Notes to the financial statements

1.1 Accounting principles for the consolidated financial statements

1.2 Risk management

 

2.Business segments        
 2007  

Vaisala Measurement Systems

Vaisala Instruments

Vaisala Solutions

Other operations

Eliminations

Group

 EUR million        
          
 Net sales to external customers   82.570.371.30.00.0224.1
 Intragroup sales  0.010.40.40.0-10.90.0
 Net sales  82.580.871.70.0-10.9224.1
          
 Operating profit  12.719.95.3-2.60.035.3
          
 Financial income and expenses       1.6
 Share of associated companies' net profit     0.0
 Net profit before taxes       37.0
 Income taxes       -11.2
 Net profit for the financial year       25.8
          
 Assets  40.819.823.8140.60.0225.1
 Holdings in associated companies0.50.00.00.00.00.5
 Liabilities  6.13.910.628.60.049.2
 Investments   1.52.00.53.30.07.3
          
 Depreciation   2.61.80.53.30.08.2
          
          
          
 2006  

Vaisala Measurement Systems

Vaisala Instruments

Vaisala Solutions

Other operations

Eliminations

Group

 EUR million        
          
 Net sales to external customers   93.264.363.30.00.0220.8
 Intragroup sales  0.011.10.40.0-11.50.0
 Net sales  93.275.363.70.0-11.5220.8
          
 Operating profit  19.819.55.4-6.10.038.6
          
 Financial income and expenses       -0.4
 Share of associated companies' net profit     0.0
 Net profit before taxes       38.2
 Income taxes       -11.6
 Net profit for the financial year       26.6
          
 Assets  51.819.522.1125.50.0218.8
 Holdings in associated companies0.40.00.00.00.00.4
 Liabilities  7.63.78.829.40.049.4
 Investments   15.11.51.62.30.020.4
          
 Depreciation   4.81.90.73.40.010.8
 Restructuring expenses  0.00.00.00.00.00.0

 

3.Geographical segments     
 2007     
 EUR million 

Net sales, by destination country  (1

Net sales, by location country  (2

Assets (2

Investments

 Europe 80.7183.2186.25.4
     of which Finland 9.2160.7171.95.2
 North America 73.281.848.81.7
 Asia and Australia 60.220.79.10.2
 Africa, South and Central America10.0  0.0
 Group eliminations  -61.6-23.3 
 Unallocated items   4.7 
       
 Total 224.1224.1225.67.3
       
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 and associated companies' countries of location 
       
 2006     
 EUR million 

Net sales, by destination country  (1

Net sales, by location country  (2

Assets (2

Investments

 Europe 76.0175.0178.44.0
     of which Finland 7.5152.4163.13.8
 North America 79.089.053.516.2
 Asia and Australia 52.319.38.20.2
 Africa, South and Central America13.6  0.0
 Group eliminations  -62.4-26.2 
 Unallocated items   5.2 
       
 Total 220.8220.8219.220.4
       
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 and associated companies' countries of location. 
       

4.Company acquisitions       
 There were no acquisitions during the year 2007    
         
 Company acquisitions in 2006       
 In January 2006 Vaisala acquired all the shares of the US company Sigmet Corp. The company’s net sales in 2005 were EUR 8.8 million. Sigmet is the world’s leading manufacturer of weather radar systems, signal processors and application software. The company has 10 employees and it is located in Westford, Massachusetts. Vaisala announced in November 2005 its decision to enter the weather radar business. The Sigmet acquisition supports this decision by supplementing Vaisala’s range of products and services. Sigmet processors and application software products will continue to be sold to all weather radar manufacturers and end customers. The products will also be part of Vaisala’s own weather radar system, which is expected to come onto the market in 2007. These synergy benefits as well as acquiring control of the Sigmet brand contributed to the generation of goodwill amounting to EUR 3.7 million. The acquisition price was EUR 16.5 million. Auditing and legal fees of EUR 0.2 million relating to the acquisition, as well as taxes of EUR 0.6 million, have also been included in the purchase price. Sigmet’s net sales in January-December 2006 of EUR 10.0 million and operating profit of EUR 2.9 million have been included in the Vaisala Group.
         
 Purchase consideration       
 EUR million       
         
 Purchase price paid   15.7   
 Expenses related to the purchase 0.8   
 Total purchase cost 16.5   
 Fair value of the acquired net identifiable assets  -12.8   
     3.7   
         
 Assets and liabilities arising from   

Fair value recognised

 

Acquiree's carrying amount

 the acquisition are as follows   

in combination

 

before combination

 Tangible fixed assets   0.4 0.1 
 Intangible assets       
     Software   4.1 0.0 
     Orderbaclocg   1.7 0.0 
     Trademark   3.2 0.0 
     Customer value   1.4 0.0 
 Inventories   0.5 0.5 
 Receivables   1.1 1.1 
 Cash and cash equivalents   0.8 0.8 
 Non-interest-bearing liabilities   -0.5 -0.5 
 Net identifiable assets 12.8 2.0 
 Acquisition cost 16.5   
 Goodwill  3.7   
         
 Purchase consideration settled in cash 15.7   
 Expenses related to the purchase  0.8   
 Cash and cash equivalents in subsidiary acquired-0.8   
 Cash outflow on acquisition 15.7   
         
         
5. Long-term project       
 Net sales include EUR 8.9 million  (2006; EUR 2.9 million ) in revenue recognised for long-term projects. Revenue of EUR 0.8 million recognised for long-term projects in progress was included in the consolidated income statement (2006; EUR 0.1 million). Advance payments of EUR 5.4 million recognised for long-term projects in progress were included in the balance sheet at 31.12.2007 (EUR 2.4 million 31.12.2006).
         
6.Other operating income       
 EUR million    

2007

 

2006

 Gains on the disposal of fixed assets  0.0 0.1
      0.0 0.1
         
7.Depreciation and impairment    

2007

 

2006

 EUR million       
 Depreciation by function       
 Procurement and production    2.2 4.7
 Sales and marketing    2.4 2.3
 Research and development     0.4 0.4
 Other administration     3.2 3.3
      8.2 10.8
         
 Goodwill not depreciated as of 1 January 2004. Procurement and production depreciation in 2006 includes depreciation of EUR 1.8 million on the order book of company acquisition Sigmet.
         
         
8.Expenses arising from employee benefits  

2007

 

2006

 EUR million       
 Salaries    

57.2

 57.3
 Social costs    6.8 6.5
 Pensions       
   Defined-benefit pension schemes   0.1 -0.2
   Defined-contribution pension schemes  5.4 6.0
 Personnel expenses, total    69.5 69.6
         
         
 Group personnel, average during the financial year 

2007

 

2006

 By business unit       
 Vaisala Instruments    281 345
 Vaisala Measurement Systems    351 335
 Vaisala Solutions    248 277
 Other operations    234 112
      1,113 1,069
 In Finland    677 656
 Outside Finland    436 414
      1,113 1,069


9.Research and development expenditure     
 The income statement includes research and development expenditure of EUR 23.5 million recognised as an expense in 2007 (EUR 20.6 million in 2006).
         
10. Financial income and expenses    

2007

 

2006

 EUR million       
 Dividend income    0.0 0.0
 Other interest and financial income    2.0 1.2
 Change in fair value of assets recognised at fair value through profit an loss*1.5 1.1
 Interest expenses       
   Short- and long-term liabilities -0.3 -0.1
   Finance lease agreements    0.0 0.0
 Other financial expenses -0.1 -0.1
         
 Realised and unrealised gains arising from changes in fair value of derivative contracts and hedging activities1.5 1.2
         
 Realised and unrealised losses arising from changes in fair value of derivative contracts and hedging activities-0.4 -0.2
 Foreign exchange gains    2.5 1.3
 Foreign exchange losses -5.1 -4.9
      1.6 -0.5
 *Change in fair value of income fund investments.  
         
11. Income taxes    

2007

 

2006

 EUR million       
 Tax based on taxable income for the financial year11.1 12.1
 Taxes from previous financial years   -0.1 0.0
 Change in deferred tax assets and liabilities 0.1 -0.5
      11.2 11.6
         
 Reconciliation statement between income statement tax item and taxes calculated at the   
 tax rate of the Group country of domicile     
 EUR million       
 Profit before taxes    37.0 38.2
         
 Taxes calculated at Finnish tax rate 9.6 9.9
 Effect of foreign subsidiaries' tax rates  1.2 1.3
 Non-deductible expenses and tax-free revenue -0.8 0.0
 Use of previously unrecognised tax losses  0.0 -0.1
 Effect of the group eliminations  0.9 0.2
 Others    0.3 0.3
 Tax in income statement 11.2 11.6
         
 Effective tax rate    30.2% 30.3%
         
 Deferred taxes in balance sheet       
 EUR million    

2007

 

2006

 Deferred tax assets    4.7 5.2
 Deferred tax liabilities    -0.4 -0.4
 Deferred tax asset, net    4.3 4.8
         
 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:

2007

 

2006

 Deferred taxes 1 Jan    4.9 4.7
 Items recognised in income statement  -0.1 0.5
 Translation differences    -0.4 -0.4
 Deferred tax asset, net    4.3 4.9
         
 Deferred tax assets of EUR 2.1 million (2006: 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 0.8 million (2006 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 2007     
 EUR million  

31.12. 2006

Recognised in income statement

Translation differences

Purchased subsidiaries

31.12. 2007

 Deferred tax assets:       
 Internal margin of inventories and fixed assets0.20.30.00.00.5
 Employee benefits  0.10.00.00.00.1
 Unused tax losses  0.80.00.00.00.8
 Timing difference of depreciation on intangible items3.1-0.3-0.30.02.5
 Other temporary differences  1.1-0.1-0.10.00.9
 Total  5.2-0.1-0.40.04.7
         
 Deferred tax liabilities       
 Timing difference between accounting and taxation0.40.00.00.00.4
         
 Deferred tax asset, net  4.9-0.1-0.40.04.3
         
         
 Changes in deferred taxes during 2006     
 EUR million  

31.12. 2005

Recognised in income statement

Translation differences

Purchased subsidiaries

31.12. 2006

 Deferred tax assets:       
 Internal margin of inventories and fixed assets0.20.00.00.00.2
 Employee benefits  0.1-0.10.00.00.1
 Unused tax losses  1.0-0.20.00.00.8
 Timing difference of depreciation on intangible items3.10.3-0.30.03.1
 Other temporary differences  0.80.4-0.10.01.1
 Total  5.30.4-0.40.05.2
         
 Deferred tax liabilities       
 Timing difference between accounting and taxation0.5-0.10.00.00.4
         
 Deferred tax asset, net  4.70.5-0.40.04.8
         
 For the EUR 28.9 million undistributed retained earnings of foreign subsidiaries in 2007 (27.1 million in 2006), no deferred tax liability has been recognised, because the assets have been invested permanently in the countries in question.
       

12. Earnings per share






 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.






2007

 


2006

 Profit for financial year belonging to parent company shareholders, EUR million25.8 26,596

Weighted average number of shares outstanding, 1000 pcs
18,209
18,168
 Earnings per share, EUR    1.42 1.46
         
 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 25.8
26.6
         

Weighted average number of shares outstanding, 1000 pcs
18,209
18,168
 Effect of share options 2000, 1000 pcs  

0

 

7


Diluted weighted average number of shares, 1000 pcs
18,209
18,174
         

Diluted earnings per share, EUR

1.42
1.46
         
13.Dividend per share






      
 For 2006 a dividend of 0.85 euros per share was paid. At the Annual General Meeting to held on 27 March 2008 the payment of a dividend of 0.85 euros per share will be proposed, representing a total dividend of EUR 15.5 million. The proposed dividend has not been recognised as a dividend liability in these financial statements.
         
14.Intangible assets







EUR million



Other






Intangible



intangible




Intangible assets

rights

Goodwill

Trademark

assets

Total


 Acquisition cost 1 Jan 20.610.03.22.336.1 

Translation difference

-1.0

-2.3

-0.3

-0.1-3.8
  Increases 0.5

-

-

-

0.5 

Acquisition of subsidiary
0.0

-

-

-

0.0
  Decreases -0.3

-

-

-

-0.3 

Transfers between items

0.6

-

-

-

0.6
 Acquisition cost 31 Dec 20.47.72.92.233.1 









         

Accumulated depreciation and impairment 1 Jan13.7

-

-

1.415.1
  Translation difference 

-0.5

-1.3

-

-0.1-1.8 

Accumulated depreciation
     
  of decreases and transfers  -0.3

-

-

-

-0.3 

Depreciation in financial year
2.0

-

-

0.32.4
 Accumulated depreciation 31 Dec14.9-1.30.01.715.3 









 Carrying amount 31 Dec 20075.58.92.90.517.8 

Carrying amount 31 Dec 2006
6.910.03.20.921.0
         
 Goodwill has not been depreciation as of 1 January 2004.    
         

Goodwill and trademark impairment testing



      
 Goodwill is attributed to the segments Vaisala Measurement Systems and Vaisala Solutions. Trademark EUR 2.9 (3.2) million is attributed to the segment Vaisala Measurement Systems. The balance sheet value of goodwill and trademarks is assessed at least once per year to ascertain any possible impairment. Trademark value is assessed by the relief-from-royalty method by comparing the present value of the royalty payments saved with the value of thetrademark. For impairment testing the goodwill is attributed to three different cash generating units, i.e. EUR 4.6 million (2006 EUR 5.1 million) to a North American lightning detection systems business unit, EUR 1.1 million (2006 EUR 1.2 million) to a North American airport weather support systems business unit, and EUR 3.3 million (2006 EUR 3.7 million) to a North American radar 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 2007 was 15.2% (2006 15.9%). 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. On the basis of sensitivity analyses made, reasonable changes to the assumptions used do not result in impairment of the goodwill of North American lightning detection systems business unit or North American radar systems business unit. At the North American airport weather business unit, a weakening of more than 6 per cent in sales or the margin receivable from products would result in an impairment recognition.
         
15. Tangible assets




Advance



EUR million



Other

payments and





Land and

Buildings and

Machinery

tangible

construction



Tangible assets

waters

structures

and equipment

assets

in progress

Total

 Acquisition cost 1 Jan 2.731.547.32.53.287.2

Translation difference

-0.2

-0.3

-1.1

-0.2

0.0

-1.8
  Increases 

-

0.02.80.43.77.0

Decreases

-

0.0

-1.9

0.0

-

-1.9
  Transfers between items

-

0.0

1.8

0.0

-2.5

-0.6

Acquisition cost 31 Dec
2.631.249.02.74.489.8
         
         

Accumulated depreciation and impairment 1 Jan

-

13.738.51.6

-

53.8
  Translation difference 

-

-0.1

-0.9

0.0

-

-1.0

Accumulated depreciation

 







  of decreases and transfers  

-

0.0

-1.90.0

-

-1.9

Depreciation in financial year

-

1.73.90.3

-

5.8
  
      

Accumulated depreciation 31 Dec0.015.339.51.90.056.7
         

Carrying amount 31 Dec 2007 2.615.99.50.84.433.1
 Carrying amount 31 Dec 2006 2.717.88.90.93.233.5
         
 The undepreciated acquisition cost of machinery and equipment belonging the tangible fixed assets was EUR 25.4 million on 31.12.2007 (EUR 25.0 million 31.12.2006).
         
 Tangible fixed assets include the following assets acquired on finance leases:  
         





Machinery and





2007 EUR million


equipment




 Acquisition cost   1.2   

Accumulated depreciation


-0.7


 Carrying amount 31 Dec 2007 0.4   
         





Machinery and





2006 EUR million


equipment




 Acquisition cost   1.3   

Accumulated depreciation


-0.8


 Carrying amount 31 Dec 2006 0.5   

16. Holdings in associated companies






EUR million



2007


2006

 Acquisition cost 1 Jan    0.4 0.3

Share of result



0.0
0.0
 Dividends received       

Increases



0.0
0.1
 Disposals and other decreases       

Translation differences



0.0
0.0
 Associated company investments, total 31 Dec 0.5 0.4
         
 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 2006, EUR million Domicile

Assets

Liabilities

Net sales

Profit/loss

Holding

 Meteorage SA, France Cedex1.51.01.60.135 %
 The information presented in the table are based on the latest available financial statements. 
         

Associated companies 2005, EUR million





 Meteorage SA, France Cedex1.40.51.60.135 %
         
 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.
         
17.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.
18.Receivables (long-term)


2007



2006

EUR million


Balance sheet values

Fair values

 


Balance sheet values

Fair values

 Loan receivables   0.00.0 0.00.0

Other receivables *


0.10.1
0.20.2
     0.10.1 0.20.2
          
 *Fair values have been calculated by discounting the future cash flows of every significant receivable at the market interest rate on the closing date.
          
19.Inventories



2007


2006


EUR million






 Materials and supplies    7.8 9.4

Work in progress



4.4
2.8
 Finished goods    3.8 5.3






16.1
17.6
 In the financial year expense of EUR 1.37million was recorded, equivalent to the amount by which the carrying amount of inventories was reduced to correspond with their net realisable value (EUR 1.3 million in 2006).
         
20.Trade receivables and other receivables

2007


2006


EUR million






 Trade receivables    39.4 43.1

Loan receivables



0.0
0.0
 Advanced paid    0.9 0.8

Other receivables



2.3
3.3
 Receivables from long-term project customers  6.6 3.3

Value-added tax receivables



2.9
1.6
 Other prepaid expenses and accrued income  1.2 1.7






53.4


53.9

 The fair values of trade and other receivables essentially correspond to their carrying amounts. 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.
         

Age analysis for the trade receivables

2007

provision for impairment

Net 2007

2006

provision for impairment

Net 2006


M€






 invoices not due 5.1 5.15.3 5.3

due less than 30 days
17.4
17.4

24.5


24.5
 due 31- 90 days 14.0 14.08.7 8.7

due over 90 days
3.20.32.95.00.54.6
 Total 39.70.339.443.60.543.1
         

The carrying amounts of group's trade and other

2007

 

2006


receivables are denominated in the following curencies:



EUR million






 EUR    

17.2

  17.3

USD


16.1

 
19.9
 GBP   

3.4

  2.6

JPY


1.7

 
2.0
 AUD   

0.4

  0.5

CNY


0.0

 
0.1
 Other   

0.6

  0.7





39.4

 
43.1
         
21.Financial assets recognised at fair value through profit and loss

2007


2006


EUR million





 


 Income fund investments     

42.6

 

41.2


Derivative contracts



0.4


0.2

         
 Fixed income fund investments are publicly quoted securities whose fair value is determined in the market and whose liquidity is good. Investments are directed at euro-denominated fixed income funds of banks that are a good credit risk and under Finnish supervision. A change in fair value is recognised in the income statement in ‘financial income and expenses’. A change in interest rate of 1 per cent upwards our downwards would correspondingly influence the value of the investments by around EUR 63,900 (94,800 in 2006).
         
22.Cash and cash equivalents



EUR million



2007


2006

 Cash and bank deposits    24.8 21.2

Certificates of deposit



31.9
25.0
 Total    56.6 46.1
         
 The values of cash and cash equivalents is equivalent to their carrying amounts. 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 teh investments in 2007 was 4.1% (2.9% in 2006). In the cash flow statements, income fund investments of EUR 42.6 million (EUR 41.2 milion in 2006) are also treated as cash and cash equivalents.
         

23.Notes relating to shareholders' equity





          
 Vaisala applies the insider rules of the Helsinki Stock Exchange.   
          

Share capital and share premium fund






EUR million

Number of shares 1000

Share capital

Share premium fund

Reserve fund

Own shares

Paid but unregistered options

Total

 31.12.2005 17,6657.45.30.10.05.418.3

Share optiosn exercised
5530.211.3

-5.46.1
 Own shares acquired -90.00.00.0-0.30.0-0.3

31.12.2006
18,2097.716.60.1-0.30.024.1
 31.12.2007 18,2097.716.60.1-0.30.024.1

Own shares held by company
9





   18,218      
          
 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.
          

Optio scheme







 
 The company's option scheme 2000 ended for all options on 31 January 2006. During the reporting period options had been used to subscribe for 293,164 Vaisala Series A shares. The subscription price was EUR 20.78 per share. 
          

Change in number of options outstanding

pcs




 Number of options outstanding on 1 Jan 2006 309,800   

Options granted







 Options exercised which have been registered 

-293,164

   

Options exercised which have not been registered




 Options held by the company     

Expired options



-16,636


 Number of options outstanding on 31 Dec 20060   
          
          

Share-based incentive schemes






2007 scheme







          
 In 2007 Vaisala’s Board of Directors instituted a new share-based incentive scheme for around 50 key individuals of the company. Some of these individuals belong to related parties of the Group. The incentive scheme is of two years’ duration and it ends in February 2009. The performance period of incentive scheme is the financial year that began on 1 January 2007 and ended on 31 December 2007. The imputed number of shares to which individuals are entitled is based on the achievement of set financial targets, which are measured by earnings per share (EPS). A bonus corresponding to the imputed number of shares will be paid in cash and the share price used is the average price on the trading day that follows the publication of the 2008 final statements. Individuals must invest the proportion of the cash sum they receive that remains after taxes in Vaisala shares. Key individuals undertake to acquire the shares themselves at the market price. In addition, the shares have a restriction on sale of one year. The maximum cost of the incentive scheme corresponds to the value of 130,000 shares. Because financial targets were not met, no liablity has been recogninsed for the scheme in the consolidated balance sheet on 31 December 2007.
          

2006 scheme







          
 In 2006 Vaisala’s Board of Directors instituted a new share-based incentive scheme for around 50 key individuals of the company. Some of these individuals belong to related parties of the Group. The incentive scheme is of two years’ duration and it ends in February 2008. The performance period of incentive scheme is the financial year that began on 1 January 2006 and ended on 31 December 2006. The imputed number of shares to which individuals are entitled is based on the achievement of set financial targets, which are measured by earnings per share (EPS). A bonus corresponding to the imputed number of shares will be paid in cash and the share price used is the average price on the trading day that follows the publication of the 2007 final statements. Individuals must invest the proportion of the cash sum they receive that remains after taxes in Vaisala shares. Key individuals undertake to acquire the shares themselves at the market price. In addition, the shares have a restriction on sale of one year. The maximum cost of the incentive scheme corresponds to the value of 130,000 shares. A EUR 2.9 million liability has been recognised for the scheme in the consolidated balance sheet on 31 December 2006.
 The incentive scheme is an arrangement that complies with IFRS 2. The fair value of the shares given as bonuses has been determined using the share price on the closing date. As the scheme involves the giving of shares for no consideration, no option pricing model has been used.
          
          

Authorisation of the Board of Directors





          
 At the end of 2007, the Board of Directors had no authorisations to increase the share capital nor to issue convertible or warrant bonds. The Board of Directors had an authorisation granted by the Annual General Meeting of 22 March 2005 to acquire and transfer the company’s own shares. The authorisation was valid until 22 March 2006. A maximum of 35,000 shares could be purchased. The Board of Directors used the authorisation in full. Under the authorisation, the shares were used as part of the incentive and bonus schemes for the company’s personnel.

Acquired own shares

Number of shares

Purchase price EUR million

 


 


 


 February 2006  13,000355   

March 2006

22,000608


 Total  35,000963   

Shares transferred

-25,850-712


 Company's own shares on 31 December 20069,150252   

Shares transferred

-

-




 Company's own shares on 31 December 20079,150252   
         
         
24.Interest-bearing liabilities







EUR million



Balance sheet value

 


 



Long-term



2007


2006

 Loans    0.0 0.1

Finance lease liabilities



0.2
0.2
      0.2 0.3
         

Short-term






 Loan repayments in next year  0.1 0.3

Other short-term liabilities



0.4

 Finance lease liability repayments      

in next year



0.3
0.3
      0.8 0.6

Interest-bearing liabilities, total 0.9
0.9
         
 The fair values of the interest-bearing liabilities is equivalent to their carrying amounts. Other shor-term liability is interest-bearing liability related to the building of the clean room. 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 2007 was 1.25% (2006; 1%). The company has no loans that would mature after five years or a longer period.
         

Maturity dates of finance lease liabilities:



EUR million



2007


2006

 Finance lease liabilities - total amount of minimum lease payments   

Up to 1 year



0.3


0.3

  1 - 5 years    

0.2

 

0.3


More than 5 years



-


-

      

0.5

 

0.6


Future financial expenses



0.0


-0.1

 Present value of finance lease liabilities  

0.5

 

0.5










 Present value of minimum payments of finance lease liabilities   

Up to 1 year



0.3
0.3
  1 - 5 years    0.2 0.2

More than 5 years



-


-

 Total    0.5 0.5

 


25.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 defined-contribution schemes. 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. 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     
 EUR million    

2007

 

2006

 Defined-benefit pension schemes   0.1 -0.2
 Defined-contribution pension schemes  5.4 6.0
      5.5 5.8
 Defined-benefit pension schemes by function     
 Procurement and production      -0.1
 Sales and marketing      -0.1
 Research and development       0.0
 Other administration     0.1 0.0
      0.1 -0.2
         
 The balance-sheet defined-benefit pension liability is determined as follows:  
 EUR million    

2007

 

2006

 Present value of unfunded obligations     
 Fair value of funded obligations    

1.8

 

1.9

 Fair value of assets    

-1.5

 

-1.7

 Deficit/surplus    

0.4

 

0.2

 Unrecognised net actuarial gains (+)/ losses (-)  

-0.1

 

0.2

 Unrecognised costs based on past service  

-

 

-

 Net liability present in balance sheet  

0.3

 

0.3

         
 Pension expenses in personnel expenses     
 EUR million    

 2007

 

 2006

 Service costs for the financial year   0.1 0.1
 Interest costs    0.1 0.3
 Expected yield from assets belonging to the scheme -0.1 -0.3
 Actuarial gains and losses    

-

 

-

 Costs based on past service    

-

 

-

 Gains/losses from  reduction of scheme  0.0 -0.3
      0.1 -0.2
         
 Actual yield from assets belonging to the scheme 

5.5%

 

6.7%

         
 Overall expected return as calculated by the insurance company. Information on asset categories is not available. Expected contributions payable for the group during the year 2007 is EUR 0.1 million (EUR 0.1 million in 2006).
         
 Changes in the present Value of the Obligation   

 2007

 

 2006

 EUR million       
 Present value of obligation 1 Jan     1.9 6.6
 Current sevice cost    0.1 0.1
 Interest cost    0.1 0.3
 Settlement and curtailments    -0.3 -4.6
 Actuarial gain (-) loss(+) on obligation  0.1 -0.5
 Present value of obligation on 31 Dec  1.8 1.9
         
 Changes in the Fair Value of Plan Assets     
 EUR million    

 2007

 

 2006

 Fair value of plan assets 1 Jan    1.7 6.1
 Expected return on plan assets    0.1 0.3
 Actuarial gain (+) loss(-) on plan assets  -0.1 -0.2
 Contributions    0.1 0.1
 Settlements    -0.3 -4.6
 Fair value of plan assets 31 Dec    1.5 1.7
         
         
 Changes of liabilities presented in balance sheet    
 EUR million    

2007

 

2006

 At beginning of financial year    0.3 0.6
 Paid contributions    -0.1  
 Pension expenses in income statement  0.1 -0.2
 At end of financial year    0.3 0.3
         
 Actuarial assumptions used:       
 Discount rate    5.00% 4.50%
 Expected yield from assets belonging to the scheme 5.00% 5.00%
 Future pension increases    3.25% 3.25%
         
         
26.Provisions    

2007

 

2006

 EUR million    

Restructuring provision

 

Restructuring provision

 Provisions 1 Jan     0.0 0.2
 Additional provisions    0.2 0.0
 Used provisions    0.0 -0.2
 Provisions 31 Dec    0.2 0.0
         
 The increase in provisions in 2007 relates to the restructuring of the company's organisation. A 2006 restructuring provision relates to the centralisation of the company’s lightning detection business into one location and to the closure of the Aix-en-Provence office, situated in France. At the end of 2006, four thousand euros of the provision remained. An increase in provisions, 24 thousand euros, results from a restructuring of production at the sonde plant in Vantaa.
         
27.Trade payables and other liabilities     
 Non-interest bearing       
 EUR million    

2007

 

2006

 Trade payables    10.4 12.2
 Salary and social cost allocations   15.5 15.8
 Other accrued expenses and deferred income 5.0 6.1
 Other short-term liabilities    1.9 1.6
 Non-interest bearing liabilities, total   32.9 35.6
         
 The fair value of the trade payables and other liabilities is equivalent to their carrying amounts.

28.Contingent liabilities and pledges given     
 EUR million    

2007

 

2006

 For own loans/commitments       
   Guarantees    8.0 9.7
 Other own liabilities       
   Pledges given    0.1 0.1
 Other leases    

0.2

 

0.2

         
 Contingent liabilities and pledges given, total 8.3 9.9
 The pledges given are lease guarantee deposits.    
         
         
 Derivative contracts    

2007

 

2006

 EUR million       
 Capital value of off-balance sheet contracts made to      
 hedge against exchange rate and interest rate risks     
 Currency forwards    14.3 11.9
 Capital value, total    14.3 11.9
         
     

2007

 

2006

 
 Derivative contracts are denominated in the following currencies:   

Currency million

EUR million

Currency million

EUR million

 USD   16.511.612.59.6
 AUD   1.50.91.61.0
 JPY   115.00.7115.00.8
 GBP   0.81.10.40.6
      14.3 11.9
         
 Maturity       
 Less than 90 days    9.6 10.8
 over 90 days and less than 120 days  3.0 1.1
 Over 120 days and less than 230 days  1.7  
      14.3 11.9
         
         
 Fair value of off-balance sheet contracts made to hedge against exchange rate and interest rate risks  
 Currency forwards    0.4 0.2
 Fair value, total    0.4 0.2
         
29.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

 

Share of

      ownership %

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 %
 Vaisala China Ltd, Beijing, China    100 % 100 %
 Tycho Technology Inc, Woburn., USA   100 % 100 %
 WSDM LCC, Minneapolis, 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)    
 Salary and bonuses paid to President and CEO  

2007

 

2006

 Kjell Forsen, President and CEO       
     Salary    0.26 0.07
     Bonuses    0.02  
 Pekka Ketonen, President and CEO 1 Jan to 30 Sept 2006    
     Salary      0.31
     Bonuses    0.28 0.38
            
 Remuneration paid to Members of the Board of Directors    
 Gustavsson Stig Member of the Board0.02 0.01
 Hautojärvi Pekka Member of the Board   0.00
 Neuvo Yrjö Member of the Board0.02 0.02
 Niinivaara Mikko Member of the Board 0.02 0.02
 Torkko Maija Member of the Board0.02  
 Voipio Mikko Member of the Board 0.02 0.02
 Voipio Raimo Chairman of the Board0.03 0.03
 Wendt Gerhard Member of the Board   0.00
 Total    0.70 0.87
 Salaries and bonuses paid to managing directors of Group subsidiaries totalled EUR 0.3 million (2006 EUR 0.3 million). Age of retirement for the President and CEO is 63 years, according to Finnish law. The President and CEO has a compensation based retirement plan.
         
 Management share ownership      
 Vaisala Oyj's Board of Directors held and controlled 1,394,601 shares on 31 December 2007, accounting for 16.6% of the total votes (2006: 1,353,101 shares and 16.5% of the total votes). The company's President and CEO did not own shares or options on 31 December 2007. 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.
  
30.Collected information       
 Information published during Vaisala previous financial year can be found on the Vaisala website: 
         
 www.vaisala.com/investors