and losses reported as a separate compo-
for deferred income taxes under IAS using the liability nent of shareholders’ equity. Any unrealized losses rec-
method. The differences between the application of IAS ognized under IAS would be reversed under U.S. GAAP.
and U.S. GAAP are insignificant in relation to Nokia’s
deferred tax balance. Sale-leaseback transaction
The 1998 U.S. GAAP net income amount has been Under IAS, the Group recorded a gain from a transac-
revised to appropriately reflect the fact that there is no tion involving the sale of property and equipment and
difference in accounting for income taxes under U.S. has recorded rental expense associated with the subse-
GAAP and IAS as a result of the adoption of IAS 12 quent leaseback of such property and equipment. Un-
revised. The effect of this revision was to decrease net der U.S. GAAP, the sale-leaseback transaction would be
income by EUR 70 million. treated as a financing. Accordingly, the gain would be
Prior to January 1, 1998, under IAS, deferred in- reversed and the proceeds from the sale treated as an
come taxes were not provided for differences between obligation. Rental payments would be applied to inter-
taxable income and accounting income that were not est expense on the obligation as well as to reducing the
expected to reverse for some considerable period of principal amount of the obligation.
time. U.S. GAAP requires recognition of deferred in-
come taxes on a comprehensive basis for all temporary
differences. Under this method, deferred tax liabilities
and assets are determined based on the difference be-
tween the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect at year-
end. Deferred tax assets are also recognized on net op-
erating loss carryforwards, reduced by a valuation al-
lowance where it is more likely than not that the asset
will not be realized.

Pension expense
Under IAS, the determination of pension expense for
defined benefit plans differs from the methodology set
forth in U.S. GAAP. For purposes of U.S. GAAP, the
Group has estimated the effect on net income and share-
holders’ equity assuming the application of SFAS No. 87
in calculating pension expense as of January 1, 1992.

Development costs
Development costs have been capitalized under IAS af-
ter the product involved has reached a certain degree of
technical feasibility. Capitalization ceases and deprecia-
tion begins when the product becomes available to cus-
tomers. The depreciation period of these capitalized
assets is between two and five years. Under U.S. GAAP
software development costs would similarly be capital-
ized after the product has reached a certain degree of
technical feasibility. However, certain non-software re-
lated development costs capitalized under IAS would
not be capitalizable under U.S. GAAP and therefore
would have been expensed.

Marketable securities
Under IAS, marketable securities for which it is man-
agement’s intent to sell within the current operating
cycle are marked to market value; otherwise such secu-
rities are carried at cost. The unrealized gain or loss
recognized in connection with these securities that have
been marked to market is charged to the profit and loss
statement. Under U.S. GAAP, the Group’s marketable
securities would be classified as available for sale and
carried at aggregate fair value with gross unrealized

41
Calculation of key ratios
Key ratios under IAS

Operating profit Share turnover, %

Profit after depreciation Number of shares traded during the period
Average number of shares during the period
Shareholders’ equity
Share capital + reserves Return on capital employed, %
Profit before taxes and minority interests
Earnings per share + interest and other financial expenses
Profit from continuing operations
Average shareholders’ equity + short-term borrowings
Average of adjusted number of shares during the year + long-term interest-bearing liabilities (including the cur-
rent portion thereof) + minority shareholders’ interests
P/E ratio
Adjusted share price, December 31 Return on shareholders’ equity, %
Earnings per share Profit from continuing operations
Average shareholders’ equity during the year
Dividend per share
Nominal dividend per share Equity ratio, %
The adjustment coefficients of the share issues that have Shareholders’ equity + minority shareholders’ interests
taken place during or after the year in question Total assets – advance payments received

Payout ratio
Net debt to equity (gearing), %
Dividend per share Long-term interest-bearing liabilities (including the cur-
Earnings per share rent portion thereof) + short-term borrowings - cash
and cash equivalents
Dividend yield, %
Shareholders’ equity + minority shareholders’ interests
Nominal dividend per share
Share price

Shareholders’ equity per share

Shareholders’ equity
Adjusted number of shares at year-end Year-end currency rates 1999 Average rates 1999

Market capitalization 1 EUR = 1 EUR =

Number of shares x share price per share class
USD 1.008 USD 1.073
Adjusted average share price GBP 0.628 GBP 0.661
Amount traded during the period SEK 8.599 SEK 8.857
JPY 103.070 JPY 122.068
Adjusted number of shares traded during the period

42
Printed on Jamsa Matt 1.45, 57 g/m2.
Sävypaino ISO 9002

43
www.nokia.com