Nokia 2005 Annual Report Download - page 202

Notes to the Consolidated Financial Statements (Continued)
38. Risk management (Continued)
Euro Commercial Paper (ECP) program, totaling USD 500 million
US Commercial Paper (USCP) program, totaling USD 500 million
None of the above programs have been used to a significant degree in 2005.
Nokia’s international creditworthiness facilitates the efficient use of international capital and loan
markets. The ratings of Nokia from credit rating agencies have not changed during the year. The
ratings as at December 31, 2005 were:
Short-term Standard & Poor’s A-1
Moody’s P-1
Long-term Standard & Poor’s A
Moody’s A1
Hazard risk
Nokia strives to ensure that all financial, reputation and other losses to the Group and our
customers are minimized through preventive risk management measures or purchase of
insurance. Insurance is purchased for risks, which cannot be internally managed. Nokia’s
Insurance & Risk Finance function’s objective is to ensure that Group’s hazard risks, whether
related to physical assets (e.g. buildings) or intellectual assets (e.g. Nokia) or potential liabilities
(e.g. product liability) are optimally insured.
Nokia purchases both annual insurance policies for specific risks as well as multi-line and/or
multi-year insurance policies, where available.
Notional amounts of derivative financial instruments(1)
2005 2004
EURm EURm
Foreign exchange forward contracts(2) ................................... 29,991 10,745
Currency options bought(2) ............................................ 284 715
Currency options sold(2) .............................................. 165 499
Interest rate swaps .................................................. 50 —
Cash settled equity options(3) .......................................... 150 237
Credit default swaps(4) ............................................... —200
(1) Includes the gross amount of all notional values for contracts that have not yet been settled
or cancelled. The amount of notional value outstanding is not necessarily a measure or
indication of market risk, as the exposure of certain contracts may be offset by that of other
contracts.
(2) As at December 31, 2005 notional amounts include contracts amounting to EUR 2.4 billion
used to hedge the shareholders’ equity of foreign subsidiaries (December 31, 2004
EUR 1.6 billion).
(3) Cash settled equity options can be used to hedge risk relating to incentive programs and
investment activities.
(4) Credit default swaps are used to selectively hedge counterparty risks involved in investment
activities.
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