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1.1. Accounting Principles for the Consolidated Financial Statements

The Group's parent company, Vaisala Oyj, is a Finnish public limited company established under Finnish law, its domicile is Vantaa and its registered address in Vanha Nurmijärventie 21, FI-01670 Vantaa (P.O. Box 26, FI-00421 Helsinki). The company's Business ID is 0124416-2. Vaisala has offices and business operations in Finland, North America, France, the UK, Germany, China, Sweden, Malaysia, Japan and Australia. Vaisala's consolidated financial statements have been prepared according to the International Financial Reporting Standards (IFRS) and in their preparation all the obligatory IAS and IFRS standards as well as the SIC and IFRIC interpretations in effect on 31 December 2005 have been followed. In addition, the Group voluntarily introduced on 1 January 2005 the IAS 39 amendment granting the option of valuation at fair value through profit and loss. By international financial statement standards is meant standards approved for application in the EU, and interpretations issued about them, according to the procedure prescribed in Finnish law and provisions enacted thereon in EU Regulation (EC) No. 1606/2002. The notes to the consolidated financial statements are also in accordance with Finnish accounting and corporate law.

Vaisala Oyj is an international technology group which develops and manufactures electronic measuring systems and instruments. The areas of application of these products are meteorology, the environmental sciences, transport and industry. Vaisala's products create the basis for better quality of life, cost savings, environmental protection, security and efficiency.

Segment reporting

Segment information is presented in accordance with the Group's business and geographical segment divisions. The Group's primary segment reporting format is according to business segments. Business segments are based on the Group's internal organisational structure and internal financial reporting.

The business segments consist of asset categories and business operations whose product- or service-related risks and profitability differ from other business segments. The products or services of geographical segments are produced in a financial environment whose risks and profitability differ from the risks and profitability of the financial environment of other geographical segments.

Pricing between segments takes place at the fair market price.

The assets and liabilities of segments are business items which the segments use in their business operations or which on sensible grounds are attributable to the segments. Other activity includes the development units of new business operations, unattributed tax and financial items as well as other items common to the whole company. Investments consist of additions to tangible fixed assets and intangible assets, which are used in more than one financial year.

Vaisala's three business divisions are Vaisala Measurement Systems, Vaisala Solutions and Vaisala Instruments.

Vaisala Measurement Systems develops, manufactures and markets systems and instruments for observing the weather in the upper atmosphere as well as wind profilers and lightning detection systems that make extensive use of remote sensing technology. The division also offers maintenance services for these systems and instruments.

Vaisala Solutions develops, manufactures and markets weather observation instruments, which are used to observe weather conditions on or near the Earth's surface. The division also offers maintenance service for these instruments.

Vaisala Instruments develops, manufactures and markets instruments for the measurement of relative humidity, dewpoint, barometric pressure, carbon dioxide, wind, visibility, cloud height and prevailing weather conditions. The division also offers its customers maintenance services for measuring instruments.

Accounting Principles for the Consolidated Financial Statements (IFRS)

During 2005 the Group has adopted the international IFRS financial reporting practice and has applied IFRS 1, First-Time Adoption of IFRS Financial Reporting Standards. The transition date was 1 January 2004. Differences resulting from the adoption of IFRS standards have been presented in reconciliation statements, which are included in the financial statements. Comparison data for 2004 have been converted to comply with the IFRS standards.

Financial statement data are presented in millions of euros and they are based on original acquisition costs if not otherwise stated in the accounting principles outlined below.

The preparation of financial statements in accordance with IFRS standards requires Group management to make certain estimates and to exercise discretion in applying the accounting principles. Information about the discretion exercised by management in applying the accounting principles followed by the Group and that which has most impact on the figures presented in the financial statements has been presented in the item 'Accounting principles that require management discretion and main uncertainty factors relating to estimates'.

Principles of consolidation
Subsidiaries

The consolidated financial statements include the parent company Vaisala Oyj and all subsidiaries in which it directly or indirectly owns more than 50% of the votes or in which the parent company otherwise exercises control. The existence of potential voting rights has been taken into account when assessing the terms of control when instruments conferring entitlement to potential control are presently exercisable. Subsidiaries acquired or founded during the financial period are consolidated from the date on which the Group has acquired control and are no longer consolidated from the date that control ceases. Subsidiaries acquired before 1 January 2004 are consolidated at original acquisition cost, according to the exception mentioned in IFRS 1. Subsidiaries acquired on or after 1 January 2004 are consolidated according to the IFRS 3 standard Business Combinations.

The consolidated financial statements have been prepared using the acquisition cost method. Intra-Group transactions, unrealised margins on internal deliveries, internal receivables and liabilities, and the Group's internal distribution of profit are eliminated. Unrealised losses on intra-Group transactions are also eliminated unless costs are not recoverable or the loss results from an impairment. The consolidated financial statements are prepared applying consistent accounting principles to the same transactions and other events which are implemented under the same conditions. Minority interests have been separated from subsidiaries' results for the financial year and have been presented as a separate item in the Group's shareholders' equity.

Associated companies

The share of profits or losses of associated companies, i.e. companies of which Vaisala owns between 20% and 50% and over which it has significant influence, are included in the consolidated financial statements using the equity method. If Vaisala's share of an associated company's losses exceeds the book value of the investment, the investment is entered in the balance sheet at zero value and further losses are not recognised unless the Group has incurred obligations on behalf of the associated company. Unrealised gains on transactions between the Group and its associated companies have been eliminated to the extent of the Group's interest in the associated companies. The Group's investment in associated companies includes goodwill on acquisition.

The Group's share of associated companies' results is presented in the income statement as a separate item after 'financial income and expenses'. Investments in associated companies are originally entered into the accounts at their acquisition cost and the book value increased or decreased by the share of post-acquisition profits or losses. Distribution of profit received from an investment reduces the book value of the investment.

Foreign currency items

Transactions in foreign currencies are recognised at the rates of exchange on the date of transaction. Receivables and payables in foreign currency have been valued at the exchange rates quoted by the European Central Bank on the closing date. Exchange rate differences resulting from the settlement of monetary items or from the presentation of items in the financial statements at different exchange rates from which they were originally recognised during the financial period, or presented in the previous financial statements, are recognised as income or expenses in the income statement group 'financial income and expenses' in the financial period in which they arise.

Items relating to the result and financial position of each entity of the Group are measured using the currency which is the main currency of each entity's operating environment. Balance sheets of Group companies outside the euro zone have been translated into euros using the official mid-market exchange rates of the European Central Bank on the closing date. In translating income statements, mid-market exchange rates have been used. Exchange rate differences resulting from the translation of income statement items at mid-market exchange rates and from the translation of balance sheet items at exchange rates on the closing date have been recognised as a separate item in shareholders' equity. Translation gains and losses which arose in the elimination of the shareholders' equity of subsidiaries have been recognised as a separate item in shareholders' equity. When a foreign subsidiary or associated company is sold, the accumulated translation difference is recognised in the income statement as part of the gain or loss on the sale.

Goodwill or fair value adjustments arising on the acquisition of an independent foreign entity are treated as that entity's foreign currency assets and liabilities and are translated at the closing balance sheet rate.

Tangible fixed assets

The office and factory premises at Vantaa were revalued by a total of EUR 5.7 million in the years 1981-1988. These revaluations have been reversed in connection with the adoption of IFRS and in the valuation of tangible assets the values have been restored in all respects to original acquisition cost.

Fixed assets comprise mainly land and buildings as well as machinery and equipment. The balance sheet values are based on original acquisition cost less accumulated depreciation and amortisation as well as possible impairment losses. The cost of self-constructed assets includes materials and direct work as well as a proportion of overhead costs attributable to construction work. If a fixed asset consists of several parts which have useful lives of different lengths, the parts are treated as separate assets. Expenditures that arise later to an asset or part thereof are capitalised only when they increase the asset's economic benefit to the company. All other expenditures, such as normal repair and maintenance, are charged to the income statement during the financial period in which they are incurred. Interest expenses are not included in the acquisition cost of fixed assets.

Depreciation is calculated using the straight-line method and is based on the estimated useful life of the asset. Land is not depreciated. Estimated useful lives for various assets are:

• Buildings and structures 5 - 40 years
• Machinery and equipment 3 - 10 years
• Other tangible assets 5 - 15 years

The residual value, depreciation method and useful life of assets are checked in connection with each financial statement and if necessary adjusted to reflect changes in the expectation of economic benefit. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the operating profit.

Public grants received for fixed asset investments are recognised as a reduction in the carrying amounts of tangible fixed assets. Grants are recognised in the form of smaller depreciations during the useful life of the asset.

Depreciation of a tangible fixed asset is discontinued when the tangible fixed asset is classified as being for sale in accordance with the IFRS 5 standard Non-Current Assets Held for Sale and Discontinued Operations.

Intangible assets
Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net assets of the acquired subsidiary/associated company at the date of acquisition. Goodwill is calculated in the currency of the operating environment of the acquired entity. If the acquisition cost is lower than the value of the acquired subsidiary's net asset value the difference is entered directly into the income statement. According to the relief permitted by the IFRS standard, company acquisitions before the IFRS transition date have not been adjusted according to IFRS principles; they have been left at the values according to Finnish accounting practice. In acquisitions that took place before the IFRS transition date, the acquisition cost has been attributed where applicable to the fixed assets of the acquired subsidiary and amortised according to plan over an estimated useful life of 5 years.

Goodwill is not amortised, rather it is tested annually for any impairment. For this purpose goodwill has been attributed to cash generating units. Goodwill is valued at the original acquisition cost and in terms of subsidiaries acquired before 1 January 2004 at assumed acquisition cost less impairments.

Other intangible assets

Other intangible assets are e.g. patents and trademarks as well as software licences. They are valued at their original acquisition cost and amortised using the straight-line method over their useful life. Intangible assets that have an indefinite useful life are not amortised, rather they are tested for impairment annually. Intangible assets of the acquired subsidiaries are valued at their fair values at the date of acquisition.

Estimated useful lives for intangible assets are:

• Intangible rights at most 5 years
• Other tangible assets at most 10 years
• Software 3-5 years

Research and development expenditure

Research and development expenditures have been recognised as expenses in the financial period in which they were incurred, except for machinery and equipment acquired for research and development use, which are amortised according to plan over 5 years. Costs relating to the development of new products and processes are not capitalised because the future earnings obtained from them are only assured when the products come to market. According to IAS 38 an intangible asset is entered in the balance sheet only when it is probable that the company will derive financial benefit from the asset. Moreover, it is typical of the industry that it not possible to distinguish the research stage of an internal project that aims to create an asset from its development stage.

Borrowing costs

Borrowing costs are recognised as an expense for the period during which they arise.

Inventories

Inventories are presented at the lower of acquisition cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. The cost of finished goods and work in progress comprises raw materials, direct labour costs, other direct costs and an appropriate proportion of variable and fixed production overheads based on normal operating capacity. In determining the acquisition cost, standard cost accounting is applied and standard costs are adjusted regularly and changed if necessary according to the situation at the time in question. Acquisition cost is determined using the weighted average method, whereby the cost is determined as the weighted average of similar inventory items which were held at the beginning of the financial period and those bought or produced during the financial period.

Lease agreements
The Group is the lessee

Lease agreements of tangible assets where the Group has a substantial part of the risks and rewards of ownership are classified as finance leases. Finance leases are entered into the balance sheet's tangible fixed assets at the start of the lease term at the lower of the fair value of the leased property and the present value of the minimum lease payments. The asset acquired under a finance lease is depreciated over the shorter of the asset's useful life and the lease term. Lease payments are allocated between the liability and finance charges so as to achieve a constant interest rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in interest-bearing liabilities.

Lease agreements where the lessor retains a significant portion of the risks and rewards of ownership are treated as other leases. Payments made under other leases are charged to the income statement on a straight-line basis over the period of the lease.

The Group is the lessor

Leases of Group assets where a significant portion of the risks and rewards of ownership are transferred to the lessee are classified as finance leases and the present value of the lease payments is recognised in the balance sheet as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Finance income from a finance lease is determined so that the remaining net investment produces a constant periodic rate of return over the term of the lease.

Assets leased out under leases other than finance leases are included in tangible fixed assets in the balance sheet. They are depreciated over their useful lives on a basis consistent with similar owned tangible fixed assets. Rental income is recognised in the balance sheet on a straight-line basis over the lease term.

Impairment

On every closing date the Group reviews asset items for any indication of impairment losses. If there are such indications, the amount recoverable from the said asset item is assessed. The recoverable amount is also assessed annually for the following asset items irrespective of whether there are indications of impairment: goodwill, intangible assets which have an indefinite useful life as well as incomplete intangible assets.

The recoverable amount is the higher of the asset item's fair value less the cost arising from disposal and its value in use. When determining value in use, the expected future cash flows are discounted based on their present values at discount interest rates which reflect the average capital cost before taxes of the country and business sector in question (WACC = weighted average cost of capital). The special risks of the assets in question are also taken into account in the discount interest rates. The recoverable amount of financial assets is either the fair value or the present value of expected future cash flows discounted at the original effective interest rate. Short-term receivables are not discounted. In terms of individual asset items which do not independently generate future cash flows, the recoverable amount is determined for the cash generating unit to which the said asset item belongs.

An impairment loss is recognised in the income statement when the carrying amount is greater than the recoverable amount. The impairment loss is reversed if a change in conditions has occurred and the recoverable amount of the asset has changed since the date when the impairment loss was recognised. The impairment loss is not reversed, however, by more than that which the carrying amount of the asset (less depreciation) would be without the recognition of the impairment loss. Impairment losses recognised for goodwill are not reversed under any circumstances.

Trade and other receivables

Trade and other receivables are recognised at their anticipated realisable value, which is the original invoicing value less the estimated impairment provision of these receivables. An impairment provision for trade receivables is made when there are good grounds to expect that the Group will not receive all its receivables on original terms.

Financial assets and financial liabilities

The IAS 32 and IAS 39 standards relating to financial instruments have been applied as of 1 January 2005. In terms of these standards, data for 2004 has been calculated according to FAS. Valuation differences according to IAS and FAS would not have had any substantial effect on the Group's result or shareholders' equity at 31 December 2004.

IAS 39 classifies a group's financial assets into the following categories: financial assets measured at fair value through profit and loss, held-to-maturity investments, loans and receivables, and available-for-sale financial assets. Categorisation is made on the basis of the purpose for which the financial assets were acquired and they are categorised in connection with the original acquisition. Transaction costs have been included in the original carrying amount of the financial assets when the item in question is not valued at fair value through profit and loss. All purchases and sales of financial assets are recognised on the trade date.

Derecognition of financial assets takes place when the Group has lost a contractual right to receive the cash flows or when it has transferred substantially the risks and rewards outside the Group. On every closing date the Group assesses whether there is objective evidence that the value of a financial asset item or group of items asset items has been impaired. If such evidence exists, the impairment is recognised in the income statement item financial expenses.

Financial assets held for trading purposes such as derivative instruments to which the Group does not apply hedge accounting under IAS 39 as well as income fund investments consisting of the short-term investment of liquid assets have been categorised as financial assets recognised at fair value through profit and loss. The fair value of income fund investments has been determined based on price quotations published in an active market, namely the bid quotations on the closing date. Realised and unrealised gains and losses arising from changes in fair value are recognised in the income statement in the period in which they arise. Financial assets held for trading as well as those maturing within 12 months are included in current assets.

Held-to-maturity investments are financial assets not belonging to derivative assets whose payments are fixed and quantifiable and which mature on a specified date and which the Group has the firm intent and ability to hold to maturity. They are valued at amortised cost and they include either short-term or long-term assets.

Loans and other receivables are assets not belonging to derivative assets whose payments are fixed and quantifiable and which are not quoted on an active market and which the company does not hold for trading purposes. This category includes Group financial assets which have arisen through the transfer of money, goods or services to debtors. They are valued at amortised cost and they include short- and long-term financial assets, the latter if they mature after more than 12 months. If there are indications of value impairment, the carrying amount is estimated and reduced immediately to correspond with the recoverable amount.

Available-for-sale financial assets are assets not belonging to derivative assets which are expressly allocated to this category or which do not fall into one of the other categories. These include long-term assets except if the intent is to keep them for less than 12 months from the closing date, in which case they are included in current assets. The company does not, however, have any such items at present.

Cash and cash equivalents are carried in the balance sheet at original cost. Cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term, highly liquid investments with original maturities of three months or less and which consist mainly of the short-term investment of cash assets. Bank overdrafts are included within current interest-bearing liabilities. Owing to their short-term nature, the fair values of cash funds and short-term investments have been estimated to be the same as their acquisition cost.

Financial liabilities are recognised at fair value on the basis of the original consideration received. Transactions costs have been included in the original carrying amount of the financial liabilities. Later, all financial liabilities are valued at amortised cost using the effective yield method. Financial liabilities include long- and short-term liabilities and they can be interest-bearing or non-interest-bearing.

Derivative contracts and hedging activities

All derivatives contracts are initially recognised at cost and subsequently remeasured at their fair value. Forward foreign exchange contracts are valued at their fair value using the market prices of forward contracts at the closing date.

The Group has sales in a number of foreign currencies, of which the most significant are the US dollar, the Japanese yen and the British pound. The Group does not apply hedge accounting under IAS 39 to forward foreign exchange contracts that hedge sales in foreign currencies. The Group has a number of investments in foreign subsidiaries whose net assets are exposed to foreign currency risk. The Group does not hedge the foreign exchange risk of subsidiaries' net assets.

Realised and unrealised gains and losses arising from changes in fair value are recognised in the income statement in 'other operating income and expenses' in the period in which they arise.

Employee benefits
Pension obligations

The Group has a number of pension schemes in different parts of the world which are based on local conditions and practices. These pension schemes are classified as either defined-contribution or defined-benefit schemes. Under defined-contribution plans, expenses are recognised in the balance sheet in the financial period in which the contribution is payable.

In defined-benefit plans, the Group can be left with the arrangement of obligations or assets after the financial period in which the contribution is payable. A pension liability describes the present value of future cash flows resulting from payable benefits. The present value of the defined-benefit pension plans has been determined using the projected unit credit method and assets belonging to the plans have been valued at fair value on the closing date. The obligations of the Group's defined-benefit pension plans have been calculated for each plan separately. On the basis of calculations made by authorised actuaries, the calculated actuarial gains and losses are recognised in the income statement during the average remaining period of service of employees participating in the plan to the extent that they exceed the greater of 10% of the present value of the plan's defined-benefit pension obligations and the fair value of assets included in the plan.

On the transition date to IFRS standards on 1 January 2004, all actuarial gains and losses have been recognised in the balance sheet's opening shareholders' equity in the manner allowed by the IFRS 1 standard.

The TEL pension disability benefit handled in the insurance company has been treated as a defined-benefit pension plan in the comparison year 2004.

Share-based payments

The Group currently has no stock option schemes other than the stock option scheme granted in 2000, which gives each member of the management of Vaisala Oyj and its subsidiaries the opportunity to acquire Vaisala Oy shares. The subscription period for warrants began in stages on 1 December 2002 and 1 December 2004 and will end for all warrants on 31 December 2006. There is no need to value the stock option scheme according to IFRS 2, because the options of the scheme were not exercisable before 1 January 2005.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as the result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. If it is possible that the Group will be reimbursed for part of the obligation by some third party, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The amount of provisions is estimated at each closing date and the amount is changed to correspond to the best estimate at the given time. A provision is cancelled when the probability of financial settlement has been removed. A change in provisions is recognised in the same item of the income statement in which the provision was originally recognised.

Provisions relate to the restructuring of operations, loss-making agreements and repairs under guarantee. Restructuring provisions are recognised when a detailed and appropriate plan relating to them has been prepared and the company has begun to implement the plan or has announced it will do so. Restructuring provisions generally comprise lease termination penalties and employee termination payments.

A provision for a loss-making agreement is recognised when unavoidable expenditure required to fulfil obligations exceeds the benefits obtainable from the agreement.

Income tax

The tax item in the income statement comprises tax based on taxable income for the financial year, adjustments to tax accruals related to previous years and the change in deferred taxes. Tax based on taxable income for the financial year is calculated for taxable income on the basis of each country's current tax rate.

Deferred taxes are calculated for all temporary differences between the carrying amount of an asset or liability and its tax base. The largest temporary differences arise from amortisation of fixed assets, defined-benefit pension schemes and unused tax losses. In taxation deferred tax is not recognised for non-deductible goodwill impairment and deferred tax is not recognised for distributable earnings of subsidiaries where it is probable that the difference will not reverse in the foreseeable future. The Group's deferred tax assets and liabilities relating to the same tax recipient are stated net.

Deferred taxes have been calculated using tax rates prescribed by the closing date.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit, against which the temporary differences can be utilised, will be available.

Shareholders' equity, dividends and treasury shares

The Board of Directors' proposal for dividend distribution has not been recognised in the financial statements; the dividends are recognised only on the basis of the Annual General Meeting's approval.

If a company buys its own shares (treasury shares), the consideration paid for them including direct costs is deducted from shareholders' equity.

Principles of revenue recognition
Sales of goods and services rendered

Revenue from the sale of goods is recognised when significant risks and rewards of owning the goods are transferred to the buyer. Revenue recognition generally takes places when the transfer has taken place. Revenue for rendering of services is recognised when the service has been performed. When recognising turnover, indirect taxes and discounts, for example, have been deducted from sales revenue. Possible exchange rate differences are recognised in the financial income and expenses.

Long-term projects

Revenues from long-term projects are recognised using the percentage of completion method, when the outcome of the project can be estimated reliably. The stage of completion is determined for each project by reference to the relationship between the costs incurred for work performed to date and the estimated total costs of the project.

When the outcome of a long-term project cannot be estimated reliably, project costs are recognised as expenses in the same period when they arise and project revenues only to the extent of project costs incurred where it is probable that those costs will be recoverable. When it is probable that total costs necessary to complete the project will exceed total project revenue, the expected loss is recognised as an expense immediately.

Other revenue received by the Group

Revenue arising from royalties and rents is recognised on an accrual basis in accordance with the substance of the relevant agreements. Interest income is recognised on a time-proportion basis, taking account of the effective yield of the asset item, and dividend income is recognised when the Group's right to receive payment is established.

Other operating income and expenses

Gains on the disposal of assets as well as income other than that relating to actual performance-based sales, such as rental income, are recognised as other operating income.

Losses on the disposal of assets and expenses other than those relating to actual performance-based sales are included in other operating expenses.

In addition, fair value changes in derivatives to which the Group does not apply hedge accounting under IAS 39 are recognised in other income and expenses.

Grants

Grants received from the state or another party are recognised in the income statement at the same time as expenses are recognised as a deduction of the related expense group. Grants relating to asset acquisition are presented as an adjustment to the acquisition cost of the asset and they are recognised in the form of smaller depreciations over the useful life of the asset.

Held-for-sale assets and discontinued operations

Held-for-sale assets and assets relating to discontinued operations, which have been classified as held for sale, are valued at the lower of the following: the carrying amount and the fair value less costs arising from the sale. Depreciation of these assets is discontinued at the moment of classification.

Accounting principles requiring management discretion and the main uncertainty factors relating to estimates

The preparation of financial statements requires the use of estimates and assumptions relating to the future and the actual outcomes may differ from the estimates and assumptions made. In addition, discretion has to be exercised in applying the accounting principles of the financial statements. Estimates made and discretion exercised are based on previous experience and other factors, such as assumptions about future events. Estimates made and discretion exercised are examined regularly. The key areas in which estimates have been made and discretion has been exercised are outlined below. Other estimates are connected mainly with environmental, litigation and tax risks, the determination of pension obligations as well as the utilisation of deferred tax assets against future taxable income.

Allocation of acquisition cost

IFRS 3 requires the acquirer to recognise an intangible asset separately from goodwill, if the recognition criteria are fulfilled. Recognition of an intangible asset at fair value requires management estimates of future cash flows. Where possible, management has used available market values as the basis of acquisition cost recognition in determining fair values. When this is not possible, which is typical particularly with intangible assets, valuation is based principally on the historic cost of the asset item and its intended use in business operations. Valuations are based on discounted cash flows as well as estimated disposal and repurchase prices and require management estimates and assumptions about the future use of asset items and the effect on the company's financial position. Changes in the emphasis and direction of company operations can in future result in changes to the original valuation.

Revenue recognition

The Group uses the percentage of completion method in recognising revenue for long-term projects. Revenue recognition according to percentage of completion is based on estimates of expected revenue and costs as well as on a determination of the progress of the percentage of completion. Changes can arise to recognised revenue and profit if estimates of a project's total costs and total income are adjusted. The cumulative effect of adjusted estimates is recognised in the period in which the change becomes probable and it can be estimated reliably.

Impairment testing

The Group tests goodwill annually for possible impairment and reviews whether there are indications of impairment according to the accounting principle presented above. The recoverable amounts of cash generating units have been determined in calculations based on value in use. Although assumptions used according to the view of the company's management are appropriate, the estimated recoverable amounts might differ substantially from those realised in future.

Valuation of inventories

A management principle is to recognise an impairment for slowly moving and outdated inventories based on the management's best possible estimate of possibly unusable inventories in the Group's possession at the closing date. Management bases its estimates on systematic and continuous monitoring and evaluations.

Application of new or amended IFRS standards and IFRIC interpretations

The IASB has announced the standards and interpretations listed below, the application of which is obligatory in 2006 or later. The Group has decided not to apply these standards earlier. The Group will adopt the following standards and interpretations in 2006*:

IAS 19 (Amendment), Employee Benefits. The amendment allows the option of recognising actuarial gains and losses directly in shareholders' equity and expands disclosure requirements.

IAS 21 (Amendment) Net Investment in a Foreign Operation.** The amendment clarifies and changes the standard's requirements relating to receivables from foreign units or liabilities to such units, which are treated as part of the net investment made by the company in the foreign unit. These items may be in any currency and either between the reporting company and a subsidiary or between subsidiaries.

Amendment to IAS 39 Cash Flow Hedge Accounting of Forecast Intra-Group Transactions. The amendment allows the foreign currency risk of a highly probable intra-group transaction to qualify as a hedged item in consolidated financial statements.

IAS 39 and IFRS 4 (Amendment), Financial Guarantees.** The amendment concerns the handling of guarantee contracts to an unrelated party. Such contracts will initially be recognised at fair value and later at the higher of the following: the amount initially recognised less cumulative amortisation or the sum necessary to settle the guarantee.

IFRIC 4, Determining Whether an Arrangement Contains a Lease. The interpretation requires that determining whether an arrangement or part thereof is a lease must be based on the content of the arrangement and more precisely on whether the fulfilment of the arrangement depends on a specific asset or whether the arrangement conveys a right to control the use of this underlying asset.

Group management estimates that these changes will have no essential effect on the consolidated financial statements.

The following new standards and interpretations that come in force in 2006 will have no effect on the consolidated financial statements*:

• IFRS 1 (Amendment), First-Time Adoption of IFRS Financial Reporting Standards and IFRS 6 (Amendment), Exploration for and evaluation of mineral resources.**
• IFRS 6, Exploration for and Evaluation of Mineral Resources.
• IFRIC 5, Rights to Interests Arising from Decommissioning, Restoration and Environmental Funds.
• IFRIC 6, Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment. **
• IFRIC 7, Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies.**
• IFRIC 8, Scope of IFRS 2.**

The Group will adopt in 2007 the following standard published by the IASB:

IFRS 7, Financial Instruments: Disclosures, and a complementary amendment to IAS 1.** The standard introduces new disclosure requirements relating to financial instruments. It requires the disclosure of qualitative and quantitative information about a company's exposure to risks arising from financial instruments, including credit risk, liquidity and market risk relating to specified minimum disclosure requirements as well as a requirement for the presentation of a sensitivity analysis in terms of market risk. The changes to the IAS 1 standard introduce additional disclosure requirements relating to the level of a company's capital and its management. The Group's management is studying the effects of the standard and the changes it brings. Current estimates indicate that the new standard will principally affect the notes to the consolidated financial statements.

* The names of standards and interpretations for which no official translation exists are presented in English.
** EU has not yet approved the use of the said standard/interpretation.

1.2. Risk management
The organisation of risk management

Risk management policies, i.e. operating principles, are determined by the Board of Directors. The policies are aimed at managing identified risks and they determine the company's approach to potential risks and their management.

Vaisala's Management Group determines more detailed guidelines for the Group's operations, for example approval, offering and procurement rights and terms of payment.

The usual risks related to international business affect Vaisala's operations.

Financial risk management

Group financing is arranged through the parent company, and the financing of the subsidiaries is arranged through internal loans. The parent company also provides the subsidiaries with the necessary credit limit guarantees. The parent company assumes responsibility for financial risk management and for investing surplus liquidity.

Interest rate risk

The effects of interest rate changes on the value of interest-bearing receivables and liabilities in different foreign currencies give rise to interest rate risk. Management estimate the interest rate risk to be small, because the Group interest-bearing liabilities and receivables are insignificant. Any debt is at a variable interest rate. There is a small risk to the return on assets invested when the interest rate changes. The main principles of investment policy, in order of importance, are: a) minimising credit loss risk, b) liquidity, c) the return on investments. The maximum duration of investments is 12 months.

Currency risk

International operations expose the Group to transaction risks, because the Group has sales in a number of foreign currencies, primarily the US dollar, the Japanese yen and the British pound. The Group has a number of investments in foreign subsidiaries whose net assets are exposed to currency risk. The Group does not hedge the currency risk of subsidiaries' net assets.

Other Group currency risks are transaction risks that arise mainly from commercial trade receivables and trade payables. Around half of the Group's net sales arises in US dollars. A significant proportion of Group purchases takes place in euros. The company uses forward currency contracts to hedge the net position arising from these. The degree of hedging is around 50% of the order book and trade receivables. Hedging is performed by the parent company.

Liquidity risk

With the Group's current balance sheet structure, liquidity risks are non-existent.

Counterparty risk

Liquid assets are directed within confirmed limits to investments whose creditworthiness is good. Investments and the limits specified for them are adjusted annually.

Credit risk

The Group has a strict policy on the granting of credit. The Group protects against credit risks by using as terms of payment letters of credit, advance payments and bank guarantees.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. Vaisala Oyj's adoption of IFRS reporting

Vaisala Oyj has adopted the International Financial Reporting Standards (IFRS) in its Group reporting from the beginning of 2005. Prior to the adoption of IFRS standards, the Vaisala Group's financial statements were prepared according to Finnish Accounting Standards (FAS). The reconciliation calculations and clarifications outlined below describe the differences between IFRS and FAS reporting for 2004 and for the opening balance sheet of 1 January 2004. The comparison figures according to Finnish accounting practice presented here are consistent with data presented in financial statements published earlier.

The financial statements have been prepared applying published IAS/IFRS standards which were valid at the end of 2005. In the adoption process IFRS 1, First-Time Adoption of IFRS Financial Reporting Standards has been followed.

The main effects of adopting IFRS

The adoption of IFRS reporting has changed the reported financial statement calculations, the notes to the financial statements as well as accounting principles in comparison with previous financial statements. Vaisala Oyj's figures are most effected by the IFRS standards relating to business combinations, employee benefits and leases as well as the cancellation of value increases made in connection with the adoption of IFRS and a tax asset recognized from the accumulated losses of the French subsidiary.

The IFRS effect on earnings per share reported for the whole of 2004 is + EUR 0.23. The effect of the discontinuation of goodwill amortization is + EUR 0.10 and the effect, with tax adjustments, of the change in the treatment of defined-benefit disability pensions included in the balance sheet is + EUR 0.14. Other adjustments had only minor effects.

The overall effect on the Group's shareholders' equity at the end of 2004 was a decrease of EUR 3.4 million. The cancellation of value increases reduced shareholders' equity by EUR 5.7 million. The discontinuation of goodwill amortization increased shareholders' equity by EUR 1.6 million. Deferred taxes from the accumulated losses of the French subsidiary increased shareholders' equity by EUR 0.8 million.

Defined-benefit pension schemes increased non-interest-bearing obligations by EUR 0.6 million at the end of 2004 and the treatment of leases as finance leases increased the Group's tangible assets by EUR 0.5 million and correspondingly increased interest-bearing non-current and current liabilities by a similar sum.

Unaudited income statement by function according to the IFRS and reconciliation to the Income statement reported under FAS.

	Consolidated income statement 1.1.-31.12.2004	Note	FAS 1-12/2004	Effect of transition to IFRS	IFRS 1-12/2004
	(EUR million )
	Net sales	10	180.6	-2.5	178.1
	Cost of production and procurement	3, 7, 9, 10	83.3	-2.1	81.2
	Gross profit		97.3	-0.4	96.9
	Cost of sales and marketing	7	33.7	-1.1	32.6
	Cost of administration
	Development costs	7	22.3	-1.0	21.3
	Other administrative costs	7	14.6	-0.3	14.4
	Group goodwill	1, 9	3.0	-3.0	0.0
			73.6	-5.4	68.3
	Other operating income	9	0.2	1.2	1.3
	Other operating costs	9	0.0	0.5	0.5
	Operating profit		23.9	5.6	29.4
	Financial income and expenses	3, 9	0.3	-0.6	-0.3
	Profit before provisions and taxes		24.1	4.9	29.0
	Direct taxes	3, 5, 7, 10	7.2	0.9	8.1
	Net profit for the financial year		17.0	4.0	20.9

Unaudited opening balances according to the IAS/IFRS standards at the date of transition 1.1.2004 and consolidated balance sheet at 31.12.2004 and reconciliation to the figures reported under Finnish Accounting Standards (FAS) at the equivalent time.

	IFRS balance sheet reconciliation
	Consolidated balance sheets 1.1.2004	Note	FAS 12/2003	Effect of transition to IFRS	IFRS 1/2004
	Assets (EUR million)
	Non-current assets
	Intangible assets
	Intangible rights		2.9		2.9
	Goodwill	9	1.2	-1.2	0.0
	Consolidated goodwill	1, 9	5.6	-0.2	5.4
	Other long-term expenditure	9	0.4	1.4	1.8
			10.1	0.0	10.1
	Tangible assets
	Land and waters	2	2.9	-0.1	2.8
	Buildings	2	25.1	-5.6	19.5
	Machinery and equipment	3	11.8	0.7	12.5
	Other tangible assets		0.5		0.5
	Advance payments and construction in progress		4.5		4.5
			44.8	-5.0	39.8
	Investments
	Other shares and holdings		0.3		0.3
	Other receivables		1.7		1.7
	Receivables from subsidiaries		-		0.0
			2.0	0.0	2.0
	Current assets
	Inventories
	Materials and consumables		9.5		9.5
	Work in progress	4	4.2	-3.0	1.2
	Finished goods		4.8		4.8
			18.4	-3.0	15.5
	Receivables
	Trade receivables		41.9	0.0	41.9
	Loan receivables		0.0		0.0
	Other receivables		2.5		2.5
	Prepaid expenses and accrued income	4, 9	4.0	3.6	7.6
	Deferred tax assets	5	2.3	2.6	4.9
			50.8	6.1	56.8
	Cash and bank balances		46.8		46.8
	Assets, total		172.9	-1.8	171.1

	Balance sheets
	Shareholders’ Equity and Liabilities (EUR million)	Note	FAS 12/2003	Effect of transition to IFRS	IFRS 1/2004
	Shareholders’ Equity
	Share capital		7.4		7.4
	Share issue		7.3	-5.7	1.6
	Reserve fund		0.1		0.1
	Profit from previous years		110.3	-2.8	107.5
	Profit for the financial year		14.5	1.2	15.7
		6	139.5	-7.3	132.3
	Obligatory provisions	9	1.1	-0.9	0.2
	Liabilities
	Non-current
	Deferred tax liabilities	5		0.7	0.7
	Retirement benefit obligations	7		4.1	4.1
	Interest-bearing longterm liabilities	8	1.2	0.3	1.5
			1.2	5.1	6.3
	Current
	Advances received		7.7		7.7
	Trade payables		9.1		9.1
	Other current liabilities	8	3.2	0.4	3.6
	Accrued expenses and deferred income	9	11.2	0.9	12.0
			31.1	1.3	32.3
	Shareholders’ equity and liabilities, total		172.9	-1.8	171.1

	Consolidated balance sheets 31.12.2004
	Assets (EUR million)	Note	FAS 12/2004	Effect of transition to IFRS	IFRS 12/2004
	Non-current assets
	Intangible assets
	Intangible rights		2.1		2.1
	Goodwill	9	0.0		0.0
	Consolidated goodwill	1, 9	3.4	1.4	4.8
	Other long-term expenditure	9	0.5	0.1	0.6
			5.9	1.5	7.5
	Tangible assets
	Land and waters	2	2.8	-0.1	2.7
	Buildings	2	26.1	-5.6	20.5
	Machinery and equipment	3	10.5	0.5	11.0
	Other tangible assets		0.7		0.7
	Advance payments and construction in progress		2.1		2.1
			42.1	-5.2	37.0
	Investments
	Other shares and holdings		0.3		0.3
	Other receivables		1.6		1.6
	Receivables from subsidiaries		-		0.0
			1.9	0.0	1.9
	Current assets
	Inventories
	Materials and consumables		8.4		8.4
	Work in progress	4	2.3	-0.7	1.6
	Finished goods		5.0		5.0
			15.7	-0.7	15.0
	Receivables
	Trade receivables		36.6		36.6
	Loan receivables		0.0		0.0
	Other receivables		3.0		3.0
	Prepaid expenses and accrued income	4, 9	2.6	1.1	3.7
	Deferred tax assets	5	2.6	1.6	4.2
			44.9	2.7	47.5
	Cash and bank balances		54.8		54.8
	Assets, total		165.3	-1.6	163.8

	Balance sheets
		Note	FAS 12/2004	Effect of transition to IFRS	IFRS 12/2004
	Shareholders’ Equity and Liabilities (EUR million)
	Shareholders’ Equity
	Share capital		7.4		7.4
	Share issue		7.3	-5.7	1.6
	Reserve fund		0.1		0.1
	Profit from previous years		101.4	-1.6	99.8
	Profit for the financial year		17.0	3.9	20.9
		6	133.1	-3.4	129.8
	Obligatory provisions	9	1.3	-1.3	0.0
	Liabilities
	Non-current
	Deferred tax liabilities	5		0.6	0.6
	Retirement benefit obligations	7		0.6	0.6
	Interest-bearing longterm liabilities	8	0.8	0.3	1.1
			0.8	1.4	2.2
	Current
	Advances received		5.9		5.9
	Trade payables		8.3		8.3
	Other current liabilities	8	2.1	0.3	2.4
	Accrued expenses and deferred income	9	13.9	1.3	15.2
			30.2	1.6	31.8
	Shareholders’ equity and liabilities, total		165.3	-1.6	163.8

Notes to the balance sheet reconciliation calculations

1. Intangible assets - Goodwill

Under the IFRS 3 standard, goodwill is not amortized; goodwill is tested for impairment. The amortization of goodwill for 2004 under FAS, amounting to EUR 1.5 million, has been cancelled. In accordance with the requirements of the IFRS 1 standard, goodwill has been assessed for impairment at the transition date. These calculations have not led to impairment recognition in the opening IFRS balance sheet.

2. Tangible fixed assets

The office and factory premises at Vantaa were revalued by a total of EUR 5.7 million in the years 1981-1988. These revaluations have now been cancelled and the value restored to original acquisition cost.

3. Tangible fixed assets

According to the principles of the IAS 17 Lease agreement standard, the Group's leases have been reviewed and fixed asset leases relating mainly to IT equipment have been classified as finance leases in the IFRS financial statements. The rental obligations relating to them are recognized in the balance sheet in non-current and current interest-bearing liabilities. The effect of these leases on the opening balance sheet is EUR 0.7 million and on the balance sheet at the closing date EUR 0.5 million.

4. Inventories

The effect of recognized projects in progress on the opening balance sheet is EUR 3.0 million and on the balance sheet at the closing date EUR 0.7 million. The receivable corresponding to the uninvoiced sales revenue of long-term projects (in the opening balance sheet EUR 3.0 million and in the balance sheet at the closing date EUR 0.7 million) has been recognized in the item 'prepaid expenses and accrued income' as uninvoiced receivables.

5. Deferred taxes

Deferred tax assets and liabilities have been presented in IFRS reporting as separate items in the balance sheet's assets and liabilities. The effect of netting on the opening balance sheet's deferred tax assets and liabilities is EUR 0.7 million and on the balance sheet at the closing date EUR 0.6 million.

In addition, the IFRS balance sheet deferred tax asset is increased by deferred tax assets recognized for IFRS adjustments, whose effect on the opening balance sheet is EUR 1.3 million and on the balance sheet at the closing date EUR 0.2 million, as well as by a deferred tax asset recognized for the accumulated losses of the French subsidiary, whose effect on the opening balance sheet is EUR 0.6 million and on the balance sheet at the closing date EUR 0.8 million.

6. Shareholders' equity

Adjustment items resulting from the recognition or non-recognition of assets and liabilities or the revaluation of balance sheet items under the IFRS accounting practice have been recognized in the shareholders' equity of the opening balance sheet. The most significant changes affecting shareholders' equity in the opening balance sheet and the balance sheet at the closing date have been listed in the table below.

	Reconciliation of equity
	(EUR million)		31.12.2004	1.1.2004
	Equity FAS		133.1	139.5
	IAS 11	Construction Contracts	-0.1	0.1
	IAS 12	Inocome Taxes	0.9	0.7
	IAS19	Employee Benefits	0.0	-2.3
	IFRS 3	Business Combinations	1.5	0.0
	IFRS 1	First-time Adoption Standard /revaluations	-5.7	-5.7
	Total IFRS restatement		-3.4	-7.2
	Equity according to IFRS		129.8	132.3

7. Pension schemes

The Group's pension schemes have been classified according to the IAS 19 standard as either defined-contribution or defined-benefit schemes. The opening balance sheet at 1 January 2004 includes defined-benefit pension obligations of EUR 4.1 million relating to TEL disability pensions and other defined-benefit pension obligations of less than EUR 0.1 million. The deferred tax asset relating to these is EUR 1.2 million. Owing to a change approved by the Finnish authorities in December 2004, the treatment of TEL disability pension has been changed to a defined-contribution basis in the final quarter of 2004. This causes a non-recurring improvement in the result of EUR 2.5 million in the final quarter of the financial year. The balance sheet liability at the closing date is EUR 0.6 million.

8. Interest-bearing non-current liabilities

IFRS reporting, finance leases are recognized in the balance sheet as assets and they are amortized during the period of the lease. The rental obligations relating to them are recognized in the balance sheet in non-current and current interest-bearing liabilities. The effect of these leases on non-current interest-bearing liabilities is EUR 0.3 million.

9. Classification changes

In terms of the goodwill of company acquisitions that took place before 1 January 2003, a reclassification has been made, as a result of which the EUR 1.4 million figure for goodwill at 31 December 2003 has been recognized in other capitalized expenditure and will be amortized fully according to the original amortization plan.

The receivable relating to the US subsidiary's taxes for the financial year (in the opening balance sheet EUR 0.6 million and in the balance sheet at the closing date EUR 0.4 million) has been transferred from deferred tax assets to the item 'prepaid expenses and accrued income'.

Obligatory provisions have been reclassified according to the IAS 37 standard and it has been stated that the items, amounting in the opening balance sheet to EUR 0.4 million and in the balance sheet at the closing date to EUR 0.8 million, are accrued expenses and deferred income in nature. In addition, the supplementary pension cover arranged in the Vaisala Pension Fund (closed on 1 January 1983) has been treated according to the IAS 19 standard as a defined-benefit scheme, in which case the Pension Fund's contribution liability, in the opening balance sheet EUR 0.6 million and in the balance sheet at the closing date EUR 0.5 million and recognized in obligatory provisions under FAS, has been cancelled. The liability includes a pension obligation recognized in accordance with actuarial calculations.

Periodization relating to the Group's taxes for the financial year has been transferred from deferred taxes to accrued expenses and deferred income. The effect of the transfer on the opening balance sheet for the financial year is EUR 0.5 million and on the balance sheet at the closing date EUR 0.4 million.

In connection with the adoption of IFRS, the presentation location in the income statement of translation differences relating to derivatives has been changed from financial income (- EUR 0.7 million) to other operating income (EUR 1.2 million) and expenses (EUR 0.5 million).

10. Net sales

Recognition of long-term projects in accordance with IAS 11 increases the net sales of the 2004 consolidated income statement by EUR 2.5 million and production costs by EUR 2.4 million.

	3.1 Business segments
	2005	Vaisala Measurement Systems	Vaisala Instruments	Vaisala Solutions	Other operations	Eliminations	Group
	EUR million
	Net sales to external customers	84.3	58.2	55.5	0.0	0.0	197.9
	Intragroup sales	0.0	8.7	0.5	0.0	-9.1	0.0
	Net sales	84.3	66.8	56.0	0.0	-9.1	197.9
	Operating profit	19.6	14.0	3.0	-6.5	0.0	30.1
	Financial income and expenses						3.9
	Share of associated companies' net profit						0.0
	Net profit before taxes						34.1
	Income taxes						-9.2
	Net profit for the financial year						24.9
	Assets	33.8	21.5	20.4	121.2	0.0	196.9
	Holdings in associated companies	0.3	0.0	0.0	0.0	0.0	0.3
	Liabilities	5.1	2.7	6.9	27.8	0.0	42.6
	Investments	1.9	1.8	3.1	1.2	0.0	8.0
	Depreciation	1.7	2.1	0.7	3.6	0.0	8.2
	Impairment	0.2	0.0	0.0	0.0		0.2
	Restructuring expenses	0.2	0.0	0.0	0.0		0.2

Restructuring expenses relate to the centralisation of French operations of the lightning detection business at one location in Paris and to the closure of the Aix-en-Provence office.

	2004	Vaisala Measurement Systems	Vaisala Instruments	Vaisala Solutions	Other operations	Eliminations	Group
	EUR million
	Net sales to external customers	72.9	52.9	52.3	0.0	0.0	178.1
	Intragroup sales	0.0	8.0	0.3	0.0	-8.3	0.0
	Net sales	72.9	60.9	52.6	0.0	-8.3	178.1
	Operating profit	11.8	14.4	4.3	-1.1	0.0	29.4
	Financial income and expenses						-0.3
	Share of associated companies' net profit						0.0
	Net profit before taxes						29.1
	Income taxes						-8.1
	Net profit for the financial year						21.0
	Assets	31.3	20.4	17.1	94.6	0.1	163.5
	Holdings in associated companies	0.3	0.0	0.0	0.0	0.0	0.3
	Liabilities	5.9	2.0	5.6	20.5	0.0	34.0
	Investments	1.0	2.1	0.2	1.5	0.0	4.8
	Depreciation	2.0	2.5	1.0	3.8	0.0	9.4

	3.2 Geographical segments 2005
	EUR million	Net sales, by destination country (1	Net sales, by location country  (2	Assets (2	Investments
	Europe	69.8	156.4	156.8	3.8
	of which Finland	7.3	134.5	141.9	3.6
	North America	70.8	83.6	66.3	3.9
	Asia and Australia	45.3	17.7	8.2	0.3
	Africa, South and Central America	12.1
	Group eliminations		-59.7	-39.6
	Unallocated items			5.3
	Total	197.9	197.9	196.9	8.0

1) Sales to external customers have been presented as net sales by destination country
2) Net sales, assets and investments have been presented by the Group's

	Geographical segments 2004
	EUR million	Net sales, by destination country (1	Net sales, by location country  (2	Assets (2	Investments
	Europe	61.0	146.1	139.6	3.5
	of which Finland	5.7	126.1	125.1	3.3
	North America	62.1	67.0	32.3	1.2
	Asia and Australia	45.1	17.0	8.1	0.1
	Africa, South and Central America	9.9
	Group eliminations		-52.0	-20.3
	Unallocated items			4.2
	Total	178.1	178.1	163.9	4.8

1) Sales to external customers have been presented as net sales by destination country
2) Net sales, assets and investments have been presented by the Group's

4. Company acquisitions in 2005

In July 2005 Vaisala acquired 100% of the stock of the US company CLH Inc. CLH's net sales for 2004 were EUR 3.1 million. The company specialises in the installation and maintenance of automatic weather observation systems as well as related telecommunications, user interfaces and airport weather support systems. With the CLH stock purchases, Vaisala also acquired a 2/3 share of WSDM Technologies LLC. The company specialises in airport weather support systems that provide nowcasts of snowfall events and conditions supporting aircraft de-icing decisions. CLH's products and services support Vaisala's existing range well. These synergy benefits have contributed to the creation of goodwill amounting to EUR 1.4 million. The purchase price was EUR 2.8 million. The price includes a contribution linked to the company's future net sales and profit, the realisation of which is deemed probable. Auditing and legal fees of EUR 0.036 million relating to the acquisition have also been included in the purchase price.

The Vaisala Group result includes CLH Inc.'s net sales of EUR 1.4 million and operating loss of EUR 0.5 million for July-December. The Group's net sales would have been EUR 200.6 million and profit 30.1 million, if CLH Inc. would have been combined into the consolidated financial statements from the beginning of 2005.

	Purchase consideration
	EUR million
	Purchase price paid	2.8
	Expenses related to the purchase	0.0
	Total purchase cost	2.8
	Fair value of the acquired net identifiable assets	-1.4
		1.4
	Assets and liabilities arising from the acquisition are as follows	Fair value recognised in combination	Acquiree's carrying amount before combination
	Tangible fixed assets	0.3	0.2
	Intangible assets	0.7	0.2
	Investments	0.0	0.1
	Inventories	0.4	0.4
	Receivables	1.2	0.4
	Cash and cash equivalents	0.0	0.0
	Deferred tax liabilities	0.0	0.0
	Non-interest-bearing liabilities	-1.1	-1.1
	Interest-bearing liabilities	-0.1	-0.1
	Net identifiable assets	1.4	0.0
	Acquisition cost	2.8
	Goodwill	1.4
	Purchase consideration settled in cash	2.8
	Expenses related to the purchase	0.0
	Cash and cash equivalents in subsidiary acquired	0.0
	Cash outflow on acquisition	2.8
	No companies were acquired in 2004.

5. Long-term project

Net sales include EUR 2.2 million (2004; EUR 0.7 million) in revenue recognised for long-term projects.

Revenue of EUR 0.1 million recognised for long-term projects in progress was included in the consolidated income statement (2004; EUR 0.0 million). Advance payments of EUR 0.2 million recognised for long-term projects in progress were included in the balance sheet at 31.12.2005 (EUR 0.3 million 31.12.2004).

	6. Other operating income	2005	2004
	EUR million
	Gains on the disposal of fixed assets	0.1	0.0
	Translation differences *	0.2	1.2
	Others	0.2	0.2
		0.5	1.4

*Foreign exchange gains from derivatives to which hedge accounting under IAS 39 is not applied.

	7. Other operating expenses	2005	2004
	EUR million
	Translation differences *	-1.5	-0.5
		-1.5	-0.5

*Foreign exchange losses from derivatives to which hedge accounting under IAS 39 is not applied.

	8. Depreciation and impairment	2005	2004
	Depreciation by function
	Procurement and production	2.7	4.0
	Sales and marketing	1.4	0.9
	Research and development	0.5	0.7
	Other administration	3.6	3.9
		8.2	9.4
	Goodwill not depreciated as of 1 January 2004.
	Impairment
	Procurement and production	0.0	0.0
	Sales and marketing	0.2	0.0
	Research and development	0.0	0.0
	Other administration	0.0	0.0
		0.2	0.0

	9. Expenses arising from employee benefits	2005	2004
	Salaries	51.9	48.5
	Social costs	11.1	5.2
	Pensions		0.0
	Defined-benefit pension schemes	0.0	-3.4
	Defined-contribution pension schemes	6.5	4.6
	Personnel expenses, total	69.4	54.9

Due to changes approved in December 2004 by the Finnish authorities, the treatment of TEL disability pension was changed to defined-contribution. This resulted in a non-recurring reduction in pension expenses of EUR 3.7 million in the comparison year. Information about the employee benefits and loans of management are presented in Note 30.

	Group personnel, average during the financial year	2005	2004
	By business unit
	Vaisala Instruments	318	309
	Vaisala Measurement Systems	377	421
	Vaisala Solutions	258	251
	Other operations	109	111
		1062	1092
	In Finland	698	713
	Outside Finland	364	379
		1062	1092

10. Research and development expenditure

The income statement includes research and development expenditure of EUR 19.8 million recognised as an expense in 2005. (EUR 21.3 million in 2004).

	11. Financial income and expenses	2005	2004
	Dividend income	0.0	0.1
	Other interest and financial income	1.1	1.0
	Change in fair value of assets recognised at fair value through profit an loss*	0.2	0.0
	Interest expenses
	Short- and long-term liabilities	-0.1	-0.1
	Finance lease agreements	0.0	0.0
	Other financial expenses	-0.1	-0.1
	Foreign exchange gains	2.8	2.1
	Foreign exchange losses	-0.2	-3.3
		3.9	-0.3
*) Change in fair value of income fund investments.

	12. Income taxes	2005	2004
	Tax based on taxable income for the financial year	9.7	7.5
	Taxes from previous financial years	0.1	0.2
	Change in deferred tax assets and liabilities	-0.6	0.5
		9.2	8.1
	Reconciliation statement between income statement tax item and taxes calculated at the tax rate of the Group country of domicile (2005: 26%, 2004: 29%)
	Profit before taxes	34.1	29.1
	Taxes calculated at Finnish tax rate	8.9	8.4
	Effect of foreign subsidiaries' tax rates	1.5	0.4
	Non-deductible expenses and tax-free revenue	-1.6	-0.8
	Use of previously unrecognised tax losses	-0.1	-0.6
	Others	0.5	0.6
	Tax in income statement	9.2	8.1
	Effective tax rate	26.9%	27.8%

	Deferred taxes in balance sheet	2005	2004
	EUR million
	Deferred tax assets	5.3	4.2
	Deferred tax liabilities	-0.5	-0.6
	Deferred tax asset, net	4.7	3.6

Deferred tax is presented net in the balance sheet in respect of those companies between which the option exists in taxation for tax equalisation or which are taxed as one taxpayer.

	Gross change in deferred taxes recognised in balance sheet:	2005	2004
	Deferred taxes 1 Jan	3.6	4.2
	Items recognised in income statement	0.6	-0.5
	Translation differences	0.4	-0.1
	Purchases of subsidiaries	0.0	0.0
	Deferred tax asset, net	4.7	3.6

Deferred tax assets of EUR 2.1 million (2004: EUR 2.1 million) related to losses of a German subsidiary have not been recognised in the consolidated financial statements because it is not deemed probable that the tax benefit connected with them will be realised in the near future. The losses are connected with company operations discontinued as unprofitable in previous years.

The balance sheet includes EUR 1.0 million (2004 EUR 0.8 million) in deferred tax assets for subsidiaries whose result for the current or previous financial years has been loss-making. The recognition of these tax receivables is based on profit forecasts which indicate that the realisation of the tax assets in question is deemed probable.

	Changes in deferred taxes during 2005
	EUR million	31.12. 2004	Recognised in income statement	Translation differences	Purchased subsidiaries	31.12. 2005
	Deferred tax assets:
	Internal margin of inventories and fixed assets	0.4	-0.2			0.2
	Employee benefits	0.1	0.0			0.1
	Unused tax losses	0.8	0.2		0.0	1.0
	Timing difference of depreciation on intangible items	3.2	-0.5	0.5		3.1
	Other temporary differences	-0.3	1.2	0.0		0.8
	Total	4.2	0.6	0.4	0.0	5.3
	Deferred tax liabilities
	Timing difference between accounting and taxation	0.6	-0.1	0.0	0.0	0.5
	Deferred tax asset, net	3.6	0.6	0.4	0.0	4.7

	Changes in deferred taxes during 2004
	EUR million	31.12. 2003	Recognised in income statement	Translation differences	Purchased subsidiaries	31.12. 2004
	Deferred tax assets:
	Internal margin of inventories and fixed assets	0.7	-0.3			0.4
	Employee benefits	1.2	-1.0			0.1
	Unused tax losses	0.7	0.1			0.8
	Timing difference of depreciation on intangible items	2.8	0.6	-0.2		3.2
	Other temporary differences	-0.5	0.0	0.1		-0.3
	Total	4.9	-0.6	-0.1	0.0	4.2
	Deferred tax liabilities
	Timing difference between accounting and taxation	0.7	-0.2			0.6
	Deferred tax asset, net	4.2	-0.5	-0.1	0.0	3.6

For the EUR 21.4 million undistributed retained earnings of foreign subsidiaries in 2005 (11.7 million in 2004), no deferred tax liability has been recognised, because the assets have been invested permanently in the countries in question.

	13. Earnings per share	2005	2004
	The undiluted earnings per share figure is calculated by dividing the profit for the financial year belonging to the parent company's shareholders by the weighted average number of shares outstanding during the financial year.
	Profit for financial year belonging to parent company shareholders, EUR million	24.9	21.0
	Weighted average number of shares outstanding, 1000 pcs	17 488	17 479
	Earnings per share, EUR	1.42	1.20
	When calculating the earnings per share adjusted by dilution, the weighted average of the number of shares takes into account the dilution of all potentially diluting shares. The Group has share options (option scheme 2000) that increase the number of diluting shares. The share options have a dilution effect when the subscription price of the options is lower than the fair value of the share. A dilution effect arises from the number of shares that have to be issued without consideration because with the funds obtained from the exercising of the options the Group could not issue the same number of shares at fair value. The fair value of the share is based on the average price of the shares during the financial year.
	Profit for financial year belonging to parent company shareholders, EUR million	24.9	21.0
	Weighted average number of shares outstanding, 1000 pcs	17 488	17 479
	Effect of share options 2000, 1000 pcs	44	-
	Diluted weighted average number of shares, 1000 pcs	17 532	17 479
	Diluted earnings per share, EUR	1.42	1.20

14. Dividend per share

For 2004 a dividend of 0.75 euros per share was paid. At the Annual General Meeting to held on 23 March 2006 the payment of a dividend of 0.75 euros per share will be proposed, representing a total dividend of EUR 13.4 million. The proposed dividend has not been recognised as a dividend liability in these financial statements.

	15. Intangible assets
	EUR million
		Intangible rights	Goodwill	Other intangible assets	Total
	Intangible assets
	Acquisition cost 1 Jan	10.7	22.8	1.6	35.1
	Translation difference	0.1	2.6	0.1	2.7
	Increases	2.3	-	-	2.3
	Acquisition of subsidiary		1.4		1.4
	Decreases	-0.1	0.0	-0.2	-0.3
	Transfers between items	-	-	-	0.0
	Acquisition cost 31 Dec	13.1	26.7	1.5	41.3
	Accumulated depreciation and
	impairment 1 Jan	8.6	18.0	1.0	27.7
	Translation difference	0.1	1.6	0.1	1.7
	Accumulated depreciation
	of decreases and transfers	0.0	0.0	0.1	0.1
	Depreciation in financial year	1.4	0.0	0.1	1.4
	Write-downs	-	-	-	-
	Accumulated depreciation 31 Dec	10.1	19.6	1.2	31.0
	Carrying amount 31 Dec 2005	3.0	7.1	0.2	10.3
	Carrying amount 31 Dec 2004	2.1	4.8	0.6	7.4

Goodwill has not been depreciation as of 1 January 2004.

Goodwill impairment testing

Goodwill is attributed to the segments Vaisala Measurement Systems and Vaisala Solutions and the balance sheet value of this goodwill is assessed at least once per year to ascertain any possible impairment. For impairment testing the goodwill is attributed to two different cash generating units, i.e. EUR 5.7 million (2004 EUR 4.8 million) to a North American lightning detection systems business unit and EUR 1.4 million to a North American airport weather support systems business unit. The value of the recoverable amount of the cash generating unit is based on value-in-use calculations. The cash flow forecasts used in these calculations are based on actual operating profit and management-approved five-year forecasts. Estimated amounts of sales are based on existing fixed assets and the most important assumptions of the forecasts are the sales distribution for each country and the margin received from the products. Vaisala's sector-specific capital yield requirement before taxes (WACC) has been used as the discount rate. The components of the yield requirement are the risk-free yield percentage, the market risk premium, the sector-specific beta coefficient as well as the cost and target capital structure of borrowing. The discount rate in 2005 was 17% (2004 16.8%). Cash flows after the management- approved forecast period have been calculated using the residual value method, in which the average of operating profits of the last four planning periods have been multiplied by four and discounted using the discount rate described above and the zero-growth percentage. On the basis of impairment testing there is no need for impairment recognitions. The view of management is that reasonable changes to the assumptions used do not result in impairment of the goodwill of any cash generating unit.

	16. Tangible assets
	EUR million	Land and waters	Buildings and structures	Machinery and equipment	Other tangible assets	Advance payments and construction in progress	Total
	Tangible assets
	Acquisition cost 1 Jan	2.7	31.5	45.1	2.9	2.1	84.3
	Translation difference	0.2	0.4	1.6	0.3	0.0	2.6
	Increases	0.0	0.0	2.3	0.5	2.3	5.1
	Acquisition of subsidiary						0.0
	Decreases	-	-0.6	-1.4	-0.9	0.0	-2.9
	Transfers between items	-	0.2	1.8	-	-2.0	0.0
	Acquisition cost 31 Dec	2.9	31.5	49.4	2.9	2.4	89.0
	Accumulated depreciation and impairment 1 Jan	-	11.0	34.1	2.2	-	47.3
	Translation difference	-	0.0	1.4	0.3	-	1.7
	Accumulated depreciation of decreases and transfers	-	-0.6	-1.4	-0.6	-	-2.6
	Depreciation in financial year	-	1.7	4.8	0.0	-	6.5
	Write-downs	-	0.0	0.0	0.2	-	0.2
	Accumulated depreciation 31 Dec	0.0	12.1	38.9	2.0	0.0	53.1
	Carrying amount 31 Dec 2005	2.9	19.4	10.5	0.8	2.4	36.0
	Carrying amount 31 Dec 2004	2.7	20.5	11.0	0.7	2.1	37.0

The undepreciated acquisition cost of machinery and equipment belonging the tangible fixed assets was EUR 22.3 million on 31.12.2005 (EUR 21.6 million 31.12.2004).

During 2005 the Aix-en-Provence operating point in France was closed. In connection with this closure, write-downs on tangible assets totalling EUR 0.2 million were made for machinery and equipment, buildings as well as other, intangible, assets.

	Tangible fixed assets include the following assets acquired on finance leases:
		Machinery and equipment
	2005       EUR million
	Acquisition cost	1.6
	Accumulated depreciation	-1.0
	Carrying amount 31 Dec 2005	0.6
		Machinery and equipment
	2004       EUR million
	Acquisition cost	1.4
	Accumulated depreciation	-0.8
	Carrying amount 31 Dec 2004	0.6

	17. Holdings in associated companies	2005				2004
	EUR million
	Acquisition cost 1 Jan	0.3				0.3
	Share of result	0.0				0.0
	Dividends received
	Increases	0.0
	Disposals and other decreases	0.0
	Translation differences	0.0				0.0
	Associated company investments, total 31 Dec	0.3				0.3
	The carrying amount of associated companies does not include goodwill.
	Information on Group associated companies as well as their combined assets, liabilities, net sales and profit/loss.
	Associated companies 2005
	EUR million	Domicile	Assets	Liabilities	Net sales	Profit/loss	Holding
	Meteorage SA, France*	Cedex	1.3	0.5	1.3	0.0	35%
	WSDM, LLC **	Minneapolis	0.2	0.2	0.2	0.0	67%
	* Information based on 2004 financial statements
	** Share of votes 50%
	Associated companies  2004
	Meteorage SA, France						35%

The information presented in the table are based on the latest available financial statements.

Associated company Meteorage SA maintains lightning detection networks and sales information related to lightning detection.

Associated company WSDM LLC specialises in airport weather support systems that produce real-time nowcasts of snowfalls and services supporting aircraft de-icing decisions.

18. Other financial assets

Other financial assets include an insubstantial quantity of unquoted shares, which have been valued at acquisition cost as well as lease guarantee deposits.

	19. Receivables (long-term)	2005		2004
	EUR million	Balance sheet values	Fair values	Balance sheet values	Fair values
	Loan receivables	0.0	0.0	0.0	0.0
	Other receivables *	1.6	1.7	1.5	1.7
		1.6	1.7	1.6	1.8

* Other receivables include a long-term customer receivable included in the balance sheet of a subsidiary. Interest of 9% is calculated on the receivable and interest is paid half-yearly. The receivable falls due for payment in full on 15 April 2007. Fair values have been calculated by discounting the future cash flows of every significant receivable at the market interest rate on the closing date.

	20. Inventories	2005	2004
	EUR million
	Materials and supplies	7.9	8.4
	Work in progress	2.0	1.6
	Finished goods	4.2	5.0
	Advance payments	0.0	0.0
		14.1	15.0

In the financial year any expense of EUR 0.7 million was recorded, equivalent to the amount by which the carrying amount of inventories was reduced to correspond with their net realisable value (EUR 0.6 million in 2004).

	21. Trade receivables and other receivables	2005	2004
	EUR million
	Trade receivables	41.4	36.6
	Loan receivables	0.1	0.0
	Advanced paid	0.4	0.4
	Other receivables	2.2	2.7
	Receivables from long-term project customers	1.0	0.7
	Value-added tax receivables	1.3	1.0
	Other prepaid expenses and accrued income	0.7	1.4
		47.1	42.8

Other receivables principally include allocations of maintenance and data sales contracts. Other prepaid expenses and accrued income include interest and exchange rate allocations as well as miscellaneous allocations.

	22. Financial  assets recognised at fair value through profit and loss	2005	2004
	EUR million
	Income fund investments	27.2	0.0
	Derivative contracts	-0.1	0.3

Financial assets recognised at fair value through profit and loss include income fund investments which involve the short-term investment of liquid assets. The maturity of these income fund interest-bearing papers is at most one year. The income fund investments are publicly quoted securities, whose fair value is determined in the market. The change in fair value has been recognised in the income statement group financial income and expenses. In 2004 there were no income fund investments.

	23. Cash and cash equivalents	2005	2004
	EUR million
	Cash and bank deposits	43.0	19.5
	Certificates of deposit	11.2	35.3
	Total	54.2	54.8

Certificates of deposit consist of short-term, highly liquid investments whose maturity is less than 3 months and which are mainly involved in the short-term investment of liquid assets. The average interest rate on the investments in 2005 was 2.08% (2.02% in 2004). In the cash flow statements, income fund investments of EUR 27.2 million are also treated as cash and cash equivalents.

24. Notes relating to shareholders' equity

Vaisala has 17,665,450 shares, of which 3,409,285 are Series K shares and 14,256,165 are Series A shares. The book equivalent value of a share is around EUR 0.42. The Series K and Series A shares different from each other so that each K share carries twenty (20) votes at meetings of shareholders and each Series A share one (1) vote. Both series confer an equal right to a dividend. According to the Articles of Association the maximum number of shares is 68,571,000 and the Group's maximum share capital is EUR 28.8 million. All the issued shares have been paid in full. Vaisala applies the insider rules of the Helsinki Stock Exchange.

	Share capital and share premium fund
	EUR million	Number of shares 1000 pcs	Share capital	Share premium fund	Reserve fund	Paid but unregistered options	Total
	1 Jan 2004	17.5	7.4	1.6	0.1		9.0
	31 Dec 2004	17.5	7.4	1.6	0.1		9.0
	Share options exercised	0.2	0.1	3.8		5.4	9.3
	31 Dec 2005	17.7	7.4	5.3	0.1	5.4	18.3
	Own shares held by company	0.0
		17.7

Shareholders' equity consists of the share capital, share premium fund, reserve fund, translation differences and retained earnings. A change in the value of the share capital that exceeds the nominal value is entered in the share premium fund. The reserve fund of EUR 0.1 million contains items based on the local rules of other . Group companies. The translation differences fund contains translation differences arising from the conversion of the financial statements of foreign units. The profit for the financial year is entered in retained earnings. The share premium fund is not a distributable equity fund. Restrictions based on local rules apply to the distributability of the reserve fund.

	Distributable equity	2005	2004
	EUR million
	Retained earnings 31 Dec	111.1	99.7
	Profit for the financial year	24.9	21.0
	Share of accumulated depreciation difference recognised in shareholders' equity	-1.5	-1.7
	Distributable equitable	134.5	119.0
Calculation of distributable equity is based in the IFRS balance sheet and Finnish legislation.

Option scheme

The company has one option scheme (Option scheme 2000). The option scheme 2000 consists of 896,000 options. By 31 December 2005 the options had been used to subscribe for 186,450 Vaisala Series A shares. Each options confers the right to one new A share at the subscription price of EUR 24.55 per share less the amount of dividend per share distributed after 1 May 2000. The subscription price on 31 December 2005 was EUR 20.78 per share. The subscription period began in stages on 1 December 2002 and 1 December 2004 and ends for all options on 31 January 2006. By virtue of all the option certificates, 4.9% of the company's shares and 1.1% of the votes can be obtained and the total book equivalent value of shares subscribable with options is EUR 376,320. A total of 140,000 options are held by the Group.

	Change in number of options outstanding	pcs
	Number of options outstanding on 1 Jan 2005	896 000
	Options granted	0
	Options exercised which have been registered	-186 450
	Options exercised which have not been registered	-259 750
	Options held by the company	-140 000
	Expired options
	Number of options outstanding on 31 Dec 2005	309 800

Share-based incentive scheme

The company has a share-based incentive scheme targeted at 50 key personnel of the Group. Some of these individuals belong to the Group's related parties. The earning period of the incentive scheme is the financial year that began on 1 Jan 2005. Possible bonuses will be paid after the publication of the financial statements that follow the earning period before the authorisation expires. The amount of bonus is based on the achievement of set financial targets, which are measured by earnings per share (EPS). Any bonuses are paid as a combination of Vaisala's listed A shares and a cash payment. The incentive scheme is not an arrangement according to IFRS 2, because the amount of bonus is not linked to the Vaisala share price.

Shares receivable on the basis of the share-based incentive scheme are covered by a prohibition on transfer such that shares receivable under the scheme cannot be conveyed or pledged for a period of two years after they have been entered in their entirety in the book-entry account of the person entitled to the bonus. The maximum number of Vaisala Oyj A shares that can be conveyed on the basis of the incentive scheme is 35,000, calculated at current market rates. The share that can be conveyed in the scheme will be Vaisala Oyj A shares that are either owned by the company or purchased from the stock market, which means that the incentive scheme will not result in an increase in the total number of shares.

Authorisations of the Board of Directors

At the end of 2005, the Board of Directors had no authorisations to raise the share capital or issue convertible or warrant bonds. or warrant bonds. The Board has a valid authorisation granted by the Annual General Meeting of 22 March 2005 to acquire the company's own shares. A maximum of 35,000 shares can be purchased. The shares can be used as part of the incentive and bonus schemes for the company's personnel. The authorisation is valid until 22 March 2006. The Board has not used the authorisation by 31 December 2005.

	25. Interest-bearing liabilities		pcs
	EUR million	Balance sheet value
	Long-term	2005	2004
	Loans	0.4	0.8
	Finance lease liabilities	0.3	0.3
		0.7	1.1
	Short-term
	Loan repayments in next year	0.5	0.6
	Finance lease liability repayments
	in next year	0.3	0.3
		0.8	0.9
	Interest-bearing liabilities, total	1.5	2.0

Interest-bearing liabilities are loans granted by Tekes, the interest rate on which is base rate confirmed by the Finnish Ministry of Finance less three percentage points, but at least one per cent. The interest rate on 31 December 2005 was 1%. The company has no loans that would mature after five years or a longer period.

	Maturity dates of finance lease liabilities:	2005	2004
	EUR million
	Finance lease liabilities - total amount of minimum lease payments
	Up to 1 year	0.3	0.3
	1 - 5 years	0.3	0.3
	More than 5 years	0.0	0.0
		0.7	0.7
	Future financial expenses	-0.1	-0.1
	Present value of finance lease liabilities	0.6	0.6
	Present value of minimum payments of finance lease liabilities
	Up to 1 year	0.3	0.3
	1 - 5 years	0.3	0.3
	More than 5 years
	Total	0.6	0.6

26. Pension obligations

Group has a number of pension schemes, which have been classified as either defined-contribution or defined-benefit schemes. Under defined-contribution plans, contributions made are recognised as an expense in the income statement of the financial period in which the contributions are payable. TEL pension cover managed in an insurance company are mainly defined- contribution schemes, except that disability benefits of TEL pensions have been treated as a defined-benefit scheme during 2004. As a consequence of a change in the basis of contributions for TEL insurance disability pensions which comes into force at the beginning of 2006, the disability benefits of TEL insurance will change to a defined-contribution basis. The defined-benefit schemes are in Finland. The Group has no other benefits post-employment benefits. The supplementary pension benefits managed in the Vaisala Pension Fund have been treated as defined-benefit pension schemes. All actuarial gains and losses have been recognised in the opening balance sheet on the transition date in a manner allowed by the IFRS 1 standard. The Pension Fund's obligations were transferred to a pension insurance company on 31 December 2005. The company retains, however, an obligation under IFRS 19 for future index and salary increases in terms of individuals covered by the Pension Fund who are employed by the company.

	Items entered in the income statement	2005	2004
	EUR million
	Defined-benefit pension schemes	0.0	-3.4
	Defined-contribution pension schemes	6.5	4.6
		6.5	1.2
	Defined-benefit pension schemes by function
	Procurement and production	0.0	-1.0
	Sales and marketing	0.0	-1.1
	Research and development	0.0	-1.0
	Other administration	0.0	-0.3
		0.0	-3.4

	The balance-sheet defined-benefit pension liability is determined as follows:	2005	2004
	EUR million
	Present value of unfunded obligations
	Fair value of funded obligations	6.6	6.8
	Fair value of assets	-6.1	-6.2
	Deficit/surplus	0.5	0.6
	Unrecognised net actuarial gains (+)/ losses (-)	0.1	-0.1
	Unrecognised costs based on past service		0.0
	Net liability present in balance sheet	0.6	0.6

The pension schemes assets and liabilities were transferred to the Pohjola Group on 31 December 2005. The pension scheme assets include in 2004 parent company Vaisala Oyj shares with a fair value of EUR 0.5 million.

	Pension expenses in personnel expenses	2005	2004
	Service costs for the financial year	0.1	0.7
	Interest costs	0.3	0.6
	Expected yield from assets belonging to the scheme	-0.2	-0.2
	Actuarial gains and losses	0.1	0.0
	Costs based on past service		0.0
	Gains/losses from  reduction of scheme	-0.4	-4.5
		0.0	-3.4
	Actual yield from assets belonging to the scheme	24,5%	2.6%

	Changes of liabilities presented in balance sheet	2005	2004
	EUR million
	At beginning of financial year	0.6	4.1
	Paid contributions		-0.1
	Pension expenses in income statement	0.0	-3.4
	At end of financial year	0.6	0.6
	Actuarial assumptions used:
	Discount rate	4.5%	5.0%
	Expected yield from assets belonging to the scheme	4.5%	2.8%
	Future pension increases	3.3%	3.3%

	27. Provisions	pcs
	EUR million	Restructuring provision
	Provisions 1 Jan 2005	0.0
	Additional provisions	0.2
	Used provisions
	Unused provisions reversed
		0.2

	28. Trade payables and other liabilities	2005	2004
	Non-interest bearing
	EUR million
	Trade payables	9.6	8.3
	Liabilities to associated companies
	Salary and social cost allocations	16.0	8.5
	Other accrued expenses and deferred income	5.3	5.3
	Other short-term liabilities	2.5	1.6
	Non-interest bearing liabilities, total	33.3	23.6

	29. Contingent liabilities and pledges given	2005	2004
	EUR million
	For own loans/commitments
	Guarantees	8.2	10.5
	Other own liabilities
	Pledges given	0.1	0.0
	Other leases	0.2
	Contingent liabilities and pledges given, total	8.5	10.5
	The pledges given are lease guarantee deposits.

	Derivative contracts	2005	2004
	Capital value of off-balance sheet contracts made to hedge against exchange rate and interest rate risks
	Currency forwards	12.7	8.8
	Capital value, total	12.7	8.8
	Fair value of off-balance sheet contracts made to hedge against exchange rate and interest rate risks
	Currency forwards	-0.1	0.2
	Fair value, total	-0.1	0.2

30. Related party transactions

The Vaisala Group's related parties include subsidiaries, associated companies, members of the Board of Directors, the President and CEO, and the Vaisala Pension Fund.

	The parent companies and subsidiaries are as follows:
	Company	Group ownership %	Share of votes %
	Parent company Vaisala Oyj, Vantaa, Finland
	Vaisala Limited, Birmingham,  UK	100%	100%
	Vaisala Pty Ltd., Hawthorn, Australia	100%	100%
	Vaisala GmbH, Hamburg, Germany	100%	100%
	Vaisala KK, Tokyo, Japan	100%	100%
	Vaisala Holding Inc., Woburn, USA	100%	100%
	Vaisala Inc., Woburn, USA	100%	100%
	CLH, Incorporated, Minneapolis, USA	100%	100%
	Vaisala China Ltd, Beijing, China	100%	100%
	Tycho Technology Inc, Woburn, USA	100%	100%
	Vaisala S.A., Argentina	100%	100%
	Vaisala SAS , Saint-Quentin-En-Yvelines, France	100%	100%

Sales of goods and services concluded with related parties are based on market prices and general market terms and conditions.

	Employee benefits of management (EUR million)	2005	2004
	Salary and bonuses paid to President and CEO
	Pekka Ketonen, President and CEO
	Salary	0.21	0.22
	Bonuses	0.04
	Remuneration paid to Members of the Board of Directors
	Raimo Voipio, Chairman of the Board	0.03	0.03
	Pekka Hautojärvi, Member of the Board	0.01	0.01
	Mikko Niinivaara, Member of the Board	0.01	0.01
	Yrjö Neuvo, Member of the Board	0.01	0.01
	Mikko Voipio, Member of the Board	0.01	0.01
	Gerhard Wendt, Member of the Board	0.01	0.01
	Total	0.35	0.31

The President and CEO has the right to retire on reaching the age of 65 years.

Salaries and bonuses paid to managing directors of Group subsidiaries totalled EUR 0.4 million.

Management share ownership

Vaisala Oyj's Board of Directors held and controlled 1,242,749 shares on 31 December 2005, accounting for 14.6% of the total votes (2004: 1,244,349 shares and 14.6% of the total votes). The company's President and CEO did not own shares or options on 31 December 2005.

The President and CEO and the Members of the Board have not been granted loans nor have guarantees or commitments been given on their behalf.

31. Events occurring after the closing date

On 4 January 2006 Vaisala signed an agreement to purchase 100% of the stock of SIGMET Corporation of Westford, Massachusetts. The agreement was concluded in cooperation with SIGMET's shareholders. The purchases was made in the name of the Vaisala subsidiary Vaisala Inc. SIGMET is the world's leading manufacturer of weather radar signal processors and applications. The purchase price is approximately USD 20 million. SIGMET currently employs 10 people. The company's net sales in 2005 were approximately USD 11 million. Vaisala announced its intention to enter the weather radar business. The purchase of SIGMET supports this decision by supplementing Vaisala's range of products and services. SIGMET processors and software applications will also be sold in future to all weather radar manufacturers and end-users. The products will also be incorporated into Vaisala's own radar, which is expected to be launched in 2007.

32. Collected information

Information published during Vaisala previous financial year can be found on the Vaisala website: www.vaisala.com/investors.

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