It should be noted that Nokia and its businesses are exposed to various risks and uncertainties and certain statements herein that are not historical facts are forward-looking statements, including, without limitation, those regarding:

These statements are based on the management’s best assumptions and beliefs in light of the information currently available to it. Because they involve risks and uncertainties, actual results may differ materially from the results that we currently expect. We describe the risks and uncertainties that affect the Nokia Group or are relevant to all Nokia businesses at the beginning of this section and provide towards the end information on additional risks that are primarily related to the individual Nokia businesses: Nokia Networks, HERE and Nokia Technologies. Factors, including risks and uncertainties that could cause such differences include, but are not limited to:

as well as the risk factors specified on pages 74 to 89 of this annual report on Form 20-F under “Operating and financial review and prospects—Risk factors”. 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. Nokia does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

INTRODUCTION AND USE OF CERTAIN TERMS

Nokia Corporation is a public limited liability company incorporated under the laws of the Republic of Finland. In this document, any reference to “we,” “us,” “the Group” or “Nokia” means Nokia Corporation and its subsidiaries on a consolidated basis and which refers generally to Nokia’s continuing operations, except where we separately specify that the term means Nokia Corporation or a particular subsidiary or business segment only or the discontinued operations, and except that references to “our shares”, matter 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 January 1, 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, and references to “dollars”, “US dollars”, “USD” or “$” are to the currency of the United States. 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 rate of 1.2101 US dollars per euro, which was the noon buying rate in New York City for cable transfers in euro as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2014. No representation is made that the amounts have been, could have been or could be converted into US dollars at the rates indicated or at any other rates.

Nokia Corporation furnishes Citibank, N.A., as Depositary, with 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 as issued by the International Accounting Standards Board and in conformity with IFRS as adopted by the European Union (“IFRS”). 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 accounting principles generally accepted in the United States, 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 ADRs, evidencing ADS, and distributes to all record holders of ADRs 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 company.nokia.com/financials. This annual report on Form 20-F is also available at company.nokia.com/financials as well as on Citibank’s website at http://citibank.ar.wilink.com (enter “Nokia” in the Company Name Search). 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.

At Nokia, we’re excited by where technology will lead us. We’re reimagining a world where technology blends into our lives. Technology that works for us, discreetly yet magically in the background, enriching our lives.

But for some, this new technology world, where everything and everybody are connected, can be challenging. Fear of intrusion, technology that seems hard to understand or control, and the complexity of choice, can be overwhelming.

That’s why our focus is, and has always been, on people. We work together, with our partners, customers, and across our businesses, to create human technology that helps people thrive. Effortless, simple, and intuitive technology, designed to enable new and extraordinary experiences in people’s lives each day.

We see the possibilities of technology. The human possibilities.

Read more online: company.nokia.com

The year 2014 was one of fundamental change for Nokia, a new chapter in our storied history, which stretches back to the founding of a small paper mill in southern Finland in 1865. Following the sale of substantially all of our Devices & Services business to Microsoft (the “Sale of the D&S Business”), which was completed on April 25, 2014, Nokia emerged with three businesses – Nokia Networks, HERE and Nokia Technologies – and a significantly improved financial footing.

Nokia Networks provides trusted mobile connectivity infrastructure and services; HERE is our mapping and location intelligence business; and Nokia Technologies is our engine for future innovation and licensing. These three businesses are leaders in their respective fields, key participants in the rapidly

evolving world of technology which is as much about connecting things as about connecting people. We expect to see more than 50 billion connected things – devices, modules and sensors – by year 2025. The opportunity is extraordinary – not just for us, but for the world at large.

We have a powerful role to play in this increasingly connected world. We see ourselves as an enabler, opening and creating possibilities for our customers, partners and consumers. Modern-day Nokia’s focus is, and always has been, on connecting people. Thus, we aim to expand the human possibilities of technology.

Our focus

We are focused on three businesses: network infrastructure software, hardware and services, which we offer through Nokia Networks; mapping and location intelligence, which we provide through HERE; and advanced technology development and licensing, which we pursue through Nokia Technologies. Each of these businesses is a leader in its respective field.

Through our three businesses, we have a global presence with operations and research and development (“R&D”) facilities in Europe, North America and Asia, sales in approximately 140 countries, and we employ approximately 62 000 people. We are also a major investor in R&D, with expenditure through the three businesses amounting to more than EUR 2.5 billion in 2014.

Net sales 2014 by business

Net sales 2014 by region

Year-on-year change is in parentheses.

140+

Sales in over 140 countries in 2014

61 656

Employees at December 31, 2014

(2013: 55 244)

Nokia Networks

Nokia Networks is the largest of our businesses. As the world’s mobile broadband specialist, we help our customers to bring their subscribers unrivalled quality of experience, to maximize the value of their subscriber base and to run extremely efficient mobile networks.

Ranked third in terms of market share in mobile radio networks and telecommunications services, Nokia Networks is a significant player in its chosen markets and, with sales in over 120 countries, served by approximately 54 600 employees, it has the global reach and scale to deliver high-quality solutions to the largest operators.

Nokia Networks has more than 100 years of experience in telecommunications, from 2G to 3G to 4G (“LTE”) and now the emerging 5G, and it has always been — and intends to remain — at the cutting edge of mobile technology.

HERE

HERE is a global leader in the mapping and location intelligence business. HERE builds high-definition (“HD”) maps and combines them with cloud technology to enable rich, real-time location experiences in a broad range of connected devices from smartphones and tablets to wearables and vehicles.

In the automotive segment HERE is a clear leader, with its maps powering four out of five in-car navigation systems in North

America and Europe, and its location platform is used by leading internet companies.

All in all, more than 13 million cars were sold with HERE maps on board during 2014. HERE offers maps for more than 190 countries, drive navigation for 118 countries and live traffic information for 44 countries.

Nokia Technologies

Nokia Technologies is a leading innovator of the core technologies enabling the Programmable World, where everything and everyone will be connected. Nokia Technologies is expanding Nokia’s successful patent licensing program and licensing proprietary technologies to enable its customers to build better products.

Nokia Technologies is also helping customers leverage the value of the Nokia brand in the consumer device space, starting with the Nokia N1 Android^TM tablet.⁽²⁾

Finally, the Nokia Technologies incubation program focuses on developing new ideas and prototypes. All of these activities are supported by its world-class Nokia Labs R&D team, which is continuing more than two decades of Nokia leadership in multimedia, connectivity, sensing and material technologies as well as imaging, audio, web and cloud technologies.

The following table sets forth the summary key financial and non-financial information for the years ended December 31, 2014 and 2013 for Nokia’s Continuing operations. This data has been derived from our consolidated financial statements, which are included in this Annual Report on Form 20-F.

Net sales (€m)

Net cash (€m)

Net sales 2014

€12.7bn

Operating profit 2014

€170m

Diluted EPS 2014

€0.30

Net cash at December 31, 2014

€5bn

Diluted EPS (€)

The year 2014 was a remarkable turning point for Nokia – käännekohta, as the Finns would say, in the fullest sense of the term.

We moved from a position of weakness to one of strength; from losses to profits; from cash burn to cash generation; from rapidly narrowing options to a world where our future is bright and our challenge is not the lack of exciting opportunities, but rather choosing from among them.

In the first half of 2014, completing the sale of substantially all of our Devices & Services business to Microsoft was the primary focus, and this was done in April. In an ideal world, the Devices & Services business would have had a different fate, but we lost ground to other players who disrupted the sector. Given this, we chose to sell the Devices & Services business to Microsoft, a transaction that made particular sense in light of our earlier acquisition of Siemens’ share of what was then Nokia Siemens Networks.

These two transactions were central to the creation of the strong Nokia of today, a company with three powerful businesses, each a leader in their respective segments. Nokia Networks holds leading positions in most segments where it competes, including 4G; HERE is by far the strongest player in mapping services for the automotive industry; and Nokia Technologies continues to build and license one of the strongest and broadest patent portfolios in our industries.

Our full-year financial results are a testament to the potential of the new Nokia. For 2014, our diluted EPS grew sixfold versus 2013 to 0.30 euro cents; net sales of EUR 12.7 billion were roughly flat and our net cash position of EUR 5.0 billion remained very healthy despite returning some EUR 1.8 billion to shareholders. Momentum gathered in the second half of the year in particular, with all three businesses returning to growth.

Profitability was strong at Nokia Networks despite the heavy R&D investments necessary to build a product and services portfolio that now may very well be the most competitive in the history of the company. The power of that portfolio is reflected in the deals we won in 2014 with customers such as Bharti Airtel, China Mobile, T-Mobile and Vodafone. Our relentless focus on efficiency delivered hundreds of millions of euros in savings, some of which we reinvested in future-oriented innovation as we move to capture opportunities in LTE, our unique small cells offering and the transition to virtualization and the Telco Cloud.

€0.30

Diluted EPS for Continuing operations in 2014

€1.8bn

Returned to shareholders in 2014

€5bn

Net cash on December 31, 2014

HERE returned to growth in the second half of the year. In October, we announced we would refocus the business’ strategy on automotive, where momentum is excellent; on enterprise, which is small but growing fast; and on location content for mobile device vendors and internet players. As part of that shift, we deprioritized monetizing our direct-to-consumer business, but will still deploy apps and other consumer offerings to support our priority areas. In fact, HERE’s Android app has been downloaded extensively and reviews have been very positive. We are also improving HERE’s operational efficiency, drawing on best practices from across the company.

Nokia Technologies took steps to monetize its remarkable patent portfolio, closing new licensing deals in 2014 with both existing and new customers, many of which are from outside the mobile industry. These deals included a settlement with HTC in February 2014 and the closing of a license agreement with Microsoft in April 2014. We also launched our first brand-licensed product, the Nokia N1 Android tablet. In 2014, we accelerated investments in Nokia Technologies to ensure we have the pipeline of innovation and business infrastructure needed for future success.

Just as important as what we delivered in the year is how we are positioned for the future. We refreshed the strategies for each of our three businesses; put in place the Nokia Business System to help optimize our investments, manage performance and develop our talent and future leaders; and honed our portfolio management approach to allocate resources based on their value creation potential. With these actions, I believe that we are well positioned for future value creation.

While I am pleased with the above achievements, what I am most proud of is our work to redefine the company’s values and outline the position to which we aspire.

Let me start with our values: respect, achievement, renewal and challenge. These four simple words feel natural to who we are at Nokia, and can inspire us for the future. They can provide a foundation for making decisions in the absence of perfect information, and as a guide for behavior, for decision-making, for action. Employees have responded to the values with enthusiasm, and already they are part of the “glue” that brings the new Nokia together.

Then, our position in the world. As we look to the future, our three businesses are focused on a technological shift that we believe will be as profound as the creation of the internet itself. We are entering a hyper-connected world where almost all people and tens of billions of devices are all linked together in extraordinary ways; ways that can unleash human potential and well-being like never before. That is why, at Nokia, we are focused on the human possibilities of technology; on technology grounded in real human needs that is truly in the service of people.

In 2015, Nokia will celebrate its 150-year anniversary, a longevity that few other companies can match. It is also the 150th anniversary of the birth of Finland’s national composer, Jean Sibelius, who once said: “Never write an unnecessary note. Every note must live.” That fits well with our belief at Nokia. Our ambitions are big and we are committed to building on the warmth and passion that continue to live on for our brand and our company. But we are tempered by pragmatism and a belief in getting the maximum benefit for our shareholders from every euro that we spend.

That is our challenge as a company, and my challenge as its President and Chief Executive Officer. It was a great honor to be appointed Nokia President and CEO in 2014 after an almost 20-year career with the company. My commitment to all of you is to do everything that I can to lead Nokia to future success in the right way: with humility, a commitment to high ethical standards, and a deep belief in the power of our values and the diversity of the world in which we live.

Rajeev Suri

President and CEO

Nokia’s 150-year anniversary

As we celebrate Nokia’s 150th anniversary, our path has been one of adapting to shifts in markets and technologies. It has taken us from one paper mill, through participation in many sectors, to our strategic decision to focus on telecommunications. This heritage of change and innovation will continue to shape our future.

Read more on page 120.

“...what I am most proud of is our work to redefine the company’s values and outline the position to which we aspire.”

The world is on the edge of a tipping point in technology; a tipping point that will have an impact as profound as the creation of the internet itself.

Today, most humans are connected. Now, we are quickly entering a totally new phase; a phase that is all about connecting things in addition to people.

By 2025, we believe there will be more than 50 billion connected things in the form of devices, modules and sensors. In time, all these connected things will come together in extraordinary ways. Software will be the glue, analytics and intelligence will bring meaning, and automated action will bring simplicity and efficiency.

The human benefits have the potential to be extraordinary:

Long-term leadership targeted in three key areas

We believe that over the next ten years, billions of connected devices will converge into intelligent and programmable systems that will have the potential to improve lives in a vast number of areas including transportation and resource consumption, learning and work, health and wellness, and many more.

We believe we have a powerful role to play in this increasingly connected world. We see ourselves as a technology leader, opening and creating possibilities for our customers, partners and consumers. Modern-day Nokia’s focus is, and always has been, on connecting people. Thus, we aim to expand the human possibilities of technology. The opportunities are significant not just for us, but for the world at large.

This new world of technology will require:

Nokia’s vision is to be a leader over the long term in these three areas.

“We believe that over the next ten years, billions of connected devices will converge into intelligent and programmable systems that will have the potential to improve lives in a vast number of areas.”

This new world of technology will require:

Connectivity

capable of handling massive numbers of devices and exponential increases in data traffic;

Location services

that seamlessly bridge between the real and virtual worlds; and

Innovation

across a number of technology areas including sensing, radio and low-power operation.

We believe that we have a strong financial position and the capacity to continue to make the necessary investments to remain an innovation leader in the industries in which our three businesses operate.

The Sale of the D&S Business in 2014 has provided us with a solid basis for future investment as it also significantly strengthened our financial position, thus supporting our target of re-establishing our investment grade credit rating.

In this annual report on Form 20-F, we describe the Nokia business as it is today, including our three continuing businesses, but also provide, under “Business overview—discontinued operations,” information about the Devices & Services business, which was part of the Nokia Group until its sale on April 25, 2014.

The human benefits of connecting things

More leisure time as technology automates the many little things which consume time and effort in our daily lives.

Our strategy is to develop our three businesses, Nokia Networks, HERE and Nokia Technologies, in order to realize our vision of becoming a technology leader in the Programmable World and, in turn, to create long-term shareholder value.

Our aim, which builds on our three businesses, is to optimize our business structure to enable each one to efficiently meet its strategic goals. Where financially prudent, we will pursue shared opportunities between our businesses, but not at the expense of focus and discipline in each.

We target long-term shareholder value creation by focusing on our three business areas:

Nokia Networks

Our Nokia Networks business will continue to invest in innovative products and services needed by our customers to manage the increase in wireless data traffic, which we expect will grow by approximately 40% annually through to 2025. Our future investments are focused on further strengthening our position in mobile broadband radio networks through investments in 5G, small cells and radio cloud; becoming the leading network implementation vendor and growing professional services; becoming a domain aggregator in Telco Cloud and expanding our business through Software Defined Networking (“SDN”) and security solutions; and targeting new opportunities in Internet of Things and data analytics.

90+

Of the world’s 100 largest operators are served by Nokia Networks

13 million

Cars sold with HERE maps on board in 2014

HERE

Our HERE business will continue to invest in our location cloud with the aim of making it the leading source of location intelligence and the best experience across many different operating systems, platforms and screens. We aim to increase our focus on our leading automotive technology business and our small, but fast-growing, enterprise operations. We will remain connected to the innovation of the consumer ecosystem through work with mobile device vendors such as Samsung and internet players such as Microsoft.

Given our focus in these areas, we have de-prioritized our efforts in the direct-to-consumer field. We also aim to strengthen the operational effectiveness of HERE to ensure we obtain maximum return on our significant R&D investments and improve long-term profitability.

Nokia Technologies

Our Nokia Technologies business aims to bolster the further development of our industry-leading innovation portfolio by:

Nokia Security Center

Nokia Networks opened the Nokia Security Center in Berlin, Germany in December 2014—a hub of expertise focused on strengthening telecommunications security. The center provides a platform for co-operating with mobile network operators, partners, governments and academic institutes to develop and share security know-how and expertise.

Nokia has a simple and clear operational governance model, designed to facilitate innovation and growth.

Strong leadership team

Nokia has a strong and experienced leadership team that brings diverse experience from telecommunications and technology, finance, sales and operations and many other areas. Most have been essential to the recent transformation of Nokia and turnaround of Nokia Networks business, and all have been proven at Nokia or in prior leadership roles.

The Group Leadership Team is responsible for the operative management of the company. Other key executives include those responsible for Nokia Networks’ sales organization and reportable segments as well as other Group executives.

Members of the Nokia Group Leadership Team

Rajeev Suri

b.1967

President and Chief Executive Officer of Nokia Corporation

With more than 25 years of international experience, Rajeev is a leader with a passion for creating value, generating growth, and delivering technologies that have a positive impact on people’s lives. He joined Nokia in 1995 and has held numerous executive roles in the company. As CEO of what is now Nokia’s Networks business, Rajeev led a complete turnaround of the company’s performance, resulting in a significant increase in shareholder value. Rajeev lives in Helsinki, Finland.

Timo Ihamuotila

b.1966

Executive Vice President and Group Chief Financial Officer

Timo has deep roots in Nokia, holding various international roles in the company since 1993, and he also had a three year banking stint outside the company during the late 1990s. Timo’s responsibilities in Nokia have ranged from sales to business unit leadership, and from risk management to treasury and corporate finance. He is firm believer in a corporate culture based on strong values and vision.

Samih Elhage

b.1961

Executive Vice President and Chief Financial and Operating Officer of Nokia Networks

Samih has 25 years of experience in the telecommunications industry, with a successful track record in transforming complex businesses by creating new operating models, translating into stronger financial performance and sustainable value creation. He joined NSN in 2012 as Chief Operating Officer, in 2013 adding the role of Chief Financial Officer to his responsibilities. Samih serves on both the Nokia Group Leadership Team and the Nokia Networks Leadership Team.

Sean Fernback

b.1963

President, HERE

Since training as an engineer 25 years ago, Sean has combined his entrepreneurial spirit with his passion for technology. He joined HERE in early 2014, leading the team responsible for smartphone app development and providing location services to the likes of Amazon, Microsoft and Samsung. He became President in November 2014. Before joining HERE, Sean held senior positions at TomTom, TV Compass, Boardbug and Pogo, among others.

Ramzi Haidamus

b. 1964

President, Nokia Technologies

Ramzi is a technology-licensing expert with proven business skills and a strong innovation background. As president of Nokia Technologies, he is continuing Nokia’s decades-long track record of R&D leadership and pioneering spirit. Before joining Nokia, he spent 17 years helping Dolby Laboratories grow into a world-class licensing company.

For the full biographies of the Group Leadership Team, see pages 102 and 103.

Nokia Networks Business Leaders

Ashish Chowdhary

b.1965

Executive Vice President and Chief Business Officer, Nokia Networks

Ashish has nearly 25 years of international experience in the enterprise and telecom sectors and has a track record of delivering consistently strong results. Ashish has led various regional and global organizations before starting his present assignment in January 2011 as Head of Customer Operations in Asia, Middle East and Africa market. He has been a member of the Nokia Networks leadership team since 2009.

Igor Leprince

b.1971

Executive Vice President, Global Services, Nokia Networks

Igor has over 18 years of experience in the telecommunications industry. He stepped to Global Services in 2014 after turning the Middle East & Africa region to profitable growth and heading the Care and Network Planning & Optimization business lines. Prior to joining the company in 2007, Igor held various management roles for telecom operators and services companies in several countries.

Marc Rouanne

b.1963

Executive Vice President, Mobile Broadband, Nokia Networks

Marc has over 20 years of international management experience in the telecommunications industry. Since joining Nokia in 2008, he has turned the company into a leader in LTE and a significant global software developer. Marc has extensive experience in executive leadership bringing advanced mobile technologies to mass market.

Other Group Executives

Hans-Jürgen Bill

b.1960

Executive Vice President, Human Resources

Hans-Jürgen has 20 years of experience in the telecommunications industry. Prior to NSN, he held a range of diverse roles at Siemens, which he joined in 1983. When NSN was formed in 2007, Hans-Jürgen became Head of West South Europe region. He assumed the role of Head of Human Resources for NSN in 2009.

Barry French

b.1963

Executive Vice President, Marketing and Corporate Affairs

Barry joined Nokia in 2006 and was instrumental in the creation and later turnaround of Nokia’s Networks business. Previous experience includes leadership positions in technology, restructuring and politics. He is a resident of London but is present regularly at the company’s headquarters in Finland.

Maria Varsellona

b.1970

Executive Vice President and Chief Legal Officer Maria joined NSN in 2013 from Tetra Pak, where she was the Group General Counsel. Previously, Maria held senior legal positions in GE Oil & Gas for many years. As an admitted lawyer in Italy and England, Maria started her career in private practice, and she also lectured international contract law at the University of Florence, Italy.

Our values

At Nokia, we want to be proud of what we achieve, but also how we achieve it.

Our values guide the way we do business:

Respect

means how we treat each other; it is something we work hard to earn from those around us.

Achievement

is about working together to deliver superior results, to bring great products and services to our customers, and to win in the marketplace.

Renewal

covers how we develop ourselves, how we grow our business, and how we strive to create the compelling new products and services that disrupt the market.

Challenge

Means we will never be complacent, always pushing for better performance, and perpetually questioning the status quo inside the company and out.

With the right behaviors, these four simple values can push us to do the right things in the right way. We can challenge and do so with respect; we can drive for near-term achievement and renew at the same time. Doing so is not always easy, but it can be done– and those people who do so become great leaders, those companies that do so become great companies.

Technology that thinks ahead

Nokia Centralized RAN

Major sporting events and concerts attract thousands of fans, many of them using smartphones to record and share their experiences over social networks. At the packed Hartwall Arena in Helsinki, Nokia’s Centralized RAN solution delivered data uploads significantly faster than using traditional radio solutions available in the market, while cutting smartphone power consumption by one third.

2.5 times faster

Data uploads

The development of ways for machines to communicate, interpret data and act—all without human intervention—enables people to address some of our biggest global challenges.

From caring for aging populations to providing clean water and safe energy to reducing greenhouse gas, the opportunities opened by the Programmable World are seemingly endless.

Nokia Networks will play a leading part in developing that world. It will provide the networks that carry data traffic from machine to machine to people and it will provide companies and individuals with the intelligence to interpret and use that data.

Through its two segments—Mobile Broadband and Global Services—it is the trusted partner of operators that, between them, have close to five billion subscribers. Nokia Networks is at the leading edge of technology. At the end of 2014 it had 162 LTE customers and an installed base of 200 WCDMA/HSPA customers and 300 GSM customers. Serving 170 customers, Nokia Networks’ Customer Experience Management (CEM) offerings are well established and it provides Operations Support Systems to the world’s top ten operators.

Its Global Services teams have so far delivered 400 multi-vendor projects; they put a new site on air every 100 seconds and manage networks serving 550 million subscribers. Nokia Networks takes its customers’ investments seriously and its highly efficient Global Delivery Centers now manage close to one billion network elements.

A world of opportunities also contains threats. Nokia Networks’ focus on security aims to protect the connected world from security breaches and, as a company, it pays great attention to keeping its employees, suppliers and partners safe.

For the future, Nokia Networks will expand its reach, while defending its strong position in its existing markets. As the realms of telecommunications and IT converge, it will continue to support, consult and serve its customers and to help them develop the human possibilities of technology.

Nokia Networks

Mobile Broadband

Global Services

Market overview

Through its broad portfolio of products and services, Nokia Networks addresses a market described as “mobile infrastructure and related services”. Demand for Nokia Networks’ portfolio is driven by the rapidly growing requirement for greater bandwidth and capacity in mobile networks globally. Bandwidth requirements are rapidly expanding as data-rich websites, applications and video usage become more common. In addition, the use of devices optimized for rich content, including smartphones and tablets, is on the increase.

Business overview

Nokia Networks’ portfolio ranges from the hardware components of networks used by mobile operators, such as base stations, to software solutions that support mobile networks, such as the core software that underpins the operations of an operator. Additionally, Nokia Networks provides the services to plan, implement, run and upgrade operators’ networks.

Nokia Networks is estimated to be the third-largest company in its target market of mobile infrastructure and related services. Nokia Networks has a strong position in all generations of radio network technologies (2G, 3G and 4G) and the underlying core networks software. In 3G, Nokia Networks serves more operators than any of its rivals, with more than one billion subscribers connected through its 3G networks. In LTE, Nokia Networks had 162 commercial contracts at the end of 2014, and it is a key LTE radio supplier to 15 of the world’s top 20 operators. Nokia Networks is also estimated to be the world’s third largest telecommunications services vendor by revenue, managing 550 million subscribers in more than 100 operator networks and close to one billion network elements through its Global Delivery Centers.

Mobile consumers and businesses expect an increase in technological capability with little (if any) increase in price. As a result, Nokia Networks’ overall market for mobile broadband and related services is expected to be flattish in the next few years. Nokia Networks is investing in new market opportunities such as small cells, Telco Cloud, data analytics, security and Internet of Things. These will support Nokia Networks’ current and new customers as they themselves look for new sources of revenue from the so-called quad-play (fixed and mobile access, internet and television) and seek efficiency improvements from the ongoing transition to cloud computing.

More than 600 customers globally with a total of almost five billion subscriptions use Nokia Networks’ equipment and services, among them most of the world’s largest mobile operators, including Bharti Airtel, China Mobile, Deutsche Telekom, NTT DoCoMo, SoftBank, Sprint, Telefónica, Verizon and Vodafone.

Nokia Networks was formerly known as the NSN business, which began operations as Nokia Siemens Networks on April 1, 2007, following a merger of the networks business of Nokia and the carrier-related operations of Siemens AG for fixed and mobile networks. Since August 7, 2013, the business has been wholly owned by the Nokia Corporation and is now operating under the Nokia brand.

Nokia Networks’ net sales totaled EUR 11.2 billion, and total assets equaled EUR 12.8 billion for 2014.

Internet of Things will impact networks

Nokia is demonstrating two emerging mobile technologies, 5G and LTE-M, that will help to make networks not only faster but more reliable, resilient and energy efficient.

“Demand for Nokia Network’s portfolio is driven by the rapidly growing requirement for greater bandwidth and capacity in mobile networks globally.”

Strategy

Nokia Networks’ industry is characterized by rapid technological development, and we see the following as the key trends within the industry.

Nokia Networks, to respond to these trends and capitalize on its strengths, has four focus areas in its strategy:

1. Accelerating leadership in radio

Nokia Networks will remain focused on the radio business, aiming to grow its market share further in LTE and LTE-Advanced and to gain leadership in 5G, small cells and radio cloud, while maintaining its overall market position. Nokia Networks is constantly developing its portfolio to offer all the technology elements in a base station site, whether through its own products or partnering, including items such as antennas, backhaul and fronthaul. Nokia Networks will also offer integrated small cells and Wi-Fi technologies to handle the large proportion of mobile data traffic that is generated by users indoors. Another example of how Nokia Networks is developing its portfolio is the use of its LTE capabilities to target new market areas, such as LTE-based public safety solutions.

2. Growing professional services

Nokia Networks aims to grow its services business overall to become the leading network implementation vendor with the highest quality and to become the best in the care business. Nokia Networks is also taking steps to increase its proportion of professional services revenue: by growing areas such as network planning and optimization for heterogeneous networks; leveraging its 3D geo-location capabilities; and growing its systems integration business with carrier-grade services to enable Telco Cloud, Internet of Things, analytics and security. Additionally, Nokia Networks aims to grow its managed services business through a portfolio in predictive operations, smart learning and software as a service. Automation and remote delivery will continue to be emphasized as part of an efficient service delivery model.

3. Winning in technology transition to the Telco Cloud

The third focus area of Nokia Networks’ strategy is based on opportunities arising from the technology transition to Telco Cloud. Nokia Networks is in a good position to benefit from its strength in Network Functions Virtualization (“NFV”), but its ambitions are also to become a domain aggregator in Telco Cloud and expand its business through Software Defined Networking. Nokia Networks also plans to expand into network and service orchestration and management, which will extend its capabilities to allow for automated arrangement, coordination and management of all network elements. To round out its end-to-end Telco Cloud offering, Nokia Networks has started to build a strong security portfolio. We believe that the transition to the cloud will give rise to next-generation security threats and new regulation, and we want to ensure a secure transformation for our customers.

Creating a network for the future

The Telco Cloud proof of concept with Nokia Networks is a significant step forward in Orange’s strategy to leverage the power of Telco Cloud and NFV, targeting a more agile service launch as well as self-healing networks and automated operations for networks.

Nokia Networks is also expanding its analytics capability building on its Customer Experience Management (“CEM”) portfolio and entering the Internet of Things market. Its CEM products address one of the main problems for our customers: how to improve customer satisfaction. We can take advantage of the predictive analytics suite of Medio, which was acquired by HERE in 2014, to help operators generate incremental revenue. This capability will enable Nokia Networks to help operators to perform end-user analytics by combining network insight with location intelligence and other types of consumer data. Additionally, Nokia Networks continues to ensure that operators’ network products and services, as well as their network infrastructure, are designed to meet the requirements of the Internet of Things.

Underlying these four focus areas, Nokia Networks has four strategic enablers:

Quality continues to be an extremely important strategic enabler and a competitive differentiator for Nokia Networks, and it is taking steps to further strengthen its quality culture by targeting world-class, end-to-end quality management, flawless service execution and highest software quality. This all contributes towards a better customer experience.

Innovation will continue to be central to Nokia Networks’ strategy as it drives technology disruptions in areas that are essential to operators’ business, such as Telco Cloud transformation, cognitive networks and 5G. Nokia Networks will also continue to dedicate resources to co-innovation with its customers, aiming to create even more added-value for them.

Nokia Networks invested EUR 1.8 billion in R&D in 2014, making it one of the largest R&D investors in the telecommunications industry. The efforts of its R&D teams have resulted in technology breakthroughs and industry awards.

For example, Nokia Flexi Multiradio base stations—which have been shipped to approximately 300 customers since their first deliveries in 2008—undergo continuous development. New versions of the product have been continuously launched, such as the range of award-winning Flexi Zone LTE microcell and picocell base stations, which was introduced in November 2013 and enhanced throughout 2014.

Another example is Nokia Networks’ cloud-ready Operations Support Systems—where during 2014, the number of customers using its virtualized NetAct solution for network management exceeded 200. To support the transition to Telco Cloud, innovations such as Cloud Application Manager and Cloud Network Director are now enabling the management of networks based on Network Functions Virtualization and Software Defined Networking.

LTE Broadcast

Working with a range of partners, Nokia Networks is pioneering LTE Broadcast, new technology that delivers the same signal to many users at the same time over existing mobile networks, instead of streaming video content individually to each user. This will allow subscribers to watch TV on their devices without eating into their data plans.

“Innovation will continue to be central to Nokia Networks’ strategy as it drives technology disruptions in areas that are essential to operators’ business.”

Nokia Networks will continue to focus on increasing its partnering activities, and in 2014 founded a new partnering unit, part of Mobile Broadband, devoted to that goal. We believe that this will enable Nokia Networks to extend its addressable market beyond its own portfolio through the market-leading products and services of our partners such as IP routers, data center equipment, software stacks and systems integration solutions. Nokia Networks also aims to enable the plug-in of third-party hardware and software elements, opening up previously closed programming interfaces to trusted partners and adjusting its own portfolio accordingly, which we believe will help Nokia Networks reach new customers and address new markets.

Nokia Networks aims to use automation to further improve its efficiency, using its analytics capabilities to enable fully automated service deployment, maintenance and network optimization. It also aims to use automation in an effort to drive operational efficiencies, covering all its businesses, R&D, financial systems and business forecasting.

Organization

Nokia Networks has two segments: Mobile Broadband and Global Services.

The Mobile Broadband segment

Mobile Broadband provides its customers with flexible network solutions for mobile voice and data services through its Radio and Core clusters. The Radio cluster covers all technology generations—GSM, CDMA, WCDMA, and LTE—and is investing in research in LTE-Advanced and 5G.

The Core cluster has a comprehensive mobile switching portfolio as well as voice and packet core solutions. The Core portfolio is based on Nokia Networks’ cloud-ready software and can scale for the challenges of data growth and Internet of Things. This provides customers with a high level of capacity, agility and performance to meet the increasing demands that subscribers are placing on networks.

The Core cluster has expertise in Customer Experience Management, virtualization and software-rich solutions. These help Nokia Networks support its customers in dealing with changing technology trends. For example, security is currently a pressing topic for operators and Nokia Networks recently opened its mobile broadband security center in Berlin, Germany. The center is a hub of leading expertise focused on ensuring robust telco security and bringing together network operators, partners, governments and academic institutions to develop and share network security expertise.

Other major trends addressed by the Mobile Broadband segment include cloud computing, analytics, big data and multimedia content. The new partnering unit, which is part of Mobile Broadband, exists to help Nokia Networks achieve its goals through partnering with recognized market leaders—the best of the up-and-coming technology innovators and companies that have established reputations as leaders in their fields. Through these activities, we believe that Nokia Networks will be able to continue to extend its offerings to its customers.

The Global Services segment

Through our Global Services segment, we aim to provide mobile operators with the solutions they need to create and maintain effective networks.

Global Services comprises five business lines. The Network Implementation business line provides customers with the services they need to build, expand or modernize a communications network. The Care business line undertakes software and hardware maintenance and provides training to help our customers maximize their networks. Within the Managed Services business line, Nokia Networks offers services such as network operations and service operations, which help its customers manage service lifecycles efficiently and enhance their subscribers’ experience (for example, by using analytics to improve their predictive services).

Within the Network Planning and Optimization business line, we offer solutions to improve the performance, consistency and reliability of our customers’ networks and services. Finally, Global Services’ Systems Integration capabilities ensure that all the elements of a mobile broadband solution, including new and mature technologies, are brought together seamlessly.

Within Global Services, Nokia Networks has two Global Delivery Centers, complemented by five Global Service Delivery hubs, bringing together global and local services experts as well as centralized tools and architecture. These facilities, which deliver a growing proportion of its services, provide efficiency for customers while at the same time allowing operators to benefit from access to world-class skills, available as part of Nokia Networks’ global presence.

Sales and marketing

Nokia Networks’ sales and business teams are active in approximately 120 countries. They ensure that Nokia Networks is close to its customers, both physically and in terms of understanding the local markets, and help it to build and maintain its customer relationships.

In 2014, Nokia Networks grouped its customer operations into three geographical markets: Asia, Middle East and Africa; Europe and Latin America; and North America. These were further divided into regions containing sales, business and delivery teams. On April 1, 2015, Nokia Networks aims to implement a new structure in its sales teams, bringing the three markets together into one global sales organization with the seven markets presented below. This new structure is targeted at allowing Nokia Networks to gain additional speed and simplicity in dealing with customer requirements while preserving existing customer relationships.

Production of infrastructure equipment and products

Nokia Networks’ Global Operations team handles the supply chain management of all its hardware, software and original equipment manufacturer products. This includes supply planning, manufacturing, distribution, procurement, logistics, supply, network design and delivery capability creation in product programs.

On December 31, 2014, Nokia Networks had six manufacturing facilities globally: four in China (Beijing, Shanghai, Tianjin and Suzhou), one in Finland (Oulu) and one in India (Chennai).

In addition to Nokia Networks’ strong manufacturing capabilities, it also utilizes third-party suppliers for certain components and sub-assembly for certain products. Examples include company-specific integrated circuits and radio frequency components. Nokia Networks then assembles these components and sub-assemblies into final products and solutions and, for selected products and solutions, its suppliers also deliver goods directly to customers. This system provides Nokia Networks with considerable flexibility in its manufacturing and enables it to meet demands related to cost, availability and customer requirements more easily.

The table below shows the productive capacity per location of major manufacturing facilities for Nokia Networks’ infrastructure equipment at December 31, 2014.

Research and development

Nokia Networks has 11 Global Technology Centers, each with individual technology and competence specialties. These are located in China, Finland, Germany, Greece, Hungary, India, the Philippines, Poland and the United States.

Nokia Networks organizes its R&D teams in a flat structure, resulting in advantages such as cost effectiveness and speed. Nokia Networks is focused on creating a strong partner ecosystem and makes efforts to ensure the effective management of portfolio for its partners and suppliers and for their products. The Mobile Broadband segment is responsible for most of Nokia Networks’ R&D internally.

Nokia Networks has a joint venture company TD Tech Communication Technologies Ltd (TD Tech) for development and manufacturing of TD-SCDMA and LTE technologies and related products in Beijing, Shanghai and Chengdu, China. The company is owned between Nokia Networks (51%) and Huawei Technologies Co. Ltd. (49%), and Nokia has ownership of the system in which the commonly created products are inserted. The joint venture has supported the growth of Nokia’s market position in China, and demonstrates that this partnering has been of great mutual benefit for both enterprises. Mutual customization of the most commoditized part of the portfolio allows Nokia Networks to focus on lowering cost while producing a higher value offering.

Gaining customer insight

At the 2014 Nokia Networks CEM Executive Forum, operators learned how implementing CEM results in financial benefits for them. Another lesson was that it is not just about the tools—the right people and processes are also very important. The operators at the forum emphasized that their future CEM requirements are also focused on providing insights into fixed and internet services.

“Intellectual property assets are fundamental to Nokia Networks. As an industry leader in the R&D of wireless, broadband and transport technologies, we have a robust patent portfolio.”

As a result of its investments in R&D, Nokia Networks is one of the largest R&D investors in the telecommunications industry, with total R&D expenses amounting to EUR 1.8 billion in 2014. We expect these capabilities to enable Nokia Networks to continue to drive innovation in the dynamic telecommunications sector, where product development constantly needs to improve in speed and efficiency in order to help operators cope with increasing subscriber demands and exponential data traffic growth.

We believe that the geographical diversity of Nokia Networks’ R&D network is an important competitive advantage for us. In addition, the ecosystem around each of its R&D sites helps it connect with experts on a global scale, a network that it complements by co-operation with universities and other research facilities.

Nokia Networks further complements its R&D efforts through its Technology & Innovation team, which focuses on developing and prototyping new and futuristic technologies, such as 5G, that are several years from reaching the market. The team is responsible for the technology vision, long-term research, innovation, standardization and intellectual property rights (“IPR”) management of Nokia Networks, and it co-operates with top customers, partners, universities, research institutes and industry bodies globally to drive Nokia Networks’ technology and innovation agenda.

Patents and licenses

Intellectual property assets are fundamental to Nokia Networks. As an industry leader in the R&D of wireless, broadband and transport technologies, Nokia Networks has a robust patent portfolio in a broad range of technology areas and we seek to safeguard our investments in technology through appropriate protection. We have generated and maintained an extensive IPR portfolio covering patents, design patents, trade secrets, trademark registrations, and copyrights. Where necessary, we obtain licenses to use standard-essential and other patents in our hardware and software solutions for mobile network infrastructure.

Nokia Networks now owns a large portfolio of almost 4 000 patent families comprising approximately 11 000 individual patents and patent applications across many technologies, some of which were transferred from Nokia and Siemens at the formation of the business as Nokia Siemens Networks in 2007. Its IPR portfolio includes high-quality standard-essential patents (“SEPs”) and patent applications which have been declared to the European Telecommunications Standards Institute and other Standards Developing Organizations as essential to standards including LTE, WCDMA, GSM and other standards. In addition, Nokia Networks holds copyright registrations relating to certain aspects of its products and services.

Nokia Networks receives and pays patent license royalties in the ordinary course of business based on existing agreements with telecommunications vendors. Nokia Networks has a number of patent license agreements in place with other major companies and patent holders, both directly and through Nokia, and these provide it with freedom to operate with limited risk of infringing SEPs owned by others.

Competition

At present, Nokia Networks considers five companies — Alcatel-Lucent, Ericsson, Huawei, Samsung and ZTE — to be its main competitors as major mobile network infrastructure providers. Nokia Networks also competes with IT companies such as Cisco Systems and Oracle.

Building a Radio Cloud

Nokia Radio Cloud is a highly scalable, flexible and efficient architecture for cloud-based networks. It allocates processing capacity from almost anywhere in the network, such as an adjacent cell or a centralized data center, to where it is needed most. By using a network’s existing radio access and transport assets more efficiently, extra infrastructure costs can be avoided.

HERE

True Cars

HERE’s fleet of True Cars is driving 50 000 km across six continents each week. Why? Using proprietary technology, the cars are collecting information to create an accurate 3D digital representation of the real world. These high-definition maps will be needed to make automated driving a reality.

2 million km

HERE has mapped more than 2 million km in highly-detailed 3D

As cartographers, we have long dreamed of creating the perfect map—one that precisely recreates the territory it seeks to represent. But, as many in the field would tell us, at the heart of that endeavor lies a great paradox: the closer to reality a map becomes, the less useful it tends to be.

Maps have been abstractions of reality by necessity: there are limits to how much information the human mind can process. But what if maps are made not just for humans but for machines capable of comprehending vast quantities of information?

As computational cartography continues to advance, maps are taking on new forms. For HERE, the map is becoming a dynamic three-dimensional, highly detailed digital representation of the world, rich in real-time and contextually-relevant information drawn from both real-world and digital sources.

HERE already aggregates data related to parking, gas prices, traffic and weather, among other things, and we see further opportunities in a world where billions of devices, including phones, tablets and cars, are connected. Accordingly, we are investing in technologies and analytics capabilities to ensure HERE’s location cloud can harness the collective power of the data these devices generate to deliver real-time, predictive and relevant information to every individual user. In the future, we also intend to leverage HERE’s location cloud to deliver HD maps and other services to power an entirely new class of driver experiences, starting with highly automated vehicles.

4 out of 5

In-car navigation systems in North America and Europe powered by HERE’s map content

6 257

Employees at December 31, 2014

HERE

Global new embedded navigation licenses

*Includes a goodwill impairment charge of EUR 1 209 million in 2014.

Market overview

The market for location services has undergone significant change in recent years. Access to location services has broadened from portable navigation devices (“PNDs”) and those in cars to multiple devices and screens, including smartphones. Location is now a key element of the mobile and web experience, whether to seek live subway departures, check restaurant ratings, share location-tagged images on social networks, or track pending online deliveries.

The industry is also delivering location experiences in a different way. In the past, static maps were often provided on disc or pre-installed on a device, whereas today users are increasingly being delivered content and services over the internet in real time, as a result of cloud-based technologies. Companies in the automotive, enterprise, mobile and broader consumer electronics industries are already making considerable investments in and around location services, and location is and will be a critical element in, for example, the areas of wearable computing, augmented reality, personal activity tracking, connected cars, and automated driving.

Business overview

HERE is the leading company in the location intelligence industry, delivering highly precise and up-to-date maps, a location platform, and location experiences across multiple screens and operating systems. Built on more than 25 years of experience in cartography and drawing on more than 80 000 sources of data, HERE offers maps for more than 190 countries, voice guided navigation for 99 countries in more than 50 languages and live traffic information for 44 countries. We believe HERE’s map is the best digital representation of the real world in terms of accuracy, coverage, richness and freshness. HERE’s global team of geographic analysts build and maintain the core map of HERE. HERE also has a fleet of sophisticated data collection vehicles, which help produce maps with centimeter-level precision. Altogether, HERE employs approximately 6 000 people, with its major development sites located in Berlin, Germany and in Chicago, United States.

HERE’s customer base includes many of the world’s leading companies from the automotive, mobile, internet and consumer electronics industries. In the automotive space, HERE is the clear market leader, providing maps for the embedded navigation systems in four out of every five new vehicles sold in North America and Europe. In 2014, this amounted to more than 13 million new vehicle licenses. Our customers can license all or

parts of the HERE offering: map content, HERE’s location platform, or specific location experiences. The platform is device and operating system agnostic and includes functionalities such as routing, traffic and positioning, a digital 3D reference model of the world, the development tools with which customers can create their own experiences on top of our map, and the analytical tools to make sense of location-based data. The flexibility in being able to choose between all or specific parts of HERE’s offering enables HERE to serve a broad range of customers with different business models and needs.

Nokia launched HERE as its brand in 2012, prior to which it was already an established business operating under the Nokia name. The business has developed organically and through acquisitions, the most significant of which were the acquisition of location software provider Gate5 in 2006, digital mapping provider NAVTEQ in 2008, and data capture company earthmine in 2012.

For over 25 years, HERE has been driving fundamental changes to its map. HERE’s predecessor NAVTEQ was an early pioneer in digital mapping, and in 2006 Nokia became the first company to launch a mobile phone with in-built GPS. HERE is transforming its map from a static, two-dimensional form akin to a digital version of a paper map and further into a dynamic three-dimensional digital representation of the world, rich in real-time and contextually-relevant information drawn from both real-world and digital sources.

In recent years, amid advances in wireless connectivity and a growing need for ever-more-relevant data, HERE has also been driving a fundamental change to the way it builds and delivers map and location data. Increasingly, HERE’s location experiences are powered by its location cloud, which processes and delivers data to smartphones, tablets, in-car navigation systems and other devices over the cloud in real time, reducing the heavy computing needs of the devices.

Leading market position

Many of the world’s leading carmakers are including HERE map data in models they are launching in 2015, demonstrating that HERE is well positioned for future developments in motoring.

“Location services will be a critical element in, for example, the areas of wearable computing, augmented reality, personal activity tracking, connected cars, and automated driving.”

Strategy

HERE already aggregates data related to parking, gas prices, traffic and weather, among other things, and it sees further opportunities in a world where billions of devices, including phones, tablets and cars, are connected. Accordingly, we are investing in technologies and analytics capabilities to ensure HERE’s location cloud can harness the collective power of the data these devices generate to deliver real-time, predictive and relevant information to every individual user. We believe the next generation map has to be fresh, predictive and very rich.

We believe that location is an essential element of the Programmable World, hence HERE is targeting its investments in three areas: 1) Automotive, for location content and technology for smart, connected and automated cars; 2) Enterprise, for location-based analytics for better business decisions; and 3) Consumer, for serving ecosystem players through cloud-based services for personal mobility and location intelligence through seamless experiences across multiple screens.

The automotive and enterprise markets are important growth areas for HERE. In the case of the former, an increasing number of vehicles have connectivity technologies onboard and it is our ambition to connect these vehicles to HERE’s location cloud. For example, HERE and BMW are collaborating to develop a suite of location-based services for the connected car and to integrate cars into modern urban transport systems. BMW’s “Intelligent Drive” uses the most sophisticated capabilities of the HERE location cloud to personalize in-vehicle technology, and provide smart recommendations for parking and fuel; enable drivers to share their destination and estimated time of arrival; and enable drivers to get safety alerts for hazards, speed restrictions and traffic.

In the future, we also intend to leverage HERE’s location cloud to deliver HD maps and other services that will power an entirely new class of driver experiences, starting with highly automated driving. Industry participants and government bodies are currently seeking to address a range of technological, legislative, regulatory and ethical issues to ensure that highly automated driving can become reality and gain broad market acceptance in the future. Automation on the road requires that vehicles communicate directly with other vehicles as well as indirectly via cloud technologies and roadside infrastructure. Consequently, HERE is advocating for a new international regulatory architecture that would enable companies and organizations to harness these data flows to bring new safety and sustainability benefits to road users. The benefits could be significant considering that the majority of accidents that occur on the road are a result of human error. From an R&D perspective, HERE is focused on addressing key technological requirements of vehicle automation, such as how HD maps can complement a vehicle’s on-board sensors to aid with precise vehicle localization. HERE has already participated in a number of automated driving pilots with major automotive companies, including Mercedes-Benz.

With respect to the enterprise market, we aim to leverage HERE’s core map, platform and automotive assets to deliver location content and services to a broad range of industries. We believe HERE’s precise map data, rich map attribution and deep analytics can be combined to give companies and organizations new insights into their operations.

Strengthening with predictive analytics

In 2014, HERE acquired Medio Systems Inc., a pioneer in the emerging field of real-time predictive analytics, to enable HERE to innovate in contextual mapmaking and deliver on its vision to create maps and location services across screens and operating systems that change according to the situation.

“We are investing in technologies to ensure HERE’s location cloud can harness the collective power of data from connected devices to deliver real-time, predictive and relevant information to every individual user.”

In addition to opportunities in the automotive and enterprise markets, we invest in and target growth opportunities in the internet and consumer electronic industries. In the latter part of 2014, HERE focused its strategy in this area, de-prioritizing certain direct-to-consumer activities and focused more of resources on its work for customers who are in the consumer markets, such as Microsoft and Samsung. In the direct-to-consumer space, HERE intends to maintain a modest presence through web and mobile applications that showcase its core assets. These applications and the development work behind them are also leveraged to support our work with our automotive and enterprise customers.

Sales and marketing

HERE’s core business is licensing content and platform technologies, and today it has agreements with most of the world’s leading automotive companies, such as BMW, Continental, Daimler, Nissan, Toyota, Volkswagen and Volvo; leading enterprises such as FedEx, Oracle and SAP; and internet and technology companies including Amazon, Baidu, Microsoft, Samsung and Yahoo.

HERE’s map content powers four out of five in-car navigation systems in North America and Europe, and its location platform is used by leading internet companies.

Research and development

HERE’s business is R&D-intensive with total R&D expenses amounting to EUR 545 million in 2014. The HERE team is focused on building and enriching its core map, as well as developing the platform and cloud technologies through which HERE can ensure the effective delivery of the map and location services to its customers irrespective of the device they use.

In addition to collecting data with HERE’s own fleet of cars, HERE aggregates data from another 80 000 sources, including parking, gas price, traffic, weather and points of interest data. To maintain the freshest maps, HERE compiles, tests and publishes them continuously. From usage, HERE collects billions of data points to update its real-time traffic, routing and search engines.

A primary focus for HERE’s longer-term R&D efforts is on the development of software, cloud and data analytical capabilities in preparation for the anticipated emergence of highly automated driving before the end of the decade. HERE’s investments are focusing on addressing what it sees as three of the most critical technological challenges: the vehicle’s ability to precisely localize itself on the road, what lies ahead of the vehicle, and how can we program vehicles equipped with HERE technology to drive like humans rather than robots, albeit with greater awareness of, and faster responsiveness to, changing road conditions and events.

Competition

HERE, Google Maps and TomTom are the largest suppliers of map data to a broad range of industries. Other participants include Inrix, which, like TomTom and Google, competes with HERE in providing traffic services. In contrast to HERE, which has a licensing model for its map data and platform, Google uses an advertising-based model allowing consumers and businesses to use its map data and related services free of charge. Google, which has leveraged Google Maps as a differentiator for its Android operating system, has ambitions to bring the Android platform into the car through Open Automotive Alliance, a coalition of technology and automotive companies, and is also exploring automated driving with pilots of self-driving vehicles underway.

To date, in the automotive space, Google has competed with HERE through its brought-in car solutions, offered via

smartphones and tablets. HERE competes in the brought-in solution space by offering mapping services via PND vendors such as Garmin, as well as through its own native smartphone and tablet applications. While brought-in solutions have become more pervasive, particularly as smartphone and tablet penetration has grown in recent years, HERE has nevertheless continued to see an increase in the car industry’s adoption of embedded navigation solutions, as represented by the proportion of all new cars sold with factory-fitted systems. While content remains important, HERE has been increasing its focus on platform technologies which can power up-to-date and predictive maps that are increasingly tailored towards the individual user, and HERE believes in this regard that the only competitive platform to its own is that of Google.

TomTom, which is today the primary competitor to HERE in embedded navigation solutions for the automotive industry, also licenses map data to other industries, including the consumer markets, and counts Apple as one of its customers. Apple, which offers its own mapping service, has sought to strengthen its location assets and capabilities through targeted acquisitions and organic growth.

Z Launcher

Z Launcher from Nokia Technologies learns and adapts to user preferences, and enables one-touch access to apps: faster, easier, more intuitive navigation using scribble letter recognition to find what users want.

500 000+

Activations of Z Launcher’s Beta version

The experts at the core of Nokia Technologies’ business solve problems in project-specific teams in addition to working closely with leading universities and technology partners on a global scale. Nokia Technologies operates its primary technology development centers in Espoo and Tampere, Finland, Cambridge, the United Kingdom, as well as Silicon Valley in the United States.

Z Launcher by Nokia is an intuitive Android launcher that adapts to user inputs, surfacing relevant apps and content at the right moment. Any app can be accessed in one second through an exceedingly simple handwriting feature.

Nokia Technologies is a leading innovator in key cellular standards, as well as wireless LAN, NFC and various audio, speech and video codecs.

The technology standards developed by our core R&D team extend beyond mobile devices to a broad range of sectors. The H.265 video compression standard, for which Nokia led development and the 3rd Generation Partnership Project (3GPP) standards body adopted, delivers outstanding picture quality at roughly double the efficiency of the previous standard. H.265 (HEVC - High Efficiency Video Coding) is integrated into some of the latest consumer displays capable of ultra-high definition (“UHD”) presentation.

60+

Licensees

Nokia Technologies

Market overview

Nokia Technologies aims to be a leader in technology development and licensing, building on several of Nokia’s former Chief Technology Office (“CTO”) and IPR licensing activities. Today, as part of our newly formed business, Nokia Technologies, the research agenda of our engineers, scientists and researchers is shifting to address opportunities in a broader market that both encompasses and goes beyond mobile devices. We see a world where billions of devices—large, small and minuscule—will connect to form intelligent systems, and we see significant potential for our own technologies and intellectual property in that world.

Business overview

Nokia Technologies develops and licenses technologies we believe will enable the Programmable World. We seek to create value from our investments by expanding our successful patent licensing program and helping other companies and organizations benefit from our innovations through our established and successful licensing business. Additionally, we are also exploring the possibility of utilizing new technologies in our own future products and services.

Nokia Technologies was formed upon the closing of the Sale of the D&S Business. The Nokia Technologies business combines a leading team from Nokia’s former CTO with our world-class IPR activities. The business builds on the foundation established by Nokia through investing cumulatively more than EUR 50 billion in R&D over the last two decades.

“The research agenda of our engineers, scientists and researchers is shifting to address opportunities in a broader market that both encompasses and goes beyond mobile devices.”

Innovations from our R&D activities created and shaped the fundamental technologies used in all mobile products and in multiple wireless communications technologies today. We are continuing to build on that heritage to drive further innovations, with a focus on multimedia, connectivity, sensing and material technologies, as well as imaging, audio, web and cloud technologies.

During 2014, Nokia Technologies’ revenue was mainly attributable to income from intellectual property. The majority of the revenue was attributable to licensing its SEPs. Nokia Technologies is a leading innovator in key cellular standards, as well as wireless LAN, NFC and various audio, speech and video codecs, and we believe the licensing of SEPs will continue to be a strength for Nokia Technologies in the future.

€50bn+

Invested in R&D over the last two decades

10 000

Patent families

30 000

Individual patents

Strategy

Nokia Technologies’ strategy consists of: 1) Patent Licensing, focused on licensing our standard-essential and other patents to companies in the mobile devices market and beyond; 2) Technology Licensing, focused on licensing proprietary technologies to enable our customers to build better products; 3) Brand Licensing, to help our customers leverage the value of the Nokia brand in consumer devices, the first example being the Nokia N1 Android tablet announced in the fourth quarter 2014; and 4) Incubation, focused on developing new ideas and prototypes; all supported by Nokia Labs, its world-class R&D team.

For examples of Nokia Technologies’ progress relative to its strategy refer to “Operating and financial review and prospects— Main events in 2014—Nokia Technologies operating highlights”.

Sales and marketing

While a new business, Nokia Technologies already has significant ongoing R&D activities and an established patent licensing program. Nokia Technologies manages its intellectual property as a technology asset and seeks a return on its investments by making its innovations available to the markets through licensing activities and transactions. Nokia Technologies currently has more than 60 licensees, mainly for Nokia SEPs.

Nokia Technologies further sees opportunities in licensing its proprietary technologies, intellectual property and brand assets into telecommunications and adjacent industries. Over the past ten years, Nokia has also systematically licensed certain Nokia proprietary technologies, which we have decided not to reserve solely for our internal use. This has enabled numerous companies and businesses to benefit from Nokia’s innovations, in areas such as connectivity and imaging.

Research and development

The Nokia Technologies’ team consists of a great number of world-class scientists and engineers who have driven more than half of Nokia’s recent patent filings and many of whom are recognized as leading experts in fields that are essential for enabling the future Programmable World. These fields include low-power connected smart multi-sensor systems, distributed sensing, and intelligent interplay between various types of radio technologies.

Additionally, Nokia Technologies’ team has been particularly strong in 3G and 4G innovation, media codecs and imaging, for example. The applied nature of our R&D in Nokia Technologies has resulted in various relevant and valuable inventions both in and around the technology areas, which we believe are important in the Programmable World, as well as for emerging consumer experiences.

Nokia N1

A simple interface and unique one-piece aluminium design are at the heart of the N1, the first Nokia-branded Android tablet designed by Nokia Technologies. It offers the innovative, predictive Nokia Z Launcher interface, within a thin and light device that is easy to hold.

Nokia Technologies has advanced R&D activities in countries including Finland, the United Kingdom, and the United States. Nokia Technologies also collaborates in open innovation with universities and research institutes globally.

Nokia Technologies holds several central roles in standardization bodies and contributes to standardization work by filing technical proposals which, when found relevant, are often accepted and embodied in standards. In addition, Nokia Technologies develops reference implementations while defining the standards, which result in significant innovations covering proprietary ways to implement relevant technologies.

For examples of Nokia Technologies’ R&D achievements in 2014 refer to “Operating and financial review and prospects—Main events in 2014—Nokia Technologies operating highlights”.

“Nokia Technologies sees opportunities in licensing its proprietary technologies, intellectual property and brand assets into telecommunications and adjacent industries.”

Patents and licenses

We manage an IP portfolio with approximately 10 000 patent families comprised of approximately 30 000 individual patents and patent applications. In industry terms, our portfolio is relatively young: ten years from now, two-thirds of our current patents will continue to be in force. We continue to renew our patent portfolio with innovations produced by our strong R&D team.

Competition

Our current patent portfolio spans a number of technology categories including radio connectivity and networking, multimedia, user interface (“UI”) and software, hardware, product, and mapping and location services. As Nokia Technologies expands its successful licensing program to cover patents which have not been broadly licensed to date, as well as proprietary technologies and other intellectual property, it could face competition from alternate technologies or solutions. However, it is too early to anticipate which of these may be significant in future.

Breakdown of Nokia Technologies’ IP portfolio

Devices & Services business sold to Microsoft

Segment overview

With the closing of the Sale of the D&S Business, Nokia exited the business of selling mobile devices. Prior to the Sale, Nokia created products for virtually every demographic, with sales in more than 160 countries. The Devices & Services business was comprised of two business units: Mobile Phones, which focused on the area of mass market entry and feature phones as well as affordable smartphones; and Smart Devices, which focused on advanced products, including smartphones powered by the Windows Phone operating system.

Mobile Phones

The Mobile Phones unit developed ultra-low cost phones, feature phones and affordable smartphones, with most models running the Nokia Asha software platform and the Series 30+ operating system. In early 2014, the unit also introduced its first affordable smartphones based on the Nokia X software platform, which offers access to Android applications. The major Mobile Phones development sites were located in Beijing, China and Oulu, Finland.

The strategy of the Mobile Phones unit focused on leveraging the company’s innovation and strength in growth markets to provide people with an affordable internet experience on their mobile device. The most affordable products were targeted at consumers for whom durability, good battery life and price are most important. The Mobile Phones business unit also produced a range of affordable smartphones whose hardware, software and services are optimized for—and not compromised by—low price points.

As part of the Sale of the D&S Business, Microsoft has licensed, for a limited time, the Nokia brand for use with certain products from the Mobile Phones unit as well as acquired the Asha brand

under which Nokia marketed some of its Mobile Phones products.

Smart Devices

The Smart Devices unit, which was acquired by Microsoft in its entirety, focused on developing smartphones based on Microsoft’s Windows Phone operating system.

Nokia brought its first Windows Phone products—under the Lumia brand—to market in 2011, several months after entering into a strategic partnership with Microsoft. We then expanded the depth and breadth of the Lumia range, contributing to Windows Phone becoming the third-largest ecosystem globally in 2013. As part of the Sale of the D&S Business, Microsoft acquired the Lumia brand under which Microsoft has continued to introduce new smartphone models, following the completion of the transaction.

Sales and marketing

We derived our net sales of mobile devices primarily from sales to mobile network operators and distributors, and to a lesser extent independent retailers, corporate customers and consumers. The marketing efforts were aimed at creating consumer loyalty, enhancing the Nokia brand and increasing sales. In the marketing of mobile devices, we focused on expanding awareness of the key points of differentiation in our products and services, such as the imaging capabilities of our high-end smartphones or the robust quality and long battery life of our most affordable feature phones. We also engaged consumers through our own social media channels, including Nokia Conversations.

Production of mobile devices

Until the closing of the Sale of the D&S Business, Nokia operated a total of eight production facilities with the purpose of production and customization of mobile devices. The production facilities were located in Manaus, Brazil; Beijing and Dongguan, China; Komárom, Hungary; Chennai, India; Reynosa, Mexico; Masan, Republic of Korea and Hanoi, Vietnam.

Following the closing of the Sale of the D&S Business, Nokia’s manufacturing facilities transferred to Microsoft with the exception of the manufacturing facilities located in Chennai, India and Masan, Republic of Korea. In India, our manufacturing facility is subject to an asset freeze by the Indian tax authorities as a result of ongoing tax proceedings and was not transferred to Microsoft as part of the Sale of the D&S Business. It continued to produce devices under contract for Microsoft following the close of the Sale of the D&S Business, however, production was suspended in November 2014 due to a lack of orders. In the Republic of Korea, Nokia and Microsoft agreed to exclude the Masan facility from the scope of the transaction, resulting in Nokia closing the site in 2014. None of these facilities is subject to a material encumbrance, with the exception of the mobile devices related facility in Chennai as tax authorities in India have placed a lien on this facility prohibiting Nokia to transfer this facility.

Business specific trends

Nokia Networks

Nokia Networks is a leading vendor in the mobile infrastructure market, providing a broad range of different products, from the hardware components of networks used by network operators to software solutions supporting the efficient interaction of networks, as well as services to plan, optimize, implement, run and upgrade mobile operators’ networks. Nokia Networks is investing in the innovative products and services needed by telecom operators to manage the increase in wireless data traffic. Nokia Networks plans to focus its future investments in further building on its strong position in mobile broadband and related services, and strengthening its leadership position in next-generation network technologies, which it believes will be important enablers for the future networks by connecting tens of billions of devices. For more information on the Nokia Networks business refer to “Business overview—Nokia Networks” above.

Industry trends

In recent years, the most important trends affecting Nokia Networks have been the increase in the use of mobile data services and the resulting exponential increase in data traffic, which has resulted in an increased need for high performance, quality and reliability in networks. The continuing data traffic increase has, however, not been directly reflected in operators’ revenue. As a result, there is an increased need for efficiency for both operators and network infrastructure and services vendors. In addition to the attempts to reduce their costs, the operators want to increase their agility through the adoption of the emerging Telco Cloud and network virtualization technologies. Operator consolidation driven by operators’ needs to provide a wider spectrum of services, especially fixed-mobile convergence services, is also a key trend that affects Nokia Networks’ business. For more information, refer to “Business overview—Nokia Networks”.

Pricing and price erosion

The pricing environment was challenging in 2014, with competition remaining intense and the consequent price erosion impacting Nokia Networks’ net sales and profitability.

Product mix

Nokia Networks’ profitability is also impacted by product mix including the share of software in the sales mix. Products and services have varying profitability profiles. The Mobile Broadband segment offers a combination of hardware and software. Software products generally have higher gross margins; however, they require significantly higher R&D investments. Global Services’ offerings are typically labor-intensive, while carrying low R&D investment, and have relatively low gross margins compared to the hardware and software products of Mobile Broadband.

Seasonality and cyclical nature of projects

Nokia Networks’ sales are affected by seasonality in the network operators’ spending cycles, with generally higher sales in the fourth quarter, as compared to the first quarter of the following year. In addition to normal industry seasonality, there are normal peaks and troughs in the deployment of large infrastructure projects. The timing of these projects is dependent on new radio spectrum allocation, network upgrade cycles and the availability of new consumer devices, which in turn affects Nokia Networks’ sales. Nokia Networks’ profitability can be affected by changes in the sales volume, as well as the requirement to source large volumes of components on short notice, which can impact the

cost of sales, or in cases where component shortages emerge, the net sales.

Continued operational efficiency improvements

In 2014, the transformation to an efficient operating model brought industry leading margins and increased R&D efficiency to Nokia Networks. Nokia Networks continues to focus on operational improvement across its business. Its “Smarter” program has a key role in making Nokia Networks a continuously more efficient and high-performing company positioned for long-term success. The program aims at further strengthening its productivity, efficiency and competitive cost structure, and Nokia Networks will bring performance excellence methodologies such as Kaizen, Lean, and Six Sigma to every part of its business. Nokia Networks also pursues further efficiency gains from increased automation in Global Services delivery and in other areas, as well as continued improvements in R&D efficiency and agility.

Uninterrupted service even at the biggest events

The Nokia Smart Scheduler, used to optimize cell capacity and network efficiency, played a key part in delivering seamless LTE services at one of the world’s showcase racing events in Shanghai. By managing uplink interference, signalling capacity and load balancing, it delivered uninterrupted service availability throughout the event.

Cost of components and raw materials

There are several factors driving Nokia Networks’ profitability: scale, operational efficiency, and pricing and cost discipline have been, and will continue to be, important factors affecting profitability and competitiveness. Nokia Networks product costs comprise, among others, components, manufacturing, labor and overhead, royalties and licensing fees, depreciation of product machinery, logistics and warranty and other quality costs.

Targets and priorities

Over the long term, Nokia targets to grow Nokia Networks’ net sales slightly faster than the market.

Nokia expects Nokia Networks’ operating margin for the full year 2015 to be in-line with Nokia Networks’ targeted long-term operating margin range of 8% to 11%, excluding special items and purchase price accounting related items. In addition, Nokia expects Nokia Networks’ net sales to grow on a year-on-year basis for the full year 2015. This outlook is based on Nokia’s expectations regarding a number of factors, including:

HERE

Our HERE business is a leading provider of maps and location experiences across multiple screens and operating systems and is focused on producing the most accurate and fresh map content, available across multiple devices and operating systems. HERE continues to invest in its leading location cloud to make it the source of location intelligence and experiences across many different operating systems, platforms and screens. We believe that location is an essential element of the Programmable World, hence HERE is targeting its investments in three areas: 1) Automotive, for location content and technology for smart, connected and automated cars; 2) Enterprise, for location-based analytics for better business decisions; and 3) Consumer, for serving ecosystem players through cloud-based services for personal mobility and location intelligence through seamless experiences across multiple screens. For more information on the HERE business, refer to “Business overview—HERE”.

Seasonality

HERE’s sales to the automotive industry are affected by seasonality in the automobile market, navigation device market, and mobile device market, with generally higher sales in the fourth quarter compared to the first quarter of the following year.

Vertical and horizontal opportunities in map content, platform and applications

HERE’S a leading provider of map content and is focused on providing the richest, most accurate and most current maps, since these attributes are becoming more important for consumers and providers of location services. HERE’s ability to offer independent solutions at various levels of the value chain offers both vertical and horizontal opportunities. HERE sees opportunities in being able to offer solutions across ecosystems and different layers within them, as well as with different types of devices.

HERE’s map data provides a strong foundation, and HERE’s cloud-based map platform enables it to compete at multiple levels of the location services value chain including partnering with automobile vendors and internet services companies for their own differentiated offerings.

Great maps for the world’s most popular mobile platform

In 2014, HERE launched its first application on Android, featuring accurate maps that are always available, even without an internet connection. Using GPS for location finding, the app allows users to browse maps, search for places and navigate even when they don’t have access to a network.

The HERE map platform enables its location intelligence and experiences to be distributed in the cloud and to be used across a number of different operating systems, platforms and screens. This enables the users of the platform to license certain parts of HERE’s offering, including content, location services and functionalities, such as routing and positioning. Access to the platform also allows users to build specific applications for location-related services.

Automotive and other industries

We continue to see opportunities within the automotive and other industries that require location-based intelligence. An area of interest is the automotive industry, where HERE’s focus goes beyond the traditional turn-byturn navigation, with HERE’s offering planned to evolve towards “Smart Guidance”—HERE’s connected driving solutions for inside and outside of the car– and later towards concepts such as the “Intelligent Car” for automated driving. As these are new areas, our success in terms of transforming development efforts into sales is dependent on these concepts developing commercially and on HERE’s ability to produce products that are appealing to the industry.

In general, we believe there is a trend of more and more connected things. We believe there may be opportunities for location-based intelligence to serve as a key dimension in this development, and we believe HERE is well-positioned to capture those potential growth opportunities with its broad offering, for example through our business with Samsung.

As the automotive industry is a significant contributor to HERE’s sales, the broader economy and its influence on new car sales are an important factor in HERE’s future success. The adoption rate of in-car navigation products and services is important as well. In general, adoption of these types of products has been increasing and is expected to further increase as connectivity becomes more pervasive in cars. The gradual move towards an increasing number of cars being connected also offers the possibility to provide more value-adding services to the automotive industry.

Targets and priorities

Nokia expects HERE’s net sales to grow on a year-on-year basis for the full year 2015, and HERE’s operating margin for the full year 2015 to be between 7% and 12%, excluding special items and purchase price accounting related items.

Nokia Technologies

Nokia Technologies pursues new business opportunities built on Nokia’s innovations and the Nokia brand. Nokia Technologies develops and licenses cutting-edge innovations that are powering the next revolution in computing and mobility. The Nokia Technologies strategy consists of: 1) Patent Licensing, focused on licensing our standard-essential and other patents to companies in the mobile devices market, consumer electronics and beyond; 2) Technology Licensing, focused on licensing and transferring proprietary technologies to enable our partners to build better products; 3) Brand Licensing, to help our customers leverage the value of the Nokia brand in consumer devices; and 4) Incubation, focused on developing new ideas and prototypes; all supported by Nokia Labs, our world-class R&D team. For more information on the Nokia Technologies business, refer to “Business overview—Nokia Technologies”.

Monetization strategies of IPR

Success in the technology industry requires significant R&D investments, with the resulting patents and other IPR utilized to protect and generate a return on those investments and related inventions. In recent years, we have seen new entrants in the mobile device industry, many of which do not have licenses to our patents. Our aim is to approach these companies by potentially utilizing one or more means of monetization. We believe we are well-positioned to protect, and build on, our existing industry-leading patent portfolio, and consequently increasing shareholder value.

We see three main means for monetizing our innovations: 1) Patent Licensing; 2) Technology Licensing; and 3) Brand Licensing. Additionally, our incubation activities may from time to time lead to concepts that we could consider licensing or bringing to the market as products or services ourselves.

In Patent Licensing, the main opportunities we are pursuing are: 1) renewal of existing license agreements, and negotiating new license agreements with mobile device manufacturers; and 2) expanding the scope of licensing activities to other industries, in particular those that implement mobile communication technologies. We no longer need patent licenses for our former Devices & Services business, enabling possibilities to improve the balance of inbound and outbound patent licensing.

Global service delivery

Nokia Networks successfully delivers Vodafone Australia multi-technology, multi-vendor Managed Services from its Global Delivery Center in India.

“We believe there may be opportunities for location-based services support the internet of things.”

In Technology Licensing the opportunities are more long term in our view, but we will look at opportunities to license technologies developed by Nokia Technologies and delivered to partners in consumer electronics as solutions or technology packages that can be integrated into their products and services to help enable the Programmable World.

In Brand Licensing, we will continue to look at further opportunities to bring the Nokia brand into consumer devices, by licensing our brand and other intellectual property, as well as, for example, industrial design.

To grow each of the aforementioned business programs it is necessary to invest in commercial capabilities to support them.

General trends in IPR licensing

In general, there has been increased focus on IPR protection and licensing, and this trend is expected to continue. As such, new agreements are generally a product of lengthy negotiations and potential litigation or arbitration, and therefore the timing and outcome may be difficult to forecast. Due to the structure of the patent license agreements, the payments may be very infrequent, at times retrospective in part, and the lengths of license agreements can vary.

Additionally, there are clear regional differences in the ease of protecting and licensing patented innovations. We have seen some licensees actively avoiding license payments, and some licensors using aggressive methods to collect them, both behaviors attracting regulatory attention. We expect the discussion on the regulation of licensing to continue on both a global and regional level. Some of those regulatory developments may be adverse to the interests of technology developers and patent owners, including Nokia.

Research, development and patent portfolio development

As the creation of new technology assets and patented innovations is heavily focused on R&D activities with long lead-time to incremental revenues, we may from time to time see investment opportunities that have strategic importance. This generally affects the operating expenses before sales reflect a return on those investments.

Targets and priorities

Nokia expects Nokia Technologies’ net sales to grow on a year-on-year basis for the full year 2015, excluding potential amounts related to the expected resolution of the arbitration with Samsung. Also, Nokia expects Nokia Technologies’ operating expenses, excluding special items and purchase price accounting related items, to increase meaningfully on a year-on-year basis for the full year 2015. More specifically, Nokia expects Nokia Technologies’ quarterly operating expenses, excluding special items and purchase price accounting related items, in 2015 to be approximately in-line with the fourth quarter 2014 level. This is related to higher investments in licensing activities, licensable technologies, and business enablers including go-to-market capabilities, which target new and significant long-term growth opportunities.

Trends affecting our businesses

Exchange rates

Nokia is a company with global operations and net sales derived from various countries and invoiced in various currencies. Therefore, our business and results from operations are exposed to changes in exchange rates between the euro, our reporting currency, and other currencies, such as the US dollar, Japanese yen and the Chinese yuan. The magnitude of foreign exchange exposures changes over time as a function of our net sales and costs in different markets, as

well as the prevalent currencies used for transactions in those markets. Refer also to “General Facts on Nokia—Selected financial data—Exchange rate data” below.

To mitigate the impact of changes in exchange rates on our results, we hedge material net foreign exchange exposures (net sales less costs in a currency). We hedge forecasted net cash flows typically with up to 12-month hedging horizon. For the majority of these hedges, hedge accounting is applied to reduce income statement volatility.

In 2014, approximately 30% of Continuing operations net sales and approximately 35% of Nokia’s continuing operations costs were denominated in euro. In 2014, approximately 30% of Nokia’s continuing operations net sales were denominated in US dollar and approximately 10% each were denominated in Japanese yen, and in Chinese yuan.

During 2014, the US dollar appreciated against the euro and this had a positive impact on our net sales expressed in euros. However, the stronger US dollar also contributed to higher cost of sales and operating expenses, as approximately 30% of our total cost base was in US dollars. In total, before hedging, the appreciation of the US dollar had a small positive effect on our operating profit in 2014.

During 2014, the Japanese yen depreciated against the euro and this had a negative impact on our net sales expressed in euros. However, the weaker Japanese yen also contributed to lower cost of sales and operating expenses, as approximately 5% of Nokia’s continuing operations total costs were denominated in Japanese yen. In total, before hedging, the depreciation of the Japanese yen had a small negative effect on our operating profit in 2014.

During 2014, the Chinese yuan appreciated against the euro and this had a positive impact on our net sales expressed in euros. However, the stronger Chinese yuan also contributed to higher cost of sales and operating expenses, as approximately 10% of Nokia’s continuing operations total costs were denominated in Chinese yuan. In total, before hedging, the appreciation of the Chinese yuan had a small negative effect on our operating profit in 2014.

Significant changes in exchange rates may also impact our competitive position and related price pressures through their impact on our competitors.

For a discussion on the instruments used by Nokia in connection with our hedging activities, refer to Note 35, Risk management, of our consolidated financial statements included in this annual report on Form 20-F. Refer also to “Operating and financial review and prospects—Risk Factors—Risks relating to Nokia”.

The financial data included in this “Operating and financial review and prospects” section at and for the year ended December 31, 2013 and 2014 and for each of the years in the three-year period ended December 31, 2014 has been derived from our audited consolidated financial statements included in this annual report on Form 20-F. The financial data at December

31, 2013 and 2014 and for each of the years in the three-year period ended December 31, 2014 should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements.

Net sales

Continuing operations’ net sales in 2014 were EUR 12 732 million, an increase of EUR 23 million compared to EUR 12 709 million in 2013. The increase in Continuing operations’ net sales was primarily attributable to higher net sales in HERE and Nokia Technologies. The increase was partially offset by a slight decrease in net sales in Nokia Networks.

The increase in net sales in HERE was primarily attributable to higher sales to vehicle customers and Microsoft becoming a more significant licensee of HERE’s services. The increase in net sales in Nokia Technologies was primarily attributable to higher intellectual property licensing income from certain licensees, including Microsoft becoming a more significant intellectual property licensee in conjunction with the Sale of the D&S Business. The slight decrease in net sales in Nokia Networks was primarily attributable to a decrease in net sales in Global Services, as well as the absence of sales from businesses that were divested and certain customer contracts and countries that were exited in 2013. The decrease in net sales in Global Services was partially offset by an increase in net sales in Mobile Broadband.

The following table sets forth the distribution by geographical area of net sales for the years indicated.

Refer to “Results of segments—Nokia Networks” for the main changes in the regional net sales.

Gross margin

Gross margin for Continuing operations in 2014 was 44.3% compared to 42.1% in 2013. The increase in Continuing operations gross margin was primarily attributable to the increase in gross margin in Nokia Networks. The increase was partially offset by a decrease in gross margin in HERE.

The increase in gross margin in Nokia Networks was primarily attributable to a higher proportion of Mobile Broadband in the overall sales mix and an increase in gross margin in Global Services was partially offset by a slight decrease in gross margin in Mobile Broadband. The decrease in gross margin in HERE was primarily due to certain ongoing expenses that had been previously borne by our former Devices & Services business.

Operating expenses

Our R&D expenses for Continuing operations in 2014 were EUR 2 493 million, a decrease of EUR 126 million, or 5%, compared to EUR 2 619 million in 2013. R&D expenses represented 19.6% of our net sales in 2014 compared to 20.6% in 2013. The decrease in R&D expenses was primarily attributable to the decrease in R&D expenses in HERE and Nokia Networks, partially offset by higher R&D expenses in Nokia Technologies.

The decrease in R&D expenses in HERE was primarily attributable to significant purchase price accounting related items of EUR 168 million in 2013 arising from the purchase of NAVTEQ, the majority of which were fully amortized in 2013. The decrease in R&D expenses in Nokia Networks was primarily attributable to lower subcontracting costs, partially offset by higher investments in targeted growth areas, most notably LTE, small cells and Telco Cloud. The increase in R&D expenses in Nokia Technologies was primarily attributable to investments in business activities, such as the Technology and Brand licensing opportunities, which target new and significant long-term growth opportunities.

R&D expenses included purchase price accounting related items of EUR 36 million in 2014 compared to EUR 188 million in 2013. In 2014, R&D expenses included EUR 23 million of transaction related personnel costs related to the Sale of the D&S Business compared to EUR 15 million in 2013.

Our selling, general and administrative expenses for Continuing operations in 2014 were EUR 1 634 million, a decrease of EUR 37 million, or 2%, compared to EUR 1 671 million in 2013. Selling, general and administrative expenses represented 12.8% of our net sales in 2014 compared to 13.1% in 2013. The decrease in selling, general and administrative expenses was primarily attributable to the decrease in selling, general and administrative expenses in Nokia Networks. The decrease was partially offset by an increase in selling, general and administrative expenses in Group Common Functions and Nokia Technologies.

The decrease in selling, general and administrative expenses in Nokia Networks was primarily attributable to structural cost savings from Nokia Networks’ global restructuring program. The increase in selling, general and administrative expenses in Group Common Functions was primarily attributable to transaction related costs resulting from the Sale of the D&S Business. The increase in selling, general and administrative expenses in Nokia Technologies was primarily attributable to increased activities related to anticipated and ongoing patent licensing cases.

Selling, general and administrative expenses included purchase price accounting items of EUR 40 million in 2014 compared to EUR 93 million in 2013. In 2014, selling, general and administrative expenses included EUR 31 million of transaction related costs related to the Sale of the D&S Business.

A goodwill impairment charge of EUR 1 209 million was recorded in the third quarter 2014. Refer to Note 10, Impairment, of our consolidated financial statements included in this annual report on Form 20-F.

Other income and expenses for Continuing operations in 2014 was a net expense of EUR 132 million, a decrease of EUR 404 million, or 75%, compared to a net expense of EUR 536 million in 2013. The decrease in other income and expenses was primarily attributable to lower restructuring and associated charges at Nokia Networks, partially offset by lower other income in Group Common Functions. In 2014, other income and expenses included restructuring and associated charges of EUR 57 million at Nokia Networks, charges related to the HERE cost reduction program of EUR 36 million and anticipated contractual remediation costs of EUR 31 million at Nokia Networks. In 2013, other income and expenses included restructuring and associated charges of EUR 602 million, and transaction related costs of EUR 18 million related to the Sale of the D&S Business.

Operating profit/loss

Our operating profit for Continuing operations in 2014 was EUR 170 million, a decrease of EUR 349 million, or 67%, compared to an operating profit of EUR 519 million in 2013. The decrease in operating profit was primarily attributable to the goodwill impairment charge relating to HERE and the higher expenses in Group Common Functions. The decrease was partially offset by an increase in operating profit in Nokia Networks and Nokia Technologies. Our operating profit in 2014 included a EUR 1 209 million goodwill impairment charge relating to HERE. In addition, it included purchase price accounting items, restructuring charges and other special items of EUR 253 million compared to EUR 917 million in 2013. Our operating margin in 2014 was 1.3% compared to 4.1% in 2013.

Net financial income and expenses

Financial income and expenses for Continuing operations was a net expense of EUR 395 million in 2014 compared to a net expense of EUR 280 million in 2013, an increase of EUR 115 million, or 41%. The higher net financial expense in 2014 was primarily attributable to EUR 123 million of one-time expense related to the redemption of materially all of Nokia Networks’ borrowings, and a non-cash charge of EUR 57 million related to the repayment of EUR 1.5 billion convertible bonds issued to Microsoft in the second quarter 2014. These charges were partially offset by reduced interest expenses during the second half of the year and lower net losses related to foreign exchange.

Refer to “—Liquidity and capital resources” below.

Profit/loss before taxes

Continuing operations loss before tax in 2014 was a loss of EUR 237 million, a decrease of EUR 480 million compared to a profit before tax of EUR 243 million in 2013.

Income tax

Income taxes for Continuing operations amounted to a net benefit of EUR 1 408 million in 2014, a change of EUR 1 610 million compared to a net expense of EUR 202 million in 2013. The net income tax benefit was primarily attributable to the recognition of EUR 2 126 million of deferred tax assets from the reassessment of recoverability of tax assets in Finland and Germany in 2014. This resulted in a EUR 2 034 million non-cash tax benefit in the third quarter 2014. Based on recent profitability and forecasts at that time, we were able to re-establish a pattern of sufficient profitability in Finland and Germany to utilize the cumulative losses, foreign tax credits and other temporary differences. A significant portion of our Finnish and German deferred tax assets are indefinite in nature and available against future Finnish and German tax liabilities. The EUR 2 034 million non-cash tax benefit was partially offset by the recognition of a net expense of EUR 341 million in valuation allowances related to HERE’s Dutch deferred tax assets in 2014. Refer to Note 13, Income Tax and Note 14, Deferred taxes, of our consolidated financial statements included in this annual report on Form 20-F.

Our current tax for Continuing operations was an income tax expense of EUR 374 million for the year ended December 31, 2014, compared to EUR 354 million for the year ended December 31, 2013. Refer to Note 13, Income taxes, of our consolidated financial statements included in this annual report on Form 20-F.

Non-controlling interests

Profit for Continuing operations attributable to non-controlling interests in 2014 was EUR 8 million, an increase of EUR 153 million compared to a loss attributable to non-controlling interests of EUR 145 million for 2013. The change was primarily attributable to our acquisition of Siemens’ stake in Nokia Networks (formerly Nokia Siemens Networks) in August 2013, which significantly reduced the non-controlling interests in that business.

Profit/loss attributable to equity holders of the parent and earnings per share

Nokia Group’s total profit attributable to equity holders of the parent in 2014 was EUR 3 462 million, an increase of EUR 4 077 million, compared to a loss of EUR 615 million in 2013. This included a gain of EUR 3 175 million from the Sale of the D&S Business. Continuing operations generated a profit attributable to equity holders of the parent in 2014, amounting to EUR 1 163 million compared to a profit of EUR 186 million in 2013. Nokia Group’s total basic earnings per share in 2014 increased to EUR 0.94 (basic) and EUR 0.85 (diluted) compared to EUR (0.17) (basic) and EUR (0.17) (diluted) in 2013. From Continuing operations, earnings per share in 2014 increased to EUR 0.31 (basic) and EUR 0.30 (diluted) compared to EUR 0.05 (basic) and EUR 0.05 (diluted) in 2013.

Net sales

Continuing operations’ net sales declined by 17% to EUR 12 709 million in 2013 compared with EUR 15 400 million in 2012. The decline in Continuing operations net sales in 2013 was primarily due to lower Nokia Networks and HERE net sales. The decline in Nokia Networks’ net sales was partially due to divestments of businesses not consistent with its strategic focus, as well as the exiting of certain customer contracts and countries. Excluding these two factors, Nokia Networks’ net sales in 2013 declined by approximately 13% primarily due to reduced wireless infrastructure deployment activity, which affected both Global Services and Mobile Broadband. The decline in HERE net sales was primarily due to a decline in internal* HERE net sales due to lower recognition of deferred revenue related to our smartphone sales, partially offset by an increase in external HERE net sales due to higher sales to vehicle customers. Additionally, Nokia Networks’ and HERE net sales were adversely affected by foreign currency fluctuations.

The following table sets forth the distribution by geographical area of our net sales for the fiscal years 2013 and 2012.

Gross margin

Gross margin for Continuing operations in 2013 was 42.1%, compared to 36.1% in 2012. The increase in 2013 was primarily due to a higher Nokia Networks’ gross margin. Nokia Networks’ gross margin increased primarily due to improved efficiency in Global Services, an improved product mix with a greater share of higher margin products, and the divestment of less profitable businesses.

Operating expenses

Our R&D expenses were EUR 2 619 million in 2013, compared to EUR 3 081 million in 2012. R&D expenses represented 20.6% of our net sales in 2013, compared to 20.0% in 2012. R&D expenses included purchase price accounting items of EUR 188 million in 2013, compared to EUR 375 million in 2012. The decrease was primarily due to lower amortization of acquired intangible assets within HERE. In addition, it included EUR 15 million of transaction related costs, related to the Sale of the D&S Business.

In 2013, our selling and marketing expenses were EUR 974 million, compared to EUR 1 372 million in 2012. Selling and marketing expenses represented 7.7% of our net sales in 2013 compared to 8.9% in 2012. The decrease in selling and marketing expenses was due to lower purchase price accounting items and generally lower expenses in Nokia Networks and HERE. Selling and marketing expenses included purchase price accounting items of EUR 93 million in 2013 compared to EUR 313 million in 2012. The decrease was primarily due to items arising from the formation of Nokia Networks becoming fully amortized at the end of the first quarter of 2013.

Administrative and general expenses were EUR 697 million in 2013, compared to EUR 690 million in 2012. Administrative and general expenses were equal to 5.5% of our net sales in 2013 compared to 4.5% in 2012. The increase in administrative and general expenses as a percentage of net sales reflected a decline in net sales in 2013. Administrative and general expenses did not include purchase price accounting items in either 2013 or 2012.

Other income and expenses was a net expense of EUR 536 million in 2013, compared to a net expense of EUR 1 237 million in 2012. In 2013, other income and expenses included restructuring charges of EUR 602 million, as well as transaction related costs of EUR 18 million related to the Sale of the D&S Business. In 2012, other income and expenses included restructuring charges of EUR 1 265 million, including EUR 42 million related to country and contract exits, impairments of assets of EUR 2 million, a negative adjustment of EUR 4 million to purchase price allocations related to the final payment from Motorola as well as amortization of acquired intangible assets of EUR 23 million and a net gain on sale of real estate of EUR 79 million.

Operating profit/loss

Our 2013 operating profit was EUR 519 million, compared with an operating loss of EUR 821 million in 2012. The increased operating profit resulted primarily from lower restructuring charges and purchase price accounting items in general and an increase in the operating performance of our Nokia Networks and HERE businesses. Our operating profit in 2013 included purchase price accounting items, restructuring charges and other special items of net negative EUR 917 million compared to net negative EUR 1 963 million in 2012. Our 2013 operating margin was positive 4.1% compared to negative 5.3% in 2012. The improvement was primarily due to an increase in our gross margin and lower expenses in other income and expenses.

Net financial income and expenses

Financial income and expenses, net, was an expense of EUR 280 million in 2013 compared to an expense of EUR 357 million in 2012. The lower net expense in 2013 was primarily driven by lower foreign exchange losses.

Refer—“Liquidity and capital resources” below.

Profit/loss before taxes

Continuing operations’ profit before tax was EUR 243 million in 2013, compared to a loss of EUR 1 179 million in 2012. Taxes amounted to EUR 202 million in 2013 and EUR 304 million in 2012.

Non-controlling interests

Loss attributable to non-controlling interests from Continuing operations totaled EUR 145 million in 2013, compared with a loss attributable to non-controlling interests of EUR 712 million in 2012. This change was primarily due to an improvement in Nokia Networks results and our acquisition of Siemens’ stake in Nokia Networks.

Profit/loss attributable to equity holders of the parent and earnings per share

Nokia Group’s total loss attributable to equity holders of the parent in 2013 amounted to EUR 615 million, compared with a loss of EUR 3 105 million in 2012. Continuing operations generated a profit attributable to equity holders of the parent in 2013, amounting to EUR 186 million, compared with a loss of EUR 771 million in 2012. Nokia Group’s total earnings per share in 2013 increased to EUR (0.17) (basic) and EUR (0.17) (diluted), compared with EUR (0.84) (basic) and EUR (0.84) (diluted) in 2012. From Continuing operations, earnings per share in 2013 increased to EUR 0.05 (basic) and EUR 0.05 (diluted), compared with EUR (0.21) (basic) and EUR (0.21) (diluted) in 2012.

Net sales

Discontinued operations net sales for the period ended April 25, 2014 were EUR 2 458 million, a decrease of EUR 8 277 million, or 77%, compared to EUR 10 735 million in 2013.

Gross margin

Discontinued operations gross margin decreased to 15.1% for the period ended April 25, 2014 compared to a gross margin of 20.6% in 2013. The decrease in gross margin was primarily attributable to a decrease in gross margin in both Smart Devices and Mobile Phones.

Operating expenses

Discontinued operations operating expenses were EUR 908 million for the period ended April 25, 2014, a decrease of EUR 1 891 million, or 68%, compared to EUR 2 799 million in 2013.

Operating profit/loss

Discontinued operations operating profit for the period ended April 25, 2014 was EUR 2 639 million, an increase of EUR 3 229 million, compared to an operating loss of EUR 590 million in 2013. The increase in discontinued operations operating profit in 2014 was primarily attributable to the gain of EUR 3 175 million from the Sale of the D&S Business.

Profit/(loss) for the period

Discontinued operations profit for the period ended April 25, 2014 was EUR 2 305 million, an increase of EUR 3 085 million compared to a loss of EUR 780 million in 2013.

The increase in Discontinued operations profit for the period ended April 25, 2014 was primarily attributable to the gain of EUR 3 175 million from the Sale of the D&S Business. The increase was partially offset by a tax expense of EUR 127 million primarily due to non-resident capital gains taxes in certain jurisdictions, as well as tax impacts of legal entity restructuring carried out in connection with the Sale of the D&S Business. Refer to Note 3, Disposals treated as discontinued operations, of our consolidated financial statements included in this annual report on Form 20-F.

Net sales

Discontinued operations net sales decreased by 29% to EUR 10 735 million compared to EUR 15 152 million in 2012. The decline in discontinued operations net sales in 2013 was primarily due to lower Mobile Phones net sales and, to a lesser extent, lower Smart Devices net sales. The decline in Mobile Phones net sales was due to lower volumes and average selling prices, affected by competitive industry dynamics, including intense smartphone competition at increasingly lower price points and intense competition at the low end of our product portfolio. The decline in Smart Devices net sales was primarily due to lower volumes, affected by competitive industry dynamics, including the strong momentum of competing smartphone platforms, as well as our portfolio transition from Symbian products to Lumia products.

The following table sets forth the distribution by geographical area of our net sales for the fiscal years 2013 and 2012.

Gross margin

Discontinued operations gross margin improved to 20.6% in 2013 compared to 18.7% in 2012. The increase in gross margin in 2013 was primarily due to a higher Smart Devices gross margin, partially offset by slightly lower Mobile Phones gross margin. The increase in Smart Devices gross margin was primarily due to lower inventory related allowances, which adversely affected Smart Devices gross margin in 2012.

Operating expenses

Discontinued operations operating expenses were EUR 2 799 million in 2013, compared to EUR 4 311 million in 2012. The 35% decrease in 2013 was due to lower Mobile Phones and Smart Devices operating expenses, primarily due to structural cost savings, as well as overall cost controls.

Operating profit/loss

Discontinued operations operating margin improved to negative 5.5% in 2013 compared to negative 9.8% in 2012. The improvement was primarily due to structural cost savings, as well as overall cost controls, and a higher gross margin.