Nokia 2006 Annual Report Download - page 195

Notes to the Consolidated Financial Statements (Continued)
37. Risk management (Continued)
customers in their financing of infrastructure investments. Nokia actively mitigates, market
conditions permitting, this exposure by arrangements with these institutions and investors.
Credit risks related to customer financing are systematically analyzed, monitored and managed by
Nokia’s Customer Finance organization. Credit risks are approved and monitored by Nokia’s Credit
Committee along principles defined in the company’s credit policy and according to the credit
approval process. The Credit Committee consists of the CFO, Group Controller, Head of Treasury and
Head of Nokia Customer Finance.
At the end of 2006, our longterm loans to customers and other third parties totaled EUR 19 million
(outstanding loans in EUR 63 million in 2005), while financial guarantees given on behalf of third
parties totaled EUR 23 million (0 million in 2005). In addition, we had financing commitments
totaling EUR 164 million (EUR 13 million in 2005). Total structured financing (outstanding and
committed) stood at EUR 206 million (EUR 63 million in 2005).
The term structured financing portfolio at December 31, 2006 was:
Financing
Outstanding commitments Total
EURm EURm EURm
Total Portfolio ********************************************** 42 164 206
The term structured financing portfolio at December 31, 2006 mainly consists of committed customer
financing to a network operator.
Financial credit risk
Financial instruments contain an element of risk of the counterparties being unable to meet their
obligations. This risk is measured and monitored by the Treasury function. The Group minimizes
financial credit risk by limiting its counterparties to a sufficient number of major banks and financial
institutions, as well as through entering into netting arrangements, which gives the company the
right to offset in the case that the counterparty would not be able to fulfill the obligations.
Direct credit risk represents the risk of loss resulting from counterparty default in relation to on
balance sheet products. The fixed income and money market investment decisions are based on
strict creditworthiness criteria. The outstanding investments are also constantly monitored by the
Treasury. Nokia does not expect the counterparties to default given their high credit quality.
Fixed income and moneymarket investments(1)(2)(3)
Maturity date Maturity date
less than 12 Months 12 months or more Total
Fair Unrealized Unrealized Fair Unrealized Unrealized Fair Unrealized Unrealized
2006 Value Losses Gains Value Losses Gains Value Losses Gains
Governments ******* 10 — — 2 360 (38) — 2 370 (38) —
Banks ************* 2 861 (2) — 860 (8) 1 3 721 (10) 1
Corporates ********* 136 — — 260 (3) — 396 (3) —
Asset backed
securities ******** 98 — — 473 (1) 2 571 (1) 2
3 105 (2) — 3 953 (50) 3 7 058 (52) 3
F60