Annual and Transition Report (foreign Private Issuer) (20-f)

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As filed with the Securities and Exchange Commission on 3 March 2022

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended 31 December 2021

Commission file number 1-13202

Nokia Corporation

(Exact name of Registrant as specified in its charter)

Republic of Finland
(Jurisdiction of incorporation)

Karakaari 7 FI-02610 Espoo, Finland
(Address of principal executive offices)

Esa Niinimäki, Deputy Chief Legal Officer, Corporate, Telephone: +358 (0) 10 44 88 000, Facsimile: +358 (0) 10 44 81 002,
Karakaari 7, FI-02610 Espoo, Finland
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

(1)   Not for trading, but only in connection with the registration of American Depositary Shares representing these shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Exchange Act: None

Indicate the number of outstanding shares of each of the registrant’s classes of capital or common stock as of the close of the period covered by the annual report. Shares: 5 675 461 159.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company” or “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ◻

International Financial Reporting Standards as issued by the International Accounting Standards Board ⌧

Other ◻

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Cross-reference table to Form 20-F

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Forward-looking statements

Certain statements contained in this report constitute "forward-looking statements." Forward-looking statements provide Nokia's current expectations of future events and trends based on certain assumptions and include any statement that does not directly relate to any current or historical fact. The words “believe,” “expect,” “expectations,” “anticipate,” “foresee,” “see,” “target,” “estimate,” “designed,” “aim,” “plan,” “intend,” “influence,” “assumption,” “focus,” “continue,” “project,” “should," "is to," "will,” "strive," "may" or similar expressions as they relate to us or our management are intended to identify these forward-looking statements, as well as statements regarding:

These statements are based on management’s best assumptions and beliefs in light of the information currently available to it and are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements. These statements are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Risks and uncertainties that could affect these statements include but are not limited to the risk factors specified under the section “Operating and financial review and prospects-Risk factors” of this report and in our other filings or documents furnished with the U.S. Securities and Exchange Commission. Other unknown or unpredictable factors or underlying assumptions subsequently proven to be incorrect could cause actual results to differ materially from those in the forward-looking statements. We do not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

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Introduction and use of certain terms

Nokia Corporation is a public limited liability company incorporated under the laws of the Republic of Finland and registered to the Finnish Trade Register since 1896. In this Annual Report on Form 20-F, any reference to “we,” “us,” “the Group,” “the company” or “Nokia” means Nokia Corporation and its consolidated subsidiaries and generally Nokia’s continuing operations, except where we separately specify that the term means Nokia Corporation or a particular subsidiary or business segment only or our discontinued operations. References to “our shares,” matters relating to our shares or matters of corporate governance refer to the shares and corporate governance of Nokia Corporation.

Nokia Corporation has published its consolidated financial statements in euro for periods beginning on or after 1 January 1999. In this Annual Report on Form 20-F, references to “EUR,” “euro” or “€” are to the common currency of the European Economic and Monetary Union, references to “dollars,” “US dollars,” “USD” or “$” are to the currency of the United States, and references to “Chinese yuan” or “Chinese yuan renminbi” or “CNY” are to the official currency of the People’s Republic of China. Solely for the convenience of the reader, this Annual Report on Form 20-F contains conversions of selected euro amounts into US dollars at specified rates or, if not so specified, at the year-end rate of 1.1326 US dollars per euro, and conversions of selected euro amounts into Chinese yuan renminbi at specified rates or, if not specified, at the year-end rate 7.1947 Chinese yuan renminbi per euro. The referred year-end rates were the European Central Bank reference rates on 31 December 2021. No representation is made that the amounts have been, could have been or could be converted into US dollars or Chinese yuan at the rates indicated or at any other rates.

Additional terms are defined in the "Glossary."

The information contained in, or accessible through, the websites linked throughout this Annual Report on Form 20-F is not incorporated by reference into this document and should not be considered a part of this document.

Nokia Corporation furnishes Citibank, N.A., as Depositary, with its consolidated financial statements and a related audit opinion of our independent auditors annually. These financial statements are prepared on the basis of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and in conformity with IFRS as adopted by the European Union. In accordance with the rules and regulations of the SEC, we do not provide a reconciliation of net income and shareholders’ equity in our consolidated financial statements to the generally accepted accounting principles in the US, or US GAAP. We also furnish the Depositary with quarterly reports containing unaudited financial information prepared on the basis of IFRS, as well as all notices of shareholders’ meetings and other reports and communications that are made available generally to our shareholders. The Depositary makes these notices, reports and communications available for inspection by record holders of American Depositary Receipts (ADRs), evidencing American Depositary Shares (ADSs), and distributes to all record holders of ADR notices of shareholders’ meetings received by the Depositary.

In addition to the materials delivered to holders of ADRs by the Depositary, holders can access our consolidated financial statements, and other information included in our annual reports and proxy materials, at nokia.com/financials. This Annual Report on Form 20-F is also available at nokia.com/financials as well as on Citibank’s website at https://app.irdirect.net/company/49733/hotline/. Holders may also request a hard copy of this annual report by calling the toll-free number 1-877-NOKIA-ADR (1-877-665-4223), or by directing a written request to Citibank, N.A., Shareholder Services, PO Box 43077, Providence, RI 02940-3081, United States. With each annual distribution of our proxy materials, we offer our record holders of ADRs the option of receiving all of these documents electronically in the future.

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Nokia in 2021

The platform for our future

The Nokia platform guides everything we do across our global organization. Its three elements shape our ambition, our strategy and our culture.

Our purpose

At Nokia, we create technology that helps the world act together.

While lives may be getting longer, healthier and richer, the world is facing fundamental challenges: pressure on the planet is increasing, productivity is stalling and access to opportunity remains stubbornly unequal. Technology is central to the solution.

With our customers, we create the critical networks that bring together the world’s people, machines and devices, sensing and acting in real time.

Our commitment

We deliver critical networks through technology leadership and trusted partnerships.

Four strategic commitments define our role in an evolving market:

Read more on page 18.

Essentials

Our guiding principles for the ways of working with and for Nokia are being open, fearless and empowered.

We are continuously working to create a company culture that is inclusive and our essentials lay the foundation of our cultural renewal that is required to deliver our purpose, our strategic commitment and to better serve our customers. Our essentials reflect what we all want to experience.

Read more on page 83.

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Helping the world act together

At Nokia, we create technology that helps the world act together.

We have a responsibility to enable digitalization. We partner with our customers so our technology can help meet some of the most pressing challenges the world faces such as climate change, the digital divide and stalling productivity growth.

Today, the vast majority of the world’s economy has not yet been digitalized, leaving a lot of potential. Our products and services can radically accelerate the digitalization process, making operations safer, more connected and more efficient.

In 2021, we significantly reduced the carbon footprint of our products, which in turn reduces the ecological impact of our customers. Driving the acceleration of digitalization is critical for making industries more sustainable, offers significant business opportunities and is key to addressing our global challenges.

Through technology leadership and trusted partnerships we are making a difference in the world.

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Global reach

Our technology solutions enable critical networks for communications service providers (CSPs), enterprise verticals and hyperscalers around the world.

Net sales in 2021

EUR 22.2bn

Countries of operation

~130

Average number of employees in 2021

~87 900

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(1) The Board of Directors proposes to the Annual General Meeting to be authorized to decide in its discretion on the distribution of an aggregate maximum of EUR 0.08 per share as dividend and/or equity repayment.

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Shareholder distributions

Dividend per share proposed in respect of 2021⁽¹⁾

EUR 0.08

Share buyback program to return up to

EUR 600m

over 2 years

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Strengthening our technology leadership

R&D investment over the past two decades

EUR 130bn+

Patent families declared as essential to 5G

4 000+

Nobel Prizes awarded for ground-breaking achievements in global innovation

9

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Ethical business

In February 2021, we were named for the fourth consecutive year (2018-2021), and the fifth time overall, as one of the World’s Most Ethical Companies by Ethisphere.

Read more about our sustainability and corporate responsibility work on page 74.

We announced our target to use 100% renewable electricity by 2025.

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Our business groups

Nokia’s renewed operating model is designed to enable the delivery of our strategic ambitions, with a lean corporate center enabling fully accountable business groups. Nokia has four business groups with each business group aiming to become a technology and market leader in their respective sector.

Mobile Networks

Mobile Networks provides products and services for radio access networks covering technologies from 2G to 5G, and microwave radio links for transport networks.

Read more on page 24.

Network Infrastructure

Network Infrastructure provides fiber, copper, fixed wireless access technologies, IP routing, data center, subsea and terrestrial optical networks – along with related services – to customers including communications service providers, webscales (including hyperscalers), digital industries and governments.

Read more on page 26.

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Cloud and Network Services

Cloud and Network Services enables CSPs and enterprises to deploy and monetize 5G, cloud-native software and as-a-Service delivery models.

Read more on page 28.

Nokia Technologies

Nokia Technologies is responsible for managing Nokia’s patent portfolio and monetizing Nokia’s intellectual property including patents, technologies and the Nokia brand.

Read more on page 29.

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Letter from our President and CEO

“This was the year we hit the reset button. We restarted with a whole new operating model, purpose, strategic commitments and cultural essentials. Our new purpose reflects both our current role and our ambition for the future: At Nokia, we create technology that helps the world act together. Considering the pace of our delivery in 2021, we have created an excellent foundation to move to the “accelerate” phase of our strategy to deliver further growth and extend profitability.”

Pekka Lundmark, President and CEO

Press reset

2021 was a transformational year for Nokia. This was the year we hit the reset button. We restarted with a whole new operating model, purpose, strategic commitments and cultural essentials.

At our Capital Markets Day in March, we launched a three-phase plan to reset, accelerate and scale our business to help us deliver on our commitments and return to sustainable, profitable growth.

The reset phase began with shifting our focus from an end-to-end approach to four fully accountable business groups, which aim for technology leadership in all the markets we compete in. We put in place a simplified operating model, led by a slimmed-down leadership team, with clear responsibilities and ownership of their respective areas.

We refocused our cost base and stepped up our investments in key areas like 5G to strengthen our technology leadership.

We adopted a new purpose: At Nokia, we create technology that helps the world act together. And we started the process of renewing our company culture around three essentials: Open, fearless and empowered.

I am pleased to say we made faster than expected progress against our plan this year, achieving improved competitiveness and strengthened technology leadership.

Strong financial and strategic performance

The changes put in place enabled us to deliver a strong financial performance in 2021 with improvements in net sales, gross and operating margins. And the continued strong cash generation and balance sheet put us in a position to look to reinstate shareholder distributions through both a dividend and a share buyback.

All our business groups made significant progress in 2021 to make us more competitive in all the markets in which we compete. Mobile Networks largely closed the gap with competition in 5G and improved its gross margin while continuing to step up R&D investments. Network Infrastructure extended its technology leadership and saw significant growth driven by Fixed Networks and Submarine Networks. Cloud and Network Services took good steps to rebalance its portfolio and we saw encouraging growth in its key focus areas. Nokia Technologies delivered a strong performance and made good progress expanding in areas such as automotive and consumer electronics.

Technology leadership

There were several high-profile and industry-leading product launches this year as we ramped up our efforts to strengthen our technology leadership across all our four business groups.

Mobile Networks launched our new AirScale 5G portfolio, powered by our advanced ReefShark System-on-Chip technology, giving our customers enhanced capacity and connectivity while offering greater energy efficiency and ease of deployment. We made good progress against all our KPIs, including increasing the proportion of our 5G shipments that are “5G Powered by ReefShark” to 76% of all our 5G shipments in December. This put us on track to achieve our target of 100% of all 5G product shipments by the end of 2022. We also opened a new Open RAN testing and collaboration center in the US, and announced partnerships with most of the biggest hyperscalers for cloud-based 5G radio solutions.

Network Infrastructure strengthened Nokia’s leadership in IP routing and silicon innovation with the launch of FP5, the industry’s most advanced processor for service provider IP networks. We also continued to drive the market in fiber and 5G fixed wireless access, and in Optical Networks we started deploying our market-leading PSE-V coherent chipset to give customers increased performance and cost efficiency. Our Submarine Networks business remains the market leader and is driving innovation in technology and customer solutions.

Cloud and Network Services strengthened our competitive advantage in private wireless with the launch of MX Industrial Edge, a new solution category that will enable on-premises processing of a host of Industry 4.0 applications and help customers accelerate their digitalization plans. We also launched our first Software-as-a-Service products for our communications service provider customers, giving them more flexibility and ways to capture revenue.

Nokia Technologies achieved the important milestone of 4 000 patent families declared as essential for 5G standards. We filed more than 1 500 patent applications, demonstrating our strength and commitment to innovation, and became one of the first companies to receive ISO 9001 certification for our high-quality patent portfolio management.

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Additionally, our new Strategy and Technology function launched the Nokia Technology Vision 2030 setting out the opportunities we expect to see from trends such as human augmentation and digital-physical fusion as we move from 5G to 5G-Advanced and then 6G by the end of this decade.

Technology is central to solving the biggest global challenges of our time

The stronger our technology the bigger the role we can play as enablers of the green transition. Digitalization can improve productivity, energy efficiency and waste management across industries.

The vast majority of the world’s economy has not yet been digitalized, leaving a lot of potential. As we said at the COP26 climate summit in November: “There’s no green without digital.” Nokia wants to lead the way on the global stage in making the case for digitalization as central to addressing the climate challenge.

We are committed to reducing emissions by 50% across both our own operations and products in use (so-called Scope 3) between 2019 and 2030. Our new recalibrated science-based targets fulfill our commitment to align with a 1.5°C global warming scenario. And in 2021, Nokia also announced a new target to purchase 100% of our electricity from renewable sources by 2025 to power our offices, R&D labs and factories. We also became a founding member of the World Economic Forum’s First Movers Coalition, which targets greater uptake of zero-emissions products and services by 2030.

We clearly demonstrated that sustainability is core to our business and embedded into the design, delivery and life cycle of our products and services. For instance, our latest AirScale and FP5 products can improve energy efficiency by 50-75% compared to previous generations. Improving performance and energy efficiency is a win-win financially and environmentally and a major driver for our business as customers increasingly prioritize sustainability when deciding on their partners.

We also take seriously the role of connectivity in building a fairer and more inclusive world. We aim to connect the unconnected and support digital skills to close the digital divide, providing equal access to opportunity. Our ambition is to provide critical networks that enable digital access to healthcare, education, employment, social services, businesses and markets. One concrete example in 2021 was connecting almost 100 schools across Kenya to enable digital learning.

I am also proud that, for the fourth time in a row, we were recognized as one of the World’s Most Ethical companies by the Ethisphere Institute.

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“There’s no green without digital. Nokia wants to lead the way on the global stage in making the case for digitalization as central to the climate challenge.”

50-75%

Our latest AirScale and FP5 products can improve energy efficiency by 50-75% compared to previous generations

100%

of the electricity to power our offices, R&D labs and factories will come from renewable sources by 2025

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Looking ahead

Overall, 2021 was a transformational year for Nokia and one that created an excellent foundation for us to move into the “accelerate” phase of our strategy to deliver growth and expand profitability.

I am enormously grateful to the entire Nokia team for helping us to successfully reset our business this year and making sure we fulfilled our company purpose to create technology that helps the world act together.

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Pekka Lundmark

President and CEO

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Our strategy

Our customers and market view

We target three customer segments with our hardware, software and services portfolio: Communications service providers, enterprise verticals and hyperscalers.

Networks play an increasingly important role in the economy and throughout society to enable mission-critical functions for both consumers and businesses. This allows Nokia to expand its market opportunities for delivering critical networks.

Critical networks combine carrier-grade resilience, reliability and security with webscale flexibility and elasticity. They are already in use today across industries like precision manufacturing, remote surgery, and high-frequency trading. As we move ahead in an era of digitalization, critical networks will gain much more importance and reliability requirements will increase significantly.

We target three customer segments with our hardware, software and services portfolio: Communications service providers, enterprise verticals and hyperscalers. Additionally, we focus on licensees in selected industries that benefit from the value of our innovations, primarily in the mobile devices, automotive, consumer electronics and emerging IoT industries.

In this section, we outline the trends that we see in each of our customer segments. Our analysis of the market evolution and customer trends informs our strategy.

Communications service providers (CSPs)

The CSPs estimated total addressable market (TAM) grew by 4% to EUR 98 billion from 2020 to 2021.

A communications service provider offers telecommunications services like voice and/or data services through fixed and/or mobile connectivity to consumers, enterprises, governments and other communications service providers. The CSPs estimated total addressable market grew by 4% to EUR 98 billion from 2020 to 2021. We expect it to grow only moderately at 1% compound annual growth rate (CAGR) 2021-26. We project the total radio access network (RAN) market outside China to continue solid growth during the same period. The market growth is driven by strong 5G RAN demand, partially offset by declining investments in 2G/3G and LTE. IP routing and optical networks for CSPs are expected to grow slightly above, or at the rate of, the overall CSP market. CSP investment in higher-speed access technologies (fiber and fixed wireless access) continues to drive investment in IP and optical layers to handle the increasing demand. The 5G cycle will also yield growth in software, namely in 5G Core and in all software segments supporting 5G operations and monetization.

CSPs have kept their capital expenditure intensity flat, but increased their earnings before interest, taxes, depreciation and amortization (EBITDA) by automation, digitalization, shift in channel mix, outsourcing and asset sales. We expect them to remain focused on the monetization of their connectivity strengths and on cost optimization. CSPs continue to assess their deployment architecture, asset structure, operating model and vendor relationships. They are also considering the divestments of passive infrastructure and the transition to network sharing models. In areas in which the network is built for coverage this might reduce the demand for network vendor equipment.

CSPs nurture a more diverse supplier ecosystem based on open architectures. Their aim is to broaden their supplier options and increase competition to strengthen their pricing power towards the network vendors. We have seen the first examples of CSPs relying on hyperscalers to lead the transition to a cloud-based operational and business model. This introduces new players and increases competition for established network vendors. Lastly, geopolitics and environmental, social and governance (ESG) criteria influence investment decisions. Security and sovereignty have become important factors in the vendor landscape. Government-funded broadband initiatives influence the investments of CSPs, for example in rural areas and support the emergence of neutral hosts. ESG factors drive green energy use, energy consumption reduction plans and circular economy approaches and shift the criteria for vendor selection as a result.

Enterprise

Enterprise estimated TAM grew by 9% to EUR 16 billion from 2020 to 2021.

Enterprise TAM includes fast-growing enterprise verticals and more mature hyperscaler markets. Enterprise estimated TAM grew by 9% to EUR 16 billion from 2020 to 2021. We forecast this market to grow strongly at 9% CAGR until 2026.

Enterprise verticals

An enterprise vertical represents a grouping of companies by an industry (like energy or transportation) that offers products and services that meet specific needs of that industry. Within the enterprise verticals segments, we primarily focus on transportation, energy, manufacturing, logistics and the public sector. We project that growth will be mainly driven by private wireless networks in manufacturing and logistics as well as energy. We estimate IP routing and optical networks will grow moderately.

The digitalization and automation of operations across verticals accelerates demand for critical networks. In manufacturing and logistics, the transition to software-centric operations and the adoption of industrial clouds and operational technology (OT) edge will further increase efficiency. Private wireless networks and mission-critical industrial edge applications are key enablers. In the energy sector, networks allow for demand management and grid automation. In transportation, vehicle automation and the automation of ports and hub operations will further increase efficiency.

Hyperscalers

Hyperscaler refers to companies like Alphabet (Google), Amazon (Amazon Web Services), Microsoft and Meta Platforms (Facebook) that provide cloud solutions at a global scale, leveraging massive connected data centers. Our TAM for hyperscalers consists of optical networks and IP routing. Within optical networks, we foresee that data center interconnect (DCI) technology will be a strong driver.

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Hyperscalers are not only a customer segment for Nokia. They also assume an increasingly important role in the telecommunication domain and will become ecosystem partners and potential competitors. Hyperscalers target edge computing as the next growth engine for industrial automation workloads and low-latency applications. They partner with CSPs to co-locate edge stacks on-premise and at metro sites. Furthermore, they aim to run telco network workloads on their cloud infrastructure. Hyperscalers engage in the transformation of network operations with collaboration models and services for 5G cloud deployments.

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Industry trends

Shaping the future of critical networks

We have identified 10 trends that will shape the future of critical networks and influence the distribution of value and the future competitive landscape within the industry ecosystems.

1. Open architectures and Open RAN:

We see increased activities towards open network architectures, most notably Open RAN (radio access network) with the O-RAN alliance. Open RAN aims at splitting a base transceiver station (BTS) into its subcomponents with open interfaces and introduces a new network function, RAN Intelligent Controller. The subcomponents can then be provided by different suppliers. CSPs currently experiment with the objective to build and nurture the open ecosystem and diversify their supplier base.

2. Cloud RAN:

Cloud RAN refers to all or some of the baseband functions being run on a commercial-off-the-shelf (COTS) computing platform rather than purpose-built hardware. The objective is to benefit from cloud computing efficiencies and the pooling of resources. Its adoption will be dependent on the cost-efficiency of COTS platforms, fiber build-out and the availability of hosting data centers.

3. Private wireless networks:

Large industrials are enhancing their operational technology networks with the target of connecting their infrastructure and devices, often in a wireless manner. This enables the collection and aggregation of operational data, which in turn is used to improve overall productivity. We currently see players in enterprise verticals building their own private 4G/5G networks complementing their wi-fi and fixed networks and expect this trend to continue.

4. Edge cloud:

To advance digitalization and automation, there is demand for specific workloads to move from the central cloud to be closer to the application due to the required low latency. The on-premise enterprise edge is best suited to serve privacy-oriented, mission-critical use cases. The remaining low latency use cases can be served at the Wide Area Network (WAN) termination site.

5. Hybrid cloud:

Hybrid cloud is emerging as a strong enabler for accelerating digital transformation. Enterprises adopting hybrid cloud models benefit from public cloud (multi-cloud) services, augmented by traditional IT systems and privacy-oriented private clouds. In this context, enterprises or CSPs as their WAN providers have brought the large cloud providers (Amazon Web Services, Microsoft Azure, Google Cloud Platform) in their WAN.

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6. As-a-Service delivery and business models:

With as-a-Service (aaS) business models predominant for software applications in enterprise, CSPs have started migrating their IT apps to public clouds and consuming them aaS. This development is also increasing in network software. For network functions like 5G Core, CSPs will likely use a phased approach with software migrating to a cloud deployment model (hybrid) first, before transitioning to an aaS business model. We expect that in the mid- to long-term, most network software and network functions will be consumed in an aaS model.

7. Coherent routing:

Pluggable coherent 400G optics, optimized line systems and network automation will enable the next generation of IP/Optical network evolution primarily for point-to-point router connections (DCI). Aggregation and backbone networks will leverage reconfigurable optical add-drop multiplexer (ROADM)-optimized IP topologies to optimize for performance and cost.

8. Infrastructure sharing:

CSPs are seeking to optimize their cost and asset structure, which leads to network sharing initiatives and spin-offs. The emergence of neutral hosts is supported by government broadband initiatives and capital from infrastructure funds. The neutral host model will take different forms depending on the market context. We expect predominantly passive infrastructure sharing with some expansion into active fiber and metro edge compute across the mid-term time frame.

9. Non-terrestrial networks:

Non-terrestrial networks are under disruption from technology-driven performance and cost improvements and the emergence of the Low Earth Orbit (LEO) deployment model. We expect the non-terrestrial networks to be mainly complementary to terrestrial networks in terms of coverage in low population density areas.

10. System-on-a-Chip (SoC):

SoCs provide a source of competitive differentiation on performance, cost and power. Industry and use case specific workloads leverage custom SoCs that provide the required performance at optimal total cost of ownership. Software applications will be redesigned to take advantage of hybrid SoC-based and commoditized x86-based platforms. We expect the build-out of the edge and the migration of workloads to hybrid cloud architecture to influence the timing of bespoke SoC utilization. The industry perspective changes from x86 for all workloads towards use case driven bespoke processor and accelerators.

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Our strategic commitments

Our main strategic commitment is to deliver critical networks through technology leadership and trusted partnerships. Building on this, four strategic commitments define the focus of our strategy in an evolving market.

In March 2021, we concluded a strategic review which resulted in four strategic commitments, announced as part of our Nokia platform. While our purpose describes the “why” and our cultural essentials the “how” of what we do, the strategic commitment establishes the “what.” Our main strategic commitment is to deliver critical networks through technology leadership and trusted partnerships. Building on this, our four strategic commitments define our focus in an evolving market, help us strengthen our position to secure opportunities in technology disruptions and hedge against potential risks.

We are a trusted partner for critical networks

Our customers build the critical networks that provide essential services for the economy and throughout society. Critical networks have the combined traits from CSP and hyperscaler networks. Like CSP networks, critical networks deliver “carrier-grade” performance, high availability and resilience. Like hyperscaler networks, they are intelligent, autonomous, flexible and agile enough to serve customers on demand. To be their trusted partner, our understanding of the needs of CSPs, enterprises and hyperscalers in an evolving market is essential. Value creation opportunities come from a deep, trusted partnership with our customers: for CSPs, for enterprise verticals and for hyperscalers.

We focus on technology leadership in each of our businesses

Cost and performance remain the top priorities for our customers. CSPs, in particular, have not experienced strong top-line growth in recent years but still need to continuously invest in their networks. Our customers build their critical networks based upon a best-of-breed approach. Network elements are selected on a best performance per total cost of ownership basis. We see this trend becoming more important as networks become more open and cloudified.

In our highly competitive industry, technology leadership is also required to underpin momentum and financial returns. It is the key to regain some pricing power, drive market share and improve profitability. Competitive dynamics in the CSP industry strongly favor the top two vendors. Almost all CSPs dual source, giving vendors no pricing power unless they offer some technology advantage. In a market with a small number of vendors,

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technology leadership is the main lever to grow organically. In addition, technology leadership increases the scale of the business and consequently improves the operating leverage in a business with high fixed costs.

In our industry, only the top one or two players create value and earn returns above their cost of capital. Therefore, each of our businesses is focused on technology leadership, and we will reconsider our segment participation in the domains in which we do not have technology leadership and do not see a credible path to achieve it.

We capture the value shift to cloud and new business models

We see networks evolving to further optimize performance to cost and increase flexibility. Value in critical networks will migrate away from monolithic systems towards silicon, software and service and will be captured through different business models like as-a-Service (aaS), for example. This development will allow networks to be consumed more flexibly and tailored towards new use cases that combine the capabilities of different players.

We have positioned our business to capture growth opportunities by investing in Open RAN (radio access networks) and cloudification. We work closely with the main hyperscalers to bring cloud computing benefits to mobile networks. We rebalance our investments to build and strengthen a winning proposition in a cloud-native software suite in the domains of 5G Core, analytics and artificial intelligence, mission-critical industrial edge and private wireless, digital operations, monetization and security. We target to transform our software business into an aaS business and delivery model.

We create value with long-term research and intellectual property

Sustainable technology leadership requires us to anticipate, shape and invest in the next technology wave. Our innovations, research assets and intellectual property provide both the technology and the financial platform to enable us to take the long-term view and deliver sustainable success.

While our business groups focus on near- to mid-term innovation, Nokia Bell Labs, our world-renowned industrial research arm, is focused on a farther time horizon in its ambition to anticipate and shape longer-term technology cycles and inflection points. To that end, we are deeply engaged in leading and influencing standards and developing new standard essential patents (SEPs). Standards work is important for us to shape technology cycles. This gives us the ability to take a longer-term perspective and to invest in further technology leadership for the future.

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Our path to continued technology leadership

As one of the industry’s leading investors in communication technology research and development (R&D), we drive innovation across a comprehensive portfolio of network equipment, software, services and licensing opportunities.

Nokia’s world-leading research and development

We have a global network of R&D centers, each with technology and competence specialties and ecosystems. Most of our R&D is conducted in the business group structures and is further elaborated upon in the business group section of this report.

Nokia Bell Labs and long-term technology leadership

Nokia Bell Labs continues its long-standing tradition of disruptive innovation in the fundamental technologies that underpin communications networks and systems, helping us to further secure our technology leadership. A key part of its charter is to also explore concepts that generate growth opportunities in adjacent and emerging markets. To address this dual mission, Nokia Bell Labs streamlined its structure in 2021, forming two organizations under the Nokia Bell Labs umbrella:

■  Bell Labs Core Research: focuses on creating game-changing innovations that define the future of networks. It also explores key technologies to prepare our businesses for the 6G era on a ten-year horizon.

■  Bell Labs Solutions Research: focuses on creating new value chains. It identifies opportunities beyond our current product and solutions portfolio and explores new market spaces and technology licensing possibilities.

Nokia has pioneered many of the foundational technologies of the 5G era and our research is already now focusing on the future beyond 5G so that we are firmly positioned to continue our leading role. 5G-Advanced is a key stepping stone to the 6G era and will develop 5G to its fullest capabilities, providing an improved experience for humans and machines, as well as extensions for new use cases and functionalities. Nokia is investing to lead in 5G-Advanced networks that are anticipated to begin appearing in 2025. We are also already actively preparing for leadership in 6G. Hexa-X, the European Commission’s flagship 6G initiative for research into the next generation of wireless networks, began in January 2021 with Nokia as project lead and working closely with a strong consortium of European partners.

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Our Technology Vision 2030

Going into 2030, we believe that two of the most impactful drivers that will dominate network traffic and shape the evolution of networks will be human augmentation and digital-physical fusion.

In 2021, we analyzed the direction and drivers of technological change in a company-wide exercise that resulted in our Technology Vision 2030.

We expect that new human augmentation technologies, like extended reality (XR), as well as digital-physical fusion technologies, like digital twins, will drive network traffic and future developments in connectivity as we enter this new era of unprecedented immersiveness and industrial digitalization.

This will create a next level of expectations for networks – on performance, reliability, ubiquity, security, openness and sustainability – with completely new pressures to match the agility of the cloud as emerging use cases focus on aaS models and performance-sensitive applications at the edge.

As we move from the 5G era towards 5G-Advanced and onwards to the 6G era, the communications fabric will need to be architected differently. Examples of this network evolution will include extreme performance specialized networks for lowest latency and highest reliability, a multi-layered network of networks to meet the new requirements of emerging applications, and with network aaS, the enabling of networks to be consumed like cloud services.

With a focused corporate and technology strategy, we believe we are strongly positioned to lead this evolution.

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Our history

Nokia has been adapting to the needs of an ever-changing world for over 155 years.

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Milestones

1865

Founded as a single paper mill operation

1960s

Nokia becomes a conglomerate comprising rubber, cable, forestry, electronics and power-generation businesses

2007

Entered a joint venture with Siemens, combining mobile and fixed-line phone network equipment businesses and creating Nokia Siemens Networks (NSN)

2011

Entered a strategic partnership with Microsoft to address increasing competition from iOS and Android operating systems

2011

Acquired the wireless network equipment division of Motorola

2013

Purchased Siemens’ stake in NSN

2014

Sold Devices and Services business to Microsoft

2016

Acquired Alcatel-Lucent, including Bell Labs, creating an innovation leader in next-generation technology and services

2017

Created Nokia Shanghai Bell, a joint venture between Nokia and China Huaxin, integrating Alcatel-Lucent Shanghai Bell Co. Ltd and Nokia China

2017-2021

Additional acquisitions enhancing our technology leadership such as:

Deepfield, the US-based leader in real-time analytics for IP network performance management and security; Comptel, a Finland-based telecommunications software company; Unium, a Seattle-based software company that specializes in solving complex wireless networking problems for use in mission-critical and residential wi-fi applications; and Elenion, a US-based company focusing on silicon photonics technology

Innovations

1926

Brought sound to motion pictures*

1947

Developed the transistor, a tiny device that revolutionized the entire electronics industry*

1954

Created the solar cell, enabling the conversion of the sun's energy into electricity*

1958

Developed the laser, creating the foundation for fiber optics*

1962

Launched the first communications satellite, Telstar 1, into orbit enabling the first ever broadcast of live television between the US and Europe*

1969

Developed Unix, the software system that made the large-scale networking of diverse computing systems and the internet practical*

1982

Introduced both the first fully digital local telephone exchange in Europe and the world’s first NMT car phone

1991

Enabled the first GSM call using a Nokia phone over the Nokia-built network of Finnish communications service provider Radiolinja

1998

Became the world’s largest manufacturer of mobile phones

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2001

Invented MIMO (Multiple-Input and Multiple-Output), a key element of a large number of modern wireless systems, that allows for greater throughput without increasing bandwidth requirements*

2006

Developed Softrouter, a routing architecture permitting development of a programmable, open network infrastructure to allow easier deployment of new services that make use of exposed network capabilities*

2014

Developed XG-FAST technology, enabling service providers to generate fiber-like speeds of more than 10Gbps over short distances using existing copper infrastructure*

2017

Developed Probabilistic Constellation Shaping, an innovative technology to get the most out of each fiber, irrespective of its length and capabilities

2019

Opened the world’s first live end-to-end 5G lab, the Future X Lab in Murray Hill, New Jersey, US

2020

Selected by NASA to build and deploy the first end-to-end LTE solution on the lunar surface

Enabled commercial deployment of the world’s first 5G liquid cooling solution

Set the 5G speed world record

2021

Developed the Resh programming language to take control of and manage a fleet of robots

*Bell Telephone Laboratories (1925-1984). Following its acquisition by Nokia in 2016, the company was renamed Nokia Bell Labs.

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Customer Experience

The Nokia Customer Experience (CX) organization was formed in 2021 to ensure we engage customers with a unified and consistent voice. It also serves as our customers’ advocate inside Nokia to see to it that we understand the needs of our customers and deliver the best possible experience for them.

The new CX organization unites our sales and customer marketing under one umbrella, allowing us to better leverage commonly required platforms, processes and resources. CX drives growth across all business group portfolios by engaging CSPs, enterprise verticals, hyperscalers and governments, positioning Nokia as a technology leader, innovation partner and solutions provider worldwide.

Our customers benefit through the unique insights as the result of our extensive analysis of the market. This enables them to make the best strategic technology decisions to help grow their business.

While enterprise sales, marketing and delivery have moved under the CX umbrella, products developed for this diverse customer segment remain in the relevant business groups. Working across industries such as manufacturing, supply chain logistics, energy, transportation and the public sector, as well as harnessing the power of our growing partner community, the enterprise team helps customers address their unique business challenges through Industry 4.0 digital transformation. Our solutions help transform operations and modernize communication networks with leading next-generation technologies from across our businesses – including IP, optical, fiber and private wireless networking. The enterprise team has worked with more than 2 200 organizations – connecting people and technologies, improving safety both in the workplace (workers and operations) and in cities around the world, increasing automation and agility to boost productivity and efficiency, and helping customers achieve greater resilience and sustainability through digitalization.

Together, CX and the business groups align on our go-to-market ambitions, resourcing and customer requirements, enabling the business groups to remain accountable for their own financial performance. Collective competence, delivered consistently across all business groups, coupled with deep expertise across each unique industry we serve, solves customer challenges, inspires growth and enables our customers to achieve their immediate and long-term goals.

Case study: Nokia 5G private wireless networking moves from trial to permanent deployment for Lufthansa Technik

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5G private wireless networking has enabled Lufthansa Technik to maintain business continuity throughout the pandemic, providing the ability to conduct virtual aircraft maintenance inspections for its civil aviation customers over fast, high-definition video links.

Over a high-quality video stream, customers communicate in real time with engine mechanics performing maintenance work. Dismantled parts are jointly inspected on-screen in high resolution, enabling informed decisions to be made. Virtual Table Inspection has now been integrated into Lufthansa Technik’s digital AVIATAR technical aircraft fleet management solution.

The network is based on Nokia Digital Automation Cloud (NDAC) 5G SA. NDAC is a 5G private wireless platform providing high-bandwidth, low-latency, hyperfast private wireless connectivity and local edge computing, providing key digitalization enablers for customers looking to transform to Industry 4.0 operations.

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Business groups

Mobile Networks

2021 was a transformational year for Mobile Networks. We increased our R&D investments and largely closed the gap with key competition in 5G.

Tommi Uitto

President, Mobile Networks

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Mobile Networks provides products and services for radio access networks covering technologies from 2G to 5G, and microwave radio links for transport networks.

Market overview

In RAN, we are seeing an uplift in the 5G share of the market, as communications service provider customers replace volumes of previous technology generations to better serve subscribers with high-speed mobile broadband.

Our market is also driven by growth in enterprise use cases, as companies across different industries, including manufacturing and energy, further automate their business processes.

The estimated Mobile Networks addressable market, excluding China, for 2021 was EUR 46 billion. We currently forecast an addressable market for 2022 of EUR 49 billion. We estimate that the addressable market will grow by approximately 3% in 2022 excluding the impact of changes in foreign currency exchange rates.

Business overview and organization

Aligned with our customer needs and as part of Nokia’s transformation, Mobile Networks adopted a new organization and operating model at the start of 2021. The business group now encompasses not only products for RAN and microwave links, but also network management solutions and services to plan, deploy, optimize and maintain networks.

In 2021, Mobile Networks launched a new 5G portfolio powered by the latest ReefShark System-on-Chip technology, bringing increased capacity and connectivity to our customers. The launches covered new AirScale radios, including the industry’s lightest high-power, 400MHz 32TRX Massive MIMO, and new baseband modules, supporting 90 000 connected users simultaneously while enabling a reduction in power consumption of up to 75%. With Single RAN software and multiradio baseband plug-in cards supporting all radio access technologies from 2G to 5G, Nokia is accelerating 5G rollouts and reducing overall RAN total cost of ownership, by unlocking network efficiencies with common transport, common operability, common software delivery and increased hardware sharing.

Mobile Networks proactively develops new approaches to building networks. In 2021, we launched Nokia Edge Automation to manage multiple cloud deployments supporting new 5G use cases, opened a new Open RAN testing and collaboration center in the US, and announced partnerships with Amazon Web Services (AWS), Google Cloud and Microsoft for cloud-based 5G radio solutions.

In 2021, we met our target to hold an estimated 25-27% share of the RAN market, excluding China. Our 4G networks deliver industry leading performance with best average downlink and uplink speeds, providing a solid foundation for us to evolve our customers’ networks to 5G⁽¹⁾. In 2021, we also largely closed the gap with our key competition in 5G performance.

By the end of 2021, Nokia supplied to approximately 40% of launched 5G networks, in half of the countries with live 5G. We had 214 commercial 5G deals, which included many new 5G customers, such as Net4Mobility in Sweden, Telus in Canada, Orange in Belgium, Elisa in Estonia and TPG Telecom in Australia. We also strengthened our footprint in China, signing new 5G deals with China Mobile and China Broadcasting Network.

Our primary focus is on building technology leadership and bringing the best performing networks to our customers. We made significant progress in enhancing our R&D output during 2019-2021. Our 5G R&D headcount increased by approximately 60% from the beginning of 2019 until the end of 2021 and our 5G software feature output increased 130% during the same time period, outpacing the increase in our headcount and indicating improved efficiency and productivity.

In line with Nokia’s overall commitment to support the Paris Agreement to limit global warming to 1.5°C, Mobile Networks announced that it would reduce the average power consumption of its AirScale 5G mMIMO Base Station Site Solution by 50% by 2023, compared to our 2019 level. In addition, to cut cooling energy consumption, we successfully trialled our Liquid Cooling baseband solution with Japanese communications service provider, KDDI.

Competition

The RAN market, including associated network management solutions and network services, is a highly consolidated market. Our main competitors are Huawei, Ericsson, Samsung and ZTE, but there are also a number of smaller competitors competing in specific technology or regional sub-segments. For example, in microwave radio links, our competitors include Ceragon, NEC and Aviat.

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commercial 5G deals

130%

increase in 5G software feature output from start of 2019 till end of 2021

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Network Infrastructure

Spanning the globe, both on land and under the sea, our networks are the capillaries of connectivity.

Federico Guillén

President, Network Infrastructure

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Network Infrastructure works with a wide range of customers in the CSP, enterprise, webscale and hyperscaler segments to meet their access, transport, routing and core needs, both terrestrial and subsea.

Market overview

Network Infrastructure comprises four complementary business divisions that can share best practice and collaborate on technology and operations, while maintaining a specialized, highly customer-centric approach.

The pandemic has accelerated and highlighted the explosion in global demand for connectivity and capacity, with moves in every society towards online work, education, entertainment, medicine and socializing. A renewed focus on broadband as a critical network element provides the impetus for CSPs, governments and others to invest in fiber, fixed wireless access and supporting IP and optical network infrastructure. As access technology evolves to 10G, 25G, and beyond, communications service providers add revenue streams by serving residential users, businesses, and 5G cells with a single network.

Our products help established CSPs and new players to build networks that can enable a new wave of industrial digitalization. They support consumers, enterprises and webscales (including hyperscalers). On land and under the sea, our networks are the capillaries of connectivity.

The estimated Network Infrastructure addressable market, excluding Submarine Networks, for 2021 was EUR 42 billion. We currently forecast an addressable market for 2022 of EUR 45 billion. We estimate that the addressable market will grow by approximately 3% in 2022 excluding the impact of changes in foreign currency exchange rates.

Business overview and organization

Our business divisions are: Fixed Networks, IP Networks, Optical Networks and Submarine Networks. Across our portfolio we combine innovative hardware and software solutions with specialist professional services to deliver value to customers.

Fixed Networks offers fiber and copper-based access infrastructure; wi-fi solutions, cloud and virtualization. We have a leading position in fiber technology and are the leaders in XGS-PON⁽¹⁾. We were also the first to offer a commercial 25G PON solution. Our in-house developed Quillion chipset brings best-in-class performance across our portfolio and enables us to innovate rapidly and with agility. We have made a strong start in the relatively new area of 5G fixed wireless access (FWA), based on technology leadership. Our wi-fi portfolio includes mesh solutions and cloud-based controllers – to manage wi-fi access points in the home – while CSPs can streamline and automate operations with our software-defined access network portfolio.

IP Networks provides IP routing solutions for IP aggregation, edge and core applications for residential, business, mobile and industrial services. Our solutions – combined with our network automation platform – enable customers to control, manage, analyze and secure their IP networks. Our software-defined WAN solutions bring easy, efficient network connectivity configuration among clouds and to any enterprise branch. Nokia has recently brought to market a next-generation “data center fabric” solution, making data center switching and cloud environments easier to scale, adapt and operate. Our ability to offer high performance and massively scalable networks is based on innovation – during 2021, we launched the latest generation in our successful in-house designed family of routing silicon.

Optical Networks is a leader in optical transport networks for metro, regional, long-haul and ultra-long-haul applications, helping communications service providers build smarter transport networks, using our software tools and automation to deliver streamlined service delivery and lower total cost of ownership. The portfolio includes coherent optical transponders, optical transport network switching, wavelength-division multiplexing, reconfigurable optical add-drop multiplexer solutions and optical line systems for metro access and aggregation, data center interconnect, regional and long-haul/ultra-long-haul applications. Our intense focus on technology innovation enabled us, in 2021, to start shipping our fifth generation of coherent optical technology, based on our in-house designed PSE-V digital signal processor.

Submarine Networks has a large physical infrastructure and a strongly cyclical business pattern. As submarine capacity is in an expansion phase – driven by webscales – the market is strong and Nokia is a leader. During 2021 we sought to consolidate our leadership by updating our fleet and focusing on converting a strong backlog of orders into revenue and we are bringing our technology focus to bear on areas including next-generation spatial division multiplexing.

25G PON

We brought the world’s fastest fiber network to life

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50%

Our Quillion and PSE-V chipsets provide around 50% higher energy efficiency than previous generations

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75%

FP5 offers up to 75% reduction in power consumption by comparison with previous generation

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Competition

Our competitors include Huawei and ZTE, along with Calix and Adtran (Fixed Networks), Cisco and Juniper (IP Networks), Ciena and Infinera (Optical Networks), and Subcom and NEC (Submarine Networks).

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Cloud and Network Services

In 2021, CNS made significant progress in its mission to help customers and partners create new value, deliver innovative digital services and transform business operations.

Raghav Sahgal

President, Cloud and Network Services

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Cloud and Network Services serves communications service providers, enterprise, and hyperscale customers and partners, helping them to navigate three major industry transitions: the introduction of 5G networks and services, cloud-native software and as-a-Service delivery models.

Market overview

The introduction of 5G networks and services, cloud-native software and as-a-Service delivery models places demands on organizations to find new ways to monetize digital assets, optimize costs, navigate complexity and mitigate security risks for their mission-critical networks.

The estimated Cloud and Network Services addressable market for 2021 was EUR 26 billion. We currently forecast an addressable market for 2022 of EUR 28 billion. We estimate that the addressable market will grow by approximately 5% in 2022 excluding the impact of changes in foreign currency exchange rates.

Business overview and organization

Cloud and Network Services comprises four areas of business focus: Business applications software, cloud and cognitive services, core networks software and enterprise solutions. The group has prioritized research and development and portfolio investments that reinforce our focus on technology leadership, which is a leading priority for our customers and a crucial marketplace differentiator.

Addressing selected platforms for growth, we are focusing our investment on 5G core software, analytics and AI Services, digital operations, monetization, private wireless and industrial automation, and security.

We have identified these fast-growing, higher-margin areas as being critically important to our CSP and enterprise customers as they deploy, operate, and monetize the next wave of 5G.

We are already delivering cloud-native solutions that provide network quality of service and agility. We are enabling customers to leverage network intelligence for user insights that facilitate efficiency and sustainability, self-protection and self-healing. We are deploying industrial solutions that drive digital transformation and Industry 4.0. And we are helping CSPs to automate network operations and manage security.

Transition to Software-as-a-Service (SaaS) delivery of network software and associated use cases is also a key aspect of Cloud and Network Services’ strategy.

Throughout 2021, Cloud and Network Services has refined operations and sales team alignment to create efficiencies and enhance portfolio positioning with customers.

Customer demand for 5G digital operations, monetization, security and analytics solutions has resulted in solid business applications software performance. Cloud and cognitive services continues to demonstrate improved performance across its cloud and managed services portfolio.

Digitalization plays a critical role in combating climate change and enabling a sustainable future. Our AI-based energy efficiency service provides an intelligent, automated way for CSP customers to control equipment power consumption, enabling them to manage energy use across their networks. In addition, our private wireless technology supports solar power plant and wind farm communications, maintenance and safety needs.

During 2021, we were named by industry analysts as a market leader in subscriber data management software⁽¹⁾, network automation software⁽²⁾, private cellular networking⁽³⁾ and data, AI and development platforms⁽⁴⁾.

Competition

Cloud and Network Services operates in a fast-moving marketplace characterized by numerous competitors that range from niche providers to global technology enterprises whose offerings span several technical capabilities.

The competitive environment comprises networking companies, infrastructure and application software suppliers, services specialists, hyperscalers, cloud providers and a wide range of industry segment businesses.

We operate in a dynamic situation, where vendors and other industry participants may on occasion be a partner or a direct competitor, depending on the nature of the engagement. We are acutely aware of the need to build alliances with partners such as hyperscalers, who are increasingly influential players in this space.

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Attained marketplace leadership in private wireless networking with more than

420 customers,

of which over

80 include 5G

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AI-based energy management automation can reduce energy costs and carbon footprint by

30%

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(1) Analysys Mason. (September 2021) Subscriber data management: worldwide market shares 2020 and forecast 2020-2021.

(2) Appledore. (July 2021) Leading Suppliers in Network Automation Software.

(3) Technology Business Research (May 2021) Private Cellular Networks Vendors Benchmark.

(4) Analysys Mason. (November 2021) Data, AI and development platforms: worldwide market shares 2020.

(5) 5G World. (September 2021) Most Innovative AI or ML Technology for the Network.

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Nokia Technologies

Licensing is a virtuous circle, a wheel that has been turning for many years, powering innovation. It enables other companies to build on our inventions without having to make their own investments in R&D.

Jenni Lukander

President, Nokia Technologies

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Nokia Technologies is responsible for managing Nokia’s patent portfolio and monetizing Nokia’s intellectual property, including patents, technologies and the Nokia brand.

Market overview

Nokia Technologies is responsible for managing Nokia’s patent portfolio and monetizing Nokia’s intellectual property, including patents, technologies and the Nokia brand, building on Nokia’s continued innovation leadership, long-term investment into research and development and decades of driving technology standards development.

Business overview and organization

Nokia Technologies has three focus areas: Patent Licensing of Nokia’s patent portfolio, Technology Licensing of Nokia’s technologies for integration into consumer devices and Brand Partnerships for licensing the Nokia brand.

Patent Licensing: We manage the Nokia patent portfolio, working with the three other Nokia business groups, and continue to pursue and grow our patent licensing and monetization activities which drive most of Nokia Technologies’ net sales. This includes our successful mobile devices

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licensing program, where we currently have licensing agreements with most of the major smartphone vendors. We also have patent licensing programs for consumer electronics, connected cars, smart meters, payment terminals and other emerging technologies in the field of IoT.

In 2021, we announced new patent licensing agreements with Daimler and several other vehicle manufacturers, as well as Samsung and Lenovo. These new agreements reflect the significance of our contributions to cellular and multimedia standards.

Technology Licensing: We continue to license our innovative multimedia technologies, such as OZO Audio and OZO Playback, to smartphone and camera manufacturers through our Technology Licensing business. We also drive advanced audio and video research and standardization through our Multimedia Technologies research unit.

Brand Partnerships: Nokia is a global brand that is recognized by almost everyone. We work with HMD Global – our licensee for Nokia-branded phones and tablets – along with brand partners in other product categories, to increase the reach and strength of the Nokia brand.

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4 000+

patent families declared as essential to 5G standards

ISO 9001

Achieved certification for our high-quality patent portfolio management

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Industry leading patent portfolio

Nokia has defined many of the fundamental technologies used in virtually all mobile devices. We have invested more than EUR 130 billion in R&D since 2000 and taken a leading role in standardization, holding a variety of leadership positions in global standards development organizations. As a result, we own one of the broadest and strongest patent portfolios in the mobile communications sector, with around 20 000 patent families (each family composed of several individual patents), of which over 4 000 are declared as essential to 5G.

Our portfolio has a long lifetime, with the vast majority of patents still in force in ten years’ time, providing a long-term foundation for the business. We have been ranked #1 in several independent third-party studies for our 2G, 3G, 4G and 5G patents that have been declared essential for cellular standards.

We also have a strong multimedia patent portfolio, built on thirty years of investment in R&D. For example, we excel in video compression technology that enables large data files to be shared across the internet. The work of Nokia’s engineers in video research and standardization has been recognized with numerous international awards, including four Technology & Engineering Emmy^® Awards.

We continue to generate new intellectual property at a robust rate, refreshing our portfolio from R&D activities across all Nokia businesses. In 2021, we filed patent applications for more than 1 500 new inventions, enabling 5G networks, connected 5G devices and more.

We actively manage our patent portfolio by continuously evaluating our collective assets and taking actions to optimize the size of our overall portfolio, while preserving the high quality of our patents. And in 2021, Nokia became one of the first companies to achieve the globally recognized ISO 9001 certification for our high-quality patent portfolio management process.

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Supply chain, sourcing and manufacturing

During 2021, global supply chain disruptions impacted operations across industries.

Nokia’s supply chain is essential to our customers and our business, and for managing the customer demand and supply for our hardware, software and contract manufactured products. Our end-to-end operations include sourcing, demand and supply planning, manufacturing, distribution and logistics.

Given the size and scope of our portfolio, we purchase over EUR 12 billion worth of products and services per year from 11 000 different suppliers to fully support our complex supply chain. Throughout 2021, we were presented with many challenges and opportunities that included semiconductor shortages, the ongoing COVID-19 pandemic, climate change, and geopolitical and security concerns, all during a critical growth period for 5G.

While our 2021 net sales were impacted by supply chain constraints, we believe Nokia performed well despite these challenges. We will continue to work to optimize our supply chain; thinking innovatively, digitally and across the longer term, working to further develop a resilient and sustainable supply chain for our customers.

Resilience through strong partnerships and digitalization

Strong partnerships and digitalization investments are critical as we build resilience. We are collaborating with our customers and suppliers to build up our solid partner network. We optimize our supply chain by leveraging digitalization to strengthen capabilities to predict and simulate various operational scenarios to minimize disruptions.

We continue to drive a diverse and resilient supplier base to ensure quality, innovation and effective risk mitigation. We partner closely across our different business groups and maintain long-lasting relationships with our suppliers. We also closely collaborate with our customers to fully understand their long-term needs. This approach is helping us address the global semiconductor shortage.

Our geographically dispersed manufacturing network consists of our own manufacturing (24% of the network) and contract manufacturing partners to minimize geographic and geopolitical risks. Our network is strategically located around the world: Asia Pacific & Japan/India (29%), Europe (27%), China (29%) and the Americas (15%).

We continuously optimize our manufacturing and supplier network across the regions and leverage artificial intelligence and machine learning capabilities in developing the supply chain and factory network. This regional approach will not only enable us to deliver a more rapid response to our customers’ needs, but also decrease transportation costs and reduce CO2 emissions.

Sustainability through innovation

We are committed to cut emissions by 50% by 2030. This commitment requires actions from us, our customers and our suppliers. We continuously challenge our full supply chain to, for example, develop new digital solutions to cut emissions.

We are delivering on increased customer demand for circular supply. Notable examples include a frame agreement with Orange and a T-Mobile USA project where we deinstalled cards from idle base station sites, upgraded software (SW), inspected and shipped back, thus avoiding approximately 844 metric tons of CO2 emissions.

Throughout our manufacturing network, our own factories are on track to be carbon neutral by 2025 through hydro, wind, solar and other sustainable sources. Many of our electronics manufacturing services (EMS) partners have roadmaps to be carbon neutral by 2030.

We clearly communicate our Third-party Code of Conduct and Nokia Supplier Requirements, which incorporate Responsible Business Alliance (RBA) Code of Conduct requirements, to our suppliers. These include standards for responsible sourcing in important areas such as the environment and human rights. Adherence is checked through audits and EcoVadis documentation audits.

We also partner with our suppliers to invest in sustainable solutions and took important steps together in 2021 in areas like transportation and packaging.

We are committed to prioritizing and strengthening resilience and sustainability across the end-to-end supply chain to help us effectively deal with current challenges and be ready for whatever is next.

Refer to “Sustainability and Corporate Responsibility” section for more information on Nokia’s sustainability targets and achievements, including those related to supplier sustainability.

COP26

Recognized with a COP26 Compass Award for Supply Chain Capacity Building for reaching beyond our own operations, driving best practices with our suppliers and their suppliers

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Own manufacturing

As of 31 December 2021, the production capacity for our wholly owned sites is noted below:

(1)   We consider the production capacity of our manufacturing network to be sufficient to meet the requirements of our business. The extent of utilization of our manufacturing facilities varies from plant to plant and from time to time during the year. None of these facilities is subject to a material encumbrance.

(2)   Production capacity equals the total area allotted to manufacturing and to the storage of manufacturing-related materials.

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Corporate governance statement

This corporate governance statement is prepared in accordance with Chapter 7, Section 7 of the Finnish Securities Markets Act (2012/746, as amended) and the Finnish Corporate Governance Code 2020 (the “Finnish Corporate Governance Code”).

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Annual General Meeting 2021 and 2022

The Annual General Meeting 2021 took place at the Company’s headquarters in Espoo on 8 April 2021. To prevent the spread of the COVID-19 pandemic, the Board resolved on extraordinary measures pursuant to the temporary legislation approved by the Finnish Parliament on 3 October 2020. The Annual General Meeting 2021 was convened to be held without shareholders and their proxy representatives being present at the meeting venue. Participation in the Annual General Meeting and use of shareholder rights was possible only by voting in advance as well as by submitting counterproposals and asking questions in advance. Approximately 66 000 shareholders representing approximately 2 500 million shares and votes were represented at the Annual General Meeting through advance voting. The Annual General Meeting supported all of the Board’s proposals.

As the COVID-19 situation remains serious, Nokia Corporation’s Annual General Meeting 2022 is planned to be held on 5 April 2022 without shareholders’ presence to prevent the spread of the ongoing pandemic. Similarly to 2020 and 2021, the meeting will be held under extraordinary measures pursuant to the temporary legislation approved by the Finnish Parliament on 8 May 2021. Participation and exercise of shareholder rights in the meeting will be possible only by voting in advance, submitting counterproposals and asking questions in advance. Proposals of the Board of Directors to the Annual General Meeting 2022 were published on 3 February 2022.

Regulatory framework

Our corporate governance practices comply with Finnish laws and regulations, our Articles of Association approved by the shareholders and corporate governance guidelines (Corporate Governance Guidelines) adopted by the Board of Directors. Corporate Governance Guidelines reflect our commitment to good corporate governance. They include the directors’ responsibilities, the composition and election of the members of the Board and its Committees, and certain other matters relating to corporate governance. We also comply with the Finnish Corporate Governance Code adopted by the Securities Market Association.

In addition, we comply with the rules and recommendations of Nasdaq Helsinki and Euronext Paris as applicable to us due to the listing of our shares on the exchanges. Furthermore, as a result of the listing of our American Depositary Shares on the New York Stock Exchange (NYSE) and our registration under the US Securities Exchange Act of 1934, we follow the applicable U.S. federal securities laws and regulations, including the Sarbanes-Oxley Act of 2002 as well as the rules of the NYSE, in particular the corporate governance standards under Section 303A of the NYSE Listed Company Manual. We comply with these standards to the extent such provisions are applicable to us as a foreign private issuer.

To the extent compliance with any non-domestic rules would conflict with the laws of Finland, we are obliged to comply with Finnish laws and applicable regulations. There are no significant differences in the corporate governance practices applied by Nokia compared with those applied by the US companies under the NYSE corporate governance standards with the exception that Nokia complies with Finnish law with respect to the approval of equity compensation plans. Under Finnish law, stock option plans require shareholder approval at the time of their launch. All other plans that include the delivery of company stock in the form of newly issued shares or treasury shares require shareholder approval at the time of the delivery of the shares unless shareholder approval has been granted through an authorization to the Board, a maximum of five years earlier. The NYSE corporate governance standards require that the equity compensation plans are approved by the company’s shareholders. Nokia aims to minimize the necessity for, or consequences of, conflicts between the laws of Finland and applicable non-domestic corporate governance standards.

In addition to the Corporate Governance Guidelines, the Committees of the Board have adopted charters that define each Committee’s main duties and operating principles. The Board has also adopted the Code of Conduct that applies to directors, executives, and employees of Nokia, as well as employees of Nokia’s subsidiaries and affiliated companies (such as joint ventures) in which Nokia owns a majority of the shares or exercises effective control. Furthermore, the Board has adopted the Code of Ethics applicable to our key executives, including the President and CEO, CFO and Corporate Controller.

Main corporate governance bodies of Nokia

Pursuant to the provisions of the Finnish Limited Liability Companies Act (2006/624, as amended) (the Finnish Companies Act) which is the legislation under which Nokia operates, and Nokia’s Articles of Association, the control and management of Nokia are divided among shareholders at a general meeting of shareholders, the Board, the President and CEO and the Group Leadership Team, chaired by the President and CEO.

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General Meeting of Shareholders

Nokia’s shareholders play a key role in corporate governance, with our Annual General Meeting offering a regular opportunity to exercise their decision-making power in Nokia. In addition, at the meeting the shareholders may exercise their right to speak and ask questions. During the years 2020-2022 the use of shareholder rights has taken, and will, take place by remote means only, due to the ongoing COVID-19 pandemic and related precautions taken to ensure the health and safety of our shareholders, employees and other stakeholders. Please refer to section “Introduction–Annual General Meeting 2021 and 2022”. A working group set up by the Finnish Ministry of Justice is preparing an amendment to the Finnish Companies Act to enable fully virtual annual general meetings and exercise of shareholder rights to their full extent also by virtual means in the future.

Each Nokia share entitles a shareholder to one vote at general meetings of Nokia. The Annual General Meeting decides, among other things, on the election and remuneration of the Board, the adoption of annual accounts, the distribution of retained earnings shown on the balance sheet, discharging the members of the Board and the President and CEO from liability, as well as on the election and fees of the external auditor. As of the Annual General Meeting 2020, the Remuneration Policy is presented to the general meeting at least every four years and the Remuneration Report annually as of 2021. Resolutions of the general meeting regarding the policy and the report are advisory.

In addition to the Annual General Meeting, an Extraordinary General Meeting may be convened when the Board considers such a meeting to be necessary, or when the provisions of the Finnish Companies Act mandate that such a meeting must be held.

Board of Directors

The operations of Nokia are managed under the direction of the Board, within the framework set by the Finnish Companies Act and Nokia’s Articles of Association as well as any complementary rules of procedure as defined by the Board, such as the Corporate Governance Guidelines and the charters of the Board’s Committees.

Election and composition of the Board of Directors

Pursuant to the Articles of Association of Nokia Corporation, we have a Board that is composed of a minimum of seven and a maximum of 12 members. The members of the Board are elected at least annually at each Annual General Meeting with a simple majority of the shareholders’ votes cast at the meeting. The term of a Board member begins at the close of the general meeting at which he or she was elected, or later as resolved by the general meeting, and expires at the close of the following Annual General Meeting. The Annual General Meeting convenes by 30 June annually.

Our Board’s leadership structure consists of a Chair and Vice Chair elected annually by the Board, and confirmed by the independent directors of the Board from among the Board members upon the recommendation of the Corporate Governance and Nomination Committee. The Chair of the Board has certain specific duties as stipulated by Finnish law and our Corporate Governance Guidelines. The Vice Chair of the Board assumes the duties of the Chair of the Board in the event he or she is prevented from performing his or her duties.

The independent directors of the new Board also confirm the election of the members and chairs for the Board’s Committees from among the Board’s independent directors upon the recommendation of the Corporate Governance and Nomination Committee and based on each Committee’s member qualification standards. These elections take place at the Board’s assembly meeting following the general meeting.

The Corporate Governance and Nomination Committee's aim is to continually renew the Board to ensure an efficient Board of international professionals with a diverse mix of skills, experience and other personal qualities in line with the diversity principles established by the Board. The Corporate Governance and Nomination Committee considers potential director candidates based on the short- and long-term needs of the Company. In the process to identify and select the candidates matching these needs and desired profiles, the Committee engages search firms and external advisors.

Board diversity

The Board has adopted principles concerning Board diversity describing our commitment to promoting a diverse Board composition and how diversity is embedded into our processes and practices when identifying and proposing new Board candidates as well as proposing re-election of current Board members.

At Nokia, diversity is not a static concept but rather a relevant mix of required elements for the Board as a whole that evolves with time based on, among other things, the relevant business objectives and future needs of Nokia. The Board diversity is treated as a means of improvement and development rather than an end in itself. Diversity of our Board is considered from a number of aspects including, but not limited to, skills and experience, age, nationality, ethnicity, cultural and educational backgrounds, self-declared gender identity, sexual orientation as well as other individual qualities. The Board shall include representatives of more than one gender.

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Nokia acknowledges and supports the resolution adopted by the Finnish Government on 17 February 2015 on gender equality on the boards of directors of Finnish large and mid-cap listed companies. We report annually on our objectives relating to equal representation of both genders, the means to achieve them, and the progress we have made in achieving them. We aim to have representation of at least 40% of the non-prevailing gender on our Board.

Currently there are six different nationalities represented on the Board and 37.5% of the Board members are female. The Board composition proposed to the Annual General Meeting 2022 has representation of six nationalities and 40% of Board members are female.

(1)   Terms as Nokia Board member before the Annual General Meeting on 8 April 2021.

(2)   As of 8 April 2021.

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Experience and skills of the Board members

Members of the Board of Directors

Until the Annual General Meeting held on 8 April 2021, the Board consisted of nine members: Sari Baldauf (Chair), Kari Stadigh (Vice Chair), Bruce Brown, Thomas Dannenfeldt, Jeanette Horan, Edward Kozel, Elizabeth Nelson, Søren Skou and Carla Smits-Nusteling.

The Annual General Meeting held on 8 April 2021 elected eight members to the Board for a term ending at the close of the next Annual General Meeting. Sari Baldauf, Bruce Brown, Thomas Dannenfeldt, Jeanette Horan, Edward Kozel, Søren Skou, Carla Smits-Nusteling and Kari Stadigh were re-elected as Board members. Following the meeting, the Board re-elected Sari Baldauf to serve as Chair and Kari Stadigh as Vice Chair of the Board for a term ending at the close of the next Annual General Meeting.

Proposals of the Board of Directors to the Annual General Meeting 2022 were published on 3 February 2022. On the recommendation of the Board’s Corporate Governance and Nomination Committee, the Board proposes to the Annual General Meeting that the number of Board members be ten. Kari Stadigh has informed that he will no longer be available to serve on the Nokia Board of Directors after the Annual General Meeting. Consequently, the Board proposes, on the recommendation of the Board’s Corporate Governance and Nomination Committee, that the following seven current Board members be re-elected as members of the Nokia Board of Directors for a term ending at the close of the next Annual General Meeting: Sari Baldauf, Bruce Brown, Thomas Dannenfeldt, Jeanette Horan, Edward Kozel, Søren Skou and Carla Smits-Nusteling.

Furthermore, the Board proposes, on the recommendation of the Corporate Governance and Nomination Committee, that the following new members be elected to the Board composition for a term ending at the close of the next Annual General Meeting: Lisa Hook, former President and CEO of Neustar, Inc., Thomas Saueressig, a member of the Executive Board of SAP SE and Global Head of SAP Product Engineering, and Kai Öistämö, President and CEO of Vaisala Corporation.

The Corporate Governance and Nomination Committee will propose in the assembly meeting of the new Board of Directors that Sari Baldauf be re-elected to serve as Chair of the Board and Søren Skou to serve as the new Vice Chair of the Board, subject to their election to the Board of Directors.

The current and proposed members of the Board are all non-executive. For the term that began at the Annual General Meeting 2021 and for the term beginning at the Annual General Meeting 2022, all Board member candidates have been determined to be independent of Nokia and its significant shareholders under the Finnish corporate governance rules and the rules of the NYSE, as applicable. Any possible changes impacting the independence assessment would be assessed as of the date of the Annual General Meeting.

As noted by the Chair of the Board in the Annual General Meeting 2021, the Corporate Governance and Nomination Committee monitors closely the time commitments of the Board members to ensure they are able to devote the appropriate time to carry out their duties and responsibilities. The Corporate Governance and Nomination Committee has prepared the proposed composition of the Board of Directors to the Annual General Meeting 2022 taking into account shareholders’ expectations and feedback in this regard.

Further, while the Finnish market practice is to vote on the proposed Board composition as a slate, some of our investors have expressed their preference of being able to vote on directors individually. Nokia has been actively involved in the initiative to supplement the market practice as well as the Finnish Corporate Governance Code to enable also individual director election method in Finland. We plan to be among the first Finnish

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companies to introduce this election method once that will be feasible to implement in the future Annual General Meetings to be organized under the Finnish Companies Act instead of the temporary COVID-19 legislation followed in 2020–2022.

Biographical details of our current Board members

Chair Sari Baldauf

b. 1955

Chair of the Nokia Board since 2020. Board member since 2018. Member of the Corporate Governance and Nomination Committee and the Personnel Committee.

Master of Business Administration, Helsinki School of Economics and Business Administration, Finland. Bachelor of Science, Helsinki School of Economics and Business Administration, Finland. Honorary doctorates in Technology (Helsinki University of Technology, Finland) and Business Administration (Turku School of Economics and Business Administration and Aalto University School of Business, Finland).

Executive Vice President and General Manager, Networks Business Group, Nokia, 1998–2005. Various executive positions at Nokia in Finland and the United States 1983–1998.

Member of the Supervisory Board and Member of the Nomination Committee of Mercedes-Benz Group AG. Member of the Board of Directors of Aalto University. Senior Advisor of DevCo Partners Oy. Member of the Board of Directors of Demos Helsinki. Vice Chair of the Board of Directors and Member of the Executive Committee of Technology Industries of Finland.

Member of the Supervisory Board of Deutsche Telekom AG 2012–2018. Chair of the Board of Directors of Fortum Corporation 2011–2018. Member of the Board of Directors of Akzo Nobel 2012–2017.

Vice Chair Kari Stadigh

b. 1955

Vice Chair of the Nokia Board since 2020. Board member since 2011. Chair of the Corporate Governance and Nomination Committee and member of the Personnel Committee.

Master of Science (Eng.), Helsinki University of Technology, Finland. Bachelor of Business Administration, Hanken School of Economics, Helsinki, Finland.

Group CEO and President of Sampo plc 2009–2019. Deputy CEO of Sampo plc 2001–2009. President of Sampo Life Insurance Company Limited 1999–2000. President of Nova Life Insurance Company Ltd 1996–1998. President and COO of Jaakko Pöyry Group 1991–1996.

Chair of the Board of Directors of Metso Outotec Corporation and member of the Remuneration and HR Committee. Chair of the Board of Directors of Saxo Bank Group.

Chair of the Board of Directors of Mandatum Life Insurance Company Limited 2001–2019. Chair of the Board of Directors of If P&C Insurance Holding Ltd 2002–2019. Member of the Board of Directors of Nordea Bank AB (publ) 2010–2018. Chair of the Board Risk Committee (BRIC) of Nordea Bank AB (publ) 2011–2018.

Bruce Brown

b. 1958

Nokia Board member since 2012. Chair of the Personnel Committee. Member of the Corporate Governance and Nomination Committee and the Technology Committee.

MBA Xavier University, the United States. BS (Chemical Engineering), Polytechnic Institute of New York University, the United States.

Chief Technology Officer of the Procter & Gamble Company 2008–2014. Various executive and managerial positions in Baby Care, Feminine Care, and Beauty Care units of the Procter & Gamble Company since 1980 in the United States, Germany and Japan.

Member of the Board of Directors, Chair of the Compensation Committee and member of the Nominating and Corporate Governance Committee of the Glatfelter Company.

Member of the Board of Directors, the Audit Committee and the Compensation Committee of Medpace Inc 2016–2019. Member of the Board of Directors of Agency for Science, Technology & Research (A*STAR) in Singapore 2011–2018.

Thomas Dannenfeldt

b. 1966

Nokia Board member since 2020. Member of the Audit Committee and the Technology Committee.

Degree in Mathematics, University of Trier, Germany.

Chief Financial Officer of Deutsche Telekom AG 2014–2018. Chief Financial Officer of Deutsche Telekom’s German operations 2010–2014. Various operational positions (sales, marketing, customer care, finance and procurement in fixed and mobile business, national and international positions) at Deutsche Telekom 1992–2010.

Chair of the Supervisory Board of Ceconomy AG and Chair of the Presidential Committee, Nomination Committee and Mediation Committee. Member of the Board of Advisors at axxessio GmbH.

Member of the Board of Directors of T-Mobile US 2013–2018 and Buy-In 2013–2018. Chair of the Board of Directors of T-Systems International 2013–2018 and EE 2014–2016.

Jeanette Horan

b. 1955

Nokia Board member since 2017. Member of the Audit Committee and the Technology Committee.

MBA, Business Administration and Management, Boston University, the United States. BSc, Mathematics, University of London, the United Kingdom.

Various executive and managerial positions at IBM 1998–2015. Vice President of Digital Equipment Corporation 1994–1998. Vice President, Development of Open Software Foundation 1989–1994.

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Member of the Supervisory Board at Wolters Kluwer, and the Chair of the Remuneration Committee. Member of the Board of Advisors at Jane Doe No More, a non-profit organization. Member of the Board of Directors of the Ridgefield Symphony Orchestra, a non-profit organization.

Member of the Board of Advisors of Cybereason 2017–2018. Member of the Board of Directors of West Corporation 2016–2017 and Microvision 2006–2017.

Edward Kozel

b. 1955

Nokia Board member since 2017. Chair of the Technology Committee and member of the Audit Committee.

Degree in Electrical Engineering and Computer Science, University of California, the United States.

President and CEO of Range Networks 2013–2014. Owner of Open Range 2000–2013. Chief Technology and Innovation Officer and member of the Board of Management of Deutsche Telekom 2010–2012. CEO of Skyrider 2006–2008. Managing Director of Integrated Finance 2005–2006. Senior Vice President, Business development and Chief Technology Officer and Board member of Cisco 1989–2001.

Member of the Advisory Board at Telia Ventures.

Various Board memberships in 1999–2009.

Søren Skou
b. 1964
CEO of A.P. Møller - Mærsk A/S. Nokia Board member since 2019. Member of the Personnel Committee.

MBA (honours), IMD, Switzerland. Business Administration, Copenhagen Business School, Denmark. Maersk International Shipping Education (M.I.S.E.).

Chief Executive Officer of Maersk Line 2012–2016. Chief Executive Officer of Maersk Tankers 2001–2011. Variety of executive roles, senior positions and other roles at A.P. Møller - Mærsk since 1983.

Member of The European Round Table for Industry.

Carla Smits-Nusteling

b. 1966

Nokia Board member since 2016. Chair of the Audit Committee and member of the Corporate Governance and Nomination Committee.

Master’s Degree in Business Economics, Erasmus University Rotterdam, the Netherlands. Executive Master of Finance and Control, Vrije University Amsterdam, the Netherlands.

Member of the Board of Directors and Chief Financial Officer of KPN 2009–2012. Various financial positions in KPN 2000–2009. Various financial and operational positions in TNT/PTT Post 1990–2000.

Chair of the Board of Directors of TELE2 AB. Member of the Board of Directors, Chair of the Audit Committee and member of the Remuneration and Nomination Committee of Allegro.eu SA. Member of the Board of Directors of the Stichting Continuïteit Ahold Delhaize (SCAD) foundation. Lay Judge in the Enterprise Court of the Amsterdam Court of Appeal since 2015.

Member of the Supervisory Board and Chair of the Audit Committee of ASML 2013–2021. Member of the Management Board of the Unilever Trust Office 2015–2019.

Operations of the Board of Directors

The Board represents and is accountable to the shareholders of Nokia. While its ultimate statutory accountability is to the shareholders, the Board also takes into account the interests of Nokia’s other stakeholders. The Board’s responsibilities are active, not passive, and include the responsibility to evaluate the strategic direction of Nokia, its management policies and the effectiveness of the implementation of such by the management on a regular basis. It is the responsibility of the members of the Board to act in good faith and with due care, so as to exercise their business judgment on an informed basis, in a manner that they reasonably and honestly believe to be in the best interests of Nokia and its shareholders. In discharging this obligation, the members of the Board must inform themselves of all relevant information reasonably available to them. The Board and each Board Committee also have the power to appoint independent legal, financial or other advisors as they deem necessary. The Company will provide sufficient funding to the Board and to each Committee to exercise their functions and provide compensation for the services of their advisors.

The Board is ultimately responsible for, and its duties include, monitoring and reviewing Nokia’s financial reporting process, the effectiveness of related control and audit functions and the independence of Nokia’s external auditor, as well as monitoring the Company’s statutory audit. The Board’s responsibilities also include overseeing the structure and composition of our top management and monitoring legal compliance and the management of risks related to our operations. In doing so, the Board may set annual ranges and/or individual limits for capital expenditures, investments and divestitures and other financial and non-financial commitments that may not be exceeded without a separate Board approval.

In risk management, the Board’s role includes risk analysis and assessment in connection with financial, strategy and business reviews, updates and decision-making proposals. Risk management policies and processes are an integral part of Board deliberations and risk-related updates are provided to the Board on a recurring basis. For a more detailed description of our risk management policies and processes, refer to “Risk management, internal control and internal audit functions at Nokia—Main features of risk management systems”.

The Board has the responsibility for appointing and discharging the President, the Chief Executive Officer, Chief Financial Officer and Chief Legal Officer. Since August 2020, Pekka Lundmark has served as the President and CEO. His rights and responsibilities include those allotted to the President under Finnish law and he also chairs the Group Leadership Team.

The Board approves and the independent directors of the Board confirm the compensation and terms of employment of the President and CEO, subject to the requirements of Finnish law, upon the recommendation of the Personnel Committee of the Board. The compensation and terms of employment of the other Group Leadership Team members are approved by the Personnel Committee upon the recommendation of the President and CEO.

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Board oversight of environmental and social activities and governance practices (ESG)

Under our Corporate Governance Guidelines, the Board evaluates Nokia’s environmental and social activities and governance practices (ESG), related risks and target setting as well as their implementation and effectiveness in the Company. In 2021, the Board approved the select key ESG targets on climate change and diversity included in the short-term incentive program and also reviewed the evolving ESG requirements and expectations, investor feedback and the disclosure approach. In addition, the Board Committees monitor environmental and social developments and activities in the Company in their respective areas of responsibilities. During 2021, the Audit Committee’s responsibilities included, amongst others, the implementation planning of new climate and other sustainability reporting requirements, as well as oversight of the ethics and compliance program and cybersecurity risks and maturity. The Audit Committee also annually reviews sustainability disclosures as well as the use of conflict minerals in Nokia’s products presented in the annual reports and the related regulatory filings. The Personnel Committee assists the Board in the incorporation of the ESG-related metrics in the incentive structures and oversees the human capital management, including personnel policies and practices related to Nokia culture, employee wellbeing, diversity, recruiting, development and retention. Corporate Governance and Nomination Committee assesses and advises the Board in the environmental, social and governance (ESG) related activities and practices aiming to enhance governance structure supporting them. The Technology Committee reviews how sustainability is embedded into our technology strategy and roadmaps.

Board evaluation

In line with our Corporate Governance Guidelines, the Board conducts an annual performance evaluation, which also includes evaluation of the Board Committees’ work, the Board and Committee Chairs and individual Board members. The Board evaluation is conducted as a self-evaluation while an external evaluator is periodically engaged. Feedback is also requested from selected members of management as part of the Board evaluation process. Each year, the results of the evaluation are discussed and analyzed by the entire Board and improvement actions are agreed based on such discussion. In 2021, the evaluation process was carried out by an external evaluator and included both a written questionnaire and interviews.

Directors’ attendance at the Board and Committee meetings in 2021 is set forth in the table below:

Additionally, many of the directors attended, as non-voting observers, meetings of a Committee of which they were not a member.

Directors meet without the management in connection with each regularly scheduled meeting. According to Board practices, meetings without management present are only attended by non-executive directors. These meetings are chaired by the non-executive Chair of the Board. In case the non-executive Chair of the Board is unable to chair these meetings, the non-executive Vice Chair of the Board chairs the meeting. Additionally, the independent directors would meet separately at least once annually. In 2021, all members of the Board were non-executive and determined to be independent from Nokia and significant shareholders under the Finnish corporate governance standards and the rules of the NYSE.

In the continued effort to prevent the spread of the COVID-19 pandemic, the Board of Directors resolved pursuant to the temporary legislation approved by the Finnish Parliament on 3 October 2020, to hold the Annual General Meeting 2021 without the presence of shareholders, their proxy representatives, the Board and the senior management. Only the Chair of the Board Sari Baldauf and the President and CEO Pekka Lundmark were present in person.

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The Audit Committee

The Committee consists of a minimum of three members of the Board who meet all applicable independence, financial literacy and other requirements as stipulated by Finnish law and the rules of Nasdaq Helsinki and the NYSE. As of 8 April 2021, the Audit Committee has consisted of the following four members of the Board: Carla Smits-Nusteling (Chair), Thomas Dannenfeldt, Jeanette Horan and Edward Kozel.

The Committee is responsible for assisting the Board in the oversight of:

In discharging its oversight role, the Audit Committee has full access to all Company books, records, facilities and personnel. The Audit Committee also maintains procedures for the receipt, retention and treatment of complaints received by Nokia regarding accounting, internal controls, or auditing matters and for the confidential, anonymous submission by our employees of concerns relating to accounting or auditing matters. Nokia’s disclosure controls and procedures, which are reviewed by the Audit Committee and approved by the President and CEO and the Chief Financial Officer, as well as the internal controls over financial reporting, are designed to provide reasonable assurance regarding the quality and integrity of Nokia’s financial statements and related disclosures. For further information on internal control over financial reporting, refer to “Risk management, internal control and internal audit functions at Nokia–Description of internal control procedures in relation to the financial reporting process”.

Under Finnish law, an external auditor is elected by a simple majority vote of the shareholders at the Annual General Meeting for one year at a time. The Audit Committee prepares the proposal to the shareholders, upon its evaluation of the qualifications and independence of the external auditor, of the nominee for election or re-election. Under Finnish law, the fees of the external auditor are also approved by the shareholders by a simple majority vote at the Annual General Meeting. The Committee prepares the proposal to the shareholders in respect of the fees of the external auditor, and approves the external auditor’s annual audit fees under the guidance given by the Annual General Meeting. For information about the fees paid to Nokia’s external auditor, Deloitte Oy, during 2021 refer to “Auditor fees and services” below.

The Board has determined that all members of the Audit Committee, including its Chair, Carla Smits-Nusteling, are “audit committee financial experts” as defined in the requirements of Item 16A of the Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (SEC). Ms. Smits-Nusteling and each of the other members of the Audit Committee are “independent directors” as defined by Finnish law, the Finnish Corporate Governance Code and in Section 303A.02 of the NYSE Listed Company Manual.

The Audit Committee meets a minimum of four times a year. The Committee meets separately with the representatives of Nokia’s management, heads of the internal audit, and ethics and compliance functions, and the external auditor in connection with each regularly scheduled meeting. The head of the internal audit function has, at all times, direct access to the Audit Committee, without the involvement of management.

Audit Committee pre-approval policies and procedures

The Audit Committee of the Board is responsible, among other matters, for oversight of the external auditor’s independence, subject to the requirements of applicable legislation. The Audit Committee has adopted a policy regarding an approval procedure of audit services performed by the external auditors of Nokia Group and permissible non-audit services performed by the principal external auditor of the Nokia Group (the “Pre-approval Policy”).

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Under the Pre-approval Policy, proposed services either: (i) may be pre-approved by the Audit Committee in accordance with certain service categories described in the Pre-approval Policy (general pre-approval); or (ii) require the specific pre-approval of the Audit Committee (specific pre-approval). The Pre-approval Policy sets out the audit, audit-related, tax and other services that have received the general pre-approval of the Audit Committee. All other audit, audit-related (including services related to internal controls and significant mergers and acquisitions projects), tax and other services are subject to specific pre-approval by the Audit Committee. All service requests concerning generally pre-approved services are submitted to an appointed Audit Committee delegate within management, who determines whether the services are within the services generally pre-approved services. The Pre-approval Policy is subject to annual review by the Audit Committee.

The Audit Committee establishes budgeted fee levels annually for each of the categories of audit and non-audit services that are pre-approved under the Pre-approval Policy, namely, audit, audit-related, tax and other services. At each regular meeting of the Audit Committee, the auditor provides a report in order for the Audit Committee to review the services that the auditor is providing, as well as the cost of those services.

The Corporate Governance and Nomination Committee

The Committee consists of three to five members of the Board who meet all applicable independence requirements as stipulated by Finnish law and the rules of Nasdaq Helsinki and the NYSE. As of 8 April 2021 the Corporate Governance and Nomination Committee has consisted of the following four members of the Board: Kari Stadigh (Chair), Sari Baldauf, Bruce Brown and Carla Smits-Nusteling.

The Committee fulfills its responsibilities by:

The Committee has the power and practice to appoint a recruitment firm to identify appropriate new director candidates.

The Personnel Committee

The Committee consists of a minimum of three members of the Board who meet all applicable independence requirements as stipulated by Finnish law and the rules of Nasdaq Helsinki and the NYSE. As of 8 April 2021 the Personnel Committee has consisted of the following four members of the Board: Bruce Brown (Chair), Sari Baldauf, Søren Skou and Kari Stadigh.

The Committee has overall responsibility for evaluating, resolving and making recommendations to the Board regarding:

The Committee is responsible for preparing the Remuneration Policy, including Nokia’s compensation philosophy and principles and ensuring that the Company’s compensation programs are performance-based, designed to contribute to long-term shareholder value creation in line with shareholders’ interests, properly motivate management, are aligned with the Remuneration Policy as well as support overall corporate strategies.

The Committee also oversees human capital management and periodically reviews the personnel policies and practices of Nokia related to human capital management and social responsibilities relating to its employees , including Company culture, occupational safety, employee wellbeing, morale, diversity, equity and inclusion, talent management and development, succession planning, resourcing, recruiting , attrition, retention and employee engagement.

The Technology Committee

The Committee consists of a minimum of three members of the Board who meet applicable independence requirements as stipulated by Finnish law and the rules of Nasdaq Helsinki and the NYSE and have such skills in innovation, technology and science matters as the Board determines adequate from time to time. As of 8 April 2021 the Technology Committee has consisted of the following four members of the Board: Edward Kozel (Chair), Bruce Brown, Thomas Dannenfeldt and Jeanette Horan.

In its dialogue with and provision of opinions and advice to the management, the Committee will periodically review:

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Group Leadership Team and the President and CEO

We have a Group Leadership Team that is responsible for the operative management of Nokia. The Board appoints the Chair of the Group Leadership Team. The Group Leadership Team is chaired by the President and CEO. The President and CEO’s rights and responsibilities include those allotted to the President under Finnish law.

On 31 December 2021, the Group Leadership Team consisted of 11 members, including the President and CEO, representing eight different nationalities. In total 27% of the Group Leadership Team members were female and 9% non-binary.

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Biographical details of the current members of the Nokia Group Leadership Team

Pekka Lundmark

b. 1963

President and Chief Executive Officer (CEO) since 2020. Rejoined Nokia in 2020.

Master of Science, Department of Technical Physics, Helsinki University of Technology, Finland.

President and CEO, Fortum Corporation 2015–2020. President and CEO, Konecranes Plc 2005–2015 and Group Executive Vice President 2004–2005. President and CEO, Hackman Oyj Abp 2002–2004. Managing Partner, Startupfactory 2000–2002. Various executive positions at Nokia 1990–2000.

Commissioner, Broadband Commission for Sustainable Development. Member of the Board, Research Institute of the Finnish Economy (ETLA) and Finnish Business and Policy Forum (EVA). International Member of the Academy, Royal Swedish Academy of Engineering Sciences (IVA). Member of the Board, Finnish Athletics Federation.

Chairman of the Board, Confederation of Finnish Industries, 2019–2020. Member of the Board, East Office of Finnish Industries, 2009–2020. Chairman of the Board, Finnish Energy, 2016–2018.

Nassib Abou-Khalil

b. 1972

Chief Legal Officer (CLO). Group Leadership Team member since 2019. Joined Nokia in 2014.

Bachelor of Arts (Political Sciences), Civil Law (LL.L.), Common Law (LL.B.) and Master of Law (LL.M), University of Ottawa, Canada.

Deputy Chief Legal Officer, Business, Nokia 2019. General Counsel, Customer Operations, Nokia 2016–2019. Head of Legal & compliance, MEA, Nokia 2014–2015. Head of Public Policy, Europe, Middle East & Africa, and General Counsel, Middle East & Africa, Yahoo!, 2010–2014. Regional Counsel, Middle East & Africa and India, GE Oil & Gas, 2007–2010. Regulatory Counsel, Etisalat, 2006–2007. Various legal counsel roles, TMF Netherlands 2002–2006. Legal articling, Fasken Martineau 1999–2001.

Member of the Board, Vice Chair of the Governance Committee and Member of the Risk Committee, Global Legal Entity Foundation (GLEIF).

Nishant Batra
b. 1978
Chief Strategy and Technology Officer (CSTO). Group Leadership Team member since 2021. Joined Nokia in 2021.

MBA from INSEAD. Master’s degree in Telecommunications and a master’s degree in Computer Science, Southern Methodist University, Dallas, the United States. Bachelor’s degree in Computer Applications, Devi Ahilya University, Indore, ‎Madhya Pradesh‎, India.

Previously Executive Vice President and Chief Technology Officer, Veoneer, Inc. 2018–2021. Prior to Veoneer Inc. held several senior positions at Ericsson, 2006–2016 in the United States, Sweden and India.

Independent member of the Board of Directors of Sensys Gatso Group.

Ricky Corker

b. 1967

Chief Customer Experience Officer (CCXO). Group Leadership Team member since 2019. Joined Nokia in 1993.

Bachelor in Communications and Electronic Engineering from the Royal Melbourne Institute of Technology, Australia.

President of Customer Operations, Americas, Nokia, 2019–2020. Executive Vice President and President of North America, Nokia, 2011–2018. Head of Asia Pacific, Nokia Siemens Networks, 2009–2011. Head of Asia North Region, Nokia Siemens Networks, 2008–2009. Head of Hutchison Global Customer Business Team, Nokia Siemens Networks, 2007–2008. Vice President Asia Pacific, Nokia Networks, 2005–2007. Lead Sales Director Asia Pacific, Nokia Networks, 2004–2005. Account Director Telstra, Nokia Networks, 2002–2003. Account Director Vodafone Australia and New Zealand, and Sales Director Vodafone Asia Pacific Customer Business Team, Nokia Networks, 2001–2002. Commercial Director Global Accounts British Telecom, Nokia Networks, 2001. Senior sales and marketing positions at Nokia, 1993–2001.

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Federico Guillén

b. 1963

President of Network Infrastructure. Group Leadership Team member since 2016. Joined Nokia in 2016.

Degree in Telecommunications Engineering, ETSIT at Universidad Politécnica de Madrid, Spain. Master’s degree in Switching & Communication Architectures, ETSIT at Universidad Politécnica de Madrid, Spain. Master’s Degree in International Management, ESC Lyon and Alcatel, France.

President of Customer Operations, Europe, Middle East & Africa and Asia Pacific, Nokia, 2018–2020. President of Fixed Networks, Nokia, 2016–2018. President of Fixed Networks, Alcatel-Lucent, 2013–2016. President and Chief Senior Officer of Alcatel-Lucent Spain and Global Account Manager Telefónica, Alcatel-Lucent, 2009–2013. Vice President Sales of Vertical Market Sales in Western Europe, Alcatel-Lucent, 2009. Head of Regional Support Center, Fixed Access Division for South Europe, Middle East & Africa, India and Caribbean & Latin America, Alcatel-Lucent, 2007–2009. President and Chief Senior Officer, Alcatel Mexico and Global Account Manager, Telmex, 2003–2007. Various R&D, portfolio and sales management positions with Telettra in Spain, and then with Alcatel in Spain, Belgium and the United States 1989–2003.

Jenni Lukander

b. 1974

President of Nokia Technologies. Group Leadership Team member since 2019. Joined Nokia in 2007.

Master of Laws, University of Helsinki, Finland.

Senior Vice President, Head of Patent Business, Nokia 2018–2019. Vice President, Head of Patent Licensing, Nokia 2018. Vice President, Head of Litigation and Competition Law, Nokia 2016–2018. Director, Head of Regulatory and Competition Law, Nokia 2015–2016. Director, Head of Competition Law, Nokia 2011–2015. Senior Legal Counsel, Nokia 2007–2011. Visiting lawyer, Nokia, 2001. Lawyer, Roschier Ltd. 1999–2007.

Raghav Sahgal

b. 1962

President of Cloud and Network Services. Group Leadership Team member since 2020. Joined Nokia in 2017.

Master of Science in Computer Systems Management, University of Maryland, the United States. Bachelor of Science in Computer Engineering, Tulane University, New Orleans, the United States. Executive Business Certificate in General Management, Harvard University, the United States.

President of Nokia Enterprise, 2020. Senior Vice President, Nokia Software, 2017–2020. President, NICE Ltd. Asia Pacific and the Middle East, 2010–2017. Advisory Board Member, Orga Systems, 2010–2014. Vice President, Communications Business Unit, Asia Pacific & Japan, Oracle, 2008–2010. Chief Business Officer, Comverse, 2005–2006. Executive Vice President, Asia Pacific, CSG, 2002–2005. Vice President, Software Products Group Asia Pacific, Lucent Technologies, 2000–2002.

Melissa Schoeb

b. 1968

Chief Corporate Affairs Officer (CCAO). Group Leadership Team member since 2021. Joined Nokia in 2021.

Bachelor of Arts in International Relations and Spanish, University of Mary Washington, Virginia, the United States. Fellowship Recipient, Four Freedoms Foundation, Rome, Italy.

Vice President, Corporate Affairs, Occidental, 2017–2021. Vice President, Communications and Public Affairs, Occidental, 2012–2017. Senior Director, Communications and Public Affairs, Occidental, 2007–2012. Senior Vice President and Senior Partner, General Manager and other senior positions, FleishmanHillard 2002–2007. Director of Global Communications, Nortel Networks, 2000–2002. Vice President, Technology, FleishmanHillard, 1998–2000. Business Director, The VenCom Group Inc, 1995–1997. Consultant, London United Kingdom and Washington DC, the United States, Gemini Consulting, 1991–1995.

Member of the Arthur Page Society and The Seminar. Member of Mary Washington University College of Business Executive Advisory Board.

Tommi Uitto

b. 1969

President of Mobile Networks. Group Leadership Team member since 2019. Joined Nokia in 1996.

Master’s degree in industrial management, Helsinki University of Technology, Finland. Master’s degree in operations management, Michigan Technological University, the United States.

Senior Vice President, Global Product Sales, Mobile Networks, Nokia 2016–2018. Senior Vice President, Global Mobile Broadband Sales, Customer Operations, Nokia Networks, 2015–2016. Senior Vice President, West Europe, Customer Operations, Nokia Networks, 2013–2015. Head of Radio Cluster (Senior Vice President), Mobile Broadband, Nokia Siemens Networks, 2012–2013. Head of Global LTE Radio Access Business Line (Vice President) and Quality, Mobile Broadband, Nokia Siemens Networks, 2011–2012. Head of Product Management, Network Systems, Nokia Siemens Networks, 2010. Head of Product Management, Radio Access, Nokia Siemens Networks, 2009. Head of WCDMA/HSPA and Radio Platforms Product Management, Nokia Siemens Networks, 2008. Head of WCDMA/HSPA Product Line Management, Nokia Siemens Networks, 2007. General Manager, Radio Controller Product Management, Nokia Networks, 2005–2007. Director, Sales & Marketing (Lead Sales Director), France Telecom/Orange Nokia Networks, 2002–2005. Operations Director, Northeast Europe, Central & Eastern Europe and Middle East, Nokia Networks, 1999–2002.

Stephanie Werner-Dietz

b. 1972
Chief People Officer (CPO). Group Leadership Team member since 2020. Joined Nokia in 1998.

Diploma in Applied business languages (Chinese) and International business studies, University of Applied Sciences, Bremen, Germany.

Vice President, Global HR Center of Expertise, Nokia, 2018–2019. Vice President, Business HR Head for Nokia Corporate Functions, Nokia, 2016–2018. Head of Business HR for Chief Finance and Operations Officer/Organization, Nokia, 2012–2015. Head of Nokia Siemens Networks Business Talent, Leadership & Organization Development, Nokia Siemens Networks, 2011–2012. Head of Business HR, Nokia Radio Access, 2007–2011. Head of HR Emerging Markets, Romania, Nokia, 2007. Senior HR Manager, Strategic Projects, US, Nokia, 2004–2006. HR Manager Global Platforms, Nokia, 2001–2004. HR Country Manager for the Philippines, Nokia, 1999–2001. HR Manager, Nokia Networks for Switzerland, Nokia, 1998–1999.

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Marco Wirén
b. 1966

Chief Financial Officer (CFO). Group Leadership Team member since 2020. Joined Nokia in 2020.

Master’s degree in Business Administration, University of Uppsala, Sweden. Studies in management and strategic leadership, including at Duke Business School, the United States, IMD, Switzerland and Stockholm School of Economics, Sweden.

President, Wärtsilä Energy and Executive Vice President, Wärtsilä Group, 2018–2020. Executive Vice President and CFO, Wärtsilä Group, 2013–2018. Executive Vice President and CFO, SSAB Group, 2008–2013. Vice President, Business Control, SSAB Group, 2007–2008. CFO, Eltel Networks, 2006–2007. Vice President of Business development, Eltel Networks, 2004–2005. Head of Service Division, Eltel Networks, 2003–2004. Vice President, Corporate Development, Eltel Networks, 2002–2003. Vice President, Strategy & Business Development, NCC Group, 1999–2002. Head of Strategic Planning, NCC Group, 1998–1999. Group Controller, NCC Group, 1996–1998.

Vice Chair of the Board of Directors and Chair of the Audit Committee, Neste Corporation.

Summary of changes in the Group Leadership Team in 2021 and thereafter

During 2021, the Group Leadership Team was complemented with two new appointments:

Furthermore, the following changes took place within the Group Leadership Team:

Share ownership of the Board of Directors and the Group Leadership Team

The following table sets forth the number of shares and American Depositary Shares (ADS) held by the members of the Board as at 31 December 2021, when they held a total of 1 116 075 shares and ADSs in Nokia, which represented approximately 0.02% of our total shares and voting rights excluding shares held by Nokia Group.

(1)   The number of shares or ADSs includes shares and ADSs received as director compensation as well as shares and ADSs acquired through other means. Stock options or other equity awards that are deemed as being beneficially owned under the applicable SEC rules are not included.

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The following table sets forth the number of shares and ADSs held by the President and CEO and the other members of the Group Leadership Team in office as at 31 December 2021, when they held a total of 2 724 205 shares and ADSs in Nokia, which represented approximately 0.05% of our total shares and voting rights excluding shares held by Nokia Group.

(1)   As at 31 December 2021, no ADSs were held by the Group Leadership Team members. The number of shares or ADSs includes shares and ADSs received as compensation as well as shares and ADSs acquired through other means. Stock options or other equity awards that are deemed as being beneficially owned under the applicable SEC rules are not included.

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Risk management, internal control and internal audit functions at Nokia

Main features of risk management systems

We have a systematic and structured approach to risk management. Key risks and opportunities are primarily identified against business targets either in business operations or as an integral part of strategy and financial planning. Risk management covers strategic, operational, financial, compliance and hazard risks. Key risks and opportunities are analyzed, managed and monitored as part of business performance management with the support of risk management personnel and the centralized Enterprise Risk Management function.

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The principles documented in the Nokia Enterprise Risk Management Policy, which is approved by the Audit Committee of the Board, require risk management and its elements to be integrated into key processes. One of the core principles is that the business or function head is also the risk owner, although all employees are responsible for identifying, analyzing and managing risks, as appropriate, given their roles and duties. Our overall risk management concept is based on managing the key risks that would prevent us from meeting our objectives, rather than focusing on eliminating all risks. In addition to the principles defined in the Nokia Enterprise Risk Management Policy, other key policies reflect implementation of specific aspects of risk management.

Key risks and opportunities are reviewed by the Group Leadership Team and the Board in order to create visibility on business risks as well as to enable prioritization of risk management activities. Overseeing risk is an integral part of the Board’s deliberations. The Board’s Audit Committee is responsible for, among other matters, risk management relating to the financial reporting process and assisting the Board’s oversight of the risk management function. The Board’s role in overseeing risk includes risk analysis and assessment in connection with financial, strategy and business reviews, updates and decision-making proposals.

Description of internal control procedures in relation to the financial reporting process

The management is responsible for establishing and maintaining adequate internal control over Nokia’s financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance to the management and the Board regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements.

The management conducts a yearly assessment of Nokia’s internal controls over financial reporting in accordance with the Committee of Sponsoring Organizations framework (the “COSO framework”, 2013) and the Control Objectives for Information and Related Technology (COBIT) framework of internal controls. The assessment is performed based on a top-down risk assessment of our financial statements covering significant accounts, processes and locations, corporate-level controls and information systems’ general controls.

As part of its assessment, the management has documented:

Further, the management has also:

In 2021, Nokia has followed the procedures as described above and has reported on the progress and assessments to the management and to the Audit Committee of the Board on a quarterly basis.

Description of the organization of the internal audit function

We also have an internal audit function that examines and evaluates the adequacy and effectiveness of our system of internal control. Internal audit reports to the Audit Committee of the Board. The head of the internal audit function has direct access to the Audit Committee, without involvement of the management. The internal audit staffing levels and annual budget are approved by the Audit Committee. All authority of the internal audit function is derived from the Board. The internal audit aligns to the business by business group and function.

Annually, an internal audit plan is developed with input from the management, taking into account key business risks and external factors. This plan is approved by the Audit Committee. Audits are completed across the business focusing on site level, customer level, business project level, IT system implementation, IT security, operations activities or at a Group function level. The results of each audit are reported to the management identifying issues, financial impact, if any, and the correcting actions to be completed. Quarterly, the internal audit function communicates the progress of the internal audit plan completion, including the results of the closed audits, to the Audit Committee.

Internal audit also works closely with our Ethics and Compliance office to review any financial concerns brought to light from various channels and, where relevant, works with Enterprise Risk Management to ensure priority risk areas are reviewed through audits.

In 2021, the internal audit plan was materially completed. Due to some Covid-19 impacts, a very small number of audits had to be rescheduled to 2022. The results of these reviews, as well as the rescheduling to 2022 were reported to the management and to the Audit Committee.

Related party transactions

We determine and monitor related parties in accordance with the International Accounting Standards (IAS 24, Related Party Disclosures) and other applicable regulations. We maintain information on our related parties as well as monitor and assess related party transactions. As a main principle, all transactions should be conducted at arm’s-length and as part of the ordinary course of business. In exceptional cases where these principles would be deviated from, Nokia would set up a separate process to determine the related parties in question and to seek relevant approvals in accordance with internal guidelines and applicable regulations.

Main procedures relating to insider administration

Our insider administration is organized according to the applicable European Union and Finnish laws and regulations. In addition, the Board of Directors has approved the Nokia Insider Policy, which sets out Nokia-wide rules and practices to ensure full compliance with applicable rules and that inside information is recognized and treated in an appropriate manner and with the highest integrity. The Nokia Insider Policy is applicable to all directors, executives and employees of the Company.

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Persons discharging managerial responsibilities

Nokia has identified members of the Board of Directors and the Group Leadership Team as persons discharging managerial responsibilities who, along with persons closely associated with them, are required to notify Nokia and the Finnish Financial Supervisory Authority of their transactions with Nokia’s financial instruments. Nokia publishes the transaction notifications.

In addition, according to the Nokia Insider Policy, persons discharging managerial responsibilities are obligated to clear with the Deputy Chief Legal Officer, Corporate, a planned transaction in Nokia’s financial instruments in advance. It is also recommended that trading and other transactions in Nokia’s financial instruments are carried out in times when the information available to the market is as complete as possible.

Closed window

Persons discharging managerial responsibilities are subject to a closed window period of 30 calendar days preceding the disclosure of Nokia’s quarterly or annual result announcements, as well as the day of the disclosure. During the closed window period, persons discharging managerial responsibilities are prohibited from dealing in Nokia’s financial instruments.

Nokia has imposed this closed window period also on separately designated financial reporting persons who are recurrently involved with the preparation of Nokia’s quarterly and annual results announcements. These persons are separately notified of their status as designated financial reporting persons.

Insider registers

Nokia does not maintain a permanent insider register. Insiders are identified on a case-by-case basis for specific projects and are notified of their insider status. Persons included in a project-specific insider register are prohibited from dealing in Nokia’s financial instruments until the project ends or is made public.

Supervision

Our insider administration’s responsibilities include internal communications related to insider matters and trading restrictions, setting up and maintaining our insider registers, arranging related trainings as well as organizing and overseeing compliance with the insider rules.

Violations of the Nokia Insider Policy must be reported to the Deputy Chief Legal Officer, Corporate. Nokia employees may also use channels stated in the Nokia Code of Conduct for reporting incidents involving suspected violations of the Nokia Insider Policy.

Auditor fees and services

Deloitte Oy, based in Helsinki, Finland, served as our auditor for the financial year ended 31 December 2021 and for the financial year ended 31 December 2020. The auditor is elected annually by our shareholders at the Annual General Meeting for the financial year commencing next after the election. On an annual basis, the Audit Committee of the Board prepares a proposal to the shareholders regarding the appointment of the auditor based upon its evaluation of the qualifications and independence of the auditor to be proposed for election.

The following table presents fees by type paid to Deloitte’s network of firms for the years ended 31 December:

(1)   Audit fees consist of fees incurred for the annual audit of the Group’s consolidated financial statements and the statutory financial statements of the Group’s subsidiaries.

(2)   Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Group’s financial statements or that are traditionally performed by the independent auditor, and include consultations concerning financial accounting and reporting standards; advice and assistance in connection with local statutory accounting requirements; due diligence related to mergers and acquisitions; and audit procedures in connection with investigations in the pre-litigation phase and compliance programs. They also include fees billed for other audit services, which are those services that only the independent auditor can reasonably provide, and include the provision of comfort letters and consents in connection with statutory and regulatory filings and the review of documents filed with the SEC and other capital markets or local financial reporting regulatory bodies.

(3)   Tax fees include fees billed for: (i) services related to tax compliance including preparation and/or review of tax returns, preparation, review and/or filing of various certificates and forms and consultation regarding tax returns and assistance with revenue authority queries; compliance reviews, advice and assistance on other indirect taxes; and transaction cost analysis; (ii) services related to tax audits; (iii) services related to individual compliance (preparation of individual tax returns and registrations for employees (non-executives), assistance with applying visa, residency, work permits and tax status for expatriates); (iv) services related to technical guidance on tax matters; (v) services related to transfer pricing advice and assistance with tax clearances; and (vi) tax consultation and planning (advice on stock-based remuneration, local employer tax laws, social security laws, employment laws and compensation programs and tax implications on short-term international transfers).

(4)   Other fees include fees billed for Company establishments; liquidations; forensic accounting, data security, other consulting services and reference materials and services.

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Compensation

This section sets out our remuneration governance, policies and how they have been implemented within Nokia. It includes our Remuneration Report where we provide disclosure of the compensation of our Board members and the President and CEO for 2021.

The content of the Remuneration Report, which will be presented to an advisory vote at the Annual General Meeting 2022, is detailed below. A standalone version is published on a stock exchange release.

Other compensation-related information provided alongside the Remuneration Report for 2021 is not subject to a vote at the Annual General Meeting 2022, but provides further information on the compensation policies applied within Nokia as well as on the compensation of the rest of the Group Leadership Team.

We report information applicable to executive compensation in accordance with Finnish regulatory requirements and with requirements set forth by the U.S. Securities and Exchange Commission that are applicable to us.

Highlights

Word from the Chair of the Personnel Committee of the Board

Dear Fellow Shareholder,

I am delighted to present this year’s compensation report, in a year that was transformational for Nokia and where Nokia reset itself and achieved strong financial performance with significantly improved profitability and cash generation. These results provide confidence that our new strategy, new operating model and new culture are delivering the types of results our shareholders expect.

Business context

The Letter from our President and CEO sets out more detail, with 2021 a year in which the new Nokia strategy delivered great results and our annual incentive plans paid out accordingly. Our performance was reflected in Nokia’s share price as well. Our continued use in 2021 of a long-term performance metric based on shareholder return ensures that shareholders and executives are aligned for the short and long term and there are direct links between executive compensation and shareholder value.

In 2021, we maintained the compensation approach set by the policy approved by shareholders in 2020 and applied to Mr. Lundmark when he was appointed. The Remuneration Report, and all elements of the compensation delivered in 2021, are fully consistent with the approved policy.

Strategy and compensation

At the core of Nokia’s philosophy lie two principles:

Shareholder outreach

I was delighted that 93% of votes cast at the Annual General Meeting in 2021 supported the remuneration report. During 2021 we met with 15 of our largest shareholders and a number of other key stakeholders, discussing a range of issues, primarily focused on governance and ESG. These meetings have helped to inform our views and strengthen our belief that ESG measures are a core component of our incentive plans.

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The Personnel Committee reviewed our compensation peer group and adjusted this to reflect a group better aligned with our new direction, strategy and market focus. Full details of the changes are presented later in this section; in summary, of the previous group of 14 companies we removed two telecoms companies and added a further 15 (mostly technology) companies giving a new peer group of 27 comparators.

CEO compensation

During 2021, there was no increase to Pekka Lundmark’s base salary and target incentives.

2021 remuneration outcomes

The 2021 Short-Term Incentive outcome for the President and CEO at 183% of overall target reflects Nokia’s excellent 2021 performance. The strong financial performance was, however, tempered by lower ESG outcomes, representing 56% of target for this portion of the annual incentive.

The 2019 Long-Term Incentive vested at the end of 2021. The outcome, at 53% of target, reflects the aggregate outcomes for the three-year performance period 2019–2021.

Share ownership requirement

Mr. Lundmark started his tenure with Nokia with a significant purchase of EUR 2.6 million of shares in 2020 and has continued to acquire Nokia shares during 2021. He now exceeds the shareholding requirement with a holding worth approximately five times his annual base salary. This is a sign of his commitment to and alignment with Nokia’s long-term success.

Short- and long-term incentives in 2022

Our 2022 incentive plans follow this structure, which is the same as 2021:

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The 2022 long-term incentive is based on performance over the life of the three-year plan from the date of the award. The metric is absolute total shareholder return (TSR) measured by dividend adjusted share price at the end of the performance period. By using this metric, we will incentivize executives to deliver the desired business results and support the restoration of the dividend and the transparency for participants to see how the plan is performing. We believe that absolute TSR is a more suitable metric than relative TSR given the Company’s turnaround phase where the most relevant benchmark is its own baseline.

Our compensation approach and structure is, has, and continues to play a key role in supporting Nokia’s reset and sustainable share price growth.

In the Remuneration Report, we also show a comparison of the development of compensation for the Board members and the President and CEO, against average employee remuneration and Nokia’s financial development over the last five years. The comparison shows a clear link between President and CEO pay and Company performance.
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Bruce Brown, Chair of the Personnel Committee

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Remuneration Policy

Nokia Corporation’s Remuneration Policy was supported at the Annual General Meeting 2020 receiving 86% of votes in favor. This policy remained in force during 2021. The information below is provided as a summary for ease of reference.

In addition to applying the Remuneration Policy to our President and CEO, the principles of our policy extend to the Group Leadership Team. This includes caps to equity award amounts and provisions related to clawback.

The Board regularly monitors the effectiveness of the measures used in our incentive plans to ensure that they align with and drive the strategy of the Company.

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Remuneration summary for the Board of Directors

The Board’s Corporate Governance and Nomination Committee periodically reviews the remuneration for the Chair and members of the Board against companies of similar size and complexity. The objective of the Corporate Governance and Nomination Committee is to enable Nokia to compete for the top-of-the-class Board competence in order to maximize the value creation for the shareholders. The Committee's aim is to ensure that the Company has an efficient Board comprised of international professionals representing a diverse and relevant mix of skills, experience, background and other personal qualities in line with the diversity principles established by the Board. Competitive Board remuneration contributes to the achievement of this target.

The Annual General Meeting resolves annually on the remuneration to the Chair and members of the Board. The Chair of the Board’s remuneration was last changed in 2008. The Board members’ annual fees were last changed in 2016 and prior to that in 2007. The structure of the Board remuneration for the current term of the Board is set out in the table below.

Remuneration for the term that began at the Annual General Meeting held on 8 April 2021 and ends at the close of the Annual General Meeting in 2022 consists of the following fees:

Proposals of the Board of Directors to the Annual General Meeting 2022 were published on 3 February 2022. To ensure the competitiveness of the Board remuneration and reflecting the fee development in Nokia’s global peer group, the Corporate Governance and Nomination Committee has recommended to the Board that the annual fees of Board members, save for the Chair, would be proposed to be increased with EUR 10 000. Other remuneration payable to the Board and Committee members would remain unchanged and thereby no additional annual fee is proposed to be paid to the members of the Corporate Governance and Nomination Committee or the Chair of the Board for her service in any of the Board Committees.

Consequently, on the recommendation of the Board’s Corporate Governance and Nomination Committee and in line with Nokia’s Remuneration Policy, the Board of Directors proposes to the Annual General Meeting 2022 that the annual fee payable for a term ending at the close of the next Annual General Meeting be as follows: EUR 440 000 for the Chair of the Board, EUR 195 000 for the Vice Chair of the Board, EUR 170 000 for each member of the Board, EUR 30 000 each for the Chairs of the Audit Committee and the Personnel Committee and EUR 20 000 for the Chair of the Technology Committee as an additional annual fee, EUR 15 000 for each member of the Audit Committee and Personnel Committee and EUR 10 000 for each member of the Technology Committee as an additional annual fee.

In order to align the interests of the Board members with those of the shareholders, it is proposed that, in line with the Company’s Corporate Governance Guidelines, approximately 40% of the annual fee be paid in Nokia shares either purchased from the market on behalf of the Board members or alternatively delivered as treasury shares held by the Company. The Board also proposes that members of the Board of Directors shall be compensated for travel and accommodation expenses as well as other costs directly related to Board and Board Committee work. The meeting fee, travel expenses and other expenses would be paid in cash.

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Remuneration summary for the President and CEO

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