Annual Report Year 2008 CEO's review CEO's webcast Main events in 2008 Key figures

Transcription

1 Annual Report 2008 Year 2008 CEO's review CEO's webcast Main events in 2008 Key figures Shareholder information Payment of dividend Financial reporting 2009 Contacts Vaisala Group Strategy Customer applications Personnel Research and development Environment Society Organization Vaisala Measurement Systems Vaisala Solutions Vaisala Instruments Vaisala Services Operations Sales organization Activities around the world Corporate governance Board of Directors President and CEO Management Group Compensation system Auditors This is a print-out of the contents of the Vaisala 2008 Annual Report. To view the online report please go to:

2 Annual report 2008 Year 2008 In 2008, Vaisala completed the new market-driven strategy, and the organization and operating model aligned with it. The new strategy is built on customer focus and concentrating our efforts on the chosen market segments. The strategy renewal was announced in November 2008 and the new organization became operational at the beginning of Another large-scale project is the renewal of the Enterprise Resource Planning (ERP) system. The new modular system supports the company strategy and business processes, and will replace several current systems. In 2008 the project reached the implementation phase which will be completed in Despite the challenging economic situation and tough competition, Vaisala has managed to maintain its strong market position. Our goal is to be the global leader also in the future in the chosen environmental measurement markets. CEO's review The net sales of the Vaisala Group grew over 8 percent in 2008 to EUR million. The strongest growth was in Asia-Pacific where net sales grew nearly 28 percent. The company's result was burdened by ongoing development projects. The unfavorable exchange rates also had an impact on the result. Of the business areas, Vaisala Measurement Systems, Vaisala Instruments and Vaisala Solutions all increased their net sales, whereas the Services business was affected by personnel and infrastructure-related development costs. Year of renewal and growth We completed the new customer-driven strategy, and the organization and operating model aligned with it. The renewal was announced in November 2008 and the new organization became operational at the beginning of The most significant difference between the old and the new strategy is the change from a product-driven to a market-driven model. I am extremely satisfied with the fact that despite the challenging economic situation and the unfavorable shifts of currency exchange rates, Vaisala has managed to maintain its strong market position and grow its net sales. Our strong order backlog will ensure a good start for The global economic recession has not yet affected us significantly, but we are monitoring the developments very closely. Our customers, especially in the weather businesses, are mostly publicly funded which means slower and more moderate changes. This is why we expect the market situation to remain largely unchanged in We expect our growth to continue, but uncertainty regarding the end of the year has increased. We continue to resolutely execute our new strategy, which will require significant investments. I am, however, confident that Vaisala will be able to further strengthen its position as the world leader in environmental measurement. Thanks I would like to express my warm thanks to Vaisala personnel for their excellent results. They have once again demonstrated their competence and commitment. I would also like to thank Vaisala s customers and partners

3 for their confidence in us. Kjell Forsén President and CEO CEO's webcast Watch CEO Kjell Forsén's webcast where he sums up Vaisala's year 2008 and talks about the company's outlook in Main events in 2008 Vaisala refined its strategy and focuses on key market segments Environmental awareness is increasing at an exponential rate, creating demand for energy efficiency and renewable energy sources. As one of the global leaders in weather and industrial measurement, Vaisala is ideally positioned to respond to these requirements: to grow within the existing market segments and enter new growth segments. Continuing the strategy redefinition started in 2007, Vaisala developed its strategy further in 2008 to be aligned with the growth and market potential. Concurrently, the company renewed its organization and adopted a market segment based reporting model. The new business areas are; Meteorology, Weather Critical Operations and Controlled Environment. The new organization and segment-based reporting became effective as of January 1, Read more. Changes in Vaisala Group's management Martti Husu was appointed Executive Vice President of the Meteorology Business Area and Jouni Rantanen was appointed Executive Vice President of the Products and Technology unit. Both are members of the Business Management Group. The appointments took effect on January 1, Kimmo Korpela was appointed Senior Vice President, Group Business Development and a member of the Strategic Management Group starting January 7, 2009 Matti Ervasti, Director, Marketing and Sales and Tapio Engström, Director, Business Development resigned from Vaisala. Vaisala strengthens its presence in India Vaisala widened its office network by establishing a liaison office in New Delhi, India. Read more. Vaisala builds new office facilities in Vantaa, Finland At the same time with the growing business of Vaisala, the need to have more office space in the company's headquarters in Vantaa has increased. To accommodate some 200 employees and to take into use more modern facilities, Vaisala will start a construction project next year. Read more. The implementation of the new enterprise resource planning system started Vaisala is renewing its Enterprise Resource Planning (ERP) system globally. The new system supports the company strategy and business processes, and will replace several current systems. The new ERP includes customer relationship and human resources management, services, finance, projects and supply chain management functionalities. The program was initiated in 2007 and is scheduled to be fully implemented by the end of The new system will be implemented in phases. The first release of the phase one, the HR module was taken into use in December Three next modules will be released in 2009 after which the new ERP system will be operational at Vaisala headquarters in Finland. Year 2010 is reserved for global roll-outs in the other Vaisala locations. Vaisala brand renewed

4 Vaisala launched a new corporate look and feel in The renewed brand identified curiosity as the driving force behind Vaisala's success. Curiosity towards scientific and technical challenges and solving customer problems has always been the "Vaisala way". Read more. Vaisala selected to elite Cleantech Index (CTIUS) Vaisala was selected by the Cleantech Group, LLC to join its prestigious Cleantech Index (CTIUS) of public clean technology companies. CTIUS is a stock market index intended to reflect the surging global demand for cleantech products and services. Read more. Business news Vaisala acquires Aviation Systems Maintenance Inc. In line with its new strategy, Vaisala seeks to grow as a service provider. The company's US subsidiary Vaisala Inc. acquires Aviation Systems Maintenance, Inc (ASMI), a Kansas, U.S. based airport service company with over 2.6 million USD net sales in The acquisition was closed on January 1, Read more Vaisala signed significant radiosonde contracts Vaisala signed a significant contract with a long standing customer for upper air observation products. The EUR 8.3 million contract includes radiosondes and accessories. Vaisala signed an agreement with the Australian Bureau of Meteorology to supply radiosondes for the national upper air observation network. The total value of the radiosondes to be supplied is expected to exceed 5 million EUR. Vaisala received EUR 6 million order for weather station components Vaisala has signed a contract with a long-term customer for the delivery of weather station components. The v alue of the contract is approximately EUR 6 million and deliveries will be made during Vaisala to supply weather monitoring equipment to Russia Vaisala will provide the Russian Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet) with state-of-the-art surface weather monitoring technology. Vaisala is partnering with a local Russian integrator, Lanit, in the delivery project. The value of the contract is 4.7 million euros. Read more Vaisala to deliver weather radar equipment to US Federal Aviation Administration Vaisala signed a 6.9 MUSD contract with the US Federal Aviation Administration (FAA) to deliver weather radar signal processors and software for the FAA Weather Radar network, operating at major airports in the USA. Read more Hurricane forecasters to use Vaisala's long range lightning data Vaisala provides real-time, long range lightning data in the US to the National Hurricane Center. The lightning data provides a new data source for hurrican forecasters to help assess the structure of tropical cyclones and other weather systems at sea. Read more Vaisala awarded second phase contract for the Next Generation Profiler Network Vaisala was awarded the National Oceanic and Atmospheric Administration Next Generation Profiler Network Phase II contract in June The customer, National Weather Service utilizes a multi-step, multi-year process for the design, development, manufacturing, and installation of high capability upper air wind profiler observation sites for the United States. Read more Vaisala weather observation equipment in Beijing Olympics Reliable weather information is essential during Olympics. To provide accurate and versatile weather information to the organizers, authorities and athletes, the Beijing Meteorological Offices upgraded weather observation networks in the Beijing metropolitan area with Vaisala equipment. New weather equipment has also been installed at the main stadium and other venues. The total value of the deliveries was 3.5 million euros. Read more

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8 Financial report Download Financial Report in PDF format. Board of Directors' report 2008 Overview of 2008 Net sales in 2008 were at a good level. Growth was highest in the Asia-Pacific region. Cost-intensive development projects continued and this shows in the overall group results. The development of exchange rates also had a negative impact, especially the weakening of the US dollar by approximately 7 percent. In the

9 fourth quarter, Vaisala announced a new market-segment based strategy and redesigned its organization to support strategy execution. Outlook Instability in the world economy and shifts in currency exchange rates are expected to continue to affect Vaisala's business. Due to the structure of Vaisala's customer base, the company's market situation is expected to remain mostly unchanged in Vaisala's growth is expected to continue in 2009, but uncertainty towards the end of the year has increased. Seasonal variations are typical of Vaisala s business, and therefore the first quarter will probably be weaker than subsequent ones. Market situation, net sales and order book The highest growth in Vaisala Group s net sales in 2008 was in Asia-Pacific, increasing by 27.8 percent on the previous year to EUR 76.9 (60.2) million. Net sales in Europe increased by 5.0 percent to EUR 84.8 million (80.7) and in Africa, South and Central America by 39.0 percent to EUR 13.9 (10.0) million. Sales in North America declined by 8.6 percent to EUR 66.8 (73.2) million. In comparable currencies, the North American segment would have declined by 2.1 percent. Thanks to focused development work and maintained competitiveness, the company was able to retain its strong market shares. The value of orders received grew by 8.5 percent from the comparison year and totaled EUR million (EUR million in 2007, million in 2006). The end-of-year order book stood at EUR 90.3 million (82.3), of which some EUR 20 million can be recognized as sales in 2010 or later. Vaisala Group s net sales increased by 8.2 percent on the comparison year and totaled EUR million (EUR million in 2007, EUR million in 2006). Net sales of all the business areas apart from Vaisala Services grew: Vaisala Solutions by 24.4 percent, Vaisala Instruments by 12.1 percent and Vaisala Measurement Systems by 9.4 percent. Net sales of Vaisala Services fell by 16.8 percent. The deterioration in exchange rates had a negative impact on the growth of net sales. If the most significant currencies with respect to Vaisala had remained at the previous year s level, Vaisala s consolidated net sales would have been up by 11.9 percent. Operations outside Finland accounted for 94 (96) percent of net sales. Performance and balance sheet Operating profit for the financial year was EUR 38.0 million (35.3), or 15.7 percent of net sales. Profit before taxes was 16.0 percent of net sales and totaled EUR 38.9 (37.0) million, up by 5.1 percent. Net profit for the financial year was EUR 28.4 million (25.8), up by 10.0 percent from the previous year. Vaisala Group s solvency ratio and liquidity remained strong. On December 31, 2008, the balance sheet total was EUR million (EUR million in 2007, EUR million in 2006). The Group's solvency ratio at the end of the financial year was 82 percent (83% in 2007, 81% in 2006). Vaisala's consolidated liquid assets totaled EUR million (EUR, 99.2 in 2007, EUR 87.3 million in 2006). Research and development Investment in research and development in the financial year totaled EUR 24.6 million (EUR, 23.5 million in 2007, EUR 20.6 million in 2006), representing 10.1 percent of the Group s net sales. Vaisala launched a new dewpoint transmitter for extremely dry conditions and a moisture in oil transmitter for the measurement of humidity in lubrication and hydraulic oil. Additionally, LAN and WLAN capabilities were added to the humidity, dewpoint, moisture in oil and pressure transmitters, improving Vaisala's ability to cater for our industrial customers. Vaisala also launched a redesigned and improved humidity probe, weather transmitter, and wind sensor for weather measurement. Additionally, several customer-specific R&D projects either continued or were completed. Capital expenditure Gross capital expenditure totaled EUR 12.2 million (7.3 million in 2007; 20.4 million in 2006). A new enterprise resource planning (ERP) system for the entire organization is being implemented. The new system supports the company strategy and business processes, replacing several systems that are used currently. The system will be taken into use gradually and the objective is to have it in use globally by the end of Changes in financial reporting

10 From the first Interim Report for 2008, Vaisala Group's business has been reported in four segments, which are Vaisala Instruments, Vaisala Measurement Systems, Vaisala Solutions and Vaisala Services. All figures for 2007 have been changed to correspond to the new reporting model, and are therefore comparable. These figures were published in a stock exchange release on April 30, Vaisala Measurement Systems Vaisala Measurement Systems consists of sounding, surface weather system, thunderstorm system, wind profiler, and weather radar business segments. In 2008, the range of products and services offered was added to by the transfer of individual products and systems from Vaisala Solutions. Correspondingly, the lightning detection services were moved to the Vaisala Services business area. Vaisala Measurement Systems' net sales to customers outside the Group showed a year-on-year increase of 10.7 percent, growing to EUR 99.9 (90.2) million. In comparable currencies, the net sales to customers outside the Group would have grown by 13.9 percent. Operating profit was EUR 17.4 (12.3) million. The growth of net sales was accelerated by several coinciding customer projects in the sounding and surface weather system businesses. Despite new projects, the net sales of wind profilers and lightning detection systems fell short of expectations. However, the market shares of these businesses remained unchanged. Vaisala has several weather radar orders on the books, with revenue expected mostly in Annual fluctuation is typical of this business. The delay caused by a temporary disruption in production in the first quarter was caught up during the third quarter, and the net sales of the soundings business in 2008 was approximately at the same level as in the previous year. Vaisala and the Australian Bureau of Meteorology signed a three-year agreement to supply radiosondes for the upper air observation network of the Bureau. Vaisala signed a USD 6.9 million contract with the US Federal Aviation Administration (FAA) for the delivery of weather radar signal processors and software for the FAA Terminal Doppler Weather Radar (TDWR) network, operating at major airports in the USA. The deliveries will take place in Vaisala will provide the Russian Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet) with state-of-the-art surface weather monitoring technology. The value of the contract is EUR 4.7 million, and deliveries started in The value of orders received was EUR million and the order book stood at EUR 41.7 million at the end of the financial year. Vaisala Instruments Vaisala Instruments consists of humidity, barometric pressure, carbon dioxide, dewpoint, oxygen, wind and optical measurement business segments. The instruments business has developed well despite of the weakened US dollar. The business area s net sales to customers outside the Group increased by 8.8 percent to EUR 72.0 (66.2) million compared to the review period. In comparable currencies, the increase in net sales would have been 11.7 percent. Operating profit of the review period was EUR 24.3 (20.5) million. The growth in the Instruments business came particularly from weather instruments and from sales to important industrial customers. The value of orders received from external customers was EUR 71.5 million and the order book stood at EUR 7.8 million at the end of the financial year. Vaisala Solutions The focus of this business area is in comprehensive weather observation solutions within aviation, traffic, meteorology and hydrology. Therefore single products and systems were transferred to the Vaisala Measurement Systems business area. Additionally, road weather services were moved to the Vaisala Services business area. Vaisala Solutions' net sales to customers outside the Group showed a year-on-year increase of 24.4 percent, growing to EUR 43.1 (34.6) million. In comparable currencies, the net sales would have been up by 27.3 percent. Operating profit for the year was EUR -0.5 (-0.6) million. Vaisala Solutions has purchased products worth approximately EUR 10 million from Vaisala Instruments and Vaisala Measurement Systems, which shows in the results of these units. Growth was especially favorable in the aviation and road weather businesses. In terms of meteorological and hydrological systems (MHS), several projects are ongoing with revenue in the books later.

11 The total value of orders received was EUR 41.8 million and the order book stood at EUR 27.9 million at the end of the financial year. Vaisala Services Vaisala's services have been centralized under the Vaisala Services business area, which became operative at the beginning of Vaisala Services consists of two business segments, Product Services and Observation Services. Net sales to customers outside the Group showed a year-on-year decrease of 16.8 percent year, to EUR 27.5 (33.0) million. In comparable currencies, the net sales would have been down by 11.0 percent. Operating profit for the year was EUR -0.2 (5.7) million. Vaisala Services is a new business area and in a strong development phase. Competition in both observation and product services tightened during the year. Additionally the business area's global development initiatives for improving efficiency and enable growth increased the amount of fixed costs. These, together with the weakening of exchange rates, had a negative impact on the net sales and profitability of the services business. Over 70% of the net sales of Vaisala Services are in US dollars or British pounds. The total value of orders received was EUR 25.3 million and the order book stood at EUR 12.9 million at the end of the financial year. Personnel The average number of people employed in the Vaisala Group during the financial year was 1,177 (1,113 in 2007; 1,069 in 2006). Some 39 percent of the personnel was based outside Finland (39% in 2007, 40% in 2006). About 20 percent of the personnel worked in research and development (21% in 2007, 19% in 2006). Salaries paid by the company are based on local collective and individual agreements, individual performance and the demand level of each job. The base salaries are supplemented by results-based bonus systems, which cover all Vaisala personnel. The total sum of salaries and bonuses paid in 2008 was EUR 59.7 million (57.2 million in 2007, 57.3 million in 2006). Vaisala has two incentive plans; one based on the development of sales and profitability and covering all employees, and the other, three-year plan, based on the development of profitability and covering key personnel. Changes in Vaisala Corporation s management Martti Husu was appointed Executive Vice President of the Meteorology Business Area and a member of the Business Management Group starting January 1, Jouni Rantanen was appointed Executive Vice President of the Products and Technology unit and a member of the Business Management Group starting January 1, Kimmo Korpela was appointed Senior Vice President, Group Business Development and a member of the Strategic Management Group starting January 7, Matti Ervasti, Director, Marketing and Sales and Tapio Engström, Director, Business Development resigned from Vaisala. Risk management See Risk management page. Vaisala s shares As at the end of 2008, the company s Board of Directors had no valid authorizations for increasing the share capital, granting special rights, or issuing stock option rights. On December 31, 2007, the average price of Vaisala s A share in the OMX Nordic Exchange Helsinki was EUR 35.60, and on December 31, 2008 the share price was EUR The highest quotation during the financial y ear was EUR and the lowest EUR A total of 2,277,884 (5,595,292) Vaisala shares were traded in the stock exchange during the financial year. Vaisala has 18,218,364 shares, of which 3,405,584 are series K shares and 14,812,780 are series A shares. The shares have a counter book value of EUR The K shares and A shares are differentiated by the fact that each K shares entitles its owner to 20 votes at a General Meeting of Shareholders while each A share entitles its owner to 1 vote. The A shares represent 81.3 percent of the total number of shares and 17.9 percent of the total votes. The K shares represent 18.7 percent of the total number of shares and 82.1 percent of the total votes. The market value of Vaisala s A shares on was EUR million, excluding the Company s own shares. Valuing the K shares which are not traded on the stock market at the rate of the A share s closing

12 price on the final day of the financial year, the total year-end market value of all the A and K shares together was EUR million, excluding the company s own shares. Vaisala s main shareholders are listed on the company s website and in the Notes to the Financial Statements. The shares give equal rights to dividends. According to the company's Articles of Association, the maximum number of shares is 68,490,017 and Vaisala s maximum share capital is EUR 28.8 million. All issued shares have been fully paid for. The shares have no consent or redemption clauses attached to them. According to the Articles of Association, a K share can be converted into an A share in the manner specified in the Articles. The number of shares held and controlled by Vaisala Corporation's Board of Directors on 31 December 2008 was 1,353,425, accounting for 15.6 percent of the total votes (2007: 1,394,601 shares and 16.6 percent of the total votes). The company's President and CEO did not own shares or options on December 31, Conversion of unlisted shares series K into series A Vaisala Corporations's 500 unlisted shares (series K) were converted into listed shares (series A). The conversion was registered in the Finnish Trade Register on June 25, Listing of the new series A shares was applied for as of June 26, Vaisala Corporations's 500 unlisted shares (series K) were converted into listed shares (series A). The conversion was registered in the Finnish Trade Register on September 3, Listing of the new series A shares was applied for as of September 4, Vaisala Corporations's 801 unlisted shares (series K) were converted into listed shares (series A). The conversion was registered in the Finnish Trade Register on December 12, Listing of the new series A shares was applied for as of December 15, Treasury shares and parent company shares At the end of the financial year, the Company held a total of 9,150 Vaisala A shares, which represented 0.05 percent of the share capital and 0.01 percent of the votes. The consideration paid for these shares was EUR 251, Board of Directors Members of the Board In accordance with Vaisala Corporation s Articles of Association, the company s Board of Directors comprises at least three (3) and at most six (6) members. According to current practice, the Board comprises six members. All Board members are appointed by a General Meeting of Shareholders. The Board elects a Chairman and a Vice Chairman from among its members. Term of office of members of the Board In deviation from recommendation no. 10 of the Finnish Corporate Governance Code, the term of office of members of the Board is not one year. Instead, the term of office is 3 years, as stipulated in the Articles of Association. The term of office begins after the General Meeting of Shareholders at which the member is elected, and ends at the close of the third Annual General Meeting that follows the member s election. Independence of the Board members Evaluated against the criteria given in Recommendation 15, all six members of the Board of Directors are independent of the company. Evaluated against the criteria given in Recommendation 15, Yrjö Neuvo, Stig Gustavson, Mikko Niinivaara and Maija Torkko are independent of both the company and the shareholders. Evaluated against the criteria given in Recommendation 15 Raimo Voipio and Mikko Voipio are dependent of significant shareholders. The current composition of the Board of Directors fulfills the independence requirements stated in the Recommendation 14. President and CEO Vaisala s President and CEO is appointed by the Board. The President and CEO manages the company in accordance with the instructions and orders given by the Board, and informs the Board of the development of the company s business and financial situation. The President and CEO is also responsible for arranging the company s management. Events relating to the permanent group of insiders No loans were granted to any of the persons belonging to the permanent group of insiders, and no contingent liabilities were made on their behalf. Group structure The company has regional offices in India, Canada, China, Malaysia and the United Arab Emirates. The addresses and contact details of the regional offices are available on Vaisala s website.

13 Environment Vaisala entered a voluntary energy efficiency agreement of the Federation of Finnish Technology Industries as a signatory. The agreement aims at improving energy efficiency, generating cost savings, and countering climate change. An energy consumption analysis of the production facilities was carried out. This provides a basis for the allocation of energy efficiency investments and cost saving measures. Vaisala announced that it will start a construction project to build more modern office space for approximately 200 employees. In line with the energy efficiency agreement, the new building will be more energy efficient and ecologically advanced. The project will start in the second quarter of 2009 and the new building is estimated to be in place by the end of The investment is expected to improve energy efficiency by 15 percent compared to the old facilities. Vaisala initiated Corporate Responsibility reporting processes in The reporting is based on Global Reporting Initiative Guidelines (GRI G3). Vaisala also became signatory of UN Global Compact, an initiative endorsing human and labor rights, protection of the environment, and anti-corruption. Vaisala is committed to applying these values in practice and has embedded them in its Code of Conduct. The first GRI-based Corporate Responsibility report will be published in March Active involvement in the scientific community Vaisala is involved in active discussion with different stakeholders, promoting advancement in science, particularly the development of environmental measurement. Vaisala collaborates in several projects with leading research institutes in the field, such as NOAA (the National Oceanic and Atmospheric Administration, USA), Colorado State University, VTT (Technical Research Centre of Finland) and the Helsinki University of Technology, Finland. Vaisala s representatives participate in the Board of the Federation of Finnish Technology Industries and in its v arious committees, such as the Environmental Committee. Vaisala also closely collaborates with a number of meteorological authorities around the world and takes part in the activity of the UN World Meteorological Organization (WMO). During the year, Vaisala granted research scholarships to universities, students and researchers in both the United States and Finland. Vaisala is a partner of Cleen Oy, a strategic competence cluster for energy and environmental competencies, established in Proposals to the Annual General Meeting The Board of Directors proposal for the distribution of profit According to the financial statements for the year to December 31, 2008, the parent company's distributable funds amount to EUR 140,308,928.32, of which the profit for the financial year is EUR 24,794, The Board proposes to the Annual General Meeting that the distributable funds be used as follows: - A dividend of EUR 0.90 per share be paid, totaling - To be retained in shareholders equity Total EUR 16,388, EUR 123,920, EUR 140,308, No material changes have occurred in the company s financial situation since the end of the financial year. The company s liquidity remains good and, in the view of the Board, is not threatened by the proposed profit distribution. The record date for dividend payment has been set at March 31, 2009, and it is proposed that the dividend be paid on April 7, The terms of office of Board members Stig Gustavson and Mikko Voipio will end at the Annual General Meeting. Shareholders representing more than 10 percent of all the votes in the company have announced their intention to propose to Vaisala s Annual General Meeting, to be held on March 26, 2008, that the number of Board members will be six. The Board proposes that Stig Gustavson and Mikko Voipio be re-elected. The Board proposes that PricewaterhouseCoopers Oy, Authorized Public Accountants, and Hannu Pellinen, APA, be re-elected as Vaisala s auditor. The proposed persons and auditor have given their consent to their re-election. Events after the financial year Vaisala's US subsidiary Vaisala Inc. acquired Aviation Systems Maintenance, Inc (ASMI), a Kansas, U.S. based airport service company. The acquisition closed on January 1, 2009, and the value of the deal was 3.2 million USD. Vantaa, Finland February 12, 2009

14 Vaisala Corporation Board of Directors Risk management Organization of risk management Vaisala has a risk management policy that has been approved by the Board of Directors and that covers the company's strategic, operating and financial risks. Vaisala s Strategic Management Group regularly assesses risk management policies, and the scope, adequacy and focus areas of related practices. The policy aims at ensuring the safety of the company's personnel, operations and products as well as the continuity of operations. The policy also covers intellectual capital, corporate image and brand protection. An appropriate and up-todate risk concept is integrated in decision-making. More detailed operational instructions are defined by the Strategic Management Group. These include approval, bidding and procurement authorizations and terms of payments. The main principles of the investment policy in the order of their priority are a) minimizing credit loss risks, b) ensuring liquidity, and c) maximizing return on investment. The maximum term of investment is 12 months. The usual risks related to international business affect Vaisala s operating environment. The most significant of these are risks relating to changes in the global economy and hence in purchasing activities, currency exchange rates (with particular respect to the U.S. dollar), supply network management and production activities. Vaisala monitors these risks and prepares for them in accordance with the company's risk management policy. Vaisala's ability to tolerate risks is good and the company has a strong capital structure, ensuring capital adequacy. Group-level insurance programs and risk-management methods have been established to deal with manageable operating risks. The insurance programs cover risks relating to property damage, business interruption, different liabilities, transport and business travel. Near-term risks and uncertainties The near term risks and uncertainties are estimated to relate to changes in the global economy, shifts of currency exchange rates, changes in purchasing or investment behavior or interruptions in manufacturing. Due to the uncertainty of the financial markets, supplier related risks have slightly increased during the review period. Significant changes in subcontractor relations, activities or operating environment may have a negative impact on Vaisala's business. Vaisala monitors these risks and prepares for them in accordance with the Company's risk management policy. The Company is currently implementing significant development projects and organizational changes, which lay the foundation for successful execution of Vaisala's new strategy. A new Group-wide enterprise resource planning system is also under development. These efforts may constitute a short-term risk regarding Vaisala's net sales and result. Interest rate risk The company has no significant interest-bearing liabilities. Interest rate risk arises from the effects of interest rate changes on interest-bearing receivables and liabilities in different currencies. According to the company s management, the interest rate risk is small, as the existing interest-bearing liabilities and receivables are but marginal compared with the scope of the company's business. Interest rate changes affect the fair value of both cash flows and investments. A change of one percentage point in the interest rate would affect the company s result after taxes by around EUR 396 (354) thousand. Further information on interest-bearing receivables is given in Note 20. Market risk on investment activity The Group invests its cash reserves in short-term income funds and is therefore exposed in its operations to a price risk arising from fluctuations in the quoted market prices of income funds. Because issuers (states, municipalities and financial institutions) whose credit rating is very good are selected as the locations for fund investments, the credit risk connected with the funds is low. The funds invest in euro-denominated interest income products, so there is no currency risk. A rise in short-term market interest rates might momentarily lower the value of fund shares. A change in fair value is recognized in the income statement in financial income and expenses. If the value of income fund investments would increase or weaken by 5 per cent, with the investment holding remaining unchanged, its affect on the result after taxes would be EUR 963 (1,484) thousand. Further information on assets recognized at fair value through profit and loss is given in Note 20. Currency risk The international nature of operations exposes the Group to risks that arise when investments in different currencies are converted into the parent company s functional currency. The most significant currencies for the Group are the US dollar, the Japanese yen and the British pound. The Group has many investments in its foreign subsidiaries, whose net assets are exposed to currency risks. The Group does not hedge the currency risks related to its subsidiaries' net assets. The separate table features a sensitivity analysis (SA) on how changes in the rates of the most important currencies for the Group and in the euro, both in terms of average

15 rate and balance sheet day rate, would affect the consolidated profit after taxes. The SA calculation does not incorporate the effects of parent company purchases in other currencies during the financial year, or the effect of hedging measures USD/EUR JPY/EUR GBP/EUR 2007 USD/EUR JPY/EUR GBP/EUR Effect on result after taxes EUR thousand Exchange rate rise 10% Exchange rate fall 10% Exchange rate rise 10% Exchange rate fall 10% Exchange rate rise 10% Exchange rate fall 10% Exchange rate rise 10% 906 Exchange rate fall 10% -832 Exchange rate rise 10% 199 Exchange rate fall 10% -163 Exchange rate rise 10% 613 Exchange rate fall 10% -555 The Group recognizes monetary items at net in accounting and hedges them with currency forwards to which the Group does not apply hedge accounting in accordance with IAS 39. Around one third of the Group s net sales arises in US dollars. A significant proportion of Group purchases takes place in euros. Currency forwards are used to hedge the net position arising from these. The degree of hedging is around 50 per cent of the order book and trade receivables. Hedging is arranged by the parent company (Note 10. Financial income and expenses). Liquidity risk The Group aims to continuously assess and observe the level of funding required to finance the business to ensure that the Group has sufficient liquid assets for financing its operations. 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. The company has no other external financial liabilities other than those related to finance leasing (Note 23. Other liabilities). With the company's current balance sheet structure, liquidity risks are non-existent. Counterparty risk Liquid assets are directed, within set limits, to investments whose creditworthiness is good. The investments and investment limits are redefined annually. Further information on the classification of investments is given in Note 21. Cash and cash equivalents. Credit risk The Group applies a stringent credit issuance policy. Credit risks are hedged by using letters of credit, advance payments and bank guarantees as terms of payment. According to Group management, the company has no material credit risk concentrations, because no individual customer or customer group represents an excessive risk, thanks to global diversification of the company's customer pool. Total credit losses arising from accounts receivable and recognized for the financial year amounted to EUR 0.4 million (0.3), and the total net credit loss for the financial year was EUR 0.4 million (-0.1). The credit losses resulted from an unexpected change in the financial environment of a customer. The maximum amount of the Group s credit risk corresponds with the carrying amount of financial assets at the end of the financial year. The periodic distribution of accounts receivable items is presented in Note 19 in the Notes to the Financial Statements. Management of capital assets Management of the Group s capital assets aims at ensuring normal company operation and increasing shareholder value with an optimum capital structure. The goal is to attain the best possible returns over the

16 long term. An optimum capital structure also ensures lower capital costs. Capital structure can be affected through dividend distribution and share issues, for example. The Group can alter or adjust the amount of dividend payable to shareholders, the amount of capital returned to them or the number of new shares issued, or it may decide to sell or divest asset items to reduce its liabilities. The company has no significant financial liabilities. The shareholders equity indicated in the consolidated balance sheet represents the capital assets managed. The Group does not apply external capital requirements. Internal Control Vaisala aims to be a good corporate citizen, and an appropriate level of documented internal control policies support this. According to the Finnish Corporate Governance Code, the purpose of internal control is to ensure the effective and profitable operations of the company, reliable information and compliance with the relevant regulations and operating principles. Internal control aims to improve the efficient fulfillment of the Board s supervision obligation. Internal control is a process carried out by the Board of Directors, management and other employees within Vaisala. It is designed to provide reasonable assurance that: - operations are effective, efficient and aligned with strategy, - financial reporting and management information is reliable, complete and timely, and - the Group is in compliance with applicable laws and regulations as well as Vaisala internal policies and ethical values, including sustainability. The Vaisala internal control framework consists of: - the internal control, risk management and corporate governance policies and principles set by the Board of Directors, - management overseeing the implementation and application of the policies and principles - finance department and business controllers monitoring the efficiency and effectiveness of the operations and reliability of the financial and management reporting - enterprise risk management process identifying, assessing and mitigating risks threatening the realization of Vaisala s objectives - compliance procedures making sure that all applicable laws, regulations, internal policies and ethical values, including sustainability, are adhered to - effective control environment at all organizational levels including control activities tailored for each process and creating group minimum requirements for business and geographical areas - shared ethical values and internal control culture among all employees - internal audit assignments reviewing the effectiveness of the internal controls as needed. Internal Control roles and responsibilities Board of Directors - Is ultimately responsible for the administration and the proper organization of the operations of the company - Ensures that the company has duly endorsed the corporate values applied to its operations. - Approves the internal control, risk management and corporate governance policies. - The Board of Directors or the President and CEO can assign Vaisala s external auditors or other external service provider to perform internal audit assignments as needed. President and CEO - Is in charge of the day-to-day management of the company in accordance with the instructions and orders given by the Board - Sets the ground of the internal control environment by providing leadership and direction to senior managers and reviewing the way they're controlling the business - Ensures that the accounting practices of the company comply with the law and that the financial matters are handled in a reliable manner. Management Group - Senior managers assign responsibility for establishment of more specific internal control policies and procedures to personnel responsible for the unit's functions. Of particular significance are financial officers and their staffs, whose control activities cut across, as well as up and down, the operating and other units of the group. Finance and control function - Helps units and functions to set up adequate control activities - Together with risk management director, facilitates the enterprise risk management process and reporting its results to the management - Operatively follows-up the adequacy and effectiveness of control activities. Internal audit assignments - Examines and evaluates the adequacy and effectiveness of the organization's governance, risk management process, system of internal control structure, and the quality of performance in carrying out assigned responsibilities to achieve the organization's stated goals and objectives. General Counsel, business area and corporate function directors - Are responsible for making sure that all functions and employees in their responsibility areas adhere to applicable laws, regulations and internal policies.

17 Auditor's report (Translation from the Finnish Original) To the Annual General Meeting of Vaisala Corporation We have audited the accounting records, the financial statements, the report of the Board of Direc-tors and the administration of Vaisala Corporation for the year ended on December 31, The financial statements comprise the consolidated balance sheet, income statement, cash flow state-ment, statement of changes in equity and notes to the consolidated financial statements, as well as the parent company's balance sheet, income statement, cash flow statement and notes to the financial statements. Responsibility of the Board of Directors and the President and CEO The Board of Directors and the President and CEO are responsible for the preparation of the fi-nancial statements and the report of the Board of Directors and for the fair presentation of the con-solidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the fair presentation of the parent company s financial statements and the report of the Board of Directors in accordance with laws and regulations gov-erning the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company s accounts and finances, and the President and CEO shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner. Auditor s Responsibility Our responsibility is to perform an audit in accordance with good auditing practice in Finland, and to express an opinion on the parent company s financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. Good auditing practice requires that we comply with ethical requirements and plan and perform the audit to obtain reason-able assurance whether the financial statements and the report of the Board of Directors are free from material misstatement and whether the members of the Board of Directors of the parent com-pany and the President and CEO have complied with the Limited Liability Companies Act. An audit involves performing procedures to obtain audit evidence about the amounts and disclo-sures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reason-ableness of accounting estimates made by management, as well as evaluating the overall presen-tation of the financial statements and the report of the Board of Directors. The audit was performed in accordance with good auditing practice in Finland. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opin-ion. Opinion on the Consolidated Financial Statements In our opinion, the consolidated financial statements give a true and fair view of the financial posi-tion, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. Opinion on the Company s Financial Statements and the Report of the Board of Directors In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company's financial performance and financial posi-tion in accordance with the laws and regulations governing the preparation of the financial state-ments and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements. Vantaa, February 12, 2009 PricewaterhouseCoopers Oy Authorised Public Accountants Mikko Nieminen, Authorised Public Accountant Hannu Pellinen, Authorised Public Accountant

18 Five years in figures Consolidated income statement IFRS 12/2008 IFRS 12/2007 IFRS 12/2006 IFRS 12/2005 IFRS 12/2004 EUR million Net sales Other operating income Costs Depreciation, amortization and impairment charges Operating profit Financial income and expenses Profit before tax Income taxes Net profit for the period Consolidated balance sheet EUR million Assets Non-current assets Inventories Current assest Shareholders equity and liabilities Equity attributable to equity holders of the parent Liabilites, total Interest bearing Non-interest bearing Balance sheet total Consolidated income statement (EUR million) Note Net sales 2, Cost of production and procurement Gross profit % % Other operating income Cost of sales and marketing 7, 8, Development costs 7, 8, Other administrative costs 7, Operating profit % % Financial income Financial expenses Share of results of associated companies Profit before tax % % Income taxes Profit after tax % % Attributable to Equity holders of the parent Earnings per share for profit attributable to the equity holders of the parent Basic earnings per share, Diluted earnigns per share, Consolidated balance sheet

19 Assets Note Non-current assets Intangible assets Property, plant and equipment Investments in associates Receivables Deferred tax assets Current assets Inventories Trade and other receivables Accrued income tax receivables Financial assets recognised at fair value through profit and loss Cash and cash equivalents Total assets Shareholders equity and liabilities Note Shareholders equity Equity attributable to equity holders 22 of the parent Share capital Share premium reserve Reserve fund Own shares Translation differences Profit from previous years Profit for the financial year Total equity LIABILITIES Long-term liabilities Retirement benefit obligations Other liabilities Provisions Deferred tax liabilities Current liabilities Current portion of long-term borrowings Current liabilities Advances received Accrued income tax payables Trade and other payables Total liabilities Total Shareholders' equity and liabilities Consolidated cash flow

20 Group Group (EUR million) Note Cash flows from operating activities Cash receipts from customers 2, Other income from business operations Cash paid to suppliers and employees Cash flow from business operations before financial items and taxes Interest received Interest paid Other financial items, net Direct tax paid Totall cash flow from business operations (A) Cash flow from investing activities Investments in intangible assets Investments in tangible assets Proceeds from sale of fixed assets Other investments The net change in financial assets recognised at fair value throug profit and loss Loans granted Total cash flow from investing activities (B) Cash flow from financing activities Repayment of long-term loans Dividend paid Total cash flow from financing activities (C) Change in liquid funds (A+B+C) increase (+) / decrease (- ) Liquid funds at beginning of period Foreign exchange effect on cash Net increase in cash and cash equivalents Liquid funds at end of period 20, The net change in financial assets recognised at fair value through profit and loss has been transferred in the cash flow statement from financial assets to cash flow from investments and data for the comparison period correspondingly amended. Financial ratios and shares in figures

21 Financial ratios IFRS 2008 IFRS 2007 IFRS 2006 Net sales M exports and international operations 94.5% 95.8% 96.6% Operating profit M % of net sales 15.7% 15.8% 17.5% Profit before taxes M % of net sales 16.0% 16.5% 17.3% Return on equity (ROE) 15.5% 14.9% 16.4% Return on investment (ROI) 15.5% 15.1% 16.4% Solvency ratio 82.4% 82.6% 81.0% Current ratio Gross capital expenditure M % of net sales 5.0% 3.3% 9.2% R&D expenditure on machinery and equipment M R&D expenditure M % of net sales 10.1% 10.5% 9.3% Orderbook on Dec. 31. M Average personnel Shares in figures Earnings/share (EPS) Earnings/share (EPS), calculated taking into account the dilution impact of the bond with warrants Cash flow from business operations/share Shareholders equity/share Dividend/share *0.90 * Dividend/earnings % **57.7% 59.9% 58.2% Effective dividend yield *** 3.8% 2.4% 2.6% Price/earnings (P/E) A-share trading highest lowest weighted average at balance sheet date Market capitalisation at balance sheet date *** M A-shares traded traded pcs 2,277,884 5,595,292 6,873,504 % of entire series 15.4% 37.8% 46.4% Adjusted number of shares pcs 18,209,214 18,209,214 18,174,250 A-shares pcs 14,812,780 14,810,979 14,809,079 K-shares pcs 3,405,584 3,407,385 3,409,285 Number of shares at Dec. 31 pcs 18,209,214 18,209,214 18,209,214 * Proposal by the Board of Directors ** Calculated according to the proposal by the Board of Directors *** Value of A and K shares is here calculated to be equal Calculation of financial ratios

22 Return on equity, ROE (%) = Profit before taxes less taxes x 100 Shareholders' equity plus minority interest (average) Return on investment, ROI (%) Profit after taxes = plus interest and financial expenses x 100 Balance sheet total less non-interest bearing liabilities (average) Solvency ratio, (%) = Shareholders' equity plus minority interest Balance sheet total less advance payments x 100 Current ratio = Current assets Current liabilities Profit before taxes less taxes Earnings / share, = +/- minority interest Average number of shares, adjusted Cash flow from business = Cash flow from business operations operations / share, Number or shares at balance sheet date Equity / share, = Shareholders' equity Number of shares at balance sheet date, adjusted Dividend / share, = Dividend Number of shares at balance sheet date, adjusted Dividend / earnings, (%) = Dividend x 100 Profit before taxes less taxes +/- minority interest Effective dividend yield, (%) = Dividend / share x 100 Share price at balance sheet date Price / earnings, = Share price at balance sheet date Earnings / share Market capitalisation, M = Share price at balance sheet date times number of shares Annual General Meeting Vaisala Oyj's Annual General Meeting will be held at 6 p.m. on Thursday March 26, 2009, at the company's head office, Vanha Nurmijärventie 21, Vantaa. The following items will be presented at the Annual General Meeting The issues defined in Section 13 of the Group s Articles of Association and the Limited Liability Companies Act to be dealt with at Annual General Meetings. The Agenda does not include any other matters for decision. The Agenda includes the items associated with calling the meeting to order according to normal Annual General Meeting practice. At the meeting, the Agenda will include the CEO s review, given in conjunction with the presentation of the financial statements. The review is not a matter for decision. Distribution of profit and remuneration of the members of the Board The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.90 per share be paid for The dividend will be paid to shareholders registered in the Register of Shareholders held by Euroclear Finland Ltd (formerly the Finnish Central Securities Depository Ltd) on the recorddate March 31, The Board proposes that the dividend be paid on April 7, The Board proposes to the Annual General Meeting that the remuneration of the members of the Board of

23 Directors to be elected at the Annual General Meeting for the term until the close of the Annual General Meeting in 2010 will be as follows: EUR 35,000 for the Chairman and EUR 25,000 for each member. Proposal for the election of the members of the Board of Directors Board members Stig Gustavsson and Mikko Voipio are in turn to retire by rotation. Shareholders representing more than 10 percent of all the votes in the company have announced that they will propose to the Annual General Meeting held on March 26, 2009 the re-election of Stig Gustavsson and Mikko Voipio. Proposal for the election of auditors and their fee The Board proposes that PricewaterhouseCoopers Oy and Mr Hannu Pellinen APA, the current Authorized Public Accountants of Vaisala Oyj, be re-elected for the next term defined by the Articles of Association. The Board of Directors further proposes that the auditors compensation will be based on reasonable invoicing presented to the company. Documentation Documents relating to the financial statements and the documentation for Annual General Meeting will be available on March 5, 2009 at the company's head office in Vantaa, Vanha Nurmijärventie 21. On request, copies will also be sent to shareholders. The material will also be available on by March 5, 2009 at the latest. Total number of shares and votes by series of shares On February 13, 2009, the date of the invitation to the General Annual Meeting, Vaisala Oyj had 18,218,364 shares, out of which 3,405,584 are series K shares and 14,812,780 are series A shares. Each K share entitles its owner to 20 votes at a General Meeting while each A share entitles its owner to 1 vote. The total number of v otes by all shares is 82,924,460 out of which the series K shares represent 68,111,680 votes and series A shares 14,812,780 votes. Notice to the attendees 1. Right of attendance and registration Shareholders who are registered in the company's share register maintained by Euroclear Finland Ltd (formerly the Finnish Central Securities Depository Ltd) by March 16, 2009 have the right to attend the Annual General Meeting. Shareholders whose shares have not been transferred to the book-entry securities system also have the right attend the Annual General Meeting, provided that such shareholders were registered in the company's share register before 21 October In such cases, shareholders must present evidence that their shareholding rights have not been transferred to the book-entry securities system. Shareholders wishing to attend the Annual General Meeting must register by 4 p.m. on Tuesday, March 17, Registration can be made either by letter addressed to Vaisala Oyj, Nina Andersin, P.O.Box 26, FIN Helsinki, Finland, by telefax to , by to nina.andersin@vaisala.com, or by telephone on weekdays between 9 a.m. and 11 a.m., tel Letters authorizing a proxy to vote on behalf of a shareholder should be sent to the company before the expiry of the registration period. Holders of nominee registered shares Holders of nominee registered shares who wish to attend the Annual General Meeting must be registered in the company s shareholders register by the record date March 16, Vantaa February 13, 2009 Vaisala Oyj Board of Directors Payment of dividend According to the financial statements for the year to December 31, 2008, the parent company's distributable funds amount to EUR 140,308,928.32, of which the profit for the financial year is EUR 24,794, The Board proposes to the Annual General Meeting that the distributable funds be used as follows: - A dividend of EUR 0.90 per share be paid, totaling EUR 16,388, To be retained in shareholders equity EUR 123,920, Total EUR 140,308, No material changes have occurred in the company s financial situation since the end of the financial year.

24 The company s liquidity remains good and, in the view of the Board, is not threatened by the proposed profit distribution. The record date for dividend payment has been set at March 31, 2009, and it is proposed that the dividend be paid on April 7, Financial reporting 2009 Vaisala Oyj will publish three interim reports, in Finnish and in English, in 2009 as follows: May 8, 2009 Interim report (Q1) Aug 11, 2009 Interim report (Q2) Nov 5, 2009 Interim report (Q3) Silent time No analyst or investor meetings are arranged during a period of three weeks before the publication of annual financial results. Annual General Meeting 2009 March 26, 2009 Vanha Nurmijärventie 21, Vantaa 2008 Financial Report The Financial Report 2008 is published in Finnish and English. The brochure is distributed to all Vaisala shareholders on week 11/2009. The company's interim reports as well as other stock exchange releases and press releases are available on the Vaisala website at Financial reports can be ordered from: Vaisala Oyj Corporate Communications P.o.Box 26, Helsinki, Finland or by info@vaisala.com Contacts Vaisala Oyj Corporate Communications P.o.Box Helsinki Finland info@vaisala.com Investor contacts Jouni Lintunen Chief Finance Officer Tel Fax jouni.lintunen(a)vaisala.com Helena Marjaranta Senior Vice President, Communications Tel Fax helena.marjaranta(a)vaisala.com

25 Vaisala Group Vaisala is a global leader in environmental and industrial measurement. Building on more than 70 years of experience, Vaisala contributes to a better quality of life by providing a comprehensive range of innovative observation and measurement products and services for meteorology, weather critical operations and controlled environments. Vaisala's competitiveness is based on understanding customer requirements, premium class quality and reliability, a wide selection of products and services, and strong application know-how. Vaisala's customer groups include meteorological and hydrological institutes, road organizations, defense forces, aviation organizations, private sector with weather-critical operations, system integrators and industry worldwide. The Vaisala Group employs over professionals. Parent company Vaisala Oyj, domicile in Finland, is listed on NASDAQ OMX Helsinki. The Vaisala Group has offices and operations in Finland, USA, Canada, France, United Kingdom, Germany, China, Sweden, Malaysia, India, Japan, Australia and United Arab Emirates. Strategy Mission Our mission is to be the leading supplier of observation and measurement products and services for meteorology, chosen segments of weather critical operationa, controlled environment and industrial measurement. We achieve leadership by providing comprehensive range of innovative products and services for each chosen segment with the right mix of performance, reliability and convenience to best fulfill the needs of the customers we serve. Vision We believe in a world where environmental observations improve daily life. Values Customer focus Science-based innovation Goal orientation Personal growth Focus on greater good Fair play Our way of working To maintain our position as a global leader in environmental measurement, we apply a unified, market driven approach throughout the company. We build our products, solutions and services on true customer need, utilizing the operational excellence built during our 70 years of experience. Customer applications Vaisala caters for the wide range of environmental and industrial measurement needs. Vaisala's weather observation equipment, systems and solutions are used in applications in the professional meteorological field and in other businesses where weather information is important in day-to-day operations. Accurate, reliable and continuous observation data is the basis for daily forecasts and weather warnings meteorological and hydrological institutes provide. Road and rail organizations can make timely decisions on winter maintanence based on accurate weather data. In aviation, the pilots need to have access to accurate weather data in order to guarantee safe take-offs and landings.

26 Industrial companies and system integrators use Vaisala's measurement instruments to monitor and control the manufacturing process, improve overall efficiency and safeguard workplace safety. The instruments are used in a variety of applications and industries, such as pharmaceutical, automotive and food industries, as well as meteorology. Weather Vaisala weather observation products are used in many applications. Below are some examples. Observation data for weather forecasting Meteorological and hydrological institutes need a continuous stream of high-quality weather data in order to make daily weather forecasts. Moreover, meteorological institutes need weather observation data to measure and explain the state of the atmosphere and climate change. Safe air travel with accurate weather data Aviation organizations are governed by international regulations and recommendations, and the stringent safety standards of civil aviation also cover weather observation instrumentation. Accurate weather information is vital during take-offs and landings, for example. Traffic weather observations Road and railway maintenance organizations need to be able to prepare for changes in weather conditions. Access to continuous and reliable weather information is vital, in order to ensure road and railway safety even in difficult conditions. Tactical weather observations Many weather related measurements are essential in a wide range of defense applications. Information for land and water resource management Hydrological data is broadly used in e.g. water source and flood control, water protection as well as in related research. Vaisala weather stations are also used to monitor and protect forest and land resources. Reliable data on atmospheric conditions for research use Many international meteorological and hydrological research programs that aim to promote environmental protection focus on measuring the Earth's atmosphere. Lightning data for insurance and energy sectors Lightning information is important not only to meteorological institutes offering weather services, but also to insurance companies and power utilities. Insurance companies use the information when handling insurance claims. Power utilities use this information to anticipate the need for grid maintenance following lightning strikes. Industry Environmental parameters play a significant role in industry and built-up environments. By measuring and controlling these parameters, it is possible to influence e.g. product quality, the efficiency of manufacturing processes, energy consumption, and the safety and well-being of people. Relative humidity - high quality, low energy consumption Relative humidity is one of the most important factors affecting indoor air quality. By measuring and controlling relative humidity, it is possible to ensure a pleasing working and living environment for people. Most materials have their own ideal storage humidity levels, and maintaining these help to ensure the quality of stored material for as long as possible. In many production processes, it is extremely important to measure and adjust humidity correctly in order to sustain the high quality of products and the correct level of energy consumption. Dewpoint - indicating absolute humidity Dewpoint is especially measured in processes where the formation of dew can be a problem or where it is important to know the precise water content of air or gas. Dewpoint measurement has become popular in many industrial applications such as metal treatment, compressed air systems, and plastic drying. For instance, dew formation should be avoided in compressed air pipelines because moisture can damage or clog the equipment. Barometric pressure - weather information and performance Barometric pressure is one of the most important parameters in weather observation because the movement of pressure fronts indicates the direction in which weather fronts are heading. Weather stations almost always include a barometer, and barometers are also used in data buoys and ships at sea. Barometric absolute pressure influences other physical and industrial processes as well. For example, engine performance is affected by air intake pressure.

27 Carbon dioxide - better indoor air quality Carbon dioxide (CO2) is one of the most common gases in our atmosphere. It is formed when humans and animals breathe, in fermentation and decomposition processes, and during the burning of fossil fuels. Carbon dioxide levels are also a good indicator of indoor air quality and ventilation efficiency, as it is people who release carbon dioxide to the indoor environment. By controlling ventilation according to carbon dioxide levels, indoor air can be kept fresh without wasting energy. Carbon dioxide is also used as a fertilizer in greenhouses. Oxygen level - successful fermentation processes Vaisala oxygen level measurement instruments have been developed for different industrial applications. For example, breweries and wineries, which use fermentation processes, need oxygen and carbon dioxide measurement instruments. Vaisala oxygen and carbon dioxide instruments can also be used for controlling air conditioning systems and maintaining safe oxygen and carbon dioxide levels. Another important oxygen measurement application is in petrochemistry. Research and development Leading the way in environmental measurement The key to Vaisala's success is its diverse research and development activity. Customers can trust that Vaisala's products represent leading edge technology. All of Vaisala's business areas actively invest in R&D, and the combined input in technology development is substantial. In 2008 the Group's R&D expenses totaled 24.6 million euros, which is 10.1 percent of its net sales. Vaisala's R&D resources are the best in the field. The Group's R&D activities are located in Finland, the USA, the UK, and Germany. Approximately 20 percent of Vaisala's personnel work in R&D. In addition to conducting its own R&D, Vaisala works closely with customers, research institutes, and universities. The forms of cooperation include partnership projects, support for meteorological training programs, grants, and the funding of scholarships and internships. Partnerships and active cooperation Vaisala participates in many projects together with leading research organizations in the field. Key partners include the National Oceanic and Atmospheric Administration (NOAA) and the National Center for Atmospheric Research (NCAR), both in the USA, the Finnish Meteorological Institute and VTT Technical Research Centre of Finland. Vaisala is involved in sponsoring the global THORPEX program (The Observing System Research and Predictability Experiment), which is being implemented together with the World Meteorological Organization (WMO). The THORPEX program was launched in 2003 and will run for 10 years. Its purpose is to study and improve the effectiveness of both earth-based and space-based atmospheric observing systems and test the ability to make extended weather forecasts for up to two weeks ahead. Helsinki Testbed continues In Finland, Vaisala is participating in the Helsinki Testbed precision weather project. This is a denser-thanusual weather observation network covering the Greater Helsinki area. It works as an open innovation platform for testing and developing new weather and environmental information services and systems in an authentic environment. These services are for private citizens, businesses and public authorities alike. Vaisala and the Finnish Meteorological Institute have participated in the project since the outset in 2005, with the main provider of funds being Tekes, the Finnish Funding Agency for Technology and Innovation. Read more at Helsinki Testbed site. Support for universities and research Universities are also part of Vaisala's partnership network. Vaisala funds selected meteorological research projects, supports meteorological studies and training programs, and provides grants, scholarships, and internships. Over many years, Vaisala has partially sponsored meteorology students selected by the American Meteorological Society. In Finland, Vaisala annually sponsors the theses of ten university students. Meteorological research at the University of Helsinki Acting jointly with the Finnish Meteorological Institute and the University of Helsinki, Vaisala is funding a five-year professorship in meteorology research, which started in The incumbent, Professor David Schultz of the U.S. National Oceanic and Atmospheric Administration (NOAA), is studying extreme weather phenomena and developing mid-term weather forecasts. He is also teaching in the University of Helsinki's Physics Faculty. Vaisala also provides funds for radar meteorology research and teaching at the University of Helsinki's Physics Faculty. Dr. Dmitri Moisseev from Colorado State University in the USA took up his post as a researcher in the field of Radar Meteorology at the end of The research contract is for five years. University cooperation in the USA The company has a long history of cooperation with the University of Oklahoma, where it sponsors a student in the Master of Science in Professional Meteorology program. In lightning detection, Vaisala has R&D cooperation

28 with the University of Arizona. Vaisala is also continuing its cooperation with the Universities of Massachusetts, Oklahoma, Colorado, and Puerto Rico-Mayaguez by supporting their joint CASA program. CASA is a 10-year research program whose goal is to develop an adaptive remote sensing system based on low-power, low-cost, dual-polarization Doppler weather radars events International Lightning Detection Conference The 20th International Lightning Detection Conference (ILDC) was held in Tucson, Arizona. The bi-annual conference drew together record number lightning experts from all over the world to present and discuss lightning detection research and applications development in the field. ILDC provides a forum for presentations and discussions related to research and emerging trends and case studies that contribute to a deeper understanding of lightning detection information, for instance in human safety and facility protection, electric power distribution, and telecommunications performance. Vaisala is the organizer and sponsor of the International Lightning Detection Conference. Vaisala part of the new strategic centre for energy and environmental expertise Vaisala is one of the shareholders in CLEEN Ltd, a specialist body for energy and environmental expertise established in September 2008 with the aim of enhancing Finnish competitiveness in these fields. CLEEN s shareholders include about 40 leading Finnish companies, in addition several universities and research institutions are also involved in the project. The main areas of research at CLEEN include carbon-neutral energy production, sustainable fuels, efficient energy use, resource-efficient production technologies and services, recycling of materials and waste management, and assessment of environmental efficiency. Vaisala's scientists awarded Dr. Walter F. Dabberdt, Vaisala s Chief Science Officer, served as 2008 President of the American Meteorological Society (AMS). The AMS President serves as Chair of the AMS Council and its Executive Committee, which function as the governing body of the 13,000-member Society. Walt Dabberdt selected Urban Weather and Climate as the theme for the 2009 AMS Annual Meeting held in Phoenix, Arizona. Walt Dabberdt has studied and published articles on climate, weather, and demographic changes in cities. Urbanization is a strong global trend and new cities are often built on coastal and other lowland areas where they are very vulnerable to extreme weather phenomena. Read the whole Perfect Storm article. Walt Dabberdt was also designated a lifetime National Associate by the National Research Council (NRC) of the National Academies for his continued service with the Council. The NRC is a private, nonprofit institution that provides science, technology, and health policy advice. Ronald L. Holle, a Vaisala Meteorologist, received the T. Theodore Fujita Research Achievement Award from the National Weather Association (NWA). This award is presented to an NWA member whose research has made a significant contribution to operational meteorology. Holle was recognized for his distinguished research in identifying the characteristics and impacts of cloud-to-ground lightning resulting in improved lightning safety rules which have led to a reduction in lightning-related fatalities, injuries, and property damage. Personnel At the end of 2008, Vaisala had 1208 (1134 year 2007) employees, of which 735 (694) were in Finland and 47 3 (440) outside Finland. 62 (61) percent of Vaisala's personnel have a technical degree and 53 (52) percent have a university degree. Women accounted for 28.4 (29.5) percent of personnel. The average age was 41 (41) years. Development Vaisala continued to invest significantly in training to improve and maintain the competence and skills of its personnel. As in previous years, the focus was on application and product training and in securing and improving individual professional skills. In 2008, 50 employees took part in a four-day introduction to meteorology course organized with Palmenia. Brief introductory courses on meteorology will be continued as a part of the induction of new employees. The seventh Vaisala Business Learning Program concluded in September with a simulation of the company's

29 financial operations. During the spring the Program's participants worked on projects dealing with Vaisala's new strategy. The projects were presented to the Management Group in May. Ability to lead is the most important part of a supervisors work The LEAD leadership training program launched in 2007 was continued. The program comprises four modules which focus on understanding various leadership roles, self-leadership and leadership performance. A total of 125 supervisors started the program in 2008 and 30 others completed it. A four-part training program for new supervisors working in Finland continued through spring 2008, as did the mentoring program, which has received outstanding feedback. In 2008, the Operations unit launched several team development processes for new teams and they will be continued in Other units also made use of various led team development programs to support their organizational and operating model changes. Vaisala has an excellent employer image In 2007 and 2008 Vaisala invested in improving its employer image, especially among students. Targeted recruiting events, company visits and the Vaisala Giant Leap trainee program launched in spring 2008 improved Vaisala's recognition and appeal considerably, especially among engineering, business and IT students. Internal employee image is also very positive and better than that of the personnel survey s benchmark companies. Of personnel, 82 percent said they would gladly recommend Vaisala as an employer to their acquaintances. Students gained valuable work experience in Giant Leap Vaisala launched the Vaisala Giant Leap internship program in 2008 for university students from diverse academic backgrounds. The objective was to provide students with valuable and meaningful work experience and to help them find out more about Vaisala. They were assigned projects from sales to R&D, depending on their background. A total of 23 students participated in the first Giant Leap program a year of great changes The strategy reform that was started in 2007 was continued in It was also necessary to change the organization and operating procedures in the new market-oriented strategy that focuses on chosen market segments. The structure, goals and markets of the business areas were redefined. Product development and management were centralized in one group level unit and strategic research was made into a separate unit. Marketing competence and capacity were also reinforced by joining the various sales segment units into a single unit. A new operating model and annual calendar were defined for the matrix organization. All reforms entered into force at the beginning of Personnel considered the new strategic direction as a change for the better, although many of the practical changes were considered challenging at times. A working group appointed by and supporting the management team managed the actual reform. The changes were implemented using active multichannel communications, two-day workshops for supervisors and a strategy web course for all personnel. Personnel survey Vaisala's personnel is committed 7 5 percent of personnel replied to the personnel survey conducted in spring. Personnel satisfaction continued to improve. The most positive results came from questions concerning the difficulty of work. Vaisala's new strategy was felt to be a welcome change and personnel continue to be strongly committed to the company. On the other hand, the personnel survey suggests that unit- and team-specific goals should be clarified, and cooperation and communication between different units

30 improved. In addition to the personnel survey, supervisors and project managers have used a team-barometer survey to identify areas where their teams should improve.

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32 Environment Vaisala is an innovator and pioneer in environmental measurement and the leading company in its sector. Vaisala s environmental measurement products and systems provide the company s clients with a means of favorably influencing their environment. Due to climate change, weather phenomena are being observed and measured more extensively and accurately than before. Industries pay more and more attention to optimizing the use of energy that causes an environmental burden, to the efficiency of production processes and to the quality of products. Vaisala implements corporate responsibility reporting During 2008, Vaisala initiated Corporate Responsibility reporting processes in order to publish the company's first Corporate Responsibility report in spring The reporting is based on the Global Reporting Initiative's Guidelines (GRI G3) for sustainability reporting, the most widely used reporting standard today.

33 In our view, responsible businesses go beyond what is required by law to make a positive impact on society and the environment through their management, operations and products and their engagement with stakeholders, including employees, customers, investors, communities and suppliers. Vaisala is a participant and stakeholder in the UN Global Compact initiative. Global Compact enlists companies and other organizations to ensure and improve human and labor rights, environmental protection and action to combat corruption. Vaisala is committed to complying with these values in practice and has embedded them in its Code of conduct. Year 2008 events Vaisala joins the Federation of Finnish Technology Industries' energy efficiency agreement Vaisala signed an energy efficiency agreement with the Federation of Finnish Technology Industries in March The purpose of the agreement is to improve energy efficiency, cut costs and help combat climate change. Being a party to the agreement, Vaisala gains information and a framework that complements the company s own views. In 2008, the existing status of energy consumption was analyzed at Vaisala plants in Finland. The purpose was to provide information based on which measures to improve energy efficiency and cut costs can be targeted at the most relevant factors, such as the operating times of ventilation systems, lighting and the use of certain electric motors. The energy efficiency agreement will also steer the construction of Vaisala's new headquarters. Construction of this new building will start in the first half of 2009 to be completed by the end of 2010 and it will house some 200 employees. In the spirit of the energy efficiency agreement, the new headquarters will be energy efficient and ecological and make use of daylight control, presence detectors and energy-efficient lighting fixtures. Top-class energy efficiency can be achieved by using solar and geothermal energy. State energy subsidyis required to deploy these. Energy efficiency is expected to improve by 10 percent on the energy efficiency at the premises currently in use. Measurement instruments for monitoring and reducing energy consumption Reducing the energy consumed by and improving the energy efficiency of properties are very important to Vaisala's industrial clients. Carbon dioxide and humidity measurements are increasing in importance in the monitoring of the quality of interior air and attaining targets in energy savings. The general comfort of interiors, legislation and cost cutting all increase the need for measurements. An important application is Demand Control Ventilation or DCV. By improving the effectiveness of ventilation control, significant improvements in energy efficiency and interior air quality can be achieved. Conventional demand control ventilation improves energy efficiency and saves costs, but it is difficult and costly to install in existing buildings. Vaisala has been developing an economical system based on wireless measurement and adjustment of ventilation. The system is easy to install, which significantly decreases the capital costs of v entilation control. Society Vaisala is involved in active discussion with different stakeholders, promoting advancement, particularly the development of natural sciences and environmental measurement. Collaboration with research bodies and universities Vaisala also closely collaborates with a number of meteorological authorities around the world. Some significant partners are the Finnish Meteorological Institute, Deutsche Wetterdienst in Germany, the National Oceanic and Atmospheric Administration in the United States, and the International Civil Aviation Organization. Vaisala is also an active member of the UN World Meteorological Organization, WMO. The World Meteorological Organization grants two professor Vilho Väisälä Vaisala awards every year. The awards are sponsored by Vaisala and have a combined total of USD 20,000. One of the Vilho Väisälä awards for 2008 was awarded to three French researchers to recognize their scientific paper dealing with measurement instruments and observation methods, and the other was awarded to four European researchers for their investigation that dealt with weather observations and their measurement, and the implementation of instruments of observation.further information is provided on the WMO website.

34 Vaisala grants research scholarships to universities, students and researchers in both the United States and Finland. In 2008, Vaisala was involved in many research and development projects with universities and other providers of higher education. In the 1960s, Professor Vilho Väisälä, the company s founder, donated Vaisala shares to the Finnish Academy of Science and Letters, and these shares were used to establish the Vilho, Yrjö and Kalle Väisälä Fund. Read more in the Research and Development section. The fund annually gives grants for research in mathematics, physics, geophysics, meteorology, and astronomy. In 2009, the Fund granted a total of over EUR 1.3 million in awards and scholarships. Campaigns in the USA to prevent damage caused by severe weather Lightning is one of the most dangerous weather phenomena in the USA. It can be very impressive but it is, above all, a violent discharge of electricity which can pose a serious threat to people and property. Each year lightning causes dozens of deaths and hundreds of injuries throughout the USA. The annual Thunderstorm Safety Awareness Week is an effective way of campaigning to prevent damage caused by lightning and severe weather. The campaign is run by the National Oceanic and Atmospheric Administration (NOAA) and other lightning experts. Vaisala is an active sponsor of the week, participating on the national and regional level, particularly in Arizona. Active member of the Federation of Finnish Technology Industries Vaisala is a member of the Federation of Finnish Technology Industries, and the CEO of Vaisala is a member of the Federation s Board of Directors. Vaisala also actively participates in the undertakings of the Federation s different working groups, such as the Working Group for Environmental Issues, which observes environmentally relevant legislation and promotes cooperation between authorities, companies and environmental experts. This activity also provides Vaisala with new insights on how to use environmental perspectives in improving the company's competitiveness. In 2008 Vaisala signed up to the voluntary energy efficiency agreement of the Federation of Finnish Technology Industries. The agreement aims to improve energy efficiency, generate cost savings, and counter climate change. Vaisala involved in the UN Global Compact initiative Vaisala is a participant and stakeholder in the UN Global Compact initiative. Global Compact enlists companies and other organizations to ensure and improve human and labor rights, environmental protection and action to combat corruption. Vaisala is committed to complying with these values in practice and has embedded them in its Code of conduct. Year 2008 events GLOBE an international science and education program for schools GLOBE, Global Learning and Observations to Benefit the Environment, is a practical science and educational program for children of school age that was launched in the USA in the 1990s. Currently about 20,000 primary and secondary schools from over 100 countries are involved in the GLOBE program. The GLOBE organization is made up of teachers, students, researchers in the relevant field and active citizens who are working towards improved environmental awareness and sustainable development all over the world. The program offers teachers new and interesting ways and practical tools for teaching natural sciences and improving environmental awareness. Vaisala has been involved in the GLOBE program for a few years. In 2008, Vaisala sponsored the three-day Globe Games event that took place in Oulu. Read more in Vaisala News. Vaisala sponsored the 2008 Finnish Innovation Journalism award The Finnish Society for Innovation Journalism annually awards the best innovation journalism story published in the Finnish media. The story must successfully deal with a technological, social or cultural innovation or any other issue regarding the future. The award is EUR 3,000. Vaisala sponsored the 2008 competition which was won by Tarja Halla, a reporter from the Maaseudun Tulevaisuus newspaper. Her winning story, "Tomorrow's meat being grown in laboratories", deals with the environmental challenges of increasing meat consumption and how these challenges could be solved in the future by producing artificial meat without endangering the environmental balance. Read the winning article: "Tomorrow's meat being grown in laboratories" Organization The Vaisala Group consists of four business areas: Vaisala Measurement Systems, Vaisala Solutions, Vaisala Instruments and Vaisala Services.

35 Vaisala Solutions and Vaisala Measurement Systems develop, produce and market systems and solutions for weather observations, and offer services in support of their customers' day-to-day operations. Vaisala Instruments specializes in industrial and environmental measurements. All services are centralized in the Vaisala Services business area which became operational in the beginning of Operations were also reorganized into one group-wide unit at the beginning of Vaisala sales is organized into seven sales groups based on the customer segments. New strategy - new organization In 2008 Vaisala refocused its strategy in order to serve the customers even more efficiently than before. Following the strategic changes, the organization was restructured into three business areas: Meteorology, Weather Critical Operations and Controlled Environment. Each business area develops their strategies in line with Vaisala s vision, mission and values to expand and strengthen Vaisala's position in the business. To seek further synergies and to utilize common technology platforms, Vaisala's product creation and product management activities were combined into one group wide Products and Technology unit. All changes became effective in the beginning of Vaisala Measurement System Vaisala Measurement Systems consisted of the soundings, surface weather systems, thunderstorm systems, windprofiler and weather radar businesses. The business area s offering was supplemented at the beginning of 2008, when certain products and systems were transferred to its product selection from Vaisala Solutions. Correspondingly, thunderstorm data and the services related to delivery of these systems were transferred to the Vaisala Services business area. Vaisala Measurement Systems main customers were meteorological and hydrological institutes, meteorological and climatological research institutes, defense forces, civil aviation organizations, insurance companies and power utilities. At the end of 2008, the Vaisala Measurement Systems business area employed approximately 150 people, mainly in Finland and the United States. The sales personnel served customers in Vaisala locations around the world. At the beginning of 2009, the Vaisala Measurement Systems business area ceased to exist, and its operations were transferred to new business areas, mainly to Meteorology and Weather Critical Operations. Year 2008 Vaisala Measurement Systems net sales to customers outside the Group increased by 10.7 percent on the comparison period to 99.9 (90.2) million euros. Had the currency exchange rates remained at the previous y ear s level, net sales would have been up by 13.9 percent. Operating profit for the financial year increased to 17.4 (12.2) million euros. The net sales increase was positively affected by the simultaneous start of several customer projects in the soundings business and in surface weather systems. Despite the projects started, the net sales of wind profilers and thunderstorm systems were lower than normal, with market shares remaining as they were. Annual fluctuations in sales are typical of this business. Business units Vaisala Soundings The unit produces systems for observing the weather in the upper atmosphere, such as radiosondes and dropsondes, and related ground equipment. The sounding systems collect and transmit data on pressure, temperature, relative humidity, and wind speed and direction. This information is used for daily weather forecasting. Sounding data collected over decades is also used for the study of climate change. Vaisala Surface Weather Systems The unit measures and collects data on the major weather variables, i.e. temperature, pressure, humidity, precipitation, and wind speed and direction. Road and airport weather systems also collect data on the slipperiness of road and runway surfaces. The systems can be built into reliable weather measurement networks for the needs of different areas. These

36 networks enable the automatic collection, processing and reporting of data. Accurate and realtime weather information is required in many environmental applications such as in meteorology and hydrology and in road and air traffic. Vaisala Thunderstorm Systems The unit produces systems and instruments for lightning tracking and detection. These systems collect and distribute information for realtime weather observations and nowcasts. The systems can be built into networks that forecast approaching thunderstorms and track lightning strikes. Lightning detection is used in electrical power distribution, the insurance business and aviation. Vaisala Weather Radar The first Vaisala Weather Radar was introduced to the market in 2007, and the first deliveries took place at the beginning of The Vaisala Weather Radar business unit includes the Sigmet product line, which specializes in weather radar signal processors, application software and updates to existing weather radars. Vaisala Windprofilers This unit produces wind profilers, i.e. wind radars, that measure the vertical profile of wind speed and direction up to altitudes of 16 km. Wind profilers are used for the study of air quality and in meteorology and aviation. Main events Vaisala Measurement Systems signed several significant contracts during A contract with a long standing customer for delivery of upper air observation products during The order was valued at 8.3 million euros and included radiosondes and accessories. A contract with a long-term customer on the delivery of weather station components. The value of the contract was approximately 6 million euros and the components were delivered during A three-year contract with Australian Bureau of Meteorology, worth in excess of 5 million euros, to supply radiosondes for the needs of the country s upper air observation network. A contract with the US Federal Aviation Administration (FAA) on the delivery of weather radar signal processors and software for the FAA Terminal Doppler Weather Radar network operating at major airports in the USA. The contract is valued at 6.9 million dollars and deliveries will take place in Vaisala was awarded a phase II upgrade contract for the United States wind profiler network. The National Weather Service is utilizing a multi-step, multi-year process aimed at replacing the US wind profiler network with a next generation system. The third phase of the project will begin in March Vaisala provides the Russian Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet) with state-of-the-art surface weather monitoring technology. The value of the contract is 4.7 million euros and deliveries started in Improved weather forecasting brings substantial savings Extreme weather phenomena, such as floods and storms, cause substantial economic loss and damage all over the world. For example, in the USA alone, the combined cost of the biggest weather disasters over the period exceeded EUR 385 billion (source: U.S. National Climatic Data Center, Billion Dollar U.S. Weather Disasters). With this in mind, weather service providers are endeavoring to issue more accurate weather information and to improve the quality of their forecasts, and Vaisala s customers around the world are looking to the company to provide them with increasingly comprehensive and diverse weather observation systems. Growing emphasis on comprehensive weather observation networks Vaisala has been commissioned to deliver a weather observation system to the authorities in the northwest province of Galicia in Spain. Galicia s western and northern coastline borders the Atlantic Ocean. Severe electrical storms and other severe storm conditions are very common in the area, and they cause many injuries and a great deal of property damage every year. It is important for the authorities in the province to be able to issue early warnings of these threatening weather conditions.

37 Detailed meteorological data improves the reliability of forecasts The weather observation system being delivered to Galicia consists of a weather radar, lightning detection network and sounding system. The system being delivered to Galicia makes it possible for data collected from v arious sources to be combined, and this will noticeably improve the accuracy of the area s long-range and short-range weather forecasting. Solution utilizes versatile weather data The weather radar is for observing the intensity and progress of precipitation, and the Vaisala radar selected is a dual polarization radar that transmits and receives both vertically and horizontally polarized microwaves. This will allow the authorities to identify accurately different forms of precipitation, differentiating e.g. hail, rain and snow. The weather radar also provides improved measurement accuracy in both temporal and spatial terms in comparison with many other surface weather observation devices. With the lightning detection network, the authorities will be better able to forecast the arrival of severe weather and the path it will take. The network also gives accurate information on lightning, indicating where and when it will occur, and its severity. This information is essential if the authorities are to be able to improve the reliability of warnings about the dangers of severe weather. Vaisala s sounding system, composed of ground equipment and radiosondes, offers valuable support for longer term forecasting. These upper-air measurement devices produce the raw data needed for forecasting 5-7 days ahead. Radiosondes are weather observation devices for upper-air measurement of pressure, temperature, humidity and wind speed and direction. The radiosonde climbs to a height of up to 30 kilometers, transmitting data continuously to a receiver on the ground, which processes and converts the data into meteorological weather reports. The Galicia weather solution is delivered to the customer in the spring The customer is actively involved in equipment testing at Vaisalas factory in Finland. Vaisala Solutions The Vaisala Solutions business area offers customer-focused solutions for weather observation to meteorological and hydrological institutes, aviation and road authorities and defense forces worldwide. Its strong market position and solid expertise, combined with an extensive installed base, enables the business area to offer tailored solutions to meet all customer requirements. Since the beginning of 2008 Vaisala Solutions has focused more specifically on solutions-driven projects. Products and the systems business have been centralized in Vaisala Measurement Systems and services in the Vaisala Services business area. At the end of the year, the Vaisala Solutions business area employed 70 people in Finland, the United States, the United Kingdom, Germany, France and China. Vaisala solutions ceased to exist from the beginning of 2009 and its operations were transferred to the new WEather Critical Operations business area and products and Technology unit. Year 2008 Vaisala Solutions net sales to customers outside the Group increased in comparable figures by 24.1 percent on the comparison year and totaled 43.1 (34.6) million euros. The operating result was negative at -0.5 (-0.6) million euros. Had the

38 currency exchange rates remained at the previous year s level, net sales would have been up by 27.3 percent. The total value of orders received was EUR 41.8 million and the order book stood at EUR 27.9 million at the end of the financial year. The demand for comprehensive solutions and the volume of orders received both developed favorably. As a result, net sales and the order book increased on the previous year. Sales and profitability targets were met. In particular, the markets for aviation-related weather observation systems performed positively. During 2008 Vaisala responded to market trends by allocating substantial resources to develop its process expertise for the solutions business. Business units Vaisala Aviation Weather Solutions The unit provides comprehensive solutions for all aviation weather observation requirements both in the air and on land at airports. Vaisala s automatic weather observation systems measure wind, cloud height and runway visual range. Vaisala Road Weather Solutions The unit provides solutions and services to road and railway authorities, highway maintenance organizations and national meteorological institutes. Vaisala s road weather stations, thermal mapping and route optimization services, as well as its local weather forecasts, support maintenance decision-making. HydroMet Solutions The unit serves the environmental monitoring needs of meteorological and hydrological institutes and defense forces. The unit s solutions range from individual monitoring platforms to comprehensive monitoring systems. Main events Vaisala delivers aviation weather solution for new terminal and runway at Beijing International Airport Reliable weather information played a key role at the Beijing Olympics. In order to ensure accurate and versatile weather information for organizers, authorities, competitors and spectators alike, the Beijing weather authorities upgraded their weather observation network with Vaisala equipment. Vaisala delivered an aviation weather solution, almost 50 weather stations and various other equipment to local Beijing Meteorological Offices. Just prior to the Olympics, a new terminal and third runway had been opened at the Beijing International Airport to cater for increasing air traffic. Vaisala s aviation weather solution, installed on the new runway, provides versatile weather information to air traffic control, pilots and the airport maintenance crew. Accurate wind and visibility information is vital to ensure safe take-offs and landings. Comprehensive support for safer roads

39 Changeable weather conditions are very common in the UK. Winters are usually short, characterized by these changes and night time temperatures hovering around freezing. The conditions can, and often do, cause regional or local disruption. Highway engineers are in the front line in facing this problem as they are responsible for the dense highway infrastructure and it being accessible and safe at all times. Undisrupted traffic flow, guaranteed safety and economic viability of the network are their goals, despite the challenging winter weather events. Right action at the right time Forecasting the localized and short-term winter weather events more than a few days in advance is difficult. In order to make the right decisions and take the necessary action before the weather event occurs, highway engineers should employ a precautionary treatment regime. Precautionary treatment will ensure that salt is spread in advance of anticipated accumulations of frost, ice or snow on the highway. Timing is crucial in salting, and the highway engineers need the best possible information about road surface conditions across their network. Vaisala's related products and service offering provide the customer with this information. With the help of accurate and timely information, road engineers will be able to make the right decisions to ensure safe roads and smooth traffic. Vaisala helps Staffordshire County Council reach their goals Staffordshire County Council is one of the customers who rely on Vaisala's road weather products and services. For over a decade, Vaisala has worked with Staffordshire s highway teams to develop the optimum solution for the best results. Our key challenge is to keep our network safe without incurring any unnecessary expenditure, says Paul Boss, Highways Asset Manager of Staffordshire Highways. To do this, we need accurate forecasts, but even more crucial is the interpretation of this forecast information. We rely on Vaisala for this support and to deliver information in a format that helps us decide on the appropriate course of action. Good information produces significant cost savings The Staffordshire authorities have recognized that uniform weather conditions do not always occur across the whole county. Additionally, differences in topography, land use, surface construction materials and sky-view factor can lead to certain stretches of highway being more or less at risk of ice formation than others. To identify, quantify and predict these differences would help target resources in the most risky areas, and this in turn would result in improved efficiency and cost savings. This crucial information is provided by Vaisala. Successful long-term partnership Paul Boss is happy with the range of products, services and support they receive from Vaisala: We re extremely satisfied. We are able to fulfill our aims, and to achieve financial savings. A good example is the Route Optimization exercise Vaisala conducted in Based on Thermal Mapping results and regional topographical constraints, our treatment routes were redesigned. We can now confidently mobilize individual routes on the basis of their forecast minimum temperature. If we issue a full turnout across our total network, 57 treatment routes are required. However, on occasion we have mobilized as few as 10 routes to treat only the coldest sections of our network. This obviously has a significant impact on our annual costs. Staffordshire County Council s successful partnership with Vaisala helps to deliver a safer road network to the motorist and tangible ongoing cost benefits to the county. Vaisala s comprehensive range of services is used by over 200 traffic weather customers around the world.

40 Vaisala Instruments The Vaisala Instruments business area develops, manufactures and markets instruments for the measurement of relative humidity, dewpoint, barometric pressure, carbon dioxide, oxygen, wind, rain, visibility, cloud height and the prevailing weather. Environmental factors also play a significant role in industrial processes and other constructed environments. The measurements are used to improve product quality and the efficiency of manufacturing processes, to reduce energy consumption, and to increase occupational safety and the wellbeing of people. Vaisala Instruments employs 208 people in offices around the world. Production and development activities are concentrated in Finland. Sales personnel serve customers in over ten sales offices around the world. Vaisala Instruments ceased to exist at the beginning of 2009 and its operations were transferred to the new Controlled Environment business area and Products and Technology unit. Year 2008 Vaisala Instruments continued to grow in Net sales to customers outside the Group increased by 8.8 percent on the comparison period to EUR 72.0 (66.2) million. Had the currency exchange rates remained at the previous year s level, net sales would have been up by 11.7 percent. Total net sales increased by 12.1 percent and were EUR 85.8 (76.6) million. The operating profit for the financial year increased to EUR 24.3 (20.5) million. Operating profit remained at an excellent level, despite the weakening of the US and Japanese currencies, due to the investments made in developing the order-delivery chain. Business units Industrial instruments The product range is comprehensive and includes both fixed and portable models. Most of the instruments are configurable, which means that the equipment is delivered in the composition and with the settings selected by the customer. Industrial instruments Relative humidity measurement equipment is required in drying processes such as in the paper and timber industries. Optimal humidity conditions improve productivity and product quality, and reduce energy consumption and maintenance costs. Monitoring the moisture content of oil prevents corrosion and machinery failures. Dewpoint measurement equipment is used in industries where the formation of dew can be a problem or where it is important to know the precise water content of air or gas. Carbon dioxide measurement equipment is used to control carbon dioxide levels. This is important in industry process control, commercial greenhouses, ecological applications and indoor ventilation control. Oxygen measurements are used in various combustion and oxidation process control applications in industry. They are also common in fermentation and bioprocesses in the pharmaceutical and biotech sector, as well as in gasworks and shielding gas control. Barometric pressure measurement equipment is used for weather observations in particular. In addition, barometric pressure is measured in industrial applications such as engine performance testing equipment. Weather instruments Wind and visibility measurement equipment is used in various weather observation applications. The instruments are used in shipping and traffic, as well as in air quality control and agriculture. Optical visibility sensors are used at airports and on runways, for road and waterway weather visibility measurements, and as additional components in weather stations. Cloud height measurement equipment is used to measure cloud height and vertical visibility. It is most commonly used in airports and meteorological applications. The weather transmitter is a compact, easy-to-use station that measures temperature, humidity, pressure, wind speed and direction, and precipitation. It is used wherever daily weather data is important, such as in

41 agriculture, boat marinas and ski resorts. Main events Product launches Vaisala Instruments launched various new products and improved the features of several product families during the year in order to strengthen Vaisala s competitiveness in industrial and meteorological measurements. An example is a new dewpoint transmitter designed for very dry conditions, such as when measuring the dryness of compressed air. The product expands Vaisala s range of products for demanding drying applications. See Vaisala website for more information about industrial instruments. Strategy renewal concluded The strategy renewal process kicked off in 2007, in which Vaisala Instruments business was to be refocused on customer segments, was concluded. Implementation of the new strategy took place step by step during the fall of Since January 2009 the whole of Vaisala has been organized and has operated according to the new market-driven strategy. Building automation at its best Vaisala technology supports state-of-the-art laboratory conditions MIKES, the Finnish Centre for Metrology and Accreditation, moved four y ears ago into its new facilities where the quality of the laboratories meets the highest international standards. MIKES ensures that the measurements, tests and inspections carried out in Finland are reliable and internationally comparable. The stability of ambient conditions such as temperature and humidity is of the utmost importance for precision measurements. In the new facilities, the key was to achieve these conditions both in small instrument cabinets and in entire laboratories. The measurement spots are sheltered from external interference, as well as from disturbances created in other laboratories. Special attention was also paid to vibration control, electromagnetic shielding and electricity. Focus on air conditioning Building maintenance technology, mainly the air conditioning equipment, takes about 30 percent of the total area of the MIKES facilities. This is required for creating the optimal conditions for the 36 laboratories that are divided into 20 sections, each with its own dedicated air conditioning system. This is needed to ensure that the operations in one laboratory will not affect the operations of other laboratories in different sections. The desired temperature and humidity conditions are generated in the technical space, where the fresh air is first cooled down and the humidity stabilized. This cool, moist air is then distributed to section-specific ventilation systems as replacement air. The performance of these machines is controlled with Vaisala humidity and temperature transmitters.

42 We have reached remarkable measurement accuracy and resolution. To make sure this process runs 24 hours a day with absolute accuracy, we have constructed an independent humidity and temperature monitoring system from Vaisala humidity and temperature probes in the most critical locations for verification, logging and alarm. These measurements need to be in line with the building automation system, says Tapio Mansten, Senior Research Scientist, Electricity, Time and Frequency at MIKES. About MIKES MIKES is the Centre for Metrology and Accreditation in Finland. It works to ensure that the measurements, tests and inspections carried out in Finland are reliable and internationally comparable, and acts as the Finnish accreditation service (FINAS) for laboratories, inspection and certification bodies, and for the Eco Management and Audit Scheme (EMAS) verifiers. MIKES also maintains and develops the national measurement standards system through research, and provides high-class calibrations and expert services in metrology. MIKES uses Vaisala HUMICAP technology in its state-of the-art facilities. Vaisala Services Vaisala Services business area became operational at the beginning of All of the service centers and functions within Vaisala were combined into a single unit, which consists of two business unit segments: Product Services and Observation Services. Geographically, Vaisala Services is divided into three regions: Europe, Middle East & Africa (EMEA), Americas, and Asia-Pacific (APAC). Each region is responsible for the operation and development of the help desk, field services, depot repair, and data service functions. At yearend, Vaisala Services employed over 200 professionals, located in 12 different offices. As services are an important growth area for Vaisala, the focus for 2008 was to create a flexible global structure that allows us to offer comprehensive services to all our customers. Year 2008 During its first operational year the net sales of Vaisala Services totaled 27.5 (33.0) million euros, representing a year-on-year decrease of percent. Net sales would have been down by 11.0 percent if exchange rates had remained unchanged. Operating profit for the financial year was -0.2 (5.7) million euros. Competition in both observation services and product services tightened during the year. Additionally, the global development initiatives undertaken to improve efficiency and enable growth have increased the level of fixed costs. These, together with the weakening of exchange rates, had a negative impact on the net sales and profitability of the Services business. Over 70% of the net sales of Vaisala Services are in US dollars or British pounds. The total value of orders received was 25.3 million euros and the order book stood at 12.9 million euros at the end of the financial year. Business units Product Services Product Services provides easy access to professional support over the life cycle of Vaisala equipment. Such services include preventative and corrective maintenance, technical support, and spare parts provisioning. Product Services is responsible for the Vaisala Helpdesk, which is often the first point of contact for customers. The unit also deploys field and depot resources depending on the nature of the customer request. Field services support both the installation of new products and service the existing installed base. Depot services handle repairs and calibrations that are performed at Vaisala's regional Service Centers in the USA, Finland, Japan, and China.

43 Observation Services Observation Services provides choices for environmental data generation and management. It enhances Vaisala's equipment and systemsby providing data, information, and decision support capabilities. Such services include network operation, raw data delivery, remote monitoring of equipment, application hosting, weather forecast utilization, and alerting services. Observations Services is responsible for the operation and development of Vaisala's data service centers in the USA and the UK. The data centers support both the remote monitoring and data service requirements for Vaisala's main regions. Main events 50 years of calibration services Regular calibration of instruments and systems is vital for accurate and reliable environmental measurements. Traceable and accurate calibration is also a vital part of Vaisala s success. The year 2008 was a significant milestone for the Vaisala calibration services in many ways: the company has provided traceable calibration services for customers for 50 years, and systematic and documented calibration of Production Working Standards for 35 years. Vaisala's own Measurement Standards Laboratory was founded 30 years ago, and has had a laboratory accreditation for 25 years. Today the company has Service Centers in Finland, the USA, Japan, and China to provide and develop services for Vaisala customers. Read more in Vaisala News. Vaisala refines its strategy and focuses on key market segments In November, Vaisala announced that it aims to focus on selected market segments and has decided to conduct its business through three business areas. Services will be a group-wide function serving all the market segments in the new matrix organization. The new organization became operational on January 1, Vaisala acquires US service company Aviation Systems Maintenance In December 2008, Vaisala announced its intention to acquire US-based service company Aviation Systems Maintenance. The acqusition is in line with the new strategic goal to grow as a service provider. Aviation Systems Maintenance, Inc had net sales of over USD 2.6 millionin The acquisition took effect on January 1, 2009, and the value of the deal is USD 3.2 million. Service culture and capability development in Vaisala Services Vaisala Services initiated an extensive project to evaluate and support the creation of a more service-oriented culture and related working practices within the new group level organization. The project, conducted in cooperation with VTT Technical Research Centre of Finland, provided a research-based evaluation for the ongoing development and strategic planning at Vaisala Services. The aim of the project is to create concrete tools and methods to support the development of leadership, organization, working practices, collaboration processes, and customer relations. In the long term, the systematic development and continuous improvement of service capability will support the transition towards a more customer-oriented service culture. At your service Product Services - service agreements for performance Product Services' primary role is to keep the installed base up and running to the level of performance that customers have come to expect. As an example, the Swedish Meteorological and Hydrological Institute (SMHI) operates two autosondes delivered by Vaisala in One is located at Sundsvall-Midlanda Airport and the other at Gothenburg Airport. Both autosondes are used for aviation and the national weather service.

44 Project deliveries To ensure the autosondes data quality and availability, the SMHI has a comprehensive service agreement with Vaisala. The agreement includes annual maintenance, 24/7 support, spare parts, and remote diagnostics, which means that Vaisala s service personnel are able to access the customer s systems remotely and also provide support off-site. SMHI s Network Manager, Hans Lund, is happy with the service relationship: Since we have only two sites and these are rather sophisticated systems, there is no point in trying to keep this know-how in-house. The cooperation with Vaisala s system engineers is working well, and data availability is excellent. Observation Services - from data to decisions Vaisala's ownership and operation of the US National Lightning Detection Network (NLDN) typifies its Observations Services charter. This unique dataset is used for a great many applications, ranging from power transmission design and analysis to forecasting the intensity of hurricanes. Vaisala's customers rely on this "mission critical" data feed in their day-today operations in order to gain a clear insight into the impact of the weather on operations and safety. Vaisala's expertise for evaluating and forecasting road conditions is yet another example of the choices Observation Services offers the company s customer base. From unique sensing technologies to networked road weather stations, Vaisala s services allow the state of the highways to be clearly understood. Furthermore, by employing targeted thermal maps and weather forecasts, robust decision support services both ensure safety and contribute to cost savings. Operations Group s operations centralized under one unit From the beginning of 2008, Vaisala s operations were centralized in one Group level unit. The new Operations unit was made up of the procurement, production, assembly and delivery units of the former divisions. Operations cover the entire delivery chain, from procurement to the delivery of finished products and services. During its first year, the Operations unit concentrated on the creation of the new organization and on the harmonization of operations. A Group level Operations unit produces economies of scale and synergies which result in a cost-efficient and flexible delivery chain. A total of 315 people work in operations in Finland, the USA and China. Procurement Vaisala s procurement activities cover the purchase of materials and services required in the delivery chain. The unit also takes care of the company s network of subcontractors. Regional purchasing activities are conducted by procurement teams in Finland, the USA and China. During its first year the integration of procurement has already resulted in significant cost savings for the company. Manufacturing and assembly Vaisala s manufactring and assembly covers the production and delivery of products and systems for customers. Manufacturing is categorized according to different production techniques: clean room, sensor factory, mass produced products, and mass customized products, systems and solutions, i.e. project deliveries. The humidity and pressure sensors produced at the clean room and the sensor factory are used in almost all of the products in Vaisala s offering. Almost 2 million sensors were produced in This figure grew almost 30 percent on the previous year. The Vaisala radiosonde is the most important mass manufactured product. Its measurement unit and other core components are manufactured at our own factory in Finland. A European partner in Malaysia is responsible for the final assembly of the product. Mass customized products include all instruments for measuring humidity, dewpoint, pressure, carbon dioxide and oxygen. Sounding equipment, radars, lightning detection systems, wind profilers and various road weather stations are categorized as systems. These systems are assembled in both Finland and the USA.

45 The solutions business is one of Vaisala s areas of strategic growth. In order to produce solutions tailored to customers, i.e. project deliveries', expertise is also required in production and assembly. In its first year of operations, the unit responsible for Vaisala s project deliveries concentrated on the standardization of project operations and on capacity management. Vaisala s project delivery teams are based in Finland and the USA. Sales organization Vaisala's customers have been divided into seven customer segments, each served by its own dedicated sales team. Six sales teams focus on meteorological customers and one focuses on industrial customers. In 2008, 116 persons were working in the sales organization. The meteorological customer sales teams serve meteorological and hydrological institutes, defense forces, aviation organizations, road organizations, integrators of meteorological systems, and other companies and entities that require weather information for efficient operation. The industrial customer sales team serves industries that use Vaisala's measurement instruments in their own core processes. In addition to Vaisala's own sales force, customers are served by global distributor network. Vaisala's sales function was reorganized in 2008 to align with the new market-driven strategy. Each new business area, Meteorology, Weather Critical Operations and Controlled Environment, has its own regional sales teams to serve customers in the respective market segments. The new sales organization became effective in the beginning of Activities around the world Vaisala Group is a global company with personnel around the world. Vaisala's personnel and distributor network serve customers in more than 100 countries. Efficient customer service requires presence, knowledge of local circumstances and close contacts with customers. Operations outside Finland accounted for 94% of Vaisala's net sales in At the end of 2008, Vaisala employed 7 35 people at its headquarters in Vantaa, Finland. They are engaged in research, product development, sales and marketing, customer service, production and administrative functions. Vaisala has 26 offices around the world: Australia, Canada, China, Finland, France, Germany, India, Japan, Malaysia, Sweden, the UK, the United States, and the United Arab Emirates. The size of the offices varies by country and business area. At the end of 2008, 39 percent of Vaisala's employees worked outside Finland. Click to enlarge Corporate governance

46 Vaisala Group s corporate governance system is based on the Finnish Companies Act and Vaisala s Articles of Association. Vaisala s A shares are listed on NASDAQ OMX Helsinki Ltd. The company complies with the recommendations and instructions for listed companies issued by NASDAQ OMX Helsinki and the Financial Supervisory Authority. Vaisala also complies with the Finnish Corporate Governance Code published by the Securities Market Association on October 22, 2008, with the exception of recommendations 10 (Term of the directors) and 28 (Establishment of a committee) Board of Directors Members of the Board In accordance with the Vaisala Oyj's Articles of Association, the Vaisala s Board of Directors comprises at least three (3) and at most six (6) members. According to current practice, the Board comprises six members. All Board members are appointed by a Shareholders Meeting. The Board chooses a Chairman and a Vice Chairman from its members. Term of office of members of the Board In deviation from recommendation no. 10 of Finnish Corporate Governance code, the term of office of members of the Board is not one year. According to the Articles of Association, the term of office is 3 years. The term of office begins after the meeting in which the member is elected, and ends after three (3) subsequent Annual General Meetings. Meetings of the Board The Board of Directors had 9 meetings in An average of 100 percent of the Board members was present at the meetings. Chairman Raimo Voipio b. 1955, M.Sc. (Eng. ) Member of Vaisala's Board of Directors since 1989, Chairman since His terms as Chairman ends in Fees in 2008: EUR Principal occupation: Board member in various technology companies. Employment history: various product marketing positions in Nokia corporation and various product marketing positions in private telephone companies. Other simultaneous positions of trust: board member in Space Systems Finland Oy and IST International Security Technology Oy Vice Chairman Yrjö Neuvo b. 1943, Ph.D. Cornell University Member of Vaisala's Board of Directors since 1989, membership term ends in Fees in 200: EUR Principal occupation: Various research technology and business related expert positions. Employment history: several expert positions in Nokia Corporation; Technology Advisor , member of Nokia Group Executive Board , responsible for product development of mobile phones, Academy of Finland, National Research Professor, Other simultaneous positions of trust: Metso Corporation, Member of the Board; Tampere University of

47 Technology, Member of Advisory Board; Metropolia Polytechnic, Vice Chairman of the Board; The Foundation of Technology, Chairman of the Board; Artemis European Technology Platform, Chairman of the Board; VTT Technical Research Centre of Finland, Chairman of Scientific Advisory Board ; Cornell University Council, Member; Finnish Centre of Expertise Program, Chairman of the Board ; Millennium Prize Foundation, Member of the Board; Finnish Science Centre Foundation (Heureka), Member Member Stig Gustavson b. 1945, M. Sc. (Eng), Dr. Tech. (h.c.) Member of Vaisala's Board of Directors since 2006, Board member term ends in Fees in 2008: EUR Principal occupation: Chairman, Konecranes Plc. Employment history: Konecranes President and CEO , Wärtsilä Oyj, RAY, Sponsor Oy, KONE Oyj Other simultaneous positions of trust: Chairman of the Board in Dynea Oy, Svenska Handelsbanken (Finland), Tammet Oy, Arcada Foundation, Cramo Oyj. Board member in Fastems Oy, Oy Mercantila Ab. Supervisory Board Chairman at Tampere Technical University and Supervisory Board Member in Varma Mutual Pension Insurance Company Member Mikko Niinivaara b. 1950, M.Sc. (Eng.) Member of Vaisala's Board of Directors since Board member term ends in Fees in 2008: EUR Principal occupation: President, Country Manager, ABB Oy. Employment history: various positions in ABB; President of ABB Industry Oy in , Division Director at ABB Ltd, Zurich in Other simultaneous positions of trust: Board Member in ABB Oy, Member of Executive Board and Chairman of the Competitiveness Working group in Technology Industries of Finland, Board Member in Confederation of Finnish Industries, Advisory Board Member at Helsinki University of Technology, Board Member in Energiaforum ry Member Maija Torkko b. 1946, B.Sc (Econ.), LL.M. Member of Vaisala's Board of Directors since Board member term ends in Fees in 2008: EUR Principal occupation: - Employment history: Senior Vice President, Corporate Controller in Nokia Corporation until Other simultaneous positions of trust: - Member Mikko Voipio b. 1960, M.Sc. (Eng.) Member of Vaisala's Board of Director since Board member term ends in Fees in 2007: EUR Principal occupation: Scientist. Employment history: R&D in SW and Telecom business Other simultaneous positions of trust: Board Member in Fontus Oy, Board Member in Novametor Oy Secretary Matti Kari, L.LM, Attorney at Law Independence of Board of Directors The Board of Directors of the Vaisala Group has evaluated the independence of its members. 1) Independence of the company Evaluated against the criteria given in Recommendation 15, all six members of the Board of Directors are independent of the company. 2) Independence of the shareholders Evaluated against the criteria given in Recommendation 15, Yrjö Neuvo, Stig Gustavson, Mikko Niinivaara and Maija Torkko are independent of both the company and the shareholders. Evaluated against the criteria given in Recommendation 15 Raimo Voipio and Mikko Voipio are dependent of significant shareholders. The current composition of the Board of Directors fulfills the independence requirements stated in the Recommendation 14. Charter of Board of Directors In accordance with the charter of the Board of Directors, the Board shall: decide on Group strategy, review and approve the interim reports, consolidated financial statements and Annual Report, confirm the Group s business plan, budget and investment plan, decide on individual investments, acquisitions, divestments or corporate restructuring and contingent

48 liabilities that are strategically or financially significant, confirm the Group s risk management and reporting procedures, confirm the Group s insurance policy, approve the Group s financing policy, decide on the compensation and incentive schemes for Group management, proposes dividend payout amount to the Annual General Meeting, appoint the company s President and CEO and decide on his compensation, assume responsibility for all other duties stipulated for Boards of Directors in the Companies Act and elsewhere, annually evaluate its operations. President and CEO Vaisala's President and CEO is appointed by the Board. The CEO manages the company in accordance with the instructions and orders given by the Board, and informs the Board of the development of the company's business and financial situation. The CEO is also responsible for organizing the company's management. Kjell Forsén Born 1958, L. Tech. Vaisala's President and CEO, as well as Chair of the Management Group as of October 1, Previously President of Ericsson Finland. Employed by Ericsson since 1986, several managerial positions, both in Finland and abroad. Board member at Helvar Oy Ab, and at Technology Industries of Finland. Salaries and other compensations: Basic salary in 2008 was euros and other compensation euros. There was no compensation in shares or share warrants during fiscal year Retirement age is 62 years, according to the Finnish law. The President and CEO has a compensation based retirement plan. Notice period, severance pay and conditions of other severance compensations are 6 months for the employee, 12 months for the employer, compensation equal to the salary. Management Group Vaisala s Management Groups are chaired by the President and CEO. Members of the Business Management Group are the Heads of the Business Areas, Products and Technology, Services, Operations and the Chief Financial Officer. In addition to the Business Management Group, the Vaisala Strategic Management Group includes the Heads of Human Resources, Communications, Group Marketing and Sales, and Group Business Development, the Chief Information Officer, the Chief Technology Officer and the Chief Science Officer. The Management Groups do not exercise any decision making power as defined in legislation or the Articles of Association. The Management Groups are advisory organs that address Group-wide development undertakings, as well as the Group s principles and operating practices in general. Business Management Group