SRV Yhtiöt Oyj — Annual Report 2010

Feb 25, 2011

SRV in 2010

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Business review

Operations in Finland: Business Premises 12 Housing 14 International operations 16

Corporate responsibility

Social responsibility:
Personnel	19
Occupational safety and
preventing the grey economy	20
Environmental responsibility	22
corporate governance
Corporate Governance Statement 2010	25
Risk Management	30
Board of Directors	31
Corporate Executive Team	32
financial statements	33
information for
shareholders	81

We develop and implement construction projects. From day one, years into the future.

SRV is an innovative construction company that provides end-to-end solutions. We assume responsibility for the design, commercialisation and construction of projects, and always work in close co-operation with our customers.

Keeping an eye on the long term in project development and robust project management implementation are our special areas of expertise. We know the needs of our customers and boldly look for new solutions for construction projects.

Our expertise is encapsulated in the SRV Approach, which enables us to implement even the most demanding projects effectively. We take responsibility for project management and complete the work as a smooth end-to-end project.

We are an open, enthusiastic and reliable partner for our customers and construction experts. That's how we deliver on our pledge of being Constructively Different.

2010 in figures

Key figures	2010	2009	2008	2007	2006*
Revenue, EUR million	484.8	390.5	547.1	544.8	479.5
Operating profit, EUR million	13.0	10.7	34.8	12.2	24.6
Operating profit, % of revenue	2.7	2.7	6.4	2.2	5.1
Return on equity, %	3.2	1.8	10.3	5.0	27.3
Return on investment, %	4.0	4.9	13.4	8.1	15.9
Equity ratio, %	35.1	41.3	40.9	53.8	31.7
Order backlog, EUR million	593.7	481.6	460.8	545.2	453.7
Personnel on average	794	776	871	761	668

*Figures for 2006 have not been corrected according to IFRIC 15. 2

Revenue

2010: 484.8 EUR million 2009: 390.5 EUR million 2008: 547.1 EUR million 2007: 544.8 EUR million 2006: 479.5 EUR million

Operating profit

2010: 13.0 EUR million 2009: 10.7 EUR million 2008: 34.8 EUR million 2007: 12.2 EUR million 2006: 24.6 EUR million

Order backlog

2010: 593.7 EUR million 2009: 481.6 EUR million 2008: 460.8 EUR million 2007: 545.2 EUR million 2006: 453.7 EUR million

Personnel

2010: 794 persons 2009: 776 persons 2008: 871 persons 2007: 761 persons 2006: 668 persons

Equity ratio

2010: 35.1% 2009: 41.3% 2008: 40.9% 2007: 53.8% 2006: 31.7%

Outlook for construction

The Finnish economy saw brisk growth, driven by rising international trade. When the recession hit, Finland was in reasonably good shape. Unemployment remained lower than feared. The Finnish economy is expected to post growth of 2.5-4.0 per cent in 2011.

The downturn of the construction market was shorter than forecast, and growth is thought to have amounted to two per cent in 2010. The volume of housing construction surged at a particularly rapid clip. The rate of growth in the costs of construction materials has been faster than average. On the other hand, growth in the costs of labour was below average, and financing costs have declined. The rapid recovery of the volume of construction has had a knock-on effect on the availability of certain construction materials. The rise in construction costs and the problems with availability are expected to ease when the rate of growth in construction settles down to a more moderate level.

The property market became more upbeat and the return requirements for the best areas and good properties declined. The rise in rents also came to a halt in many locations. However, the pickup in the property market did not have an effect on property sale volumes, which remained at a low ebb.

Activity in the construction of business premises became muted during the financial crisis. At the end of 2010, we started moving ahead with projects again. Thanks to the better-than-expected trend in the economy, new traffic routes and growing environmental and quality demands, the market is set to keep rolling ahead. Regional and quality disparities will continue to widen in the market for business premises: the best properties are in stronger shape, but in the most problematic areas, vacancy rates are on the rise and rent levels are sliding down.

Consumers are now more confident in the economy. During the recession, households set aside a greater share of their income into savings. Pent-up demand has been unleashed into consumer durables and housing. Housing construction surged due to the growth in demand and the scarce supply of new housing. It is expected that the trend in housing construction will remain favourable. The factors shaping demand for new residences are ongoing urbanisation, especially in the growth centres, the smaller average size of families and the greying of the population.

The government's stimulus measures contributed to the rise in the volume of renovation works. This trend will continue in 2011. The growth of the building stock, the ageing of existing buildings and the modernisation of technical standards will maintain the volume of renovation works in years to come. There are great regional differences in infrastructure construction – large-scale projects provide employment in southern Finland and several other localities.

The Russian economy started to recover quickly from the financial crisis, but growth slackened slightly towards the end of the year. Although the growth of the Russian economy is expected to remain good, it will not return to its pre-crisis figures in the near future. Higher oil prices, slower inflation and lower interest rates improved the construction and property market, but the situation is expected to remain challenging. The availability of financing still continued to put the brakes on growth. That said, the outlook for the future is positive. The construction sector also offers plenty of potential for SRV's large-scale business premises projects.

The economies of the Baltic countries remained weak, but have now passed their lowest ebb. Estonia is expected to post positive growth figures for 2010. Although the Latvian and Lithuanian economies did not recover as quickly, they have probably put the worst behind them. Both construction and the property market remained muted, but signs of recovery could already be seen. In the next few years, the outlook for the Baltic countries will remain challenging, albeit cautiously optimistic.

SRV adapts to business cycles

The financial crisis affected Europe on an exceptionally large scale, but started showing signs of easing off in 2010. The stimulus measures launched in Finland also aimed at revitalising the construction industry in several ways: production of rental housing has increased and major infrastructure projects have been started up. The market for new owneroccupied housing was brisk during the entire report year, driven by both low interest rates and structural demand. At the end of 2008, housing production came to a standstill. It was stepped up again in 2010, but due to the natural inertia involved in construction, the supply could not meet the surging demand. As a result, housing prices rose by as much as 15 per cent in some locations during the review year. This is not a desirable trend in the long term – not even for builders. Finnish housing production will rise close to its long-term average, about 30,000 new residences per year, normalising the imbalance between supply and demand in 2011.

As a result of the financial crisis, the vacancy rates of offices are still relatively high, and new project start-ups have been pushed back. The vacancy rates of retail premises are lower. In the growth centres, commercial premises are almost fully rented out. However, new project start-ups are still few and far between. Logistics facility projects have been mainly developed in the hubs of new route investments. Industrial construction has been hit the hardest, posing a dangerous long-term scenario. Finland needs strong and competitive industry – we cannot rely solely on the foreign subsidiaries of Finnish companies. Service provision plays an important role in the strategy for the development of the national economy, but will not suffice to ensure the livelihood of the Finns. For this reason, it's vital for industrial investments to be in better shape in Finland.

Thanks to our networked operating model, SRV is a construction company that adapts flexibly to economic cycles. One excellent example of our flexibility was the rapid ramp-up of housing production in 2010 as demand recovered. During the report year, we started the production of 543 developer contracting housing units. Through competitive bidding, we are also participating in the implementation of 1,024 rental housing units for property investors and non-profit housing developers. We set SRV the goal of substantially increasing our housing construction volume in both the Greater Helsinki Area and Finland's largest growth centres. Our order book includes more than 1,600 residential units for 2011, which will raise SRV to the next level as a housing construction company in Finland. In housing production, we have enhanced our customer-focused service model and tools that enable us to offer consumers individual and easyto-customise interior decoration packages instead of mass-produced solutions.

In the market for business premises, we have been proactively looking for construction projects initiated by users and investors. Our largest and highest-profile construction sites during the review year were the Helsinki Music Centre and the expansion and renovation of the Stockmann Department Store in the centre of Helsinki. Rakennuslehti magazine chose the Helsinki Music Centre as the winner of the Worksite of the Year 2010 competition. This was the fifth time SRV won the award – and the third win for the same project organisation. Other major sites included the extension of the Helsinki Fair Centre and the construction of the Central Library of the University of Helsinki, the Karisma shopping centre in Lahti and the Holiday Club Saimaa spa in Lappeenranta.

At the end of 2010, our order book stood at a record-breaking EUR 594 million, enabling us to start the new year with confidence. SRV's implementation organisation is in good trim. In these challenging times, we can offer work and sources of income to our competitive construction partners. In 2010, we invested in tools that enable us to manage the construction process even more effectively. With our SRV Network Register, we can ensure that the persons who work on our sites have completed the required occupational safety training, their conditions of emloyment fulfil both official and contractual requirements and they have duly attended to their tax obligations. The Network Register enables us to guarantee to our customers that our sites comply with the obligations and responsibilities set out in the Act on the Contractor's Obligations and Liability. We seek to operate transparently and offer these tools to the authorities so that the reputation of the construction industry, which has been tarnished by the grey economy, can be rehabilitated. Our company also suffers from the negative fallout of the grey economy. For this reason, it's important to develop our cooperation with the authorities to ensure that the companies in our industry can compete in the spirit of open and fair play. This means not neglecting the rights of employees, the statutory obligations of companies and the responsibilities of employers. In a well-ordered society, we all have to do our part.

Russia provides massive opportunities for SRV. We have laid the groundwork for business in Russia during our entire 23-year history. We have successfully completed more than 70 projects in Russia, and a similar number in the Baltic countries. When SRV went public, we announced that increasing business in Russia is one of our key objectives. We have invested a total of EUR 185 million in international projects – most of it into Russia. We completed our Etmia office complex in Moscow during the severe financial crisis. Initially, the rental situation looked grim. As the year went on, the complex was rented out almost completely, and in this sense the Russian outlook is showing signs of improvement. Interest rates are still high in Russia, and thus many construction projects have been put on hold to wait for better times. However, we have used this time to hone our plans and commercial concepts for the sites where our partners and we

exercise an influence. During the review year, we made great progress towards the start-up of the construction of the Pearl Plaza shopping centre project, which is being implemented with a Chinese partner. We expect that VTB-Ashmore property fund will decide on its first investment in 2011. Our 8.5-hectare Septem City project in St. Petersburg has progressed in a schedule allowed by the infrastructural development of the area.

Despite a low business result, year 2010 testifies to the competitive strength of SRV's personnel and approach.

Our financial result for 2010 is a profit of EUR 5.2 million, which falls short of our profitability targets. However, it demonstrates the competitiveness of SRV's personnel and operating model. We managed to keep SRV profitable in a very tough economic climate. Under the circumstances, we have had to accept work with a lower profitability than usual, but it's important to keep the wheels turning. This gives us credibility in the eyes of our partners. Customers respect our commitment to tough projects. And our employees can do what they're best at – building new sites. The outlook for 2011 is in many respects more upbeat than in 2010. Entrepreneurship built SRV – and that is the spirit that drives our growth. We thank our customers, employees and shareholders for 2010. Although it will not go down in history as a financially successful year, it testifies to SRV's toughness and ability to rise to the occasion. Our aim is to be the most reliable, customer-focused and cost-effective partner in the construction industry. We have made great strides in this effort during the present year, too, seeking to do our utmost to continue SRV's excellent growth story.

Jukka Hienonen

President and CEO

A robust operating model steers the achievement of objectives

• SRV's growth focuses are business in Russia and the construction of business premises outside the Greater Helsinki Area.

• The company's operating model is based on innovative project development and customer-focused project management implementation.

In SRV's strategy, project development is an integral part of line operations. Our SRV Approach gives us a competitive edge. It is geared towards improving our profitability and safeguarding growth. In line with our strategy, operations focus on growth centres.

We seek to improve profitability by increasing the share of operations accounted for by development projects and by boosting customer relationship management. Our growth focuses are business in Russia and the construction of business premises outside the Greater Helsinki Area. We constantly hone our competitiveness by improving customer service, deepening our knowledge of the businesses of our main customer groups and working out concepts for innovative total service solutions that can be offered to customers.

SRV can take end-to-end responsibility for even the most demanding projects.

SRV's operating model combines unrivalled project development and project management implementation. Our operations hinge on open cooperation with the customer, innovation and overall economy.

Customers can outsource their entire construction process to SRV. We take responsibility for the project and implement all the phases as a single process in line with the customer's needs and a jointly agreed schedule, as well as quality and cost targets.

Project design and implementation taps into SRV's extensive and professionally skilled partner network. Our robust project management model

ensures that the responsibility chain does not break at any time. SRV supports, directs and oversees the operations of its partners in all phases of implementation.

For us, innovation means thinking outside the box and proposing solutions of our own to achieve the optimal results. We proactively seek to find the answers to the needs of users, owners, investors and other stakeholders. SRV has a great track record in successfully integrating the needs of customers and society as a single project.

Our operating model provides overall economy because we can take our customers' business needs into account early on in the building design phase, and implement demanding projects rapidly and efficiently from start to finish. The SRV Approach is highly scalable to adapt to changes in the market, thereby enabling flexible operations in the ups and downs of the construction industry.

The SRV Approach can be employed in all forms of contracts and is well-suited to projects of different sizes and types. That said, clients reap the greatest benefits when they partner up with SRV at the very start of the project.

In 2011, SRV's Housing and Business Premises were merged to form a single company to attend to operations in Finland. The merger further bolsters SRV's operating model, enabling us to harness the synergies and best practices of our business functions.

SRV Approach

The SRV Approach combines the entire construction project into a consistent and flexible process that ensures overall economy, faster implementation and results that are a better match to the customer's needs.

Forging ahead in long-term projects

Several projects that have been under development for a long time took major steps forward.

Urbanisation and sustainable development were reflected in project development.

SRV's development projects are based on project development that sets out to identify future trends and gain a deep understanding of the needs of customers' business operations. SRV's Project Development seeks to find premises for users, owners for premises and investments for owners. Systematically acquiring plots and looking into potential sources of financing are also key subfactors in project development.

Project development is a long-term activity in which the open-minded search for implementation alternatives and the correct timing of implementation are important. Thanks to our networked operating model, we can combine the needs of customers and stakeholders innovatively. With the SRV Approach, which is based on robust project management expertise, we can also turn good ideas into successful construction projects.

Project development is guided by an open-minded search for alternatives.

SRV's business units and Project Development have shared concept groups that continuously monitor the retail and logistics sectors, hotel construction and the office business. We also develop project expertise in a range of research projects – one of these is the Low2No development project, focusing on low energy consumption living, ongoing in the Jätkäsaari district of Helsinki in partnership with Sitra and VVO.

From the standpoint of project development, 2010 was a busy, high-performance year. We had almost 100 project candidates on the go. We took major steps forward in many long-term projects.

Project development in housing construction was even more closely aligned with megatrends such as the population shift to growth centres, the ageing of the population, the effects of climate change, sustainable development and growing use of public transit. The same trends are also being felt in retail projects, which are now increasingly often gravitating towards city centres.

One of the milestones of 2010 was the start-up of the construction of Karisma shopping centre in the Karisto area of Lahti and the renting of its retail premises. Another breakthrough was made in Perkkaa, Espoo, where a joint venture of SRV, SATO and Ilmarinen acquired a plot and business premises from Siemens Oy. City plan alterations are under way with a view to designating the area for 110,000-120,000 square metres of floor area for about 3,000 residents.

In connection with the Siemens plot transaction, we also drummed up business for the Derby Business Park office project in Perkkaa. We made a rent and implementation agreement with Siemens, whereby Siemens will move its offices to the environmentally friendly Derby Business Park.

The design and zoning of the residential towers planned for Keilaniemi in Espoo also progressed during the review year.

In 2011, we seek to proceed to the implementation phase in development projects. Project development continues to be brisk in Russia, where SRV owns plots in good locations in the centre of Moscow and St Petersburg.

Karisma is under construction in the Karisto district of Lahti. It will be the only shopping centre in Finland based on refined industry-level thinking, where stores are grouped in categories. Karisma will house about 90 specialty stores, making it the most diverse shopping centre in the Lahti area. We are acquiring tenants that are leaders in their business areas. Their stores will be grouped thematically in the shopping centre. All in all, the offering has a strong focus on ensuring shopper comfort. The end result is a well-controlled and dynamic shopping centre. We expect it to at- tract about three million customers every year.

SRV Project Development and Ruokakesko teamed up to develop the shopping centre in a prime location next to Highway 4 in 2008. We sought a peerless business idea for the shopping centre – and decided on a conceptualised model. Once the idea was in sharp focus, we carried out the city plan alteration process in co-operation with the City of Lahti. Earthworks started at the Karisma site in December 2009. Construction began in May 2010. The shopping centre will be completed by Christmas 2011.

The client is Ruokakesko Oy. In addition to construction, SRV is responsible for acquiring tenants for Karisma.

Karisma is very easy to reach. Improved access roads will be built from Highway 4, along with new pedestrian and bicycle routes from Karisto. The shopping centre will have parking for 1,600 cars, and bicycle parking. What's more, buses will run between Karisma and the centre of Lahti.

The range of services in the Karisto district is rounded out by a service station that SRV built in 2008.

Business Review

10

Turn to spread 12-13 to read more on the SRV Business Premises' order book which reached an all-time high in 2010. On pages 14-15 you can learn about SRV Housing, and, finally, SRV International on spread 16-17.

operations in finland

Business Premises

Retail, office, logistics and rock construction, as well as demanding special premises and property development.

Housing

Housing construction in the Greater Helsinki Area and neighbouring municipalities as well as regional business operations. Besides housing, regional business operations included commercial, business premises and logistics construction projects.

Revenue

2010: 143.1 EUR million 2009: 158.6 EUR million 2008: 139.0 EUR million Change from 2009: -9.7%

Order backlog

2010: 249.9 EUR million 2009: 201.7 EUR million 2008: 159.4 EUR million Change from 2009: 23.9%

Operating profit

2010: 8.4 EUR million 2009: 5.4 EUR million 2008: 2.8 EUR million Change from 2009: 55.0%

International

Project management contracting and property development in Russia and the Baltic countries. In Russia, SRV specialises in the development and construction of commercial and multifunction premises, shopping centres, offices, hotels and different kinds of production and logistics facilities. In the Baltic countries, SRV has also been active in the housing market.

2010: 22.3 EUR million 2009: 24 EUR million 2008: 59.1 EUR million Change from 2009: -7.0%

Order backlog

2010: 19.2 EUR million 2009: 24.6 EUR million 2008: 35.6 EUR million Change from 2009: -21.9%

Operations in Finland: Business Premises

Share of Group revenue 66%

Year of a large order book

• The market remained very tough, but SRV Business Premises' order book was at an all-time high.

• SRV's scalable operating model enabled the rapid start-up of projects and acceptance of new orders.

SRV Business Premises develops and builds retail premises, offices, logistics centres and hotels, as well as underground construction projects and other special premises for its customers. We carry out business premises projects through either developer contracting or project management contracting. Our experts and network of specialist contractors implement them efficiently using the SRV Approach.

In addition to project management expertise, SRV is thoroughly well-versed in different business areas. In all types of contracts we can create productive premises that support our customers' business operations thanks to our strong stakeholder networks. That said, clients gain the greatest added value when we are involved in demanding projects from day one.

Achievements yielded more orders from long-term customers.

In 2010, SRV Business Premises remained strongly afloat in a very tough market. The rising vacancy rates of business premises and the impacts of the financial crisis muted construction and led a substantial decrease also in SRV's construction volume. In spite of this, we widened our lead over our competitors: SRV Business Premises has a larger order book than ever before.

Our achievements in earlier projects yielded more orders for SRV, especially from our long-term customers. Thanks to our scalable operating model, we were able to accept large orders and fast-track new

construction projects.

During the report year, we had several special sites under construction. These included the expansion works at the Stockmann Department Store as well as the Helsinki Music Centre, which was chosen as the worksite of the year in December.

SRV's operating model also rose to the occasion at several multipurpose sites. For instance, the second phase of the construction of the Willa Shopping Centre commenced in the centre of Hyvinkää in October. In this project, we can harness our knowledge of the needs of the retail business and combine our expertise in the construction of both housing and business premises.

SRV seeks to step up the construction of business premises, especially in growth centres outside the Greater Helsinki Area. We are also preparing to go ahead with major business premises projects around the country during the next few years.

SRV Housing and Business Premises were merged at the beginning of 2011 to form a single company to handle operations in Finland. Shared resources will provide synergy benefits in this cyclical business. The merger will also make it easier for us to harness our expertise in business premises in those areas where we are already strongly positioned in housing construction.

Stockmann Delivering the goods ahead of schedule

Business premises projects 2010:

• · Helsinki Music Centre 1,700-seat concert hall. Five smaller halls. Restaurant and foyer areas. Premises for the Sibelius Academy. Completion in April 2011.
• · Stockmann Growth project, Helsinki

About 10,000 m2 of additional retail space for a department store. The floor area of the Stockmann Herkku grocery store doubled. A new 600-space car park. Completed in October 2010.

· Karisma shopping centre, Lahti

A shopping centre jointly developed by Kesko and SRV. Total of 35,000 m2 of retail space. K-citymarket and about 90 other stores. Completion in October 2011.

• · Kaisa-talo building, Helsinki An old shopping centre and its car park will be converted into a library for the city centre campus of the University of Helsinki. The first basement and street level floors will remain in retail use. Completion in April 2012.
• · Hall extension and heightening of a car park at the Helsinki Fair Centre New multipurpose hall. Completion in August 2011. Heightening of a car park. About 1,200 new parking spaces. Completion in January 2011.
• · HC Saimaa Spa Hotel and HC Villas Saimaa, Lappeenranta

221-room spa hotel and aqua park, wellness area, restaurants and a multifunction ice arena. Completion in September 2011.

Timeshare complex in line with the HC Villas concept. 63 residential units. Completion in November 2011.

· Willa shopping centre, Hyvinkää

Second stage of a shopping centre under construction in the centre of Hyvinkää. Two apartment houses. Completion in September 2012.

In autumn 2008, SRV took on the responsibility for the project management of the extension and renovation works of Stockmann's department store in Helsinki. At that point, construction had progressed for more than two years, employing close to 600 people. We rapidly took charge of the site and reorganised it into subprojects. A technical department was set up to serve these subprojects. The site became an evolving multi-organisation project based on teamwork.

We ensured its success by agreeing on shared practices with the client and setting clear target deadlines for each main phase. In a project of this scale, the most vital aspect is open and confidential co-operation between the parties. What's more, production economy had to be systematically honed due to the diversity and tight schedule of the project.

Stockmann is the largest department store in the Nordic countries. It remained open for business while the work was in progress. This posed great challenges to the construction work, its organisation and scheduling. One of the key phases of the project – the new Stockmann Herkku grocery store – was completed two months ahead of schedule, much earlier than we dared to expect in the contract phase. This was a major boon in terms of both construction costs and retail revenue.

Operations in Finland: Housing

Share of Group revenue 30%

Growth in the best locations

• Providing attractive concepts and kick-starting operations right after the end of the downswing generated results in 2010.

• SRV claimed its place as the third-largest developer-contractor of apartment houses in the Greater Helsinki Area.

SRV's housing production focuses on growth centres, where structural demand provides a strong foundation for expanding housing construction. The engine of housing construction is small apartments with good access to public transport and services.

After two tough years, SRV's housing production posted growth in 2010. Sales and construction of housing came to an almost complete standstill during the recession in 2008. However, at the end of 2009, we turned our eyes to the far future and made substantial investments in stepping up housing construction. In 2010, we already started up the construction of 543 developer contracting housing units, as compared to 251 a year earlier.

During the report year, we successfully doubled our housing production and became the third-largest developer contractor of apartment houses in the Greater Helsinki Area. This growth demonstrates the agility of our organisation and the effectiveness of our housing concepts.

SRV Housing builds apartments in greatest demand.

The residences that are now in greatest demand are high-quality two- and three-room apartments in prime locations with excellent transport connections. In our view, urbanisation, the smaller size of households and the ageing of the population will continue to maintain demand for small apartments for many years to come. We also believe that good transport connections and services will play a growing role. SRV's residences meet these needs – and will thus retain their value in spite of the ups and downs of the market.

During the report year, SRV had a total of over 1,600 residential units under construction in Finland. More than 500 completed units were sold. We started up numerous large-scale projects and completed attractive residential projects such as Vallikallion Rubiini in the Leppävaara area of Espoo and Vantaan Musketööri in Kartanonkoski. In the Greater Helsinki Area, we launched new housing projects in locations such as Matinkylä, Kannelmäki and Martinlaakso. In 2010, we started up our first HITAS project in Arabianranta, Helsinki. It is slated for completion in 2012, but almost all of its apartments were already sold in the autumn.

In addition to developer contracting projects, SRV carries out negotiated contracts with the public sector and other clients. Our prices have also appealed to clients in competitive bidding – we won three such contracts at the end of the year.

In the future, we will stand out from the competition not only by providing well-designed apartments that meet structural demand, but also by providing the best customer-focused service in the business. We are enhancing our operations throughout the service chain, from design to the sales process. For example, in 2010 we launched the industry's first electronic reservation system for HITAS residences, enabling customers to reserve apartments without having to stand in line in person. The system also ensures fair treatment in the processing of housing applications.

SRV's housing construction will see further growth in 2011, when many of our development projects are recognised as revenue and we can launch new projects. In 2011, Housing and Business Premises were merged in Finland, further bolstering our ability to manage our businesses as a whole and react rapidly to market changes.

Martti, Mortti and Vertti

A trio with excellent traffic connections

Housing projects 2010:

· Vantaan Mortti, Vertti and Martti as well as Pertti Parkki

Three apartment houses in Martinlaakso, Vantaa. 152 residential units. Mainly two- and three-room apartments. Parking spaces for the block are located in a separate car park owned by the housing corporation. Martti will be completed in March 2011, Mortti and Vertti in December 2011.

· Helsingin Isolokki

Three HITAS apartment houses in Arabianranta. A total of 142 residential units. Completion in late 2012.

· Espoon Kokki

An apartment house project to be built on the former site of the Matinkylä vocational school. 78 residential units. Completion in late 2011.

• · Espoon Vallikallion Rubiini, Safiiri and Turkoosi Three apartment houses. A total of 117 residential units. Completed in 2010.
• · Vantaan Musketööri An apartment house project completed in Kartanonkoski at the end of 2010. 88 residential units.

· Kaarinan Sello An apartment house with 26 residential units. Completion in autumn 2011.

• · Viikin Walborg, Nokia Terraced and semi-detached houses and a two-level terraced house to be built on the grounds of an old manor estate. 16 residential units. Completion in September 2011.
• · Helsingin Tampuriini 29 apartments in Kannelmäki. Completion in autumn 2011.
• · Espoon Saunavuori 57 residential units in an apartment house. Completion in September 2011.

station in Vantaa. They're a perfect fit for SRV's housing construction strategy. The houses are being built as urban infill, next to good traffic connections. Their apartments are of the type that is currently in the hottest demand – two- and three-room flats. Homebuyers often move into new apartments from a close-by neighbourhood. Martinlaakso is thus a familiar place to many of the new residents. The district is well-connected to public transport, but the design of the apartment houses also caters to those who drive their own cars. The

ing space will be sold as shares.

The apartments are designed to be environmentally friendly and energyefficient. The houses rely on district heating. What's more, the apartments have dedicated heat recovery, boosting the efficiency of energy use. Apartment-specific cold water metering helps regulate water consumption.

Martti will be the first of the buildings to be erected. Construction was started up quickly when housing sales picked up in late 2009. The construction of Mortti and Vertti began in October 2010.

International operations

Projects expectant of market rebound

• SRV is seeking substantial growth in the Russian market, where the company's strengths are the best concepts for premises and a transparent operating model.

• Foreign financiers have temporarily withdrawn from Russia, delaying project progress.

SRV's international operations are divided into Baltic and Russian operations. Russia is our major strategic growth area. In Russia, we specialise in the development and construction of high-quality shopping centres, commercial and multifunction premises, offices, hotels and various production and logistics facilities. In geographical terms, operations focus on Moscow and St Petersburg.

2010 was a relatively heavy year for international operations. Western financiers withdrew temporarily from the Russian property market after the financial crisis hit in 2008, and this continued to delay the start-up of numerous major projects. The property market also remained muted in the Baltic countries due to the weak state of their economies, and no new projects were initiated.

Growth prospects in Russia remain excellent.

SRV carried on with hotel renovation works in Russia in 2010. In spite of the tough economy, Etmia II, an office and car park complex in the centre of Moscow measuring over 14,000 m2 , has been able to attract tenants. Etmia II has now been almost fully rented out. We also pushed on with the development of the Pearl Plaza shopping centre in St Petersburg, which is part of the Baltic Pearl project. The project is being implemented with a Chinese partner. Development progressed to the point that an investment decision could be made. Preliminary work can be started up in early 2011.

Although the financial market is sluggish, we see staggering opportunities for growth in the Russian property market. Returns on properties in Russia tend to be high. Furthermore, thanks to slower inflation and lower interest rates, construction volumes have swung to growth. We cannot expect overnight successes, but greater purchasing power, the old building stock and the undersupply of high-quality business premises, housing and hotels are expected to substantially increase demand in the property markets of both St Petersburg and Moscow.

Maintaining stakeholder relations in Russia is a demanding task and the timeframe of construction is significantly longer than in Finland due to the difficult access to infrastructure and heavier bureaucracy. We believe we can succeed in this challenging business environment thanks to our customerfocused concepts and fully transparent operating model, which plays a major role in the overall quality of our construction and risk management.

Construction that seeks to cater to the business requirements of customers is still in its infancy in Russia, and we can thus leverage our unique business expertise in different industries in our projects. In Russia, our operations are an open book and comply with local legislation without exceptions. Design and construction that adhere to western norms and the criteria of sustainable development in turn ensure that the end product always measures up to the quality requirements of international investors.

In 2011, SRV's focus in Russia will be on starting up projects. Investments will be channelled into projects such as Septem City, which comprises large-scale office and retail space and premises for hotel, restaurant and entertainment companies on an 8.5-hectare area owned by SRV in the centre of St Petersburg.

Pearl Plaza A shining example of international co-operation

140,000 m2 shopping centre built by

Construction of the first phase of Pearl Plaza will begin in early 2011 and

SRV – Pearl Plaza.

In addition to construction, SRV is responsible for the commercial development and leasing of Pearl Plaza. 86,500 gross m2 of floor area will

Thanks to the large population and current lack of commercial services in the area, Pearl Plaza is poised for success.

Corporate Responsibility

The decisions made during construction have a broad and lasting impact on the environment and the lives of many people. For this reason, we take a long-term approach to project development – and build a sustainable future through our responsible operations.

The guiding themes of SRV's corporate responsibility are the transparency of operations, occupational safety and preventing the grey economy. Other key issues include personnel wellbeing, taking care of the environment and the financial stability of the company.

We have the best tools and practices in the industry to promote occupational safety and prevent the grey economy. For instance, we have developed the SRV Network Register, which enables us to verify that all project parties fulfil their statutory obligations.

The transparent and highly scaleable SRV Approach ensures that projects run smoothly and that we can provide quality and added value for the users of the properties, owners and other stakeholders. Thanks to our operating model, we can maintain the well-rounded economic structure of society and also give small companies the opportunity to participate in construction projects.

SRV is a pioneer in responsibility and risk management in the construction industry. Our track record speaks for itself – studies show that our employees are highly motivated, we have won numerous awards for the best construction site of the year, our order book has grown even in tough times, and we have successfully completed countless construction projects.

On the next page you can read more about SRV's social responsibility efforts and personnel issues. Turn to page 20 for information on grey economy prevention and employee safety. On the same spread there is a case story on the Helsinki Music Centre, selected Finland's best construction site. At the end of this section, on spread 22–23, you can read more about SRV environmental responsibility.

Type of employment

Permanently employed: 716 Temporarily employed: 76

Social responsibility: Personnel

Extensive managerial training deepens project management expertise

SRV's success hinges on motivated employees and wide-ranging specialist expertise.

In 2010, we enhanced the competence of our personnel with extensive managerial training.

SRV is an expert organisation of construction specialists. Every construction project is a unique effort that would not be possible without skilled and motivated employees. That's why it's important for our employees to be enthusiastic about getting the job done right. In addition to being true professionals, they should also have good interaction skills and the ability to work responsibly in demanding projects with a large network of partners.

SRV's special strength is our peerless expertise in project development and management – we have a track record of carrying out construction projects with finesse. Our flat organisation and lean administration facilitate the sharing of best practices within the company and enable employees to flexibly move from one project to another. Well-rounded experts and personnel mobility enable the optimal allocation of resources to projects.

The development of personnel competence is strongly interlinked with SRV's business management and the practical development of operating methods. In 2010, we created a competence development model for our company, dividing personnel competence into four categories: product, process, basic and supplementary competence.

During the report year, we made a concerted effort to develop supplementary competence by organising extensive managerial training for more than 100 people. Good managerial skills are important when dealing with project parties. The programme seeks to enhance the interaction and negotiation skills of managers and motivate them to keep honing these skills.

In leadership and managerial coaching, SRV's goal is to be the undisputed leader in the construction industry. This will ensure the further development of our unique approach, which is based on strong co-operation and interaction. Customers can count on us to provide them with the best construction solutions.

The results of personnel surveys have shown year after year that SRV's employees are highly motivated and committed. The personnel survey carried out at the end of 2010 also indicated that improvements have been made in organising training for employees, and that they are encouraged to do more studying on their own, too. The current situation is also good from the perspective of occupational wellbeing. For instance, the amount of sick leave is low, we have high ratings on work ability indexes and, thanks to the solid management of personnel risks, cases of occupational disability are rare.

Key figures	2010	2009	Change, %
Average number of employees	794	776	2.3
Employees at 31 Dec	792	767	3.3
Permanently employed	716	706	1.4
Women, %	20	20	0.0

Number of employees by business area

at 31 Dec	2010	2009	Change, %
Business Premises	337	289	16.6
Housing	222	215	3.3
International	153	182	-15.9
Other	80	81	-1.2
Total	792	767	3.3

Salaried employees/workers

Salaried employees: 578 Workers: 214

Total: 792

Social responsibility: Occupational safety and preventing the grey economy

Seeking full transparency

• A transparent operating model plays an integral role in the overall quality of SRV's construction and risk management.

• SRV launched its Network Register at all worksites in Finland.

SRV is the undisputed leader in preventing the grey economy and promoting occupational safety in the construction industry. For us, fighting against the grey economy is part and parcel of ensuring the overall quality of construction and first-class project management implementation. We continuously develop our operating methods and new tools to keep our construction sites safe and ensure that our entire chain of operations is manageable, transparent and legal.

SRV works with well-established specialised contractors that can demonstrate their responsibility. They commit to our approach to the job. Maintaining an open and positive team spirit, we monitor, train and support our partners to adopt responsible working methods in their day-to-day activities and inform them about matters such as changes in occupational safety legislation.

Accident frequency in SRV

Accidents/million work hours 2010: 15.9 2009: 18.1 2008: 23.3

Our most important tool in preventing the grey economy is our electronic SRV Network Register, which facilitates on-site reporting to the authorities, as required by the Act on the Contractor's Obligations and Liability. The Network Register is used for the centralised storage of direct agreements with our contractor partners as well as up-to-date official document information. The register includes information on all contractors as well as their employees and co-operation networks.

For us, it's important to always know the actual cost structure of construction projects and which parties are handling each phase of the work. The full traceability of procurements is likewise important. The Network Register makes it easy to ensure that the work is carried out by approved contractors and to unearth for example the forging of client responsibility documents and the underpaying of employees.

In 2010, the Network Register was deployed in all construction projects started up in Finland. We also prepared an operations manual for our partners. The manual covers matters such as good on-site practices, the employee orientation and guidance responsibilities of employers and the legal obligations of foreign companies in Finland.

Grey economy activity has been very rare at SRV's sites. No significant faults came to light in worksite inspections by the Regional State Administrative Agencies during the report year. The Finnish Tax Administration also provided commendable feedback on both the Helsinki Music Centre site and the Stockmann Department Store extension project. Compliance with the Act on the Contractor's Obligations and Liability was excellent in both projects.

The grey economy weakens the management of occupational safety risks. For this reason, the promotion of occupational safety hinges on the transparency of operations and knowledge of partners.

In occupational safety, our target is zero accidents. Everyone working on sites led by SRV is provided with orientation on shared working methods and on-site safety practices, such as the use of safety equipment. Rescue instructions are prominently displayed on construction sites. We use easy-to-check occupational risk evaluation forms to keep track of employees' competence in matters such as the use of technical equipment.

In 2010, the accident frequency rate at SRV sites declined from 18.1 to 15.9. One serious on-site accident befell a specialist contractor.

In assessing and managing occupational safety risks, we use information from TR-measurements, the statutory weekly inspection procedure for worksites. The TR-measurement principles were updated in 2010 – use of eye protection is now mandatory and a new measurement area, dust management, was introduced. The average TR-measurement score at SRV sites declined from 95 to 88 per cent during the review year, mainly due to shortcomings in the uninterrupted use of eye protection.

The Helsinki Music Centre The best construction site in Finland

The Helsinki Music Centre won the Construction Site of the Year competition in 2010. This was the third consecutive win for the same worksite organisation. SRV's skill in staying on top of this demanding project was one of the major reasons why we won. The jury also noted that occupational safety at the site is of the highest level in Finland.

As in other SRV projects, every employee working on the Helsinki Music Centre is provided with orientation concerning the site, its rules

and safety issues, no matter what his or her nationality. In the orientation stage, we feed the information on the employee and contractor into the SRV Network Register, and ensure that the employer has fulfilled all of its statutory obligations. We check that each and every employee has photo ID that also indicates which company pays his or her wages. Likewise, we record information on vocational diplomas and other qualifications into the register.

Safety is to a great extent a question of attitude – but guidelines,

encouragement and even supervision are also necessary. Everyone on site must use safe working methods and tools. SRV sells personal safety gear at the Helsinki Music Centre site. Contractors can purchase the necessary equipment for their employees from our outlet.

Tidiness and order are also vital for keeping construction sites safe. Even visitors to the site have stated that general order, tidiness and dust management at the Helsinki Music Centre site are top notch.

Quality construction pays attention to the environment

• SRV has made excellent headway in waste management and material efficiency on construction sites.

• The company develops and implements attractive housing and areas that encourage their residents and users to adopt environmentally friendly lifestyles.

The built environment is expected to be even more energy and eco-efficient to solve climate and energy challenges. Developing construction that goes easy on the environment is an important element of our code of values and operating model.

We assess the environmental impacts of buildings over their entire life cycles. Our aim is to implement residential and working environments that are as attractive as possible and also encourage their users to adopt ecological lifestyles, such as commuting by rail.

SRV's environmental activities hinge on a commitment to enhancing operations in line with sustainable development and to the reporting of the impacts of our own business operations. Operations are based on current environmental legislation. In addition, our customers and we set project-specific environmental objectives for construction projects.

Reclaiming of waste

Reclaimed 90% Landfill 10%

Waste from on-site work is the major direct environmental impact of construction. SRV's environmental activities are steered by our environmental policy. This policy is ratified by the Corporate Executive Team and one of its major objectives is to optimise the material efficiency of sites and develop waste management. We have had excellent success in this effort. For example, the waste-recycling rate at the Primulan Herkkupaja worksite in Järvenpää was an astonishing 95 per cent in 2010.

SRV requires that an environmental plan must be drafted for each and every site in Finland as part of the quality system. All the parties involved must commit to the plan. The environmental plan is intended to help worksites to identify the environmental perspectives of site operations and to plan

measures so as to prevent or minimise environmental impacts. In addition, we appoint an on-site environmental officer for each project. These officers keep track of matters such as site waste volumes and energy consumption using SRV's environmental reporting system, SRV Environment.

Over and above our environmental efforts as part of practical project work, we develop our environmental expertise in a variety of research projects. In 2010 we progressed into the design phase in Low2No, a joint project with Sitra and VVO. Its pilot site is a residential and commercial quarter in Jätkäsaari, Helsinki. An international team headed by the UK firm ARUP is responsible for the design of the quarter.

During the review year, the winner of the SRV InTo (The Innovative Town Concept for the Future) idea competition was chosen. The project examines a model of a low-carbon town in a pilot area located in Henna, Orimattila, next to the Lahti direct railway line. SRV was very pleased with the competition entries. Further design will be started up, drawing on several winning ideas. The area will be closelyknit and urban, while also being close to nature and designed for pedestrians. It will feature efficient public transit and its centrally located services can be reached by foot or bike.

SRV also joined Green Building Council Finland. FIGBC seeks to include sustainable development as a natural element in all operations in the property and construction sectors.

In 2010, 7,562 tonnes of waste (8,047 tonnes in 2009) was reported using SRV Environment. Of this amount, 90% (84%) was reclaimed. Reported amounts do not include demolition waste or surplus soil. 61% (66%) of SRV's sites in Finland were covered by the reporting. These sites amount to approximately 75% of domestic revenue.

Holiday Club Saimaa Refreshing source of energy efficiency

Holiday Club Saimaa, being built in Lappeenranta, is the biggest tourism project ongoing in the Nordic countries. It includes the construction of 221 hotel rooms, a water park with a well-being spa, several restaurants and an ice arena.

Holiday Club Saimaa has been designed with a view to minimising its ecological footprint. To that end, we have relied on sustainable area planning and state-of-the-art green technology. The Holiday Club is located

in an area with a close-knit structure and a great range of services. This will cut emissions by reducing the need to travel. What's more, the Holiday Club will attract Finnish tourists who would otherwise go on holiday abroad – allyear round.

The services designed for the Holiday Club – such as a water park, ice arena and spa hotel – would consume a great deal of energy if they were implemented using traditional methods. But the project is minimising energy

consumption by means such as recirculating treated rinse water back into the pools and by utilising the waste heat generated by arena ice-making for the heating of utility water and ventilation air. In addition, we selected much of the equipment – such as ventilation machines and compressors – on the basis of life-cycle calculations. The hotel rooms will not be equipped with electricity-hungry minibars. And heating will be efficient thanks to the local district-heating network.

23

Corporate Governance

Starting from the next page, you can read our Corporate Governance Statement. Turn to page 30 for information on SRV risk management. Information on the Board of Directors (p. 31) and Corporate Executive Team (p. 31) finish this section of the Annual Report.

Corporate Governance Statement 2010

SRV Group Plc's corporate governance is based on Finnish legislation, SRV Group Plc's Articles of Association and the 2010 Finnish Corporate Governance Code for listed companies, with the exceptions specified below. SRV Group Plc's shares are listed on NASDAQ OMX Helsinki and the company observes the rules and regulations concerning listed companies that have been issued by the stock exchange as well as the regulations of the Financial Supervisory Authority.

SRV Group Plc follows the 2010 Finnish Corporate Governance Code for listed companies, with the exceptions noted below. The company reports that it deviates from the 2010 Finnish Corporate Governance Code for listed companies in the following respects:

• 1. The company does not follow Recommendation 9 of the Corporate Governance Code, which states that both genders shall be represented on the Board. In connection with the preparations for the 2010 Annual General Meeting, the Nomination and Remuneration Committee has taken steps to find a suitable female member for the company's Board of Directors. However, the Nomination and Remuneration Committee was not at the time able to put forward a candidate who would be well-versed in the company's main field of business and who would have agreed to take on the position.
• 1. The company does not comply with Recommendation 22 of the Corporate Governance Code, according to which a committee shall have no less than three members. According to the standing orders of the committees, they shall have 2-3 members who are elected by the Board from amongst its number. Two members can be appointed to a committee if the Board considers this appropriate in view of the structure of the Board and the number of directors.
• 1. The company does not follow Recommendation 26 of the Corporate Governance Code, according to which the members of the Audit Committee shall be independent of the company. The Board of Directors considers it appropriate that sufficient expertise in construction, property investment and project development is represented on the Audit Committee. There are thus good reasons for Timo Kokkila, who has acted as SRV Group Plc's Manager, Project Development, to have been appointed member

of the Audit Committee in the first Board of Directors' meeting since the General Meeting of 16 March 2010. Timo Kokkila's employment relationship with SRV Group has ended after the end of the financial year 2010. The 2010 Finnish Corporate Governance Code for listed companies is available at the Internet site of the Securities Market Association, www.cgfinland.fi.

This statement is published separately from the Report of the Board of Directors.

Administrative bodies

The administration, management and supervision of SRV Group Plc are divided between the General Meeting of Shareholders, the Board of Directors and the President and CEO. The company's senior management is responsible for the internal audit. The external audit is carried out by auditors. The President and CEO attends to line operations with the assistance of the Corporate Executive Team.

General Meeting

The General Meeting of Shareholders is SRV Group Plc's highest decision-making body. Each SRV share confers its holder the right to one vote at a General Meeting.

General Meetings are convened by the Board of Directors. A notice of a General Meeting is published in one nationwide newspaper no earlier than three months and no later than three weeks before the meeting. The notice, the documents to be presented to the General Meeting and the proposals to the General Meeting are also published on the company's Internet site. However, said notice of general meeting must be published no less than nine days before the General Meeting record date, as defined by the Limited Liability Companies Act. Shareholders who are registered in the company's shareholder list eight weekdays before the General Meeting shall have the right to participate. In order to participate in a General Meeting, a shareholder must notify the company of his or her intention to attend no later than the date mentioned in the notice, which may be no earlier than 10 days before the meeting. An Extraordinary General Meeting shall be held when the Board of Directors deems it necessary or when required by law.

Meetings shall deal with the matters specified in the

Articles of Association as being the business of Annual General Meetings. These matters include taking decisions on the election of Board members, the chairman of the Board, the auditor and deputy auditor, their remuneration, the adoption of the financial statements and consolidated financial statements, release of the Board members and the President and CEO from liability and the disposal of profits shown in the balance sheet. The General Meeting may also deal with other matters specified in the Companies Act as being the business of General Meetings, such as increases or decreases in the share capital, issuance of new shares, buyback of shares, and amendments to the Articles of Association. In addition, the General Meeting will deal with matters included on the agenda by shareholders as set out in the Companies Act.

The President and CEO, the chairman of the Board and a sufficient number of Board members shall attend General Meetings in order to ensure that the shareholders and the administrative bodies of the company can interact and shareholders can exercise their right to ask questions. A person who is proposed as a Board member for the first time shall participate in the General Meeting deciding on his or her membership, unless there are weighty reasons for his or her absence.

Board of Directors

SRV Group Plc's Board of Directors comprises five to eight members who are elected by the General Meeting. The General Meeting elects one of the Board members as its chairman. The Board of Directors elects the vice chairman from amongst its number. The term of office of a Board member begins at the General Meeting at which he or she was elected and ends at the close of the next Annual General Meeting. The Board of Directors evaluates the independence of its members and announces which of its members have been deemed to be independent of the company and of its major shareholders.

Up until the General Annual Meeting held 16 March 2010, the members of the Board of Directors were Ilpo Kokkila (Chairman of the Board), Lasse Kurkilahti (Vice Chairman of the Board), Jukka Hienonen and Matti Mustaniemi.

The General Meeting of 16 March 2010 elected six members to the Board of Directors. The following persons were elected:

• · Ilpo Kokkila, Chairman of the Board, M.Sc. (Eng.), born 1947
• Pontos Oy, Chairman of the Board
• · Lasse Kurkilahti, Vice Chairman of the Board, M.Sc. (Econ.), born 1948 Senior Adviser
• · Arto Hiltunen, M.Sc. (Econ.), born 1958
• · Timo Kokkila, M.Sc. (Eng.), born 1979
• Manager, Project Development, SRV Group Plc (until

2/2011), Pontos Group, Investment Director (from 3/2011)

• · Matti Mustaniemi, M.Sc. (Econ.), born 1952
• · Ilkka Salonen, M.Soc.Sc., born 1955

Of the members, Lasse Kurkilahti, Arto Hiltunen, Matti Mustaniemi and Ilkka Salonen are independent of both the company and its major shareholders. Ilpo Kokkila and Timo Kokkila are major shareholders and are not independent of the company.

The Board of Directors convened 11 times in 2010. On average, 98.7% of the Board members attended the meetings of the Board.

The Board of Directors has prepared written standing orders for itself, specifying the key tasks and operating principles of the Board and its chairman. The chairman of the Board ensures and supervises that the Board efficiently and purposefully discharges the tasks set for it in legislation, the Articles of Association and standing orders.

According to the standing orders, the Board of Directors is responsible for the administration of the company and the due organisation of operations. In addition to the tasks set forth in the Companies Act, the Board of Directors approves the company's vision and values as well as annually ratifies the strategies, budgets and business plans set to achieve them. The Board of Directors decides on the most significant business matters concerning the Group, such as substantial investments and commitments as well as acquisitions of both companies and business operations. The Board of Directors ensures the functionality of the company's management system and approves its principles for risk management and internal control. Furthermore, the Board of Directors appoints the President and CEO and the deputy CEO and both directs and oversees the work of the CEO. The Board of Directors appoints the Corporate Executive Team and decides on the compensation and incentive schemes for line management and personnel.

The Board of Directors meets regularly as set in the meeting schedule, which is confirmed in advance, and also when necessary. The Board of Directors has a quorum when more than half of the members are present and one of them is the chairman or the vice chairman. The CEO and the chief legal counsel, who serves as the secretary of the Board, participate in Board meetings. Other members of the Corporate Executive Team participate in Board meetings on the invitation of the Board.

The Board of Directors shall conduct an annual assessment of its activities and working procedures.

Board committees

The Board of Directors has decided to establish two committees: an Audit Committee and a Nomination and Remuneration Committee. The committees function in accordance with the standing orders confirmed by the Board of Directors and they report to the Board. The committees do not have independent power of decision. Their task is to enhance the effectiveness of the Board of Directors by preparing matters for decision by the Board and the General Meeting.

Audit Committee

The Audit Committee deals with matters concerning the company's financial reporting and monitoring. Its tasks include overseeing the Group's financial situation, monitoring the financial reporting process and the interim reports, financial statements and audit, evaluating the effectiveness of internal control, internal audit and risk management systems, preparing the financial policy, and overseeing collateral. In addition, the Audit Committee prepares the election of the auditor for presentation to the General Meeting.

The Audit Committee is comprised of 2-3 members whom the Board of Directors elects from amongst its number. Two members can be appointed to the committee if the Board considers this appropriate in view of the structure of the Board and the number of directors.

The chairman of the Audit Committee is Matti Mustaniemi. Until the Annual General Meeting held on 16 March 2010, Lasse Kurkilahti served as member of the Audit Committee. After the General Meeting of 16 March 2010, Lasse Kurkilahti and Timo Kokkila served as members of the Audit Committee. Of the members, Matti Mustaniemi and Lasse Kurkilahti are independent of the company and its major shareholders. Timo Kokkila is a major shareholder and is not independent of the company.

The Audit Committee met four times during 2010. Attendance at meetings was 90.9%.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee prepares matters concerning the election and remuneration of members of the Board of Directors and its chairman for presentation to the General Meeting. In addition, the committee considers matters relating to the nomination and compensation of the CEO and other management as well as the remuneration and incentives of personnel. The committee evaluates the activities of senior management.

The Nomination and Remuneration Committee is comprised of 2-3 members elected by the Board of Directors from amongst its number. Two members can be appointed to the committee if the Board considers this appropriate in view of the structure of the Board and the number of directors.

The chairman of the Nomination and Remuneration Committee is Ilpo Kokkila. Until the Annual General Meeting held on 16 March 2010, Jukka Hienonen served as member of the Nomination and Remuneration Committee. After the

General Meeting of 16 March 2010, the other members are Arto Hiltunen and Ilkka Salonen. Of the members, Arto Hiltunen and Ilkka Salonen are independent of the company and of its major shareholders. Ilpo Kokkila is a major shareholder and is not independent of the company.

The Nomination and Remuneration Committee met four times during 2010. Attendance at meetings was 100%.

The President and CEO

The President and CEO is in charge of the company's line operations and day-to-day administration. He is accountable to the Board of Directors for the achievement of the goals, plans, policies and objectives set by the Board of Directors. The President and CEO ensures that the company's bookkeeping complies with the applicable law and that management of funds is handled in a reliable manner. He prepares matters to be dealt with and decided by the Board of Directors and carries out the decisions of the Board. The President and CEO also serves as the chairman of the Corporate Executive Team. The Board of Directors appoints the CEO and his deputy and relieves them of their duties.

Hannu Linnoinen, LL.M., B.Sc. (Econ.), (born 1957), served as SRV Group Plc's President and CEO until 31 July 2010, after which the position was assumed by Jukka Hienonen, M.Sc. (Econ.), (born 1961). The deputy to the President and CEO of SRV Group Plc is Timo Nieminen, M.Sc. (Eng.), (born 1958).

Corporate Executive Team

The Corporate Executive Team and its working committee assist the President and CEO in planning operations and in line management as well as prepare matters to be dealt with by the parent company's Board of Directors. The Corporate Executive Team and the working committee deal with matters concerning business operations as well as operations control and development.

The members of the Corporate Executive Team are:

Jukka Hienonen	The President and CEO
Timo Nieminen	Senior Executive Vice President, Project Development in Finland, Deputy CEO
Hannu Linnoinen	Senior Executive Vice President, CFO
Juha Pekka Ojala	Senior Executive Vice President, Business Operations in Finland
Veli-Matti Kullas	Director, Project Development in Russia
Jussi Kuutsa	Country Director, Russia
Juha-Veikko Nikulainen	Director, Housing in Finland
Pirjo Ahanen	Director, HR
Katri Innanen	Chief Legal Councel
Jussi Ollila	Director, Communications and Marketing until 1 August 2010
Valtteri Palin	Director, Financial Administration

The working committee of the Corporate Executive Team includes Jukka Hienonen, Hannu Linnoinen, Timo Nieminen, Juha Pekka Ojala, Veli-Matti Kullas, Juha-Veikko Nikulainen and Jussi Ollila (until 1 August 2010). The Director in charge of Development Affairs acts as the secretary of the Corporate Executive Team and its working committee. In 2010, the Corporate Executive Team convened 12 times and the working committee 30 times.

Remuneration

The General Meeting decides on the remuneration paid to the members of the Board of Directors and the committees. The company's Board of Directors decides on the terms of employment of the President and CEO, Deputy CEO and members of the Corporate Executive Team and their other compensation. For more detailed information on remuneration, see the salary and remuneration report published on SRV Group Plc's Internet site (http://www.srv.fi/ investors/corporate_governance/remuneration).

Board of Directors' remuneration

The Annual General Meeting held on 16 March 2010 confirmed the following monthly fees: EUR 5,000 for the chairman of the Board, EUR 4,000 for the vice chairman and EUR 3,000 for other Board members. In addition, it was decided that members would be paid EUR 500 for meetings of the Board of Directors and the committees. Travel expenses of the members of the Board of Directors are paid according to the Company's travel rules.

Total remuneration of the Board members for 2010 amounted to:

	EUR
Ilpo Kokkila,
Chairman of the Board	68,500
Lasse Kurkilahti,
Vice Chairman of the Board	56,000
Jukka Hienonen (1 Jan–16 Mar 2010)	10,565
Arto Hiltunen (16 Mar–31 Dec 2010)	33,548
Timo Kokkila (16 Mar–31 Dec 2010)	34,548
Matti Mustaniemi	45,000
Ilkka Salonen (16 Mar–31 Dec 2010)	34,048
Total	281,709

Salaries and compensation paid by SRV to the President and CEO, his deputy and the Corporate Executive Team in 2010

EUR	Regular sal ary includ ing fringe benefits	Bonuses paid	Share payments	Total
President and CEO Hannu Linnoinen (1 Jan–31 Jul 2010)	163,202	--	--	163,202
President and CEO Jukka Hienonen (1 Aug–31 Dec 2010)	221,609	--	--	221,609
Deputy CEO	152,992	8,926	--	161,918
Other members of the Corporate Executive Team	935,401	69,459	196,674	1,201,534

Audit

The auditor is elected at the Annual General Meeting to a term of office that ends at the close of the next Annual General Meeting following the auditor's election.

The Annual General Meeting held on 16 March 2010 elected Ernst & Young Oy, Authorised Public Accountants, as the regular auditor, with Mikko Rytilahti, Authorised Public Accountant, as the chief auditor.

In 2010, the auditor was paid auditing fees of EUR 230,000. In addition, the auditor was paid EUR 55,000 for other services (including all the companies belonging to the same group or chain).

Major characteristics of the internal control and risk management systems related to SRV's financial reporting

SRV continuously monitors its functions to ensure that the result of its operations is reliable. The objective of internal control is to ensure that the company's operations are efficient and productive, reporting is reliable and that laws and regulations are complied with. However, the internal control system cannot provide full certainty that risks can be prevented.

SRV's business operations are guided by consistent Group-wide business principles, decision-making authorisations and values. Internal control is founded on a healthy corporate and management culture and specified reporting and the grounds thereof. In particular, internal control is based on financial reports, management reports, risk reports and internal audit reports. The company's main operations are controlled by means of written internal operating policies and procedures.

SRV's business operations are based on the implementation of construction projects. SRV's revenue is generated by construction projects, and the company's result depends on the profitability of individual projects as well as their progress.

Financial control

The internal control system applied to business operations is the responsibility of the executive teams of the business areas and the controller function in accordance with SRV's Group principles and instructions. In ensuring the effectiveness and efficiency of operations, a key control process is the monthly financial reporting process with analyses of deviations between actual results, budgets and continuously updated forecasts of business performance and construction projects.

The internal control system applied to business operations is the responsibility of SRV Group Plc's Board of Directors and Audit Committee, the Corporate Executive Team and its working committee, the executive teams of the business areas and the financial administration. In ensuring the accuracy of the Group's financial reporting, a key control process is the monthly management financial reporting process with analyses of deviations between actual results, budgets and continuously updated forecasts.

Financial management and the control of operations are supported and co-ordinated by the Group's financial administration and the controller organisation of SRV's business functions. SRV has drafted Group-level reporting models for standardising the financial reporting of the business functions. The reports of the business functions seek to ensure that control covers all the major aspects of business operations. This ensures that any deviations from financial objectives are identified, communicated and reacted to efficiently, in a harmonised and timely manner.

Financial control measures also include the ongoing business control procedures of the management. Financial reports define the key control indicators that aim to measure and support business efficiency and consistency and to monitor the achievement of the set objectives.

The Board of Directors has approved the internal approval limits drafted by the Corporate Executive Team.

Reliability of financial reporting

Monitoring of the reliability of financial reporting is based on the principles and guidelines SRV has set for the financial reporting process.

The interpretation and application of financial statement standards are centralised in the Group's financial administration, which maintains the SRV IFRS Accounting Manual under the supervision of the company's Audit Committee. The Group's financial administration oversees compliance with these standards and instructions.

The supervision of budgeting and reporting processes is based on SRV's budgeting instructions. The Group's financial administration is responsible for drafting and maintaining these instructions on a centralised basis. The principles are applied consistently throughout the Group.

Internal audit

The internal audit operates under the Board of Directors of SRV Group Plc. The Board of Directors may use an external service provider to attend to the internal audit. The internal audit reports to the Board's Audit Committee, the President and CEO and the Senior Vice President, Financial Administration. The audits are based on the Audit Plan, which is approved annually by the Audit Committee. Reports on the audits carried out are submitted to the Audit Committee and annually to the company's Board of Directors.

Shareholding 25 Jan 2011

Members of the Board of Directors

Ilpo Kokkila	9,034,712 shares
Ownership of companies under his control	5,178,129 shares
In addition, SRV Group Plc, which is under Ilpo Kokkila's control, owns its own shares, totalling	957,916 shares
Arto Hiltunen	none
No controlled company ownership
Timo Kokkila	4,522,288 shares
No controlled company ownership
Lasse Kurkilahti	2,200 shares
No controlled company ownership
Matti Mustaniemi	60,000 shares
No controlled company ownership	5,800 shares
Ilkka Salonen	2,200 shares
No controlled company ownership

The President and CEO and his deputy

Jukka Hienonen	20,000 shares
Ownership of companies under his control	none
Timo Nieminen	418,266 shares
No controlled company ownership

Corporate Executive Team

Pirjo Ahanen	1,700 shares
Katri Innanen	none
Veli-Matti Kullas	103,984 shares
Jussi Kuutsa	none
Hannu Linnoinen	615,566 shares
Juha-Veikko Nikulainen	10,080 shares
Juha Pekka Ojala	106,744 shares
Valtteri Palin	19,597 shares

Risk management

SRV engages in systematic risk management in order to protect itself against factors that might hinder its business operations and to recognise new opportunities. The company improves the stability of its operations by identifying and reacting to strategic and operational risks in time. Risk management is part of SRV's management system. It supports the company's values, vision, strategy and the achievement of its earnings objectives.

The objective of risk management is to ensure that controllable risks do not jeopardise SRV's operations. To this end, SRV ensures that it has a systematic and end-to-end approach to identifying and assessing risks as well as to carrying out the necessary risk management measures and reporting on operations.

Overall responsibility for risk management rests with the company's Board of Directors and President and CEO. The Board of Directors approves the risk management strategy and policy, and assesses the framework for risk management covering the entire company. Line management is in charge of carrying out day-to-day risk management as well as for its management and supervision. The Group's risk management function supports the application of risk management principles and develops Group-wide ways of working.

STRATEGIC RISKS

Macroeconomy

Changes in the economic cycle or in the operating environment of the customers can have a material impact on SRV's operations and thereby on its financial position and result of operations.

Construction operations hinge on companies' confidence in the general trend in the economy and consumers' confidence in their own finances. When the cyclical outlook weakens significantly, demand for housing and business premises declines. The prices and rents of business premises and the prices of housing can go into decline. The construction volume decreases and competition for projects heats up.

Availability of financing and changes in the terms of financing have a direct impact on the property and housing market. When the market is poor, it is difficult to secure financing and its cost soars, especially in the case of higherrisk sites.

Managing cyclical risks at SRV is based on continuous anticipation of changes in the environment and market situation, systematic operational planning and monitoring, management of the priorities of various business areas and project models, prudent use of capital, a flexible organisation model and the ability to respond swiftly.

Profitability

SRV improves operational profitability by stepping up the design and implementation of developer contracting projects. Projects are analysed carefully both in their development stage and when taking decisions on construction start-ups. The aim in allocating capital is to undertake short-term commitments as well as to line up users and owners before starting construction. The company maintains and hones its costeffectiveness continuously. Operations are planned and scaled in line with the prevailing market conditions.

Growth

SRV seeks long-term growth from emerging markets close to Finland and in Finland's growth centres. At the same time, the operations of the business areas are balanced out.

The management of growth-related risks is upgraded by deepening the company's expertise in the operations of its main customer groups, enlarging its reliable networks of local partners and standardising the supervision and reporting of operations. In addition, SRV is making a concerted effort to upgrade the expertise of its personnel, develop matrix functions and transfer expertise to new and growing business areas.

OPERATIONAL RISKS Resource management

The most significant risks for the company's own organisation relate to retaining its present staff and obtaining new, skilled employees. These aims are promoted through a sound human resources policy that emphasises systematic training and a good working environment, active co-operation with educational institutions as well as a positive and competitive employer image.

Other important resources for the company's operations include the special experts, designers, subcontractors and material suppliers in the co-operation network that implements projects. SRV is always on the lookout for new reliable and skilled partners for its network.

Project management

Technical and operational risks involved in projects are managed with project plans, steering of the design and planning process, quality assurance plans and implementation control. In the management of subcontractor processes, SRV carries out close co-operation with the authorities. SRV's proactive efforts to develop its operations – which are co-ordinated in all business areas – also play a key role in risk management.

For more information on SRV's risk management, see pages 20, 28 and 67.

Board of Directors

1. Ilpo Kokkila b. 1947, M.Sc. (Eng.) Chairman of the Board of Directors 1987–. Chairman of the Nomination and Remuneration Committee 2007–.

5. Matti Mustaniemi

b. 1952, M.Sc. (Econ.) Member of the Board 2005–. Chairman of the Audit Committee 2007–.

2. Lasse Kurkilahti b. 1948, M.Sc. (Econ.) Member of the Board 2007–. Vice Chairman of the Board of Directors 2008–. Member of the Audit Committee 2009–.

6. Ilkka Salonen

b. 1955, M.Soc.Sc. Member of the Board 2010–. Member of the Nomination and Remuneration Committee 2010–.

3. Arto Hiltunen b. 1958, M.Sc. (Econ.) Member of the Board 2010–. Member of the Nomination and Remuneration Committee 2010–.

4. Timo Kokkila

b. 1979, M.Sc. (Eng.) Member of the Board 2010–. Member of the Audit Committee 2010–.

Information on the shareholdings of the Board of Directors is presented on page 29. More detailed information on their positions and work experience is presented at www.srv.fi > Investors > Corporate Governance.

31

Corporate Executive Team

1. Jukka Hienonen b. 1961, M.Sc. (Econ.) The President and CEO. Joined the Group in 2010.

9 10

5. Juha-Veikko Nikulainen b. 1961, M.Sc. (Eng.) Director, Housing in Finland. Joined the Group in 2007.

9. Katri Innanen b. 1960, L.L.M. Chief Legal Councel. Joined the Group in 2008. 2. Timo Nieminen b. 1958, M.Sc. (Eng.) Senior Executive Vice President, Project Development in Finland (Deputy CEO). Joined the Group in 1987.

6. Veli-Matti Kullas b. 1956, M.Sc. (Eng.) Director, Project Development in Russia. Joined the Group in 2004.

10. Valtteri Palin b. 1973, M.Sc. (Econ.) Director, Financial Administration. Joined the Group in 2005.

3. Hannu Linnoinen

b. 1957, B.Sc. (Econ.), M.L.L. Senior Executive Vice President, CFO. Joined the Group in 2006.

7. Jussi Kuutsa b. 1964, M.Sc. (Econ.) Country Director, Russia. Joined the Group in 2010.

4.Juha Pekka Ojala

b. 1963, B.Sc. (CE) Senior Executive Vice President Business Operations in Finland. Joined the Group in 1997.

8. Pirjo Ahanen b. 1958, M.Sc. (Econ.) Director, HR. Joined the Group in 2006.

Information on the shareholdings of the Corporate Executive Team is presented on page 29. More detailed information on their positions and work experience is presented at www.srv.fi > Investors > Corporate Governance.

Financial Statements

This report describes the SRV Group´s financial performance in 2010. SRV Group Plc´s full financial statements for the financial year 1 January–31 December 2010 are included in the company´s official financial statements, which are available on the company's website at www.srv.fi.

Report of The Board of Directors	34
Key financial indicators	42
Calculation of key figures	43
Shares and shareholders	44

Consolidated financial statements

1 Jan–31 Dec 2010, IFRS
Consolidated income statement	45
Consolidated balance sheet	46
Consolidated cash flow statement	47
Consolidated statement of changes in equity	48
Notes to the consolidated financial statements	49

Parent company´s financial statements

1 Jan–31 Dec 2010, FAS
Income statement of the parent company	72
Balance sheet of the parent company	73
Cash flow statement of the parent company	74
Statement of changes in equity of the parent company	75

Signatures to the financial statements and report of The Board of Directors 76

Auditor´s report 77

Comparison figures for the 2009
financial year in accordance with
the new IFRS interpretation	78
Gr oup and segment

information by quarter (unaudited) 79
------------------------------------------

Report of the Board of Directors

Reporting period 1 January–31 December 2010 in brief:

• SRV's revenue was EUR 484.8 million (EUR 390.5 million in January–December 2009), change 24.2%

• Operating profit was EUR 13.0 million (EUR 10.7 million), change 21.7%

• Profit before taxes was EUR 7.6 million (EUR 6.5 million), change 16.5%

• The order backlog at the close of the review period was EUR 593.7 million (EUR 481.6 million), change 23.3%

• New contracts EUR 559.9 million (EUR 396.1 million), change 41.4%

• The equity ratio was 35.1 per cent (41.3%)

• Earnings per share were EUR 0.19 (EUR 0.08)

• Proposed dividend EUR 0.12 (EUR 0.12) per share

group key figures

			change,
2010	2009	MEUR	%
484.8	390.5	94.3	24.2
13.0	10.7	2.3	21.7
-5.4	-4.2	-1.2	29.8
7.6	6.5	1.1	16.5
593.7	481.6	112.1	23.3
559.9	396.1	163.8	41.4
2.7	2.7
1.1	0.7
35.1	41.3
220.9	179.9
140.6	109.8
4.0	4.9
3.2	1.8
0.19	0.08
4.55	4.48
33.9	36.0		-5.8
	1–12/	1–12/	IFRS IFRS change,

Consolidated revenue was EUR 484.8 million (EUR 390.5 million in January–December 2009), of which Finland accounted for 95 per cent (94%) and Russia and the Baltic countries for 5 per cent (6%). Revenue in the Business Premises business area was EUR 319.5 million (EUR 208.0 million). Revenue in the Housing business area was EUR 143.1 million (EUR 158.6 million). Revenue in the International business area was EUR 22.3 million (EUR 24.0 million).

The Group's operating profit was EUR 13.0 million (EUR 10.7 million in January–December 2009). Operating profit margin was 2.7 per cent (2.7%). Operating profit in the Business Premises business area was EUR 18.0 million (EUR 18.0 million). Operating profit in the Housing business area was EUR 8.4 million (EUR 5.4 million). Operating loss in the International business area was EUR 7.5 million (operating loss of EUR 7.7 million).

The Group's profit before taxes was EUR 7.6 million (profit of EUR 6.5 million in January–December 2009). The profit for the financial year was EUR 5.2 million (profit of EUR 2.9 million). Earnings per share were EUR 0.19 (EUR 0.08). Return on equity was 3.2 per cent (1.8%) and return on investment was 4.0 per cent (4.9%).

The order backlog grew by 23.3 per cent and was EUR 593.7 million on 31 December 2010 (EUR 481.6 million on 31 December 2009). The major reason behind the development of the order backlog was the 41.4 per cent increase of new contracts and the principle of the recognition of revenue from developer contracting housing projects based upon delivery. The share of sold order backlog increased by 39.3 per cent to EUR 441 million (EUR 317 million on 31 December 2009). The increase was due to the amount of new projects as well as to the fact that the housing sales concentrated more on production under construction. The share of the unsold order backlog amounted to EUR 153 million (EUR 165 million on 31 December 2009).

Key figures for the Segments

Revenue

	IFRS	IFRS	change,	change,
EUR million	1-12/2010	1-12/2009	MEUR	%
Business Premises	319.5	208.0	111.5	53.6
Housing	143.1	158.6	-15.4	-9.7
International	22.3	24.0	-1.7	-7.0
Other Operations	10.3	8.7	1.6	18.9
Eliminations	-10.4	-8.8	-1.7
Group, total	484.8	390.5	94.3	24.2

Operating profit

Group, total	13.0	10.7	2.3	21.7
Eliminations	0.0	-0.3	0.3
Other Operations	-5.9	-4.7	-1.2
International	-7.5	-7.7	0.2
Housing	8.4	5.4	3.0	55.0
Business Premises	18.0	18.0	0.0	0.0
EUR million	1-12/2010	1-12/2009	MEUR	%
	IFRS	IFRS	change,	change,

Operating profit

Group, total	2.7	2.7
International	-33.5	-32.1
Housing	5.9	3.4
Business Premises	5.6	8.6
%	1-12/2010	1-12/2009
	IFRS	IFRS

Order backlog

	IFRS	IFRS	change,	change,
EUR million	12/2010	12/2009	MEUR	%
Business Premises	324.6	255.3	69.3	27.1
Housing	249.9	201.7	48.2	23.9
International	19.2	24.6	-5.4	-21.9
Group, total	593.7	481.6	112.1	23.3
- sold order backlog	441	317	125	39.3
- unsold order backlog	153	165	-12	-7.5

Earnings trends of the Segments

Business Premises

	IFRS	IFRS	change,	change,
EUR million	1–12/2010	1–12/2009	MEUR	%
Revenue	319.5	208.0	111.5	53.6
Operating profit	18.0	18.0	0.0	0.0
Operating profit, %	5.6	8.6
Order backlog	324.6	255.3	69.3	27.1

The Business Premises business area comprises SRV Toimitilat Oy's retail, office, logistics and rock construction operations and property development.

Revenue in the Business Premises business area was EUR 319.5 million (EUR 208.0 million). Operating profit was EUR 18.0 million (EUR 18.0 million), generating an operating profit margin of 5.6 per cent (8.6%). The order backlog grew by 27.1 per cent to EUR 324.6 million (EUR 255.3 million). The increase in revenue was attributable to the growth in the contracts and the order backlog.

Among the projects completed during the financial year were extension and renovation of the Stockmann Helsinki department store, the construction of the new Viikki parking garage and air raid shelter as well as the new logistics centre for Anttila Oy in Kerava. Moreover, the completed projects included the renovation of the shopping centre Forum in Jyväskylä, the first phase of Malmi Hospital in Helsinki, the renovation of Kiinteistö Oy Niittymäentie 7 for Ilmarinen Mutual Pension Insurance Company in Espoo, alteration and renovation works in the mail sorting department of Itella's postal centre in Pasila, Helsinki, as well as the repair works on the second stage of the University of Helsinki's Metsätalo Building and the adjacent service tunnel in Unioninkatu, Helsinki. The new equestrian centre Primus in Espoo, the bus depot in Kivikko, Vantaa, the renovation and building of Mercuria business school in Vantaa, and a new production building for Lassila & Tikanoja in Kerava were also completed. The construction of Vierumäki Congress & Resort Hotel was completed and handed over to Mutual Pension Insurance Company Varma.

In January, SRV signed a contract for the construction of the spa hotel Holiday Club Saimaa in Lappeenranta. In addition to the hotel, the contract includes an aqua park with a wellness area, a restaurant world and a multifunction ice arena. The spa hotel will be completed in the summer of 2011. In January, SRV and the Finnish Fair Corporation signed a contract for the heightening of the Helsinki Fair Centre's car park, expanding it by approximately 1,200 new parking spaces.

In February, Citycon Oyj chose SRV as its project management contractor for the construction and renovation of Espoontori shopping centre. The total floor area of the project is about 18,600 square metres. In February, SRV and Helsinki University Premises and Property Services signed a project management contract on the construction and renovation of the Kaisa-talo building, a shopping centre in Kaisaniemenkatu, Helsinki, which will be converted into the University's

central campus library. This 30,740 square metre project will be completed by 1 May 2012.

In June, SRV and Kesko signed the project management contract for the construction of the shopping centre Karisma to be built in the Karisto district in Lahti. SRV and Kesko have jointly developed the project and SRV will act as the main contractor in the project. The total sales area in the shopping centre is 35,000 square meters including a modern K-Citymarket and some 90 shops. The shopping centre will open for Christmas 2011.

In July, SRV and Aro-Yhtymä Oy signed a project management contract for the construction of a car dealership in Vantaa. The building will measure 18,400 gross square metres and will be completed towards the end of 2011.

In October, SRV sold the STC Viinikkala property to Pohjola Insurance Ltd. STC Viinikkala is a logistics centre developed and built by SRV with 10,000 square metres of modifiable warehouse, production and office space. The project will be completed by the end of September 2011.

In November, Holiday Club Resorts Oy and SRV agreed on the construction of holiday homes. The first Villas-apartments will be completed in the Holiday Club Saimaa spa hotel complex being built in Lappeenranta next year. As a whole, Holiday Club Saimaa is the biggest tourism project under construction in the Nordic countries.

In December, SRV and Keva (Local Government Pensions Institution) signed a contract for the construction of rental apartments to be built on Abraham Wetterintie street in the Herttoniemi district of Helsinki. Six high-rise buildings will include a total of 345 apartments, commercial premises and basement parking. The total floor area of the project totals 42,386 square metres. The project will be completed in autumn 2012.

During the financial year, a project and construction contract was signed for the construction of a logistics centre for Tapiola General Mutual Insurance Company on Tuupakantie in Vantaa. Contracts were also signed with the City of Vaasa for the construction of day-care centre Punahilkka in Vaasa, for the construction of new car service and repair premises for ScanAuto in Hämeenlinna, the renovation of the premises of the European Chemicals Agency in Annankatu, Helsinki. Moreover, SRV signed a contract with the City of Hyvinkää on the construction of new premises for the Hyvinkää town hall in the Old Wool Factory. Contracts were also signed with the Helsinki University Premises and Property Services for the completion of the renovation of the Institute of Dentistry and the renovation of the Accelerator Laboratory on the Kumpula campus, for the construction of a K-supermarket for Ruokakesko in Espoo and for the extension works of an aviation service hangar at the Helsinki-Vantaa airport.

In a completion arranged by Rakennuslehti magazine SRV's Helsinki Music Centre was elected as the best construction site in Finland in 2010. In its arguments the professional jury praised SRV's solid working methods and site management. Also the work safety at the Music Centre construction site is of the highest level. SRV has put extensive efforts into fighting grey economy, as well, and the Music Centre site has been a pilot site in implementing the SRV network register.

Housing

IFRS	IFRS	change,	change,
1–12/2010	1–12/2009	MEUR	%
143.1	158.6	-15.4	-9.7
8.4	5.4	3.0	55.0
5.9	3.4
249.9	201.7	48.2	23.9

The Housing business area comprises housing construction in the Helsinki Metropolitan Area and the neighbouring municipalities, in addition to regional business operations. Besides housing, regional business operations include commercial, business premises and logistics construction projects.

Revenue in the Housing business area amounted to EUR 143.1 million (EUR 158.6 million) in the review period and operating profit was EUR 8.4 million (EUR 5.4 million). The order backlog was EUR 249.9 million (EUR 201.7 million). The decline in revenue was attributable to the focus on developer contracting housing projects and the fact that housing sales concentrated more on production under construction. For the developer contracting housing projects SRV applies the recognition principle based upon delivery. By using the earlier percentage of completion method the revenue for the review period would have been around EUR 21.1 million higher. During the financial year construction of 543 (251) residential units was started and 201 residential units (252) were completed during the financial year. Growth in operating profit was attributable to better project results compared to previous year.

During the financial year we signed contracts worth EUR 75.7 million with external clients. Of the signed contracts, negotiation contracts amounted to EUR 19.9 million; in these contracts, SRV serves as project developer and in addition to construction attends to certain development tasks. A contract was signed with Scan-Auto for the construction of a new Scania centre in Oulu for servicing large vehicles. The project was completed before the year's end. We signed a contract with YH-Asumisoikeus Länsi Oy for the construction of 28 right-of-occupancy flats in the Vatiala district in Kangasala and 20 flats in Pirkkala. In Ylöjärvi, SRV will build two blocks of flats housing a total of 40 residential units for AVO Vuokratalot Oy. Moreover, 28 flats in terraced houses will be built for Suomen Asumisoikeus Oy in Kaarina.

Contracts worth EUR 55.8 million that were won through bidding competitions were signed. The major contracts in the Helsinki metropolitan area were for a 66-unit apartment house to be built for VVO on Agronominkatu street in Viikki, Helsinki, for a 58-unit apartment house for Asokodit in Suurpelto, Espoo and an assisted-living building for Espoon Kruunu in Kauklahti, with 62 adjacent housing units. In Paattinen, Turku, construction of a school for the city of Turku was commenced. In Tampere, an assisted-living home is being built for Kotilinna-säätiö, with 76 units.

More resources were allocated to developing contracting projects. During the review period, 543 (251) new housing units were qualified for sale to consumers and were included in the order backlog. In Helsinki, SRV will build the HITAS project Isolokki in Arabianranta (142 price and quality controlled owner-occupied flats) and Tampuriini in Kannelmäki (29-unit apartment house). In Espoo, SRV started up Saunavuori, an apartment house with 57 units in Saunalahti, and Espoon Kokki, an apartment house with 78 units in Matinkylä. Espoon Kokki will be erected next to the Iso Omena shopping centre and the new metro station to be built in Matinkylä. In Vantaa, construction of two high-rise buildings (Mortti with 38 homes and Vertti with 47 homes) was started on a plot next to the Martinlaakso train station. One apartment house and three terraced-house projects were started in Pirkanmaa: apartment house Teravaskanto in Kangasala (32 units), Pirkkalan Sinisiipi (26 units), Nokian Walborg (16 untis) and Tampereen Frida (11 units). SRV builds Sello, a 26-unit apartment house, in Kaarina as well as Kirkkoväärti, a 21-unit apartment house in Vaajakoski, Jyväskylä. The first five homes in the 20-unit terraced-house project Marjalan Saunaranta were completed in Joensuu already during the financial year.

In addition to projects that are qualified for sale, SRV has decided to start the construction of high-rise blocks in Kaarina, Lahti, Saarijärvi and in Ylöjärvi. The projects include 104 housing units. Because the projects did not reach RS-stage by the end of the year they are not included in the order backlog.

The S-Group's Kodin Terra hardware and home decor department store and ABC service station in the Kolmenkulma business estate in Nokia were completed in late spring. Major developer contracting projects under construction include Martti, Mortti and Vertti in the Martinlaakso district of Vantaa (152 units), Isolokki in Arabianranta, Helsinki (142 units) and Kokki in Matinkylä, Espoo (78 units).

Housing production in Finland

	1–12/2010	1–12/2009	change, units
Developer contracting
Start-ups	543	251	292
Sold	524	207	317
Completed	201	252	-51
Completed and unsold 1)	137	171	-34
Under construction, total 1) 2)	1,629	966	663
- negotiation and
construction contracts 1) 2)	1,024	703	321
- developer contracting 1)	605	263	342
- of which unsold 1)	284	231	53

1) at the end of the period.

2) housing contracts of SRV Business Premises Ltd

are included in the production under construction.

SRV increased significantly its housing production and at the close of the financial year SRV had a total of 1629 residential units under construction. 83 per cent of the production under construction was implemented under building contracts or they were our own production which had already been sold. During the financial year, SRV started the construction of 543 (251) developer contracting residential units. SRV sold 524 (207) housing units to consumers, most of them in projects under construction. With negotiation contracts, 116 (323) units were sold to investors. At the end of the period, 605 (263) residential units for sale to consumers were being constructed, 284 (231) of which had not been sold. There were 137 (171) completed but unsold units, 22 of which were rented at the period-end. A total of 201 (252) developer contracting residential units were completed during the review period. The most significant completed projects included apartment building Musketööri which was completed in Kartanonkoski, Vantaa in December and Rubiini with 43 units in Vallikallio, Espoo. Based on the current completion schedules, SRV estimates that a total of 465 developer contracting residential units will be completed during 2011 of which 67 units during the first quarter.

SRV is participating in the Low2No project, which aims to develop and implement a solution for the construction of low carbon or no-carbon sustainable urban environments in order to minimise energy consumption. This project is partly funded by Tekes. In addition to SRV, the participants include Sitra (the Finnish Innovation Fund), VVO Yhtymä Oyj and an international design team that was selected in a sustainable construction competition in 2009. The City of Helsinki has reserved a city block for Sitra in Jätkänsaari that will be built in line with the Low2No concept. The housing units and business premises in this block will be designed as multipurpose environments that serve changing work and life patterns, making use of innovative environment, layout and service planning.

International Operations

	IFRS	IFRS	change,	change,
EUR million	1–12/2010	1–12/2009	MEUR	%
Revenue	22.3	24.0	-1.7	-7.0
Operating profit	-7.5	-7.7	0.2
Operating profit, %	-33.5	-32.1
Order backlog	19.2	24.6	-5.4	-21.9

International Operations comprises the business activities of the SRV International subgroup in Russia and the Baltic countries.

Revenue in the International business area was EUR 22.3 million (EUR 24.0 million). Operating loss was EUR 7.5 million (a loss of EUR 7.7 million). The order backlog was EUR 19.2 million (EUR 24.6 million). The revenue level was a result of the small number of projects under construction while the activities were focused on the development of our own projects in Russia, in particular. In addition to the small number of projects under construction, operating profit was affected by the development costs of developer contracting projects and the fixed costs of business operations. Furthermore cost entries of around EUR 2.0 million were recorded. They related to projects which were completed earlier and to inventories.

Russia

The official opening ceremonies of Etmia II office and parking house project in the heart of Moscow were arranged during the financial year. More than 90 per cent of the facilities are leased and SRV is negotiating with several tenant candidates for the rest of the premises. SRV's role in the project is to act as co-owner with a 50 per cent stake and as the project management contractor.

During the review period, SRV had a particular focus on the analysis and clarification of the investment sites of VTBC-Ashmore Real Estate Partners I in Moscow. The fund primarily invests in the construction of offices, commercial premises, hotels and upscale housing in Moscow and St Petersburg. SRV's share of the investment commitments in the first phase is EUR 20 million. During the spring, Deutsche Bank announced its wishes to withdraw from its position in the General Partner company due to tightened bank control regulations. Deutsche Bank has been replaced with Ashmore Group Plc ("Ashmore"), which also became a shareholder in the General Partner company and, together with various funds it manages, a Limited Partner investor. The other investors involved in the fund are VTB Capital and the Finnish pension insurance companies Ilmarinen and Etera. VTB Capital and Ashmore act as sponsors and general partners of the fund. Their tasks include identifying investments and arranging financing for the projects. SRV acts both as an investor and project management contractor with respect to the fund, through which it expects to receive at least EUR 200 million worth of construction contracts. The fund is currently primarily analysing Elite residential sites as well as office, commercial and hotel sites in the heart of Moscow.

During the review period, SRV continued the development of the shopping centre to be built on the Baltic Pearl area in St Petersburg. SRV and Shanghai Industrial Investment Company (SIIC) established a joint project company, OOO Pearl Plaza, to develop the project. SRV's share of the joint venture is 50 per cent. SRV is responsible for the development and construction of the project. During the review period, SRV signed a project management contract with OOO Pearl Plaza for the design and development of the shopping centre. Urban Planning and Architectural Committee of St Petersburg approved the conceptual plan in November. Negotiations concerning the final investment decision were going on at the end of the year. The shopping centre is part of the Baltic Pearl development project, in which Baltic Pearl

CJSC will use a land area of over 205 hectares, located south-west of central St Petersburg, for development. This project is China's largest international investment project, apart from oil and natural gas investments. The cornerstone laying ceremony of the Baltic Pearl project was held at the end of September. Paavo Väyrynen, the Finnish Minister for Foreign Trade and Development, attended the ceremony.

In the Moscow area, construction of the electrical connection for the Mytischi shopping centre project was completed during the summer. Financing of the project has not advanced, and implementation possibilities of alternative concepts are being studied. The majority owner of the project is the Finnish real estate investment company Vicus, with a 75 per cent stake. SRV owns 25 per cent of the shopping centre project and its total investments amount to EUR 7.5 million.

At the Sheremetyevo airport in Moscow, SRV continued the renovation of the old Aeroport hotel. In St Petersburg, the renovation of some 200 rooms in the Pulkovskaya Hotel began also in October. Both hotels belong to the Wenaas Group. The projects are a continuation of the cooperation that started already in 2007.

SRV continued the development of the Septem City project which is located on a 8.5 hectare land area in the Ohta district in St Petersburg. The plans include the construction of office and retail space, as well as hotel, restaurant and entertainment premises. Moreover, facilities will be built for the IBI University. The Urban Planning and Architectural Committee of St Petersburg has approved the overall concept of the project allowing the construction of 600,000 square metres. The project will be implemented in several phases. In the first phase, a shopping centre will be built in the area. The concept development of the shopping centre is being processed and the decision concerning the final scope will be done in the near future. SRV has invested about EUR 51.8 million in acquisition of land and properties in this area; further investment in land acquisition is estimated at about EUR 8 million. At the moment, SRV owns 87.5 per cent of the project, but its ownership will decline to 77.5 per cent when all ownership arrangements have been completed according to the cooperation contract.

The development of the Eurograd logistics area in St Petersburg continued. SRV has 49 per cent ownership of the Russian company that possesses a plot of 24.9 hectares located north of St Petersburg, in the immediate vicinity of the Ring Road. Over 100,000 square metres of logistics facilities are planned for the site, to be built in several stages during the next few years. The zoning of the area for logistics has been completed.

In the city of Vyborg, the intensified marketing campaign for the apartments in the Papula residential area continued till the summer. A total of 17 housing units have been sold while 21 units remained unsold at the end of the period.

Baltic countries

Business volumes in the Baltic countries were low. In Estonia, 14 (11) residential units were sold during the period. All in all, there were 17 (31) completed but unsold units at the end of the period. In Estonia, the number of staff was adjusted to the market situation.

In Latvia, the construction of the International School of Latvia commenced in September according to the construction contract between SRV and the school which was signed in 2009. The project start-up was postponed due to a delay in the financing.

Other Operations

	IFRS	IFRS	change,	change,
EUR million	1–12/2010	1–12/2009	MEUR	%
Revenue	10.3	8.7	1.6	18.9
Operating profit	-5.9	-4.7	-1.2

Other Operations comprise mainly the SRV Group Plc and SRV Kalusto Oy businesses.

The revenue of Other Operations during the review period was EUR 10.3 million (EUR 8.7 million) and operating loss was EUR 5.9 million (a loss of EUR 4.7 million). The increase in revenue was attributable to higher operation volumes and the decrease in operating profit was attributable to increased costs used for project development.

Financing and financial position

Net operational cash flow was EUR 26.8 million negative (EUR 6.1 million in January–December 2009). The weakening of the cash flow during the review period was attributed to the increase of inventories as a result of land investments in the housing production and the start-ups of developer contracting production. The Group's inventories were EUR 338.9 million (EUR 292.2 million), the share of land areas and plot-owning companies being EUR 183.1 million (EUR 153.0 million). The Group's invested capital amounted to EUR 387.0 million (EUR 349.0 million).

At the end of the financial year, the Group's financing reserves were EUR 108.8 million, of which the Group's cash assets amounted to EUR 9.0 million and the share of committed undrawn financing reserves amounted to EUR 99.9 million. In addition, the group had committed financing commitments amounting to EUR 38.0 million. The Group's net interest-bearing liabilities were EUR 220.9 million on 31 December 2010 (EUR 179.9 million on 31 December 2009). Net financing expenses totalled EUR 5.4 million (EUR 4.2 million).

Investments in SRV's developer contracting housing projects in Finland including completed, unsold projects, total around EUR 88.5 million. SRV estimates that the completion of these projects requires another EUR 69.0 million. Undrawn housing corporate loans related to RS projects totalled EUR 74.9 million. Investments in the international business area related to unsold residential projects in Estonia amount to EUR 1.1 million, and EUR 2.7 million in Vyborg. EUR 32.4 million is invested in the Etmia office project.

Equity ratio was 35.1 per cent (41.3%). The change in the equity ratio and net liabilities was affected by the EUR 8.5 million derivative agreement signed by SRV with Nordea Bank Ab for 1,909,483 SRV Group Plc's shares which are considered equal to treasury shares held by the company as well as the increase in inventories. The Group's shareholders' equity totalled EUR 157.1 million (EUR 163.9 million on 31 December 2009). The return on investment was 4.0 per cent (4.9%) and the return on equity was 3.2 per cent (1.8%).

In its reporting SRV Group applies IFRIC 15 Agreements for the Construction of Real Estate. The recognition of developer contracting production upon delivery increases the total amount of inventories, interest bearing debts and balance sheet, thus weakening the key figures related to the financing position for its part.

Investments

The Group's investments totalled EUR 2.3 million (EUR 3.7 million) and were mainly related to the acquisition of machinery and equipment.

Unbuilt land areas, land acquisition commitments and land development agreements

			Interna
Land reserve	Business		tional
31.12.2010	Premises	Housing	Operations	Total
Unbuilt land areas and land acquisition commit ments
Building rights*, m2	206,000	284,000	861,000	1,351,000
Land development agreements
Building rights*, m2	481,000	369,000	152,000	1,002,000

* Building rights also include the estimated building rights/construction volume of unzoned land reserves and land areas covered by agreements in projects that are wholly or partly owned by SRV.

During the financial year, SRV bought a total of 10,000 square metres of building rights in the Matinkylä district from the City of Espoo. Furthermore, the company agreed with the City of Espoo on the purchase of 4,000 square metres in Matinkylä. SRV bought 7,000 square metres of building rights in the Kaarela area in the district of Kannelmäki in Helsinki. Moreover, the lease of 12,000 square metres of building rights in a HITAS project in the Arabianranta district of Helsinki was transferred from VVO to SRV.

On 14 June 2010, The Trade and Competitiveness Division of the Espoo City Board decided to make a reservation for SRV, Mutual Pension Insurance Company Varma and SATO Oyj regarding the future Niittykumpu metro station and neighbouring areas in the intersection of Merituulentie and Haukilahdenkatu for planning of the metro station and related use of land. The intention is to plan and build residential and commercial buildings in the area. The preliminary plan includes building rights of about 150,000 m2 of floor area.

On 11 October 2010, Siemens Osakeyhtiö sold its plots and office building in the Perkkaa area of Espoo to Kiinteistö Oy Perkkaantalo, a joint venture of SRV, SATO Oyj and Ilmarinen Mutual Pension Insurance Company. City plan alterations to designate new block areas for apartment houses are pending. The joint venture will start developing the area in cooperation with the City of Espoo. The target for residential floor area is 110,000–120,000 m2 .

On 4 October 2010, based on competition, the Town Council of Mikkeli decided to approve SRV as their partner to develop market and build the Itäportti area in Visulahti, Mikkeli. The aim of the town and SRV is to develop the area into a competitive commercial area with valid zoned building right for 72,500 floor square metres.

Group structure

SRV is Finland's leading project management contractor that builds and develops commercial and business premises, residential units as well as infrastructure and logistics projects. Apart from Finland, the company operates in Russia and the Baltic countries. SRV Group Plc, the Group's parent company, is responsible for the Group's management, treasury, finance and administrative functions. The Property Development and Building Systems units support and serve all of the Group's business operations.

SRV's business areas are Business Premises, Housing, International Operations, and Other Operations. The Business Premises business area comprises the operations of SRV Toimitilat Oy. Housing comprises the operations of SRV Asunnot Oy and one regional subsidiary. International Operations comprises the business activities in Russia and the Baltic countries. Other Operations consist primarily of the SRV Group Plc and SRV Kalusto Oy businesses.

Changes in Group structure

SRV decided to merge its Business Premises and Housing and Regional business areas in Finland as from 1 January 2011. The aim is that the juridical changes are finalised by the end of March 2011.

After the merger, SRV's business operations will be divided into two business areas: Operations in Finland and International Operations. In addition, the company will report Other operations in accordance with the present practice. In its financial reporting, the company will give more detailed information on Business Premises construction and Housing construction within the business segments.

The CEO of the company resulting from the merger, SRV Construction Ltd, is Juha Pekka Ojala. He s in charge of the Business Premises and Housing business areas. SRV Construction ltd has regional units in Turku, Tampere, Jyväskylä, Oulu, Lappeenranta and Joensuu.

Changes in the Group management

Jukka Hienonen started as CEO of the Group on 1 August 2010. Hannu Linnoinen. Senior Executive Vice President, CFO, acted as CEO during 1 January–31 July 2010. SRV's Country Manager (Russia) Jussi Kuutsa was nominated as member of SRV's Corporate Executive Team as of 3 November 2010. SRV's Russian business operations were divided into two segments. Jussi Kuutsa is in charge of operational functions in Russia, and Veli-Matti Kullas is in charge of project development. SRV's Executive Vice President, Business Premises, Juha Pekka Ojala was appointed SRV Group's Senior Executive Vice President in charge of business premises and housing in Finland as of 14 December 2010. Jussi Ollila, member of the Corporate Executive Team, Senior Vice President, Communications and Marketing, joined another company outside the Group as of 1 September 2010. Taneli Hassinen was appointed Group's Senior Vice President, Communications and Marketing and member of the Corporate Executive Team at SRV Group Plc as of 15 March 2011.

Personnel

SRV had an average payroll of 794 (776) employees, of whom 566 (544) were white-collar. The parent company had an average staff of 47 (53) white-collar employees. At the close of the financial year, the Group had 792 (766) employees, of whom 47 (47) were employed by the parent company. An average of 16 per cent (17) of the employees work in subsidiaries and representative offices abroad. At the end of the financial year, SRV had a total of 17 (18) trainees working in the Group's operations in Finland (in summer jobs and in work training as well as students working on their thesis or diploma). The salaries and compensations paid during the financial year totalled EUR 39.0 million (EUR 35.8 million).

In 2010, SRV launched an extensive training programme for leadership and interaction skills. More than 100 supervisors from all SRV locations, both offices and the work site organisation, are participating in the programme. Our partner is JTO School of Management. The training programme will continue in 2011.

Personnel by business area

Group, total	792	767	100.0
Other Operations	80	81	10.1
International	153	182	19.3
Housing	222	215	28.0
Business Premises	337	289	42.6
	31.12.2010	31.12.2009	personnel, 31.12.2010, %
			Share of Group

The share-based incentive plan for 2010 includes about 70 employees and the reward is based mainly on consolidated and partly on business area performance. The reward for the earning period 2010 is 56,869 SRV Group Plc shares. In addition, a sum of money corresponding to this number of shares is paid for tax withholding purposes.

Outlook for construction

During the review period, the world economy continued to grow. The recovery is unstable and the situation continues to be challenging in the property and construction markets. Expectations for increases in interest rates have been postponed in Europe and the United States due to the slow start of the recovery.

The total number of building permits increased during the review period due to a sharp rise in permits for residential buildings while the number of permits for commercial and office buildings declined. Due to revived residential construction, there have been delays in the availability of certain building materials. On monthly level, the construction costs have shown an upward trend.

Strong consumer confidence in the housing markets and the low interest level has sustained demand. The volume of new start-ups in developer contracting housing projects is still growing. Weak employment trends will have a negative short-term effect on the housing markets. In the longer term, trends such as migration to population growth centres and the smaller size of households will increase the need for housing construction.

New start-ups in commercial and office construction continued to decrease during the period. Vacancy rates in office premises in particular have reached a high level and construction is slow. The near future outlook for commercial and logistics construction is somewhat better.

The slight growth in renovations is expected to continue in 2010. The cutback in civil engineering is predicted to be over at the end of the year.

The economic situation in the Baltic countries has remained weak. The Estonian economy is predicted to grow during the ongoing year. In Latvia and Lithuania, the growth in total production is meagre. Construction and the property markets are slow, still. In the short term, the economic situation in the Baltic countries will continue to be challenging.

The Russian economy continues to be challenging. The Russian national economy has revived due to rising oil prices, inflation has abated and interest rates have declined while the scarce availability of financing limits growth opportunities. In 2010, Russia's total production is expected to grow by 4–5 per cent.

Risks, risk management and corporate governance

General economic trends and changes in customers' operating environments have an immediate effect on the construction and property markets. A change in the general interest level has a direct impact on both SRV's cash flow from operating activities and financing costs. The general economic trend is upward but unstable. Demand for property investments has remained weak. Interest rates are low but, compared to pre-recession times, the availability of credit from banks is lower and loan margins are clearly higher. The global financial crisis is making it more difficult for SRV's clients to obtain financing and is hampering the functioning of the property markets. Property values face pressures and the number of property transactions and, in particular, new large-scale project start-ups have decreased due to difficulties in securing financing. The financial crisis adds SRV's risk to be forced to tie up capital in projects longer than intended.

SRV's revenue is generated by construction projects, and the company's result depends on the profitability of individual projects as well as their progress. Fierce competition for new orders in the construction sector may affect the volume and profitability of SRV's new order backlog. In developer contracting projects, recognition of revenue is based mainly on the Completed Contract method. Revenue recognition depends on the percentage of sold premises in delivered projects. Delivery schedule of developer contracting projects can affect essentially on the development of revenue and profit for the financial year and the quarters. Project sales are affected by factors such as the availability of financing for the buyer and occupancy rate. When sales are delayed, the recognition of revenue and operating profit is delayed correspondingly. Postponed start-ups of developer contracting projects increase the level of development expenses, which are recorded as costs. The slowdown in housing sales will increase sales and marketing costs and interest expenses in developer contracting housing production. After a rapid decline, housing sales have recovered in Finland while remaining virtually at a standstill in Estonia.

Construction is subject to significant cost risks relating to subcontracting and deliveries, and the control of these underlines the need for long-term planning. A weak economic cycle increases financial risks relating to subcontractors. SRV's contracting model requires skilled and competent personnel. Warranty and liability obligations related to construction can span up to ten years. Construction costs in many materials are rising. The swift growth in residential construction has hampered the availability of purchases in adjusted production chains. SRV is involved in some arbitration and legal proceedings. SRV's management believes that the cases or their outcome do not have a significant impact on SRV's financial result.

Besides land acquisition risks, property projects face other challenges, such as those related to the outcome of zoning, soil conditions, financing, commercialisation of projects, partners, and the geographical location and type of project. In accordance with its strategy, SRV has focused on developer contracting projects and has increased its land acquisition in Finland and Russia, in particular. The crisis in the international financial market has substantially weakened the availability of financing in property projects for property development and investments. It has also put project start-ups on hold.

The financial risks connected with SRV's operations are interest rate, currency, liquidity and contractual party risks, which are discussed in more detail in the Notes to the Financial Statements. Currency risks are divided into transaction risks and translation risks. Transaction risks are related to currency-denominated business and financing cash flows. The accounting effects of translation risks are shown in the translation differences of equity in the consolidated figures in investments made in foreign subsidiaries with some other operating currency than euro.

Liquidity risks may have an effect on the Group's earnings and cash flow if the Group is unable to ensure sufficient financing for its operations. SRV maintains adequate liquidity by means of efficient management of cash flows and solutions linked to it, such as binding lines of credit that are valid until further notice. The company has a longterm liquidity arrangement of EUR 100 million, of which EUR 55 million will mature in December 2012 and EUR 45 million in December 2013. The company's financing agreements contain customary terms and conditions. The financial terms and conditions of the agreements concern the equity ratio.

The Group's risk management is carried out in line with the Group's

operations system and control is exercised in accordance with the Group strategy approved by the Board of Directors of the Group's parent company. SRV also makes every effort to cover operational risks by means of insurance and contractual terms.

The 2010 annual report including Financial Statements, Report of the Board of Directors and Corporate Governance Statement is available in the company's website at www.srv.fi on week 8/2011.

Environmental issues

The Group's aim is to minimise the harmful environmental impacts and to contribute to sustainable development in built environment. SRV wants to be a forerunner also in development and construction of attractive living and working environments that encourage to ecologic way of life.

In 2010, SRV together with Sitra and VVO launched a sustainable development design competition for the implementation of a Low2No city block to be built in Jätkäsaari, Helsinki. SRV arranged also an extensive design competition together with VTT and Orimattila town to find ecologically, financially and socially sustainable solutions for a future town. Several other projects are under construction or being developed with special focus on minimising the environmental impacts.

In 2010, SRV's personnel's awareness of environment was enhanced through training and information and by updating model documents. In autumn 2010 SRV joined the Green Building Council Finland which fosters sustainable development practices in construction and real estate business.

Corporate governance and resolutions of general meetings

The Annual General Meeting was held on 16 March 2010. The AGM adopted the financial statements for 2009 and granted release from liability to the members of the Board of Directors and the Presidents and CEOs. A dividend of EUR 0.12 per share was declared. Mr Ilpo Kokkila was elected chairman of the Board of Directors and Mr Arto Hiltunen, Mr Timo Kokkila, Mr Lasse Kurkilahti, Mr Matti Mustaniemi and Mr Ilkka Salonen were elected to seats on the Board. The firm of public accountants Ernst & Young Oy was elected as the company's auditor. Mikko Rytilahti, authorised public accountant, will act as the principal auditor.

The general meeting authorised the Board of Directors to decide on the acquisition of the company's own shares, using the company's unrestricted equity. The Board was authorised to acquire a maximum of 3,676,846 own shares, however, in such a manner that the number of shares acquired on the basis of this authorisation when combined with the shares already owned by the company and its subsidiaries, does not at any given time exceed 3,676,846 shares, or 10 per cent of all shares of the company. Based on this authorisation, the Board may acquire a maximum of 3,676,846 shares of the company in public trading arranged by Nasdaq OMX Helsinki Oy at a market price valid at the moment of acquisition, and a maximum of 2,400,000 shares of the company in public trading arranged by Nasdaq OMX Helsinki Oy or otherwise for a maximum price of EUR 4.45 per share, the maximum being, however, 3,676,846 shares. The aforementioned authorisations include the right to acquire own shares otherwise than in proportion to the holdings of the shareholders. These authorisations will remain in force for 18 months from the decision of the meeting.

The general meeting authorised the Board of Directors to decide on the issue of new shares or the transfer of treasury shares against payment or without consideration. This authorisation includes the right to issue new shares or to transfer the treasury shares in deviation from the shareholders' pre-emptive subscription right under the terms of the Companies Act. This authorisation is in force for two years from the decision of the meeting.

In its organisational meeting on 16 March 2010, the Board of Directors elected Lasse Kurkilahti vice chairman of the Board, Matti Mustaniemi chairman of the Audit Committee, Lasse Kurkilahti and Timo Kokkila members of the Audit Committee, Arto Hiltunen and Ilkka Salonen members of the Nomination and Remuneration Committee and Ilpo Kokkila chairman of the Nomination and Remuneration Committee.

Shares and shareholders

SRV Group Plc's share capital is EUR 3,062,520. The share has no nominal value and the number of shares outstanding is 36,768,468. The company has one class of shares. SRV had a total of 5,624 shareholders on 31 December 2010.

The company received six flagging notifications during the financial year Bank AB (publ) announced that it had bought 1,909,483 SRV Group Plc shares, increasing Nordea Group's total holding in SRV to 5.28 per cent. On 17 March 2010, Nordea Bank Suomi Oyj announced that it had purchased the above-mentioned shares from Nordea Bank AB (publ), after which the total holding of Nordea Group in SRV was 5.28 per cent. On 17 May 2010 Nordea Bank AB (publ) announced that it had bought the above-mentioned shares, the holding of Nordea Group being 5.27%. The flagging notifications are related to a futures contract between Nordea and SRV. Upon termination of the contract, the shares will be sold and Nordea Group's holding in SRV will fall to below 1/20. On 20 December 2010, Timo Kokkila announced that his portion of ownership had increased to 12.30 per cent (earlier 0.0%) and that his ownership had increased to 4,522,288 shares (5,000 shares). On 20 December 2010, Ilpo Kokkila announced that his portion of ownership had decreased to 38.65 per cent (50.94%) and that his ownership had decreased to 14,212,841 shares (18,730,129 shares).

The share closing price at OMX Helsinki at the end of the financial year was EUR 6.63 (EUR 5.89 on 31 December 2009). The highest share price in the review period was EUR 7.14 and the lowest was EUR 5.50. The change in the all-share index of the Helsinki Stock Exchange (OMX Helsinki) during the same period was 16.2 per cent and the OMX Industrial and Services index 46.0 per cent.

At the end of the financial year, the company had a market capitalisation of EUR 224.8 million, excluding the Group's own shares. About 12.1 million shares were traded during the financial year and the trade volume was EUR 71.3 million.

On 5 January 2010, SRV implemented the agreement signed with Eero Heliövaara on 11 August 2009, and Nordea Bank AB (publ) acquired Heliövaara's shares for a per-share price of EUR 4.45. In the same connection, SRV signed an EUR 8.5 million derivative agreement with Nordea for 1,909,483 company shares, according to which the shares will be sold to SRV or an entity named by SRV. These shares are considered equal to treasury shares held by the company. The derivative agreement will mature in March 2011.

At the end of the financial year, SRV Group Plc had 2,867,399 of SRV Group Plc's shares taking account of the derivative contract concluded with Nordea Bank AB (7.8 per cent of the total number of the company's shares and combined number of votes). On 16 February 2011, the Group had 2,867,339 shares (7.8 per cent of the total number of the company's shares and combined number of votes).

Financial targets

As SRV's medium-term aim, the Board of Directors has set the achievement of annual average growth of approximately 15 per cent in Group revenue and annual average growth of over 30 per cent in revenue from International Operations. SRV aims to increase the level of operating profit and, in the medium to long term, to achieve an operating margin of 8 per cent. In addition, the company aims to maintain an equity ratio of over 30 per cent.

The international economic and financial crisis has hampered the growth outlook for business operations. Realisation of the sales of developer contracting projects has a substantial effect on the development of profitability. In the current economic conditions, the set financial targets cannot be met. The company is endeavouring to maintain profitability by rationalising operations.

events after the end of the financial year

In January, SRV and Pearl Plaza LLC, the joint venture of SRV and Shanghai Industrial Investment (Holdings) Co Ltd, concluded the investment decision on construction of the first phase of the shopping centre in Saint Petersburg, Russia and signed with SRV Project Management contract for the construction works of the first phase of the project. The PM contract is worth about 100 million Euros. The value of investment is about 130 million Euros. Financing of the project will come mainly from China. SRV will invest approximately 20 Million Euros in the implementation of the first phase. SRV is responsible for commercial development and leasing of the premises. The scope of the first phase of Pearl Plaza SC is about 86,500 m2 , with GLA about 46,500 m2 . Pearl Plaza has signed a letter of intent with the Finnish Prisma supermarket operator, who will lease around 7,600 square meters from the shopping centre for a hypermarket.

outlook for 2011

Revenue and profit before taxes in 2011 are expected to exceed the previous year's level.

Proposal for the distribution of profits

The parent company's distributable funds on 31 Dec 2010 are EUR 131,871,340.63 of which net profit for the financial year is EUR 2,810,343.35

The Board of Directors proposes to the Annual General Meeting that distributable funds be disposed of as follows:

A dividend of EUR 0.12 per share be paid to shareholders, or	EUR 4,412,216.16
The amount to be transferred to shareholders' equity	EUR 127,459,124.47

No material changes have taken place in the company's financial position after the close of the financial year. The company's liquidity is good and, in the view of the Board of Directors, the proposed dividend payout does not compromise the company's solvency.

Espoo, 16 February 2011

Board of Directors

KEY FINANCIAL INDICATORS

		2010	2009	2008	2007	2006***
Revenue	EUR million	484.8	390.5	547.1	544.8	479.5
Operating profit	EUR million	13.0	10.7	34.8	12.2	24.6
Operating profit, % of revenue	%	2.7	2.7	6.4	2.2	5.1
Profit before extraordinary items	EUR million	7.6	6.5	25.6	8.7	20.7
Profit before extraordinary items, % of revenue	%	1.6	1.7	4.7	1.6	4.3
Profit before taxes	EUR million	7.6	6.5	25.6	8.7	20.7
Profit before taxes, % of revenue	%	1.6	1.7	4.7	1.6	4.3
Net profit for the financial year attributable to equity holders of the parent company	EUR million	6.4	2.9	17.1	5.2	14.5
Return on equity, %	%	3.2	1.8	10.3	5.0	27.3
Return on investment, %	%	4.0	4.9	13.4	8.1	15.9
Equity ratio, %	%	35.1	41.3	40.9	53.8	31.7
Property, plant and equipment investments	EUR million	2.3	3.7	16.8	5.4	3.3
Property, plant and equipment investments, % of revenue	%	0.5	0.9	3.1	1.0	0.7
Order backlog	EUR million	593.7	481.6	460.8	545.2	453.7
New agreements	EUR million	363.6	396.1	399.1	568.3	568.7
Personnel on average		794	776	871	761	668
Invested capital	EUR million	387.0	349.0	340.8	226.2	141.7
Net interest-bearing debt	EUR million	220.9	179.9	171.5	48.6	64.6
Net gearing ratio, %	%	140.6	109.8	103.4	31.1	103.9
Earnings per share, share issue adjusted *)	EUR	0.19	0.08	0.47	0.16	0.56
Equity per share, share issue adjusted *)	EUR	4.55	4.48	4.52	4.16	2.22
Dividend per share, share issue adjusted **)	EUR	0.12	0.12	0.12	0.12	0.12
Dividend payout ratio, %	%	63.2	150.0	25.5	75.0	21.4
Dividend yield, %	%	1.8	2.0	3.5	2.4	-
Price per earnings ratio		34.9	73.6	7.4	31.4	-
Share price development
Share price at the end of the period	EUR	6.63	5.89	3.47	5.02	-
Average share price	EUR	6.42	4.06	5.05	8.40	-
Lowest share price	EUR	5.50	2.75	2.82	4.72	-
Highest share price	EUR	7.14	5.97	6.60	10.79	-
Market capitalisation at the end of the period	EUR million	224.8	210.7	125.7	184.6	-
Trading volume	1,000	12,114	8,309	13,543	22,514	-
Trading volume, %	%	35.7	23.1	37.1	68.8	-
Weighted average number of shares outstanding	1,000	33,923	35,999	36,526	32,703	26,064
Number of shares outstanding at the end of the period	1,000	33,901	35,768	36,210	36,768	26,064

*) The Extraordinary General Meeting of SRV Group Plc decided on 2 April 2007 to increase the number of shares of SRV Group Plc twenty fold (split). Before the change in nominal value the number of shares was 1,303,200 and after the change the number of shares was 26,064,000. SRV Group Plc arranged Initial Public Offering in June 2007. In the Offering 13,000,000 shares were subscribed. After the Offering the number of shares was 39,064,000. The plan to merge SRV Henkilöstö Oy into SRV Group Plc was executed on 28 September 2007. At the same time 10,216,468 new shares of SRV Group Plc were issued without raising the share capital. In connection with the merger SRV Group Plc received the 12,512,000 shares held by SRV Henkilöstö Oy. After the merger the number of shares was 36,768,468.

**) The Board of Directors' dividend proposal for 2009.

***) Figures for the financial year 2006 is not adjusted in accordance with IFRIC 15.

CALCULATION OF KEY FIGURES

	Net interest-bearing debt
Net gearing ratio, %	= Total equity
	Profit before taxes – income taxes
Return on equity, %	= Total equity, average	x 100
	Profit before taxes + interest and other financial expenses
Return on investment, %	= Invested capital, average	x 100
	Total equity =	x 100
Equity ratio, %	Total assets – advances received
Invested capital	Total assets – non-interest bearing debt – deferred tax liabilities – provisions =
Net interest bearing debt	Interest bearing debt – cash and cash equivalents =
	Net profit for the financial year attributable to equity holders of the parent company
Earnings per share, share issue adjusted	= Weighted average number of shares outstanding
Equity per share, share issue adjusted	Equity attributable to equity holders of the parent company =
	Number of shares outstanding at the end of the period, share issue adjusted
Price per earnings ratio	Share price at the end of the period =
	Earnings per share, share issue adjusted
Dividend payout ratio, %	Dividend per share, share issue adjusted =	x 100
	Earnings per share, share issue adjusted
Dividend yield, %	Dividend per share, share issue adjusted =	x 100
	Share price at the end of the period, share issue adjusted
Average share price	Number of shares traded in euros during the period =
	Number of shares traded during the period
Market capitalisation at the end of the period	Number of shares outstanding at the end of the period x share price = at the end of the period
Trading volume	Number of shares traded during the period and in relation to the weighted average = number of shares outstanding

SHARES AND SHAREHOLDERS

hare price trend and trading of shares

The shares of SRV Group Plc are quoted on the OMX Nordic Exchange. The trading with SRV Group Plc's shares (SRV1V) started on the Main list of OMX on 15 June 2007. During 2010 the highest price was EUR 7.14 and the lowest price EUR 5.50. The average share price for 2010 was EUR 6.42 and the closing price EUR 6.63 giving the company a market capitalisation of EUR 224.8 million as of 31 December 2010. 12.1 million shares were traded in OMX which corresponds to 35.7% of the weighted average number of SRV shares outstanding. The trading value of the shares was EUR 71.3 million.

The authorisations of the Board of Directors

The Board of Directors of SRV Group Plc has neither valid authorisations to raise the share capital, issue bonds with warrants or convertible bonds. The Board of Directors has valid authorisation to buy and sell own shares (Note 23).

Management shareholding

The Members of the Board of SRV Group Plc as well as the President and CEO and the Deputy CEO owned directly a total of 14,059,666 shares on 31 January 2011 which corresponds to 38.2% of SRV shares and voting rights. In addition to the direct ownership Ilpo Kokkila owned SRV shares also through Kolpi Investments Oy and Matti Mustaniemi through Petromaa Oy.

Shareholders on

31 January 2011

		Holding and
	Number of	voting rights,
Shareholder	shares	%
Kokkila Ilpo	9,034,712	24.6
Kolpi Investments Oy	5,178,129	14.1
Kokkila Timo	4,522,288	12.3
Srv Yhtiöt Oyj	957,916	2.6
Fondita Nordic Micro Cap	900,000	2.4
Valtion Eläkerahasto	700,000	1.9
OP-Suomi Arvo	687,000	1.9
Linnoinen Hannu	615,566	1.7
Keskinäinen Työeläkevakuutusyhtiö Varma	430,000	1.2
OP-Suomi Pienyhtiöt	420,185	1.1
Nieminen Timo	418,266	1.1
Alfred Berg Finland Sijoitusrahasto	397,237	1.1
Keskinäinen Eläkevakuutusyhtiö Etera	388,385	1.1
Sundholm Göran	323,906	0.9
Stiftelsen För Åbo Akademi	300,000	0.8
Keskinäinen Eläkevakuutusyhtiö Ilmarinen	225,000	0.6
Sijoitusrahasto Taaleritehdas ArvoMarkka	164,500	0.4
Alfred Berg Small Cap Finland	155,000	0.4
Nordea Suomi erikoissijoitusrahasto	151,450	0.4
Säästöpankki Kotimaa-Sijoitusrahasto	150,000	0.4
20 largest shareholders	26,119,540	71.0
Nominee registration	2,746,858	7.5
Other	7,902,070	21.5
Total number of shares	36,768,468	100.0

Breakdown of share ownership on 31 January 2011 By number of shares owned

	Number of share	% of share	Number of	% of
Number of shares	holders	holders	shares	shares
1–100	611	10.7	41,662	0.1
101–500	3,363	58.9	756,911	2.1
501–1,000	743	13.0	611,892	1.7
1,001–5,000	745	13.0	1,779,240	4.8
5,001–10,000	91	1.6	632,311	1.7
10,001–50,000	120	2.1	2,446,549	6.7
50,001–100,000	9	0.2	677,564	1.8
100,001–500,000	20	0.4	4,504,315	12.3
over 500,000	10	0.2	25,318,024	68.9
Total	5,712		100.0 36,768,468	100.0
of which nominee
registrations	6	0.1	2,746,858	7.5

By shareholder category

	% of shares
Corporations	20.7
Financial and insurance institutions	17.6
Non-profit organisations	2.0
Public institutions	5.3
Households	54.2
Non-Finnish shareholders	0.2
	100.0

Consolidated Financial Statements, IFRS

CONSOLIDATED INCOME STATEMENT

EUR 1,000 Note	2010	2009
Revenue	484,796	390,478
Other operating income 5	3,248	2,594
Change in inventories of finished goods and work in progress	29,745	-10,317
Use of materials and services	-437,828	-313,477
Employee benefit expenses 8	-49,616	-44,503
Depreciation and impairments 7	-3,517	-3,678
Other operating expenses 6	-13,801	-10,394
Operating profit	13,026	10,703
Financial income 10	2,136	6,037
Financial expenses 10	-7,538	-10,198
Financial income and expenses, total	-5,402	-4,160
Profit before taxes	7,624	6,542
Income taxes 11	-2,460	-3,622
Net profit for the financial year	5,164	2,920
Attributable to
Equity holders of the parent company	6,385	2,882
Minority interest	-1,221	38
Earnings per share calculated on the profit attributable to equity holders of the parent company (undiluted and diluted) 12	0.19	0.08

STATEMENT OF COMPREHENSIVE INCOME

EUR 1,000	Note	2010	2009
Net profit for the financial year		5,164	2,920
Other comprehensive income:
Gains and losses arising from translating the financial statements of a foreign operation		-14	-30
Gains and losses on remeasuring available-for-sale financial assets		75	0
Income tax relating to components of other comprehensive income		-16	8
Other comprehensive income for the year, net of tax		45	-22
Total comprehensive income for the year		5,209	2,898
Attributable to
Equity holders of the parent company		6,430	2,860
Minority interest		-1,221	38
Earnings per share calculated on the profit attributable to equity holders of the parent company (undiluted and diluted)	12	0.19	0.08

CONSOLIDATED BALANCE SHEET

EUR 1,000	Note	2010	2009	1 Jan 2009
ASSETS
Non-current assets
Property, plant and equipment	14	13,978	16,265	18,986
Goodwill	15	1,734	1,734	1,734
Other intangible assets	15	370	453	537
Other financial assets	16, 17	5,177	4,801	4,266
Receivables	16, 18	21,930	16,197	6,601
Deferred tax assets	19	5,522	2,281	1,944
Non-current assets, total		48,710	41,731	34,066
Current assets
Inventories	20	338,928	292,205	300,224
Trade and other receivables	16, 21	81,891	76,905	85,849
Current tax receivables		1,545	1,905	5,082
Cash and cash equivalents	22	8,961	5,217	3,372
Current assets, total		431,325	376,233	394,526
ASSETS TOTAL		480,035	417,964	428,593
EQUITY AND LIA BILITIES
Equity attributable to equity holders of the parent company
Share capital	23	3,063	3,063	3,063
Share premium reserve	23	0	0	0
Invested free equity fund	23	87,768	87,338	87,338
Translation differences		-113	-99	-69
Other reserves		0	-75	-75
Retained earnings		63,657	69,906	73,388
Equity attributable to equity holders of the parent company, total		154,375	160,133	163,645
Minority interest		2,740	3,758	2,226
Equity, total		157,115	163,891	165,872
Non-current liabilities
Deferred tax liabilities	19	841	532	272
Provisions	24	4,217	4,771	5,571
Interest-bearing liabilities	16, 25	78,761	96,871	71,844
Other liabilities	16, 26	1,303	764	390
Non-current liabilities, total		85,122	102,938	78,077
Current liabilities
Trade and other payables	16, 26	79,696	56,439	69,793
Current tax payable		3,439	2,626	7,990
Provisions	24	3,529	3,837	3,809
Interest-bearing liabilities	16, 25	151,134	88,233	103,052
Current liabilities, total		237,798	151,134	184,644
Liabilities, total		322,921	254,073	262,721
EQUITY AND LIA BILITIES , TOTAL		480,035	417,964	428,593

CONSOLIDATED CASH FLOW STATEMENT

EUR 1,000	Note 2010	2009
Cash flow from operating activities
Net profit for the financial year	5,164	2,920
Adjustments:
Depreciation and impairments	3,517	3,678
Non-cash transactions	30 639	2,657
Financial income and expenses	5,402	4,160
Capital gains on sale of tangible and intangible assets	-26	-11
Income taxes	2,460	3,622
Adjustments, total	11,992	14,107
Changes in working capital:
Change in loan receivables	1,106	-13,459
Change in trade and other receivables	-10,599	17,703
Change in inventories	-46,383	9,985
Change in trade and other payables	22,855	-12,292
Changes in working capital, total	-33,021	1,937
Interest paid	-7,700	-12,667
Interest received	847	5,667
Dividends received	99	0
Income taxes paid	-4,217	-5,882
Net cash from operating activities	-26,836	6,082
Cash flow from investing activities
Acquisition of subsidiaries, net of cash	-330	-2,290
Property, plant and equipment	-1,513	-814
Intangible assets	-57	-70
Other financial assets	-428	-536
Sale of property, plant and equipment and intangible assets	150	29
Sale of financial assets	1	1
Net cash used in investing activities	-2,177	-3,680
Cash flow from financing activities
Proceeds from loans	15,407	19,625
Repayments of loans	-6,086	-22,227
Change in loan receivables	0	0
Change in housing corporation loans	-2,170	-9,247
Change in credit limits	38,199	17,454
Purchase of treasury shares	-8,530	-1,772
Dividends paid	-4,063	-4,389
Net cash from financing activities	32,757	-556
Net change in cash and cash equivalents	3,744	1,846
Cash and cash equivalents at the beginning of financial year	5,217	3,372
Cash and cash equivalents at the end of financial year	8,961	5,217
Gross investments	-2,327	-3,711

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

EUR 1,000				Equity attributable to equity holders of the parent company
	Share capital	Share pre mium reserve	Invested free equity fund	Translation differences	Fair value reserve	Retained earnings	Total	Minority interest	Equity Total
Equity, total, 1 Jan 2009 (before changing in accounting policy)	3,063	0	87,338	-99	-75	70,083	160,310	3,758	164,068
Changing in accounting policy	0	0	0	30	0	3,305	3,335	-1,531	1,804
Equity, total, 1 Jan 2009 (after changing in accounting policy)	3,063	0	87,338	-69	-75	73,388	163,645	2,226	165,872
Total income and expenses for the financial year	0	0	0	0	0	2,882	2,882
Dividends paid	-	-	-	-	-	-4,344	-4,344
Share based incentive plan	-	-	-	-	-	9	9
Purchase and cancellation of treasury shares	-	-	-	-	-	-1,772	-1,772
Other changes	-	-	-	-30	-	-258	-288
Equity, total, 31 Dec 2009	3,063	0	87,338	-99	-75	69,906	160,133	3,758	163,891
Equity, total, 1 Jan 2010	3,063	0	87,338	-99	-75	69,906	160,133	3,758	163,891
Total income and expenses
for the financial year	0	0	0	-14	75	6,385	6,446
Dividends paid	-	-	-	-	-	-4,063	-4,063
Share based incentive plan	-	-	-	-	-	320	320
Purchase and cancellation of treasury shares	-	-	429	-	-	-8,530	-8,101
Other changes	-	-	-	-	-	-360	-360
Equity, total, 31 Dec 2010	3,063	0	87,767	-113	0	63,658	154,375	2,740	157,115

Notes to the Consolidated Financial Statements

Description of operations

SRV Group Plc and its subsidiaries (the SRV Group) is a leading Finnish project management contractor that constructs and develops commercial and Business premises, residential housing as well as industrial and logistics facilities in Finland, Baltic countries and Russia. In line with the Group's strategy, operations are organised into three business areas: Business Premises, Housing, and International Operations. The main operational companies are SRV Toimitilat Ltd, SRV Asunnot Ltd, SRV Baltia Ltd and SRV Russia Ltd. The Business Premises business area comprises SRV Toimitilat Ltd's retail, office, logistics and rock construction operations and property development. The Housing business area comprises housing construction in the Helsinki Metropolitan Area and the neighbouring municipalities as well as the operations of the regional subsidiaries. Besides housing, the regional business operations include commercial, business premises and logistics construction projects. International Operations comprises the business activities of the SRV International subgroup in Russia and the Baltic countries. SRV Group Plc's Project Development unit and Group Administration support and serve all the Group's operations.

The Group's parent company, SRV Group Plc (the Company), is a Finnish public limited company which is domiciled in Espoo, Finland. The Company's registered address is Niittytaival 13, 02200 Espoo.

The Board of Directors has approved these consolidated financial statements for issue on 16 February 2011.

Accounting policies

Basis of preparation

The consolidated financial statements have been prepared on 31 December 2009 in accordance with IFRS (International Financial Reporting Standards). International Financial Reporting Standards refer to the standards and their interpretations issued and approved for application within the EU in accordance with the procedure prescribed in EU regulation (EC) 1606/2002. The financial statements are presented in thousands of euros unless otherwise stated.

The consolidated financial statements have been prepared based on a historical cost basis, except for available-for-sale investments, financial assets and liabilities measured at fair value through income statement and derivative contracts measured at fair value as well as share-based payments which are measured at fair value.

Application of new standards, amendments and interpretations

The following standards, amendments and interpretations have been applied as from the accounting period beginning on 1 January 2010:

· IAS 27 Consolidated and Separate Financial Statements. According to the revised standard, the changes in the ownership interest of a subsidiary that does not result in loss of control are recognized in equity. Losses incurred by the subsidiary will be allocated to the non-controlling interest even if the losses exceed the non-controlling equity investment in the subsidiary.

· IFRIC 15 Agreements for the Construction of Real Estate. This interpretation concerns the recognition of revenue from developer contracting projects. The interpretation specifies whether revenue from a construction project should be recognised on a percentage of completion basis or upon delivery. The adoption of the interpretation primarily affects the recognition of revenue from SRV Group's developer contracting housing projects. The Group previously recognised revenue from developer contracting housing projects on a percentage of completion basis. Under the new interpretation, revenue will from now on mainly be recognised on the basis of project delivery. The interpretation has been applied retrospectively.

This amendment has an impact both on the Group's financial position and to some extent on the presentation of consolidated financial statements.

· Annual improvements 2009.

These standards, amendments and interpretations do not have an effect on the Group's financial position. They have to some extent effect on the presentation of the consolidated financial statements.

The application of the following standards, amendments and interpretations is mandatory as from the accounting period beginning on or after 1 January 2011:

· IFRS 9 Financial Instruments, Part 1. As the EU has not approved the new standard, it cannot be applied for the time being. According to IFRS 9, the new standard would come into effect for financial periods beginning on or after 1 January 2013. The changes shall be applied retroactively. Earlier application is permitted.

These standards, amendments and interpretations do not have an effect on the Group's financial position. They have to some extent effect on the presentation of the consolidated financial statements.

• · Annual improvements 2010 (in force for the financial year commencing 1 January 2011). The Group will apply this standard as from 1 January 2011
• · Amendment to IFRS 7 Financial Instruments: Disclosures Transfers of Financial Assets. The amendment will come into effect for financial periods beginning on or after 1 July 2011. The EU has not approved this standard.

These standards, amendments and interpretations do not have an effect on the Group's financial position. They have to some extent effect on the presentation of the consolidated financial statements.

Use of estimates

The preparation of financial statements in accordance with IFRS requires the management to make certain estimates and to use the judgement in applying accounting policies. The estimates and assumptions have an effect on assets and liabilities as well as on revenues and expenses for the reporting period. Estimates and

assumptions have been used for example in the impairment testing of goodwill, property, plant and equipment and intangible assets, in the revenue recognition of construction contracts, in the measurement of current assets, in the measurement of warranty and other provisions and in the recognition of income taxes.

Revenues and expenses related to the construction contracts are recognised based on the percentage of completion method, when the outcome of the project can be estimated reliably. Revenue recognition according to the percentage of completion is dependent on estimates of the expected revenue and expenses from the project as well as on reliable measurement of the progress of the project. The estimate of the expected revenue from the project is affected by the estimated amount of the rental liabilities. Should the estimates of the project's outcome change, the revenues and the profit will be correspondingly changed during the financial period that the change is discovered and can be estimated.

The Group carries out an annual impairment testing of goodwill and intangible assets having an indefinite useful life. The recoverable amounts of cash-generating units have been defined on the basis of value in use calculations. The preparation of these calculations requires use of estimates.

Warranty provisions and 10-year warranty provisions are recorded when the amount of the provision can be estimated reliably. The recorded amount is the best estimate of the expected cost that will be required to meet the claim as of the balance sheet date. The estimate concerning probability of costs is based on previous similar events and previous experience and it requires judgement from the Group management.

When preparing the financial statements the Group estimates the net realisable value of current assets and the possible consequent need for write down. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made as to the amount the inventories are expected to realise. Assessing the need for impairment of inventory items may require management to make estimates of matters such as the future costs of development and construction, the future income and expenses accruing from the item, the market return requirement at the time of realisation and the sale value of the item.

When preparing the financial statements the Group especially estimates if there is a need for recognition of deferred taxes. The Group prepares an estimate about the probability of the profits of subsidiaries against which the unused tax losses or unused tax credits can be used.

Consolidated Financial Statements Subsidiaries

The consolidated financial statements comprise the parent company SRV Group Plc and all the companies in which SRV Group Plc holds, directly or indirectly, more than 50 per cent of the voting rights or otherwise exercises control. Control means the right to govern the financial and operating policies of an entity to obtain the benefits from its activities. Balance sheets of developer contracting projects are included in the consolidated financial statements.

The financial statements of the SRV Group have been consolidated using the purchase method. Acquisition cost is determined by taking into account funds given as consideration and measured at fair value, and liabilities assumed, as well as the direct costs of an acquisition. Acquired and identifiable assets and liabilities are

measured at fair value at the acquisition date, irrespective of the size of any minority interest. The amount by which the cost exceeds the fair value of Group's share of the net identifiable assets acquired is recorded as goodwill. Goodwill is not amortised but is tested for impairment annually. If the acquisition cost is less than the fair value of the acquired subsidiary's net assets, this difference is recorded directly to the income statement.

When the group acquires minority interests the amount by which the cost exceeds the acquired equity is recognized as goodwill.

The accounting policies of subsidiaries have been changed as necessary to correspond the Group's accounting policies.

Subsidiaries are consolidated starting from the date of acquisition, being the date on which the Group obtains control and continue to be consolidated until the date that such control ceases.

Intra-group transactions, receivables and liabilities as well as unrealised gains on intra-group transactions are eliminated in the consolidated financial statements. Unrealised losses are eliminated if the loss is not caused by an impairment.

Minority interest has been presented separately after Net profit for the period and in Total equity.

Joint ventures

Joint ventures are companies in which the Group exercises a shared controlling interest with other parties based on an agreement. The Group's holding in joint ventures is consolidated proportionally on a line by line basis. The consolidated financial statements consist of the Group's share of joint ventures' assets, liabilities, income and expenses. The joint ventures included in the consolidated financial statements are project companies.

Associated companies are companies in which the Group exercises a significant influence. Associated companies are consolidated using the equity method. The associated companies included in the consolidated financial statements are project companies.

Foreign currency transactions

Functional and presentation currency

Items of each group company included in the consolidated financial statements are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to group company (the functional currency). The functional currency of a group company may therefore differ from the currency used in its country of location. The consolidated financial statements are presented in euros, which is the parent company's functional currency.

Group companies

The income statements of those subsidiaries whose functional currency is not Euro are translated into euros using the average rate for the financial period. The balance sheets of subsidiaries are translated into euros using the rates at the balance sheet date. The translation differences arising from the use of different exchange rates are recorded in Translation differences under equity. In so far as the loans between the group companies are considered part of net investment in foreign subsidiaries, the currency exchange differences are recorded in Translation differences. When a foreign subsidiary is sold, the cumulative translation differences are recognised in the income statement as part of the capital gain or loss.

Transactions and balance sheet items

Transactions denominated in foreign currency are recorded using the exchange rate on the date of the transaction. Monetary foreign currency items in the balance sheet are measured using the exchange rate at the closing date. Non-monetary items denominated in foreign currency are measured using the exchange rate on date of the transaction. Exchange rate gains and losses on business operations are included in corresponding items above operating profit. Exchange rate differences of financing items are included in financial income and expenses.

Income recognition

Construction contracts

Income and costs of construction contracts are recorded as revenue and expenses on the basis of the percentage of completion, when the outcome of the project can be estimated reliably. The percentage of completion is calculated on the basis of the estimated total cost of a contract and the cumulative costs at the balance sheet date.

In the developer contracting of housing projects will be recognised upon completion at the earliest. The share of revenue and expenses corresponding to the percentage of sale at the time of completion will be recognised as revenue. The revenue recognition method to be employed in the developer contracting of business premises is determined on a project-by-project basis. Sold developer contracting projects are recognised on a percentage of completion basis if the risks and rewards of the project are transferred substantially to the buyer when the project is sold. The relative share recognised as revenue is calculated in accordance with the combined percentage of completion, which is derived from the percentage of completion of construction and percentage of sale. If the risks and rewards cannot be deemed to have been transferred to the buyer during construction, the project is recognised when it has been completed and the risks and rewards have been transferred.

If it is probable that the total expenditure required to complete a contract will exceed the total income from the project, the expected loss is expensed immediately. Revenue from projects which comprise construction and rental liability are recognised as one construction contract. Gross profit is recognised on projects containing a rental liability starting from the point when the total revenue from the fixed construction contract and the rental agreements concluded exceeds the estimated total cost of the project. The recognition of revenues is deferred in respect of the estimated rental liability and this estimated deferral is recognised in Advance payments in Liabilities. The rental security deposits reduce the Advance payments of the project. Uncertainty associated with a lease agreements is taken into account in income recognition.

If the costs and recorded profits of construction contracts exceed the amount of progress billings, the difference is disclosed in Trade and other receivables. If costs and recorded profits of construction contracts are less than the amount of progress billings, the difference is disclosed in Trade and other payables.

Order backlog

A construction project is included in the order backlog when the construction contract of the project has been signed or the decision to start construction has been made in case of a developer contracting project. The order backlog consists of the construction contracts not yet recognised as revenue (including the plot).

Borrowing costs

Borrowing costs in projects which are implemented for clients outside the group, are recognised as an expense in the period in which they are incurred. In developer contracting projects interests are activated during the construction period and are recognised when the project is sold. These interest costs are entered as project expenses above operating profit.

Research and development expenditure

SRV's research and development expenditures are planning costs of developer contracting projects and development projects for which the decision to start has not yet been made. These costs are recorded as an expense in the income statement.

Property, plant and equipment

• · Property, plant and equipment is valued at historical cost less accumulated depreciation and possible accumulated impairment losses. Historical cost consists of the costs directly related to acquiring the asset.
• · Land and water areas are not amortised because the economic life of these assets cannot be determined. Depreciation on other tangible assets than land and water areas is calculated by using the reducing balance method or on a straight-line basis by recording acquisition costs as expense over their estimated economic lives as follows:
• · Buildings and structures, reducing balance method: 4–7% or amortised on a straight-line basis over their estimated economic life
• · Machinery and equipment, reducing balance method: 25%

· Other intangible assets, straight-line method: 3–5 years The carrying amounts and economic lives of property, plant and equipment are estimated and values adjusted as needed. The Group estimates at every balance sheet date if there is a need for impairment. If the carrying amount of an asset item exceeds the estimated recoverable amount, the carrying amount is lowered to correspond the recoverable amount.

Capital gains and losses on property, plant and equipment are included in the income statement.

Intangible assets

Intangible assets which have a limited useful life are valued at historical cost and amortised over their estimated economic life (3–5 years). Intangible assets which have an unlimited useful life are tested yearly for impairment.

Goodwill is the excess of the cost of the business combination over the fair value of the Group's share of acquired net assets. Goodwill is subject to an annual impairment test. For this purpose, goodwill has been allocated to cash-generating units. Goodwill is measured at historical cost less impairment. Impairment is expensed directly to the income statement.

Assets which are depreciated or amortised are always tested for impairment when events or changes in circumstances indicate the carrying amount may not be recovered. An impairment is recorded through profit and loss to the extent that the carrying amount of the asset item exceeds the recoverable amount. The recoverable amount is the higher of the following: the fair value of the asset item less selling costs or its value in use.

Financial assets and liabilities

The Group classifies its financial assets and liabilities into the following categories: financial assets held for trading, loans and other receivables, available-for-sale financial assets, financial liabilities held for trading that are recognised at fair value through profit or loss, and financial liabilities measured at amortised cost.

The classification is made in accordance with the purpose for which the financial assets were initially acquired. The Group records financial assets and liabilities in the balance sheet when it becomes a party to the contractual terms and conditions of the instrument. Group management defines the classification of financial assets and liabilities in the initial recognition. Purchases and sales of financial assets are recognised on the clearing day. Financial assets are derecognised from the balance sheet when the contractual right to the cash flows of the item included in financial assets ceases or when the Group has transferred a significant part of the risks and returns associated with the financial assets. Financial liabilities are derecognised when the obligation specified in the contract has been fulfilled, cancelled or the liability has ceased.

Derivative Financial Instruments and Hedge Accounting

Derivative financial instruments are initially recognised in the balance sheet at cost which corresponds to their fair value on the transaction day and subsequently measured at their fair value on each balance sheet day. At the time of entering into derivative instrument the Group designates them as either cash flow hedges of business or financing cash flows or as hedges of investments in foreign entities.

Changes in the fair value of derivative instruments qualifying for IAS 39 hedge accounting are recognised in equity under the Fair value reserve for their effective part. The cumulative gain or loss of derivatives is transferred into income statement as revenue or expense for the same accounting period when the underlying hedged item is recognised the income statement. The ineffective part of the hedge is recognised directly in the income statement.

Changes in the fair value of derivative instruments which do not qualify for IAS 39 hedge accounting are recognised directly in the income statement.

Group's Treasury unit is responsible for the hedge transactions according to the policy approved by the Board of Directors. Hedge accounting is selectively applied for relevant forecasted business or financing cash flows. Hedge accounting is always applied for hedges of investments in foreign entities.

During the fiscal year 2010 and 2009 there were no hedges qualifying for IAS 39 hedge accounting.

Financial assets and liabilities held for trading

The derivative instruments which do not meet the criteria for hedge accounting are classified as financial assets or liabilities held for trading. Derivatives are initially recognised in the balance sheet at cost, which corresponds to their fair value on the transaction day and thereafter measured at fair value on each balance sheet date. Changes in fair values are recognised in the income statement under Other financial income and expense and in the balance sheet under short term financial assets or liabilities.

Loans and other receivables

Loans and other receivables are non-derivative financial assets with fixed or definable payments. They are not quoted on the market and it is not a primary intention of the company to sell them in the short term. Loans and other receivables are included in non-current financial assets, except for items whose maturity is shorter than twelve months. These items are classified as current financial assets.

Loans and other receivables, including trade receivables, are recorded in the balance sheet at amortised cost. Interest is recognised in the income statement over the maturity of the loan using the effective interest method. Impairment loss is recognised if there is evidence that the Group will not recover the receivable in full or in part according to the original terms. Matters that constitute evidence of this kind can be a debtor's serious financial problems, the probability that a debtor will end up in bankruptcy or is subjected to other financial arrangements as well as payment delinquency. The amount of the impairment is the difference between the receivable in the balance sheet and the present value of estimated future cash flows.

Available-for-sale financial assets

Available-for-sale financial assets are financial assets that are either defined belonging to this category or which cannot be classified in any other category. They are included in non-current financial assets unless Group intents to sell the investment within twelve months of the balance sheet date.

Available-for-sale financial assets are measured at fair value. Changes in the fair value are recognised directly in equity. When the asset is sold, the cumulative changes in fair value are recognised as a transfer from equity to income statement.

Investments are derecognised when the rights to the cash flows from the investment cease to exist or they have been transferred and the Group has transferred the substantial risks and rewards of ownership.

The Group estimates at each balance sheet date whether there is objective evidence that a single asset or group of assets belonging to available-for-sale financial assets is impaired.

Cash and cash equivalents

Cash and cash equivalents consist of cash, current bank deposits as well as other current liquid investments with a maturity not exceeding three months. Bank overdrafts are included in current liabilities in the balance sheet.

Financial liabilities measured at amortised costs

Financial liabilities are initially recognised at fair value. Transaction expenses have been included in the original carrying amount of financial liabilities. Interest is recognised in the income statement over the maturity of the loan using the effective interest method. Financial liabilities are recognised in the balance sheet under noncurrent and current liabilities and they can be interest-bearing or non-interest-bearing.

An external loan from a financial institution taken out by housing corporations in connection with developer contracting contracts is recognised as a liability until the project is completed. In completed developer contracting housing projects the loan is derecognised when the purchaser assumes the liability.

Leases

Operating leases

Lease agreements in which the risks and benefits are retained by the lessor are classified as operating leases. Lease payments under an operating lease are recognised as an expense in the income statement on a straightline basis over the lease term.

Inventories

The costing of raw materials and consumables is measured using weighted average cost method.

The balance sheet item "Work in progress" comprises the cost of construction work and plot for uncompleted construction projects not yet expensed. The acquisition costs included in the Work in progress are raw materials, direct cost of labour, other direct costs, indirect costs of purchase and construction as well as borrowing costs.

The balance sheet item "Land areas and plot-owning companies" comprises costs of development stage projects. The costs that are considered to increase the value of land areas and plotowning companies are capitalised.

The balance sheet item "Shares in completed housing corporations and real-estate companies" comprises unsold completed projects.

The balance sheet item "Advance payments" comprises advance payments in connection with the inventories.

The balance sheet item "Other inventories" comprises share capitals from projects of which the decision to start construction has not yet been made and the property bought for resale.

Inventories are valued at the lower of cost and net realisable value. In ordinary business, net realisable value is the estimated selling price which is obtainable, less the estimated costs incurred in bringing the product to its present condition and selling expenses.

The net realisable value of land areas and plot-owning companies is based on their expected use. The net realisable value of land areas and plot-owning companies expected to be used in project operations is evaluated as part of the net realisable value of the entire project. Land areas and plot-owning companies are impaired only if it is forecast that the project as a whole will result in a loss. If it is expected that a land area or plot-owning company will be realised by sale, the net realisable value is based on the estimated market price. The net realisable value of work in progress and completed housing corporations and real-estate companies is based on their selling price at the expected time of sale.

Income taxes

Tax expense in the income statement comprises current taxes and deferred taxes. Current tax is calculated based on the taxable income for the financial period using the statutory tax rate that is force in each country at the balance sheet date (and local tax legislation). Taxes are adjusted for any taxes for previous periods.

Deferred taxes are recognised on temporary differences. Deferred taxes are not recognised in connection with investments made in subsidiaries when the Group can control the timing of the reversal of the temporary difference, and the temporary difference will probably not be reverse in the foreseeable future.

A tax asset is recognised to the extent when it is probable that the asset can be utilised against future taxable income.

Employee benefits

Pension liabilities

Group companies have various pension plans in accordance with the local regulations and practices of each country of operation. Pension plans are funded through contributions paid to insurance companies based on paid salaries and wages.

The Group has only defined contribution plans. The payments in connection with Group's defined contribution plans are recognised in the income statement in the period which they relate to.

Share-based payment

The Group applies IFRS 2 Share-based Payment standard on its share-based incentive schemes. Share-based incentive scheme is valued at fair value by using the Black & Scholes pricing model in every interim and annual closing. The change in the incentive liability is recognised in the income statement. The share-based payments of the Group are cash or share settled transactions.

Provisions

A provision is recognised when the company has a legal or constructive obligation as a result of a past event, the payment obligation is probable and the amount of obligation can be reliably estimated.

If compensation can be received from a third party for a part of the obligation, the compensation is recognised as a separate item when it is virtually certain that the compensation will be received. A provision is recognised for a loss-making contract when the costs required to meet the obligations exceed the benefits received from the contract.

SRV and its subsidiaries are reengaged in several legal proceedings which relate to ordinary business or to other processes. The result of these legal proceedings and processes is difficult to predict. In case of litigation a provision is recognised in the financial statements according to the mentioned accounting policies when there is a legal or constructive obligation against third-party, payment obligation is probable and the amount of an obligation can be reliably estimated.

Warranty provisions comprise the costs resulting from the repair of completed projects if the warranty period is still in effect at the balance sheet date. A warranty provision is recognised at the time of the project hand-over, and the amount of provision is based on prior experience of the materialisation of warranty expenses. It is expected that warranty provisions are used during the two years from the completion of the project.

The amount of a 10-year warranty provision in the construction industry is based on prior experience of the materialisation of these expenses. It is expected that a 10-year provision will be used over the ten years following the completion of the project.

Dividends

The dividend payout proposed by the Board of Directors to the Annual General Meeting is recognised in the financial statements when the company's shareholders have approved the relevant resolution at the Annual General Meeting.

53

1 Segment information

Segment information has been prepared in compliance with IFRS 8 and it follows the accounting standards of Group's financial statements as well as the Group's management and organisational structure. IFRS 8 has been early adopted.

Pricing of transactions between the operating segments equals the market price. Segments assets and liabilities are those assets and liabilities that the segment uses in its operations or which can be allocated to the segments on a reasonable basis.

Unallocated items include income taxes and financial items as well as Group level items.

Operating segments

SRV Group has the following operating segments:

Business premises

Business Premises operating segment is specialised in office, commercial, logistics and underground construction in Finland. The customers are primarily users of premises, owners of properties or plots and real-estate investors as well as municipalities, the State and other public sector entities. Business Premises brings special expertise to the design and implementation of the Group's joint projects for the development and construction of commercial and office premises.

Housing

Housing operating segment comprises residential construction in the Greater Helsinki area and its peripheral communities as well as the operations of the regional subsidiaries. The regional companies carry out residential, commercial, office premises and logistics construction projects. The clientele is made up of consumers, professional developers and public sector entities. Housing brings special expertise to the design and implementation of the Group's joint projects within new residential construction and refurbishment.

International operations

International Operations is specialised in the implementation of construction projects in the Baltic countries and in Russia's regional centres as well as in developer construction of residential projects in selected markets. The product range covers housing, office and commercial premises as well as logistics and industrial sites. The clientele consists primarily of Finnish and international companies expanding into this region as well as real-estate investors and consumers.

Operating segments derive the revenues from construction services. Other operations include Group services and the services related to rental of construction equipment.

The geographical distribution of the Group's operations is in line with the operating segments. International Operations comprise the operations in Russia and in the Baltic countries. The operations of other business segments comprise the operations in Finland.

During the financial year 2010 and 2009, the Group did not have major customers according to the definition of IFRS 8. 54

2010
	Business		International
EUR 1,000	Premises	Housing	Operations	Other	Total
Revenue, external	319,452	142,855	22,307	182	484,796
Revenue, internal	5	258	2	10,165	10,429
Total	319,457	143,112	22,309	10,347	495,225
Operating profit	17,982	8,419	-7,476	-5,898	13,026
Segments' assets
Non-current	784	4,648	25,958	10,124	41,513
Current
Land areas and plot-owning companies	34,502	56,213	92,153	0	182,868
Work in progres	0	45,981	855	0	46,836
Shares in completed housing corporations and real estate companies	25,765	42,512	19,984	0	88,262
Other inventories	5,079	6,206	10,456	5	21,746
Inventories total	65,346	150,912	123,449	5	339,712
Other current assets	42,105	9,871	41,935	219,848	313,759
Total	108,235	165,432	191,342	229,976	694,984
Segments' liabilities
Non-current	687	71,069	9,037	3,939	84,731
Current	76,379	69,142	189,319	105,192	440,031
Total	77,066	140,210	198,356	109,131	524,762
Invested capital
At the end of period	54,416	125,292	185,268		387,010
Return on investment, %	37.3	6.8	-3.4		4.0
Order backlog	324,613	249,934	19,202		593,750

2009

	Business		International
EUR 1,000	Premises	Housing	Operations	Other	Total
Revenue, external	207,899	158,554	23,968	56	390,478
Revenue, internal	94	0	11	8,648	8,753
Total	207,993	158,554	23,980	8,704	399,231
Operating profit	17,984	5,433	-7,693	-4,740	10,984
Segments' assets
Non-current	863	1,432	25,148	10,918	38,361
Current
Land areas and plot-owning companies	27,816	41,415	83,553	0	152,784
Work in progres	0	21,173	13,970	0	35,143
Shares in completed housing corporations
and real estate companies	25,491	55,478	5,461	0	86,430
Other inventories	5,056	3,679	9,876	0	18,610
Inventories total	58,363	121,745	112,860	0	292,968
Other current assets	29,461	28,345	44,508	203,622	305,936
Total	88,687	151,521	182,516	214,540	637,265
Segments' liabilities
Non-current	10,989	68,195	18,385	5,190	102,759
Current	44,510	64,963	163,356	74,037	346,865
Total	55,499	133,158	181,741	79,226	449,624
Invested capital
At the end of period	42,044	122,926	176,296		348,996
Return on investment, %	35.2	4.2	-1.4		4.9
Order backlog	255,329	201,716	24,583		481,628

1 Jan 2009

	Business		International
EUR 1,000	Premises	Housing	Operations	Other	Total
Segments' assets
Non-current	917	1,932	16,232	12,547	31,627
Current
Land areas and plot-owning companies	24,604	41,560	75,959	0	142,123
Work in progres	29,951	61,875	14,334	0	106,160
Shares in completed housing corporations and real
estate companies	0	30,618	3,321	0	33,938
Other inventories	5,048	4,602	9,262	10	18,922
Inventories total	59,602	138,655	102,876	10	301,144
Other current assets	56,355	21,555	40,308	172,552	290,770
Total	116,874	162,143	159,416	185,108	623,540
Segments' liabilities
Non-current	1,116	60,780	12,677	6,856	81,429
Current	80,551	85,281	135,499	58,825	360,157
Total	81,667	146,061	148,176	65,682	441,586
Invested capital at the end of period	63,872	140,811	138,050		340,768

Revenue

EUR 1,000	2010	2009
Segment's revenue	484,878	390,527
Revenue, others	10,347	8,704
Eliminations and other adjustments	-10,429	-8,753
Total	484,796	390,478

Operating profit

EUR 1,000	2010	2009
Segments' operating profit	18,924	15,724
Operating profit, others	-5,898	-4,740
Eliminations and other adjustments	0	-281
Total	13,026	10,703

Assets

EUR 1,000	2010	2009	1 Jan 2009
Segments' assets	465,008	422,725	438,432
Assets, others	229,976	214,540	185,108
Eliminations and other adjustments	-220,470	-221,582	-196,891
Deferred tax assets	5,522	2,281	1,944
Total	480,035	417,964	428,593

Liabilities

EUR 1,000	2010	2009	1 Jan 2009
Segments' liabilities	415,631	370,398	375,904
Liabilities, others	109,131	79,226	65,682
Eliminations and other adjustments	-202,683	-196,083	-179,136
Deferred tax liabilities	841	532	272
Total	322,921	254,073	262,721

Order backlog

EUR million	2010	2009	1 Jan 2009
Order backlogs of the segments	593.7	481.6	460.8
Total	593.7	481.6	460.8

2 Acquisitions

SRV Group did not acquire new businesses in 2010 and previous years.

3 Disposals

SRV Group did not have significant disposals of businesses in 2010 and previous years.

4 Construction contracts

EUR 1,000	2010	2009	1 Jan 2009
Revenue from construction
contracts recognised as income
during the financial year	475,514	383,750
Contract costs and profits at the end of financial year (less recognised
losses) 1)	327,793	286,216
Gross amount due from customers
related to construction contracts 2)	19,821	17,517	21,874
Gross amount due to customers
related to construction contracts 3)	30,269	19,555	20,782

1) Related to the work in progress.

2) Expenses and recognised profits exceeding the progress billings are disclosed in the balance sheet under Trade and other receivables.

3) If the actual expenses and profits recorded are less than progress billings, the difference is disclosed under Trade and other payables.

5 Other operating income

2010	2009
27	11
2,203	2,011
1,018	572
3,248	2,594

6 Other operating expenses

EUR 1,000	2010	2009
Equipment and intangible assets	1	0
Rental expenses	2,253	2,508
Voluntary indirect personnel expenses	1,241	778
Car and travel expenses	1,107	1,035
Entertainment and marketing	965	792
Communications and IT	1,407	1,191
Other external services	881	1,010
Other fixed expenses	5,945	3,080
Total	13,801	10,394

Auditing fees

EUR 1,000	2010	2009
Audit	230	236
Auditors' statements	1	3
Tax services	4	10
Other services	50	5
Total	285	254

7 Depreciation and impairments

EUR 1,000	2010	2009
Depreciation
Intangible assets
Other intangible assets	140	168
Property, plant and equipment
Buildings and structures	1,563	1,581
Machinery and equipment	1,814	1,929
Other tangible assets	0	0
Total	3,517	3,678

8 Employee-benefit expenses

EUR 1,000	2010	2009
Wages and salaries 1)	39,027	35,789
Pension expenses – defined contribution plans	6,380	5,863
Share-based incentive scheme	1,694	408
Other indirect personnel expenses	2,515	2,442
Total	49,616	44,503

1) Information on management's compensation as well as employee benefits is disclosed in Section 32 Related party transactions.

SRV Group has only defined contribution plans in connection with the pensions.

Average number of personnel

	2010	2009
Business Premises	332	285
Housing	220	234
International Operations	160	171
Other	82	86
Total	794	776

Share-based incentive scheme

Grant year	2009 3)	2006 2)
Subscription ratio	1:1	1:1
Exercise price	4.80	3.85
Dividend adjusted exercise price	4.80	3.37
Amount granted	2,000,000	100,000
Subscription period	2010–2016	2010–2013

2) One member of the Corporate Executive Team of SRV Group Plc has a sharebased incentive scheme under which the member is entitled to a share bonus while in the employ of the Group. The amount to be paid as a share bonus is based on the price development of SRV Group Plc's share. SRV Group Plc may upon its discretion pay the share bonus in cash or as shares. SRV Group Plc has decided that half of the bonus shall be paid as shares and half in cash. The amount to be paid is determined as the difference between the specified initial price and the publicly quoted price of the share determined in a more specified way on the date on which the share bonus is paid. This share-based incentive scheme is valued using the Black & Scholes pricing model. Bonuses paid as shares are valued in accordance with their value at the time when the decision on the payment method is made and those paid in cash are valued at fair value. Changes in value are recognised in the income statement over their effective period. The volatility used in the pricing model is 33%.

On 11 February 2008, the Board of Directors of SRV approved a new share-based incentive scheme for the Group's key personnel. The scheme includes three earning periods – the calendar years 2008, 2009 and 2010. During 2010 it was decided that the potential reward will be paid partly as shares in the company and partly in cash. Previously the incentive scheme was paid fully as shares. The correction has been noted also in equity. and partly in cash. The proportion to be paid in cash will cover taxes and tax-related costs arising from the reward. The shares may not be transferred during the two-year restriction period. If a key person's employment or service ends during said restriction period, he/she must return the shares rewarded under the scheme to the company without compensation. In the 2010 earning period, the target group of the scheme included about 70 people and the reward is based mainly on consolidated and partly on business area earnings before taxes. The rewards paid for earning period 2010 amounted to about 57,000 shares. The rewards paid as shares under this share-based incentive scheme are valued in accordance with their value at the time of granting and the rewards paid in cash are valued at fair value. Changes in value are recognised in the income statement over their effective period.

3) On 15 December 2009, the Board of Directors of SRV decided on a long-term share-based incentive scheme that includes two key employees of the Group, one of whom is the CEO of the Group. The amount to be paid as a share bonus is based on the price development of SRV Group Plc's share. SRV Group Plc has decided that half of the bonus shall be paid as shares and half in cash. The bonus paid in cash has been revalueated in December 2010 and transferred from equity to deffered liabilites. According to the terms of the scheme, half of the post-tax value of the rewards must be tied to SRV Group Plc shares and the shares are subject to a two-year transfer restriction. The bonus paid as shares in this share-based incentive scheme is valued at its value at the time of granting. Changes in value are recognised in the income statement over their effective period. Exercise price is not adjusted by dividends.

9 Research and development expenses

SRV Group's research and development costs attribute to the planning costs of the developer contracting projects and the development projects for which construction decision has not been made. These costs are recognised as an expense in the income statement.

10 Financial income and expenses

EUR 1,000	2010	2009
Financial income
Income on available-for-sale assets	115	0
Interest income from loans and receivables	1,823	2,623
Other financial income	198	3,415
Total	2,136	6,037
Financial expenses
Expenses for financial liabilities at amortised cost	-5,220	-6,665
Losses and write-offs on available-for-sale assets	-236	-14
Other financial expenses	-1,213	-3,029
Total	-6,668	-9,709
Exchange rate and fair value gains and losses
Liabilities at amortised cost	-237	162
Financial asset/liabilities at fair value	-633	-650
Total	-870	-489
Financial income and expenses, total	-5,402	-4,160

11 Income taxes

Income taxes in the income statement

EUR 1,000	2010	2009
Current taxes	5,662	2,868
Taxes for previous financial years	-84	854
Other taxes	-3	-26
Deferred taxes	-3,114	-73
Total	2,460	3,622
Effective income tax rate	32.3%	55.4%

The income taxes in the consolidated income statement differ from the statutory income tax rate in Finland (26% in 2010 and 2009) as follows:

Income tax reconciliation

EUR 1,000	2010	2009
Profit before taxes	7,624	6,542
Income taxes at statutory tax rate in Finland (26%)	1,982	1,701
Differing tax rates of foreign subsidiaries	330	377
Effect of changes in income tax rates on
deferred taxes	0	-46
Tax exempt income	-304	-120
Non-deductible expenses	368	589
Tax losses and temporary differences not
recognised	169	630
Taxes for previous financial years	-84	854
Group eliminations	0	-363
Income taxes	2,460	3,622

12 Earnings per share

	2010	2009
Net profit for the financial year attributable to
equity holders of the parent company, EUR 1,000	6,385	2,882
Weighted amount of shares during the financial
year, 1,000 shares	33,923	35,999
Earnings per share, EUR/share	0.19	0.08

SRV Group Plc does not have arrangements that dilute earnings per share.

13 Dividend per share

The dividends paid in 2010 were EUR 0.12 per share, totalling EUR 4.1 million. The dividends paid in 2009 were EUR 0.12 per share, totalling EUR 4.3 million. The dividends paid in 2008 were EUR 0.12 per share, totalling EUR 4.4 million. A dividend of EUR 0.12 per share will be proposed at the Annual General Meeting on 15 March 2011 corresponding to total dividends of EUR 4.4 million. This proposed dividend is not recorded as liability in the financial statements.

14 Property, plant and equipment

2010

EUR 1,000	Land and water areas	Buildings and structures	Machinery and equipment	Other tangible assets	Advance payments	Total
Historical cost, 1 Jan	273	13,218	15,029	7	1	28,527
Increases	0	0	1,512	1	0	1,513
Decreases	0	-394	-57	28	0	-423
Historical cost, 31 Dec	273	12,824	16,484	36	0	29,616
Accumulated depreciation and impairments, 1 Jan	0	-2,975	-9,287	0	0	-12,262
Depreciation	0	-1,563	-1,814	0	0	-3,377
Accumulated depreciations of decreases	0	0	0	0	0	0
Accumulated depreciation and impairments, 31 Dec	0	-4,537	-11,101	0	0	-15,639
Carrying amount, 1 Jan	273	10,243	5,742	7	1	16,265
Carrying amount, 31 Dec	273	8,287	5,382	36	0	13,978

2009

	Land and	Buildings and	Machinery and	Other tangible	Advance
EUR 1,000	water areas	structures	equipment	assets	payments	Total
Historical cost, 1 Jan	273	13,243	13,313	35	1,001	27,864
Increases	0	14	800	0	0	813
Decreases	0	0	-110	0	0	-110
Reclassifications	0	-39	1,026	-28	-1,000	-41
Historical cost, 31 Dec	273	13,218	15,029	7	1	28,527
Accumulated depreciation and impairments, 1 Jan	0	-1,432	-7,446	0	0	-8,878
Depreciation	0	-1,581	-1,929	0	0	-3,510
Accumulated depreciations of decreases	0	39	88	0	0	127
Accumulated depreciation and impairments,
31 Dec	0	-2,975	-9,287	0	0	-12,261
Carrying amount, 1 Jan	273	11,810	5,867	35	1,001	18,986
Carrying amount, 31 Dec	273	10,243	5,742	7	1	16,265

Finance lease agreements

SRV Group had no finance lease agreements in 2010 and 2009.

15 Goodwill and other intangible assets

2010

	Intangible		Other capitalised
EUR 1,000	rights	Goodwill	expenditure	Total
Historical cost, 1 Jan	250	1,734	2,012	3,996
Increases	0	0	57	57
Reclassifications	0	0	0	0
Historical cost, 31 Dec	0	0	0	0
Accumulated amortisation, 1 Jan	250	1,734	2,069	4,053
Amortisation	0	0	-1,809	-1,809
Accumulated depreciations of decreases	0	0	-140	-140
Accumulated amortisation, 31 Dec	0	0	0	0
	0	0	-1,949	-1,949
Carrying amount, 1 Jan	250	1,734	203	2,187
Carrying amount, 31 Dec	250	1,734	120	2,104

2009

	Intangible		Other capitalised
EUR 1,000	rights	Goodwill	expenditure	Total
Historical cost, 1 Jan	250	1,734	1,941	3,925
Increases	0	0	70	70
Decreases	0	0	-13	-13
Reclassifications	0	0	13	13
Historical cost, 31 Dec	250	1,734	2,012	3,996
Accumulated amortisation, 1 Jan	0	0	-1,654	-1,654
Amortisation	0	0	-168	-168
Accumulated depreciations of decreases	0	0	13	13
Accumulated amortisation, 31 Dec	0	0	-1,809	-1,809
Carrying amount, 1 Jan	250	1,734	287	2,271
Carrying amount, 31 Dec	250	1,734	203	2,187

SRV Group's goodwill is allocated to operating segments and to cash-generating units as follows:

Goodwill

EUR 1,000	2010	2009	1 Jan 2009
Housing
SRV Asunnot Oy	1,734	1,734	1,734
Total	1,734	1,734	1,734

Impairment test

The recoverable amount of cash-generating units is based on value in use calculation model in which cash flows are based on baseyear figures and on business units growing cash flows for the next 5 years strategy period. SRV's mid-term target is to reach an average annual consolidated revenue growth of about 15 per cent in Group revenue and annual average growth of over 30 per cent in revenue from International Operations. SRV will seek to increase the level of operating profit and achieve an 8 per cent operating profit margin over the medium and long term. Group's objective is also to maintain the equity ratio above 30%.

In the impairment test of goodwill performed in January 2011, a growth factor of 2 per cent was used and it does not exceed the actual long-term growth of the business. The main factors in impairment test are operating profit margin and discount factor. The discount factor used is the latest weighted average cost of capital (WACC) pre-tax. In the value in use calculation a WACC of 8 per cent was used. The calculation parameters of WACC are risk-free interest rate, market risk and company specific premium, industry specific beta, the cost of liabilities and equity ratio.

The recoverable amount exceeded the carrying amounts significantly in all cash-generating units with goodwill. According to the impairment tests there were no need for impairments.

Sensitivity analysis

The performed sensitivity analysis does not cause impairments for cash-generating units when using moderate changes in default factors.

16 Carrying amounts of financial assets and liabilities by measurement categories

2010

Total	1,284	0	0	251,610	252,894	253,111
Trade payables	0	0	0	20,413	20,413	20,413	26
Derivative instruments	1,284	0	0	0	1,284	1,284	29
Interest bearing liabilities	0	0	0	151,134	151,134	151,302	25
Current financial liabilities
Other non-current liabilities	0	0	0	1,303	1,303	1,306	26
Interest bearing liabilities	0	0	0	78,761	78,761	78,806	25
Non-current financial liabilities
Total	0	98,597	5,177	0	103,774	103,774
Cash and cash equivalents	0	8,961	0	0	8,961	8,961	22
Derivative instruments	0	0	0	0	0	0	29
Other interest bearing receivables	0	17,484	0	0	17,484	17,484	21
Construction contracts receivables	0	19,821	0	0	19,821	19,821	21
Trade receivables	0	30,400	0	0	30,400	30,400	21, 27
Current financial assets
Other financial assets	0	0	5,177	0	5,177	5,177	17
Long-term interest bearing receivables	0	21,930	0	0	21,930	21,930	18
Non-current financial asset
EUR 1,000	assets and liabilities at fair value through profit and loss	Loans and receivables	Available-for sale financial assets	Financial liabilities measured at amortised cost	Carrying amounts by balance sheet item	Fair value	Note
	Financial

2009

	Financial
	assets and liabilities at fair		Available-for	Financial liabilities	Carrying amounts by
	value through	Loans and	sale financial	measured at	balance sheet
EUR 1,000	profit and loss	receivables	assets	amortised cost	item	Fair value	Note
Non-current financial asset
Long-term interest bearing receivables	0	16,197	0	0	16,197	16,238	18
Other financial assets	0	0	4,801	0	4,801	4,801	17
Current financial assets
Trade receivables	0	22,532	0	0	22,532	22,532	21, 27
Construction contracts receivables	0	17,517	0	0	17,517	17,517	21
Other interest bearing receivables	0	22,591	0	0	22,591	22,591	21
Derivative instruments	0	0	0	0	0	0	29
Cash and cash equivalents	0	5,217	0	0	5,217	5,217	22
Total	0	84,054	4,801	0	88,854	88,896
Non-current financial liabilities
Interest bearing liabilities	0	0	0	96,871	96,871	96,924	25
Other non-current liabilities	0	0	0	764	764	764	26
Current financial liabilities
Interest bearing liabilities	0	0	0	88,233	88,233	88,307	25
Derivative instruments	650	0	0	0	650	650	29
Trade payables	0	0	0	14,485	14,485	14,485	26
Total	650	0	0	200,354	201,004	201,130

1 Jan 2009

Total	0	0	0	195,046	195,046	193,222
Trade payables	0	0	0	19,761	19,761	19,761	26
Derivative instruments	0	0	0	0	0	0	29
Interest bearing liabilities	0	0	0	103,052	103,052	103,084	25
Current financial liabilities
Other non-current liabilities	0	0	0	390	390	390	26
Interest bearing liabilities	0	0	0	71,844	71,844	69,987	25
Non-current financial liabilities
Total	9	86,426	4,266	0	90,701	90,932
Cash and cash equivalents	0	3,372	0	0	3,372	3,372	22
Derivative instruments	9	0	0	0	9	9	29
Other interest bearing receivables	0	15,000	0	0	15,000	15,078	21
Construction contracts receivables	0	21,874	0	0	21,874	21,874	21
Trade receivables	0	39,580	0	0	39,580	39,580	21, 27
Current financial assets
Other financial assets	0	0	4,266	0	4,266	4,266	17
Long-term interest bearing receivables	0	6,601	0	0	6,601	6,753	18
Non-current financial asset
EUR 1,000	liabilities at fair value through profit and loss	Loans and receivables	Available-for sale financial assets	liabilities measured at amortised cost	amounts by balance sheet item	Fair value	Note
	assets and			Financial	Carrying
	Financial

Carrying amounts of financial assets represent the maximum amount of credit risk at the balance sheet date.

17 Other financial assets

Other financial assets include both quoted and unquoted shares, which are classified as available-for-sale financial assets.

Quoted shares have been valued at fair value at the closing date and the amount is considered immaterial.

The fair values of unquoted shares cannot be determined reliably. Unquoted shares are measured at cost less possible impairments.

EUR 1,000	2010		2009 1 Jan 2009
Carrying amount, 1 Jan	4,801	4,266
Increases	512	536
Decreases	-16	-1
Amount of available-for-sale financial assets removed from equity and recognised in the income statement	0	0
Net gains on available-for-sale financial assets	-119	0
Carrying amount, 31 Dec	5,177	4,801
Non-current	5,177	4,801	4,266
Current	0	0	0
Quoted shares	0	0	0
Unquoted shares	5,177	4,801	4,266

18 Receivables

		Fair value			Carrying amount
EUR 1,000	2010	2009	1 Jan 2009	2010	2009	1 Jan 2009
Non-current receivables
Loan receivables	21,930	16,238	6,753	21,930	16,197	6,601
Total	21,930	16,238	6,753	21,930	16,197	6,601

19 Deferred tax assets and liabilities

2010

		Recognised
		in the
EUR 1,000	1 Jan	income statement	Recognised in equity	31 Dec
Deferred tax assets
Tax losses	1,529	1,953	0	3,482
Employee-benefit	45	110	0	154
Unrealised losses of financial
instruments	0	673	0	673
Consolidation and group
eliminations	707	505	0	1,212
Total	2,281	3,240	0	5,522
Deferred tax liabilities
Undistributed profits of foreign
subsidiaries	0	0	0	0
Consolidation and group
eliminations	522	-107	-183	232
Other	9	417	0	426
Total	532	310	-183	658

2009

Net deferred taxes	1,426	323	0	1,750
Total	272	260	0	532
Other	55	-46	0	9
Consolidation and group eliminations	217	306	0	522
Deferred tax liabilities Undistributed profits of foreign subsidiaries	0	0	0	0
Total	1,698	583	0	2,281
Consolidation and group eliminations	400	307	0	707
Unrealised losses of financial instruments	0	0		0
Tax losses Employee-benefit	1,298 0	232 45	0 0	1,529 45
Deferred tax assets
EUR 1,000	1 Jan	Recognised in the income statement	Recognised in equity	31 Dec

· A deferred tax asset for unused tax losses of subsidiaries, EUR 464,317 (2010) and EUR 517,414 (2009), has not been recognised in the consolidated financial statements because realisation of the tax benefit in this respect is not considered probable.

· The deferred tax liability has been recognised in the consolidated financial statements in connection with for the undistributed profits of subsidiaries whose income tax is determined on the basis of profit distribution. The deferred tax liability has not been recognised when Group is able to control the timing of profit distribution and the distribution is not probable at the balance sheet date.

· Recorded deferred tax receivables and deferred tax liabilities are based on the changes in accounting principles which relates to the adoption of International Financial Reporting Standards (IFRS).

20 Inventories

EUR 1,000	2010		2009 1 Jan 2009
Raw materials and consumables	183	4	1
Work in progress	46,836	35,143	106,204
Land areas and plot-owning companies 1)	183,118	153,034	142,123
Shares in completed housing corporations and real estate companies 2)	88,262	86,451	34,008
Advance payments	5,612	3,554	3,684
Other inventories	14,918	14,019	14,203
Inventories, total	338,928	292,205	300,224

· During the financial year 2010 there were impairment losses on inventories 1) EUR 2,462,000.

· During the financial year 2009 there were impairment losses on inventories, 1) EUR 305,000 and 2) EUR 327,000.

21 Trade and other receivables

	Fair value			Carrying amount
EUR 1,000	2010	2009	1 Jan 2009	2010	2009	1 Jan 2009
Trade receivables	30,400	22,532	40,438	30,998	22,532	39,580
Loan receivables	17,484	22,591	15,078	17,484	22,591	15,000
Gross amount due from customers related
to construction contracts	19,821	17,517	21,874	19,821	17,517	21,874
Accrued income and prepaid expenses	7,094	5,406	1,231	7,094	5,406	1,231
Other receivables	6,493	8,860	8,164	6,493	8,860	8,164
Total	81,293	76,905	86,785	81,891	76,905	85,849
Interest bearing receivables	17,484	22,591	15,078	17,484	22,591	15,000
Non-interest bearing receivables	63,809	54,314	71,707	64,407	54,314	70,849
Total	81,293	76,905	86,785	81,891	76,905	85,849

In 2010 the Group's trade receivables were on average EUR 26,765,000. The trade receivables are non-interest bearing and they are normally about 30 days by age. During the financial year 2010 there were no impairment losses on trade receivables.

22 Cash and cash equivalents

EUR 1,000	2010	2009	1 Jan 2009
Cash in hand and at bank	8,961	5,217	3,372
Total	8,961	5,217	3,372

23 Equity

Share capital, share premium reserve and invested free equity fund

	Number of shares	Share capital	Invested free equity fund	Total
1 Jan 2009	36,210,468	3,062,520	87,338,104	90,400,624
Purchase and cancellation of treasury shares	-442,000
31 Dec 2009	35,768,468	3,062,520	87,338,104	90,400,624
1 Jan 2010	35,768,468	3,062,520	87,338,104	90,400,624
Purchase and cancellation of treasury shares	-1,950,137			0
Sale of treasury shares	82,738		429,451	429,451
31 Dec 2010	33,901,069	3,062,520	87,767,555	90,830,075

Shares, share capital and share premium reserve

On the 31 December 2010, the total number of SRV Group Plc's shares outstanding was 33,901,069 and the share capital amounted to EUR 3,062,520. The share has no nominal value.

The Annual General Meeting of SRV Group Plc authorised on 16 March 2010 the Board of Directors to acquire the company's own shares (treasury shares) using the company's non-restricted equity. A maximum of 3,676,846 own shares, or a lower amount that, in addition to the shares already owned by the company and its subsidiaries, is less than 10 per cent of all shares, may be acquired on the basis of the authorization. The authorisation includes the right to acquire own shares otherwise than in proportion to the holdings of the shareholders.

The company's own shares can be acquired in order to be used as part of the company's incentive programs, as payment in corporate acquisitions or when the company acquires assets relating to its business as well as to be otherwise conveyed, held or cancelled.

The authorisation is in force for 18 months from the decision of the Meeting. In 2010 SRV Group Plc acquired 1,826,745 own shares and SRV Kalusto Ltd and SRV Hallinnointi Ltd acquired totally 40,654 own shares. At the end of December there were 2,867,399 own shares in Group´s possession.

Invested free equity fund

Invested free equity fund consists of the net proceeds from the Offering of SRV Group Plc as well as received and cancelled SRV shares. Invested free equity fund includes also the share subscription of own shares conveyance.

Translation difference

Translation difference comprises of the translation of financial statetements of the foreign subsidiaries to the functional currency of the parent company in case the functional currency is not euro.

Fair value reserve

Fair value reserve comprises of the cumulative changes in available-for-sale financial assets.

Dividends

After the balance sheet date, the Board of Directors proposed a dividend of EUR 0.12 per share.

24 Provisions

2010

contracts	provisions	Total
8,300	307	8,607
20	0	20
-573	-239	-812
0	-69	-69
7,746	0	7,746
		4,217
3,529	0	3,529
7,746	0	7,746
	Provisions for construction 4,217	Other 0

2009

	Provisions for
	construction	Other
EUR 1,000	contracts	provisions	Total
1 Jan	9,380	0	9,380
Increase in provisions	3,197	307	3,504
Provisions used	-3,740	0	-3,740
Reversals of unused provisions	-537	0	-537
31 Dec	8,300	307	8,607
Non-current	4,771	0	4,771
Current	3,529	307	3,837
Total	8,300	307	8,607

1 Jan 2009

		9,380
3,809	0	3,809
5,571	0	5,571
9,380	0	9,380
-113	0	-113
-4,024	0	-4,024
3,558	0	3,558
9,959	0	9,959
contracts	provisions	Total
	Provisions for construction	Other 9,380 0

· Provisions for construction contracts include the contractual warranty provisions for the projects and a 10-year warranty on residential construction.

· The 10-year warranty provision is based on index-adjusted historical data.

25 Interest-bearing liabilities

	Fair value			Carrying amount
EUR 1,000	2010	2009	1 Jan 2009	2010	2009	1 Jan 2009
Non-current
Loans from financial institutions	34,615	50,653	16,291	34,571	50,600	16,340
Housing corporation loans	44,191	46,271	53,696	44,191	46,271	55,504
Total	78,806	96,924	69,987	78,761	96,871	71,844

	Fair value			Carrying amount
EUR 1,000	2010	2009	1.1.2009	2010	2009	1 Jan 2009
Current
Loans from financial institutions	92,435	69,350	95,983	92,433	69,316	95,994
Commercial papers	58,800	18,800	6,930	58,634	18,760	6,887
Housing corporation loans	67	157	171	67	157	171
Total	151,302	88,307	103,084	151,134	88,233	103,052

26 Other liabilities

		Fair value		Carrying amount
EUR 1,000	2010	2009	1 Jan 2009	2010	2009	1 Jan 2009
Non-current
Other liabilities	1,303	764	390	1,303	764	390
Total	1,303	764	390	1,303	764	390
Current
Trade payables	20,413	14,485	19,761	20,413	14,485	19,761
Advance payments related to construction contracts	30,269	19,555	20,782	30,269	19,555	20,782
Other advance payments	1,565	969	1,827	1,565	969	1,827
Other current liabilities	11,777	6,488	7,161	11,777	6,488	7,161
Accrued expenses and prepaid income	15,672	14,659	20,262	15,672	14,659	20,262
Total	79,696	56,156	69,793	79,696	56,156	69,793
Accrued expenses and prepaid income
Wages and salaries and related expenses	6,816	6,456	6,827	6,816	6,456	6,827
Interest and other financial liabilities	1,574	832	2,419	1,574	832	2,419
Periodisations of project expenses	1,864	2,168	6,203	1,864	2,168	6,203
Other	5,418	5,203	4,814	5,418	5,203	4,814
Total	15,672	14,659	20,262	15,672	14,659	20,262

27 Financial risk management

Interest-rate Risks

Changes in interest rates on interest-bearing debts and receivables create interest-rate risks. Interest-rate risk management is centralized to Group's Treasury unit. Majority of Group's interest-bearing debt is servicing short-term financing need for the construction period of Group's ongoing projects.The interest period for these loans is chosen to facilitate economic repayment or refinancing of the loans upon release of the property. Interest-bearing loan receivables relating to ongoing projects are funded with ear-marked financing arrangements to meet the on-lending terms. Interestrate risk is monitored and measured with gap-analysis and average maturity of interest periods. Interest-rate risks are managed with the selection of interest period or with interest rate derivatives. At the end of 2010 the nominal value of interest rate swaps amounted to 63.4 million euros. Interest rate swaps are used to hedge against changes in the market interest rates, and changes

in the fair value of interest rate swaps are entered in financing income or expenses in the financial period in which they were incurred. Derivatives are non-current liabilities when their maturity is more than 12 months and current liabilities when the remaining maturity is less than 12 months. The fair value of derivative instruments equals the value the Group would receive or pay, if the derivative contract would be terminated. The fair value of interest rate forward agreements are based on the counterparts' quoted prices. These quoted prices for agreements are based on general market conditions and common pricing models. Hedge accounting was not applied 2010 and 2009. Changes in interest rate levels have direct impact on Group customers' investment decisions and therefore to Group's operational cash flow. The sensitivity analysis below includes floating rate debt and loan receivables with interest period maturing within the next 12 months.

		2010		2009
	Carrying	Average	Average maturity,	Sensitivity,	Carrying	Sensitivity,
EUR 1,000	amount	interest rate	months	EUR 1)	amount	EUR
Debt	84,034	1.86%	1.4	737	112,072	1,031
Receivables 1)	17,956	6.01%	2.0	-45	12,038	-30

1) Effect of one percentage point rise in market interest rates on the Group's interest expenses and revenue during the next 12 months. All other variables assumed unchanged.

Currency Risks

The Group is exposed to currency risks relating to the international business' commercial cash flows, financing of the ongoing projects during the construction period and equity and other investments in foreign subsidiaries and project companies. The objective of currency risk management is to minimise the effect of currency fluctuation on earnings and equity. The Group targets to stay currency neutral. Open positions can be hedged with derivatives or currency loans according to Group financing policy. Currency risks are divided into transaction risk and translation risk. Transaction risk relates to business (sales and purchases) and financing (loans) cash flows in foreign or non-operational currencies. Translation risk relates to investments in foreign subsidiaries and project companies and the effect is shown in translation differences in Group consolidated equity. The Group is exposed to RUB, EEK and LVL risk in those entities where the operational currency is not euro.

Sensitivity to currency fluctuation

The sensitivity analysis illustrates the impact of currency fluctuations to Group earnings and equity. In the table below the positions are shown as net positions after matching the in- and outgoing cashflows and possible hedge transactions. At the end of year 2010 there were no open hedge instruments. The positions include only financial instruments at the balance sheet date and therefore e.g. highly probable sales and purchases that could have been hedged or that could have a neutralising impact on the cashflows are not noted. A change of +/-10% is used as it is considered to be a potential change in the currency areas in question.

	2010				2009
EUR 1,000	RUB	EEK	LVL	RUB	EEK	LVL
Net position 1)	5,438	-13,412	3,578	2,819	-12,657	3,437
Impact on earnings
euro 10% strenghtening	-494	-1,792	168	-238	-1,632	113
euro 10% weakening	604	2,190	-205	291	1,994	-138
Impact on equity 2)
euro 10% strenghtening	0	-101	-157	-18	-461	-199
euro 10% weakening	0	124	192	22	563	244

1) Net position countervalue in euros at balance sheet date. The transaction risk and translation risk positions combined. The sign illustrates the direction of the cash flow, e.g. negative sign shows that there is more outgoing than incoming cashflow in that particular position.

2) Direct impact, effect through earnings not noted.

Liquidity and Refinancing risks

Liquidity and refinancing risk may have an impact on Group result and cash flow if the Group is not able to secure sufficient financing for the operations. The Group maintains adequate liquidity by efficient cash management and related instruments, like committed current account overdraft limits (31.3 million euros). The Group has a long-term committed Revolving Credit Facility (100 million euros) and in addition to that an uncommitted Commercial Paper Programme (100 million euros) for short-term financing needs. Refinancing risk is managed by maintaining the maturity of the

commited credit lines in relation to the cash flows of debt payments. The committed Revolving Credit Facility will expire during years 2012–2013 (2012: exp. 55 million euros, 2013: exp. 45 million euros). At the end of December 2010 the amount of committed undrawn credit lines and cash in hand and in bank accounts amounted to 109 million euros and committed undrawn housing and other project finanacing facilities amounted to 75 million euros. Committed credit offers amounted to 38.0 million euros. There are standard covenant clauses in financial contracts, the financial covenant being the equity ratio.

Financial liabilities

	2010		Maturity					2009
EUR 1,000	Carrying amount	Contractual liability 1)	2011	2012	2013	2014	later	Carrying amount	Contractual liability
Loans from finan cial institutions 2)	127,003	130,886	62,747	30,800	31,881	3,667	1,791	119,917	126,580
Housing loans 3)	44,257	51,001	2,561	670	1,284	1,618	44,868	46,428	52,772
Commercial Papers	58,634	58,800	58,800	0	0	0	0	18,760	18,800
Subordinated loans	0	0	0	0	0	0	0	0	0
Derivative liabilities	1,284	1,284	14	289	0	980	0	650	650
Trade payables	20,413	20,413	20,413	0	0	0	0	14,485	14,485
Investment commitment 4)	0	21,794	21,794	0	0	0	0	0	22,902
Total	251,592	284,178	166,329	31,759	33,165	5,285	46,659	200,240	236,189

1) Includes all contractual payments, e.g. interest and commitment fees.

2) On the basis of contract terms committed current account overdrafts are assumed to expire later than 2014.

3) Housing loans book value corresponds the sales rate. Interest payment liability is noted for the full contractual amount until the completion of the property and in proportion of the sales rate at the end of December 2010 thereafter.

4) Off-balance sheet liability.

Available liquidity reserves

EUR 1,000	31 Dec 2010	31 Dec 2009	1 Jan 2009
Committed credit facility	70,000	80,000	90,000
Committed current account overdraft limits	29,857	18,145	13,604
Cash in hand and at bank accounts	8,961	5,217	3,372
Total	108,818	103,362	106,976

· In addition to the above the Group has 75 million euros of undrawn housing loans and other project financing facilities available for selected projects. These are not included in the liquidity reserves.

Credit risk

The Group is exposed to credit risk relating to receivables from ongoing projects, accounts receivables, loan receivables, cash investments and receivables from derivative Instrument counterparties. The Group does not have any significant investment activities or derivative instrument trading. The investments relate to daily cash management and are mainly short-term bank deposits with the Group's solid relationship banks. The Group Treasury unit is responsible for investment and derivative instrument counterparty risks in accordance with the Group financing policy approved by the Board of Directors. Business units are responsible for credit risk management relating to ongoing projects and accounts receivables in accordance with the Group credit policy which defines the requirements for credit decision process, sales terms and collection process. The Group's commercial counterparties are mainly publicly listed companies or notable institutional and property investors. In Housing business there are mainly individuals as buyers and during 2010 some rental agreements have also been made relating to completed apartments. The same Group credit policy principles are applied to tenant selection. Tenants are usually required to deposit a guarantee payment equivalent to two or three months rent. The loan receivables relate to financing the construction period for ongoing or development projects where the Group has also equity interest.

At the balance sheet date there were some 2.7 million euros (incl. VAT) of accounts receivables under customer complaint. Based on the opinion of the business unit management no impairment has been made for these receivables. At the end of December 2010 the book value of receivables corresponds the maximum credit risk. It is estimated that the securities received, e.g. mortgages or pledged shares, do not decrease the credit risk because due to the exceptional situation prevailing at the balance sheet date it is difficult to make a reliable market valuation for these securities. There were no credit risk concentrations at the end of 2010. There were no relevant credit losses during 2010.

Ageing of accounts receivables

EUR 1,000	2010	2009	1 Jan 2009
Current	22,280	17,277	26,265
1–30 days past due	7,153	2,896	4,919
31–60 days past due	160	139	349
Over 60 days past due	1,405	2,219	8,047
Total	30,998	22,532	39,580

· There were no past due receivables in other group financial assets.

Price risk

At the end of December 2009 and at the end of December 2010 there were no financial instruments exposed to price risk.

Capital risk management

The Group secures with the efficient capital structure that the group can give support to its businesses and can grow the shareholder value of the investors. The Group does not have a public rating. The capital structure of the Group is reviewed by the Board of Directors of SRV on a regular basis.

To maintain the capital structure the Group can balance the dividends or issue new shares. Additionally the Group can adjust the businesses and capital to be used to maintain the capital structure. The Group monitors its capital on the basis of equity ratio. The Group's objective is to maintain the ratio of total equity to total assets less advance payments above 30%. Total equity consists of equity attributable to equity holders of the parent company and minority interest.

Equity ratio	35.1%	41.3%	40.9%
	448,201	397,440	405,984
- Advance payments	-31 835	-20,524	-22,609
Total assets	480,035	417,964	428,593
Total equity	157,115	163,891	165,872
EUR 1,000	2010	2009	1 Jan 2009

28 Operating leases, commitments and contingent liabilities

Group as lessee

The future minimum lease payments under non-cancellable operating leases:

EUR 1,000	2010	2009
In less than a year	2,243	1,947
In more than one but less than five years	1,485	1,879
In more than five years	0	4
Total	3,728	3,829

Liabilities in connection with the operating lease agreements of employee cars generally have duration of three to four years.

The Group has leased the office premises in use. The maximum duration of the operating lease agreements is 58 months. The various terms and conditions of the office premises contracts including the index, renewal and other terms differ from each other.

EUR 1,000	2010	.2009
Collateral given for own liabilities
Real-estate mortgages given	129,001	106,039
Other commitments
Investment commitments given	21,794	22,090
Landplot commitments	16,559	19,507

29 Fair and nominal values of derivative instruments

EUR 1,000	2010		2009
		Fair values		Fair values
	Positive	Negative	Positive	Negative
Hedge accounting not applied
Foreign exchange forward contracts	0	0	0	0
Interest rate swap	0	1,284	0	650
	0	1,284	0	650

EUR 1,000	2010	2009
Nominal values of derivative instruments
Foreign exchange forward contracts	0	0
Interest rate swap	63,400	63,400
	63,400	63,400

· The fair values of foreign exchange forward contracts are based on market prices at the balance sheet date.

· Open foreign exchange forward contracts are hedging the financing cash flow.

30 Adjustments to cash flows from operation

EUR 1,000	2010	2009
Non-cash transactions
Minority interest	203	1,456
Change in provisions	-861	-773
Others	1,296	1,997
Total	639	2,680

31 Subsidiaries and joint ventures

		Group's holding,	Group's voting right,
Name	Domicile	%	%
Shares in subsidiaries
SRV Toimitilat Oy	Espoo	100.00	100.00
SRV Asunnot Oy	Espoo	100.00	100.00
SRV Baltia Oy	Espoo	100.00	100.00
SRV Investments S.à r.l	Luxembourg	100.00	100.00
Rakennusliike Purmonen Oy	Joensuu	65.00	65.00
SRV Kalusto Oy	Vihti	100.00	100.00
Porvoon Puurakennus Oy	Porvoo	100.00	100.00
KOy Nummelanrinne	Vihti	100.00	100.00
SRV Russia Oy	Espoo	100.00	100.00
OOO SRV Development	St Petersburg	100.00	100.00
SRV Stroi OOO	Moscow	100.00	100.00
SRV Terbelat Sia	Riga	100.00	100.00
SRV Ehituse AS	Tallinn	100.00	100.00
TBE-Construction Oy	Espoo	100.00	100.00
SRV Kinnisvara AS	Tallinn	65.00	65.00
SRV Develita UAB	Vilnius	100.00	100.00
SRV Realty B.V	Amsterdam	100.00	100.00
Jupiter Realty B.V	Amsterdam	87.50	87.50
Netherlands Pearl Plaza B.V	Amsterdam	50.00	50.00

32 Related party transactions

2010

EUR 1,000	Selling of goods and services	Management salaries and other short term employment-based benefits	Purchase of goods and services	Receivables	Liabilities
Management	0	1,202	0	0	0
Joint ventures	-604	0	45	8,916	0
Associate company	2,999	0	0	9,106	0
Other related parties	0	0	0	0	0
Total	2,395	1,202	45	18,022	0

2009

	Selling of goods	Management salaries and other short	Purchase of goods
EUR 1,000	and services	term employment-based benefits	and services	Receivables	Liabilities
Management	35	1,393	0	0	0
Joint ventures	1,419	0	0	17,147	0
Associate company	2,740	0	0	8,541	0
Other related parties	4,159	0	0	25,689	0
Total	8,352	1,393	0	51,377	0

2008

EUR 1,000	Selling of goods and services	Management salaries and other short term employment-based benefits	Purchase of goods and services	Receivables	Liabilities
Management	0	1,711	0	0	0
Joint ventures	3,885	0	0	13,334	0
Associate company	0	0	0	3,094	0
Other related parties	0	0	0	0	0
Total	3,885	1,711	0	16,428	0

· The related parties of SRV include subsidiaries and affiliated companies as well as joint ventures, the Management and owners of SRV as well as companies controlled by the owners of SRV.

· Other related parties include transactions carried out with other companies under the control of the Group's management or with other companies under control of minority shareholders.

· Goods and services are sold to related parties at market price.

· Subsidiaries included in related parties are listed above in Section 31 Subsidiaries and joint ventures. Subsidiaries are included in the consolidated financial statements and therefore the transactions between Group companies are not included in Section 32 Related party transactions.

Compensation to President and CEO

and Board of Directors

EUR 1,000	2010	2009
Hienonen Jukka, President and CEO 1)	222	0
Linnoinen Hannu, President and CEO and CFO 2)	163	104
Heliövaara Eero, President and CEO 2)	0	169
Nieminen Timo, Deputy CEO	162	160
Members of the Board
Kokkila Ilpo, Chairman	69	70
Kurkilahti Lasse, Vice Chairman	56	59
Mustaniemi Matti	45	45
Hiltunen Arto	34	0
Salonen Ilkka	34	0
Kokkila Timo	35	0
Hienonen Jukka, until 16 Mar 2010	11	46
Sarkamies Markku, until 24 Mar 2009	0	14
Leinonen Hannu, until 30 Sep 2009	0	21
Members of the Board, total	282	255

1) Jukka Hienonen started as President and CEO 1 Aug 2010.

2) Eero Heliövaara resigned from his post of SRV 12 Aug 2009 and Hannu Linnoinen acted as President and CEO from 13 Aug 2009 until 31 Jul 2010.

The president's period of notice is 6 months. If SRV Group Plc dismisses the president, he shall be paid termination compensation amounting to 12 months' salary. If the president terminates the agreement before serving for more than two years, he will receive

termination compensation amounting to six months' salary over and above his salary for the period of notice. If the president terminates the agreement after serving for more than two years, he will be paid termination compensation amounting to 12 months' salary.

The president and CEO is entitled to retire at 60 years of age.

33 Events after the balance sheet date

In January SRV and Pearl Plaza LLC. the joint venture of SRV and Shanghai Industrial Investment (Holdings) Co Ltd. concluded the investment decision on construction of the first phase of the shopping centre in Saint Petersburg. Russia and signed with SRV Project Management contract for the construction works of the first phase of the project. The PM contract is worth about 100 million euros. The value of investment is about 130 million euros. Financing of the project will come mainly from China. SRV will invest approximately 20 million euros in the implementation of the first phase. SRV is responsible for commercial development and leasing of the premises. The scope of the first phase of Pearl Plaza SC is about 86,500 m2 . with GLA about 46,500 m2 . Pearl Plaza has signed a letter of intent with the Finnish Prisma supermarket operator, who will lease around 7,600 square meters from the shopping centre for a hypermarket.

Parent company's Financial Statements, FAS

INCOME STATEMENT OF THE PARENT COMPANY

EUR 1,000	2010	2009
Revenue	5,505	5,226
Other operating income	541	185
Personnel costs
Salaries and other remuneration	-4,479	-3,962
Indirect personnel costs
Pension costs	-597	-656
Other indirect personnel costs	-185	-280
Depreciation and impairments
Depreciation	-200	-215
Other operating expenses	-7,362	-4,916
Operating loss	-6,778	-4,617
Financial income and expenses	-278	20,815
Loss before extraordinary items	-7,056	16,198
Extraordinary items +/-	11,500	8,237
Profit before appropriations and taxes	4,444	24,435
Income taxes	-1,634	-1,401
Net profit for the financial year	2,810	23,034

BALANCE SHEET OF THE PARENT COMPANY

EUR 1,000	31 Dec 2010	31 Dec 2009
ASSETS
Non-current assets
Intangible assets	305	381
Property, plant and equipment	501	499
Investments
Shares in group companies	20,792	20,552
Receivables from group companies	0	300
Other financial assets	4,296	4,222
Non-current assets, total	25,895	25,954
Current assets
Inventories	5	5
Other receivables	217,699	205,272
Cash and cash equivalents	3,116	0
Current assets, total	220,821	205,277
ASSETS , TOTAL	246,716	231,231
EQUITY AND LIA BILITIES
Equity
Share capital	3,063	3,063
Invested free equity fund	87,768	87,338
Retained earnings	41,293	31,067
Net profit for the financial year	2,810	23,034
Equity, total	134,934	144,501
Obligatory provisions	653	239
Liabilities
Non-current liabilities	3,045	4,458
Current liabilities	108,084	82,033
Liabilities, total	111,129	86,491
EQUITY AND LIA BILITIES , TOTAL	246,716	231,231

CASH FLOW STATEMENT OF THE PARENT COMPANY

EUR 1,000	2010	2009
Net profit for the financial year	2,810	11,500
Adjustments:
Depreciation	200	215
Non-cash transactions	198	239
Financial income and expenses	278	-20,815
Capital gains on sales of tangible and intangible assets	0	0
Income taxes	1,634	1,401
Adjustments, total	2,310	-18,960
Changes in working capital:
Change in trade and other receivables	-14,930	-46,091
Change in inventories	0	16,932
Change in trade and other payables	-21,957	-906
Working capital, total	-36,888	-30,065
Interest paid	-2,444	-2,159
Interest received	3,425	3,683
Dividends received	91	19,209
Income taxes paid	-1,800	2,610
Net cash from operating activities	-32,496	-14,184
Cash flow from investing activities
Acquisition of subsidiaries, net of cash	-330	-2,290
Property, plant and equipment	-115	-51
Intangible assets	-18	-36
Other financial assets	-108	-549
Sale of property, plant and equipment and intangible assets	6	2
Sale of investments	300	601
Net cash used in investing activities	-265	-2,323
Cash flow from financing activities
Proceeds from loans	8,497	0
Repayments of loans	-1,412	-1,408
Change in loan receivables	2,522	-4,708
Change in credit limits	38,427	17,167
Purchase of treasury shares	-8,068	-1,715
Dividends paid	-4,089	-4,363
Net cash from financing activities	35,877	4,972
Net change in cash and cash equivalents	3,116	-11,534
Cash and cash equivalents at the beginning of financial year	0	0
Cash and cash equivalents at the end of financial year	3,116	-11,534

STATEMENT OF CHANGES IN EQUITY OF THE PARENT COMPANY

EUR 1,000	2010	2009
Share capital, 1 Jan	3,062	3,062
Share capital, 31 Dec	3,062	3,062
Invested free equity fund, 1 Jan	87,338	87,338
Change	429
Invested free equity fund, 31 Dec	87,767	87,338
Retained earnings, 1 Jan	31,066	34,138
Profit for the previous financial year	23,034	3,007
Dividends paid	-4,089	-4,364
Purchase of treasury shares	-8,718	-1,715
Retained earnings, 31 Dec	41,293	31,066
Net profit for the financial year	2,810	23,034
Equity, 31 Dec	134,933	144,501
Statement of distributable funds at 31 Dec
Invested free equity fund, 1 Jan	87,767	87,338
Retained earnings	54,100	37,145
Dividends paid	-4,089	-4,364
Purchase of treasury shares	-8,718	-1,715
Net profit for the financial year	2,810	23,034
Distributable funds, 31 Dec	131,871	141,439

Signatures to the Financial Statements and Report of The Board of Directors, auditor's note

Signatures to the financial statements and Report of the Board of Directors

Espoo, 16 February 2011

Ilpo Kokkila Lasse Kurkilahti Chairman Vice Chairman

Arto Hiltunen Timo Kokkila

Matti Mustaniemi Ilkka Salonen

Jukka Hienonen President and CEO

Auditor's note

Our auditor's report has been issued today.

Espoo, 16 February 2011

Ernst & Young Oy Authorized Public Accounting Firm

Mikko Rytilahti Authorized Public Accountant

Auditor's report

To the Annual General Meeting of SRV Yhtiöt Oyj

We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of SRV Yhtiöt Oyj for the year ended 31 December, 2010. The financial statements comprise the consolidated statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows, 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 Managing Director

The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of financial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing 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 Managing Director 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 express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about 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 company and the Managing Director are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Limited Liability Companies Act or the articles of association of the company.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures 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, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of financial statements and report of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of the Board of Directors.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion on the consolidated financial statements

In our opinion, the consolidated financial statements give a true and fair view of the financial position, 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 position in accordance with the laws and regulations governing the preparation of the financial statements 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.

Espoo, February 16, 2011

Ernst & Young Oy Authorized Public Accounting Firm

Mikko Rytilahti Authorized Public Accountant

Comparison figures for the financial year 2009 in accordance with the new IFRS interpretation

	2009	2009		1 Jan 2009	1 Jan 2009
EUR million	new	previous	Change	new	previous	Change
Revenue	390.5	385.0	5.5
Operating profit	10.7	9.9	0.8
Net profit for the period	2.9	2.3	0.6
Inventories	292.2	291.4	0.8	300.2	294.8	5.4
Trade and other receivables	76.9	77.6	-0.7	85.8	86.7	-0.9
Advances received	20.8	20.5	0.3	22.6	20.5	2.1
Other liabilities	56.4	56.2	0.3	68.2	65.2	3.0
Equity, total	163.9	164.1	-0.2	165.9	166.6	-0.7
Balance sheet total	418.0	417.9	0.1	428.6	423.8	4.8
Order backlog	481.6	480.6	1.0
sold order backlog	317	316	1.0
unsold order backlog	165	165	0.0
Equity ratio, %	41.3	41.3
Return on investment, %	4.9	4.7
Return on equity, %	1.8	1.4
Earnings per share calculated on the profit attributable to equity holders of the parent company (undiluted and diluted)	0.08	0.06
Net cash flow from operating activities (equivalent negative impact on net cash flow from financing activities)	6.1	3.6	2.5

Major changes due to the interpretation

From now on, developer contracting housing projects will be recognised upon completion. The share of revenue and expenses corresponding to the percentage of sale at the time of completion will be recognised as revenue.

The revenue recognition method to be employed in the developer contracting of business premises is determined on a projectby-project basis. Sold developer contracting projects are recognised on a percentage of completion basis if the risks and rewards of the project are transferred substantially to the buyer when the project is sold. If the risks and rewards cannot be deemed to have been transferred to the buyer during construction, the project is recognised when it has been completed.

In the consolidated income statement adoption of the interpretation affects the reported revenue, operating profit and result before taxes. In the case of developer contracting projects, the fact that the recognition of revenue and expenses is firmly connected to project completion leads to the later timing of revenue recognition. The interpretation does not affect the total sum of project revenue and expenses or the Group's tax rate.

In the consolidated balance sheet the gross accumulated expenses of developer contracting projects are included in the inventory item work in progress and the payments received from the buyer of the project in Advance payments until the revenue from the project is recognised. This, coupled with the increase in deferred taxes due to the later recognition of revenue, increases the balance sheet total. Housing corporation loans – including those of sold residential units – remain in the consolidated balance sheet until the project has been handed over.

The adoption of the interpretation will affect most of the key figures calculated on the basis of the income statement and balance sheet. The change in revenue recognition also affects the Group's reported order backlog. The Group's order backlog includes the unrecognised share of the expected revenue from received, ongoing and completed projects. It is expected that the greater quarterly variations in revenue will also be reflected in the Group's order backlog, which will see larger fluctuations.

The net change in cash and cash equivalents as well as cash and cash equivalents at the end of the period will remain unchanged. There are only changes between items.

Group and segment information by quarter (unaudited)

Revenue

	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS
EUR million	10–12/2010	7–9/2010	4–6/2010	1–3/2010	10–12/2009	7–9/2009	4–6/2009	1–3/2009
Business premises	103.2	84.8	76.8	54.7	66.9	40.2	46.1	54.8
Housing	44.2	24.7	35.8	38.3	49.9	39.7	42.4	26.6
International	9.8	5.8	4.8	2.0	3.4	7.4	7.6	5.6
Other operations	2.8	2.5	2.5	2.5	2.3	2.1	2.1	2.2
Eliminations	-2.8	-2.5	-2.6	-2.5	-2.3	-2.1	-2.1	-2.2
Group, total	157.2	115.3	117.3	95.0	120.1	87.3	96.0	87.0

Operating profit

	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS
EUR million	10–12/2010	7–9/2010	4–6/2010	1–3/2010	10–12/2009	7–9/2009	4–6/2009	1–3/2009
Business premises	4.5	4.5	4.7	4.3	4.3	3.1	4.6	5.9
Housing	3.9	1.4	0.7	2.4	1.9	1.3	2.3	-0.1
International	-1.0	-0.4	-2.2	-3.9	-2.0	-1.3	-1.9	-2.5
Other operations	-2.0	-1.1	-1.6	-1.2	-1.4	-0.7	-1.0	-1.6
Eliminations	0.2	0.0	-0.1	-0.1	-0.2	-0.1	0.0	0.0
Group, total	5.7	4.3	1.5	1.6	2.7	2.3	3.9	1.8

Operating profit

	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS
%	10–12/2010	7–9/2010	4–6/2010	1–3/2010	10–12/2009	7–9/2009	4–6/2009	1–3/2009
Business premises	4.4	5.3	6.1	7.9	6.5	7.7	10.0	10.8
Housing	8.8	5.5	2.1	6.3	3.8	3.4	5.3	-0.4
International	-9.8	-7.1	-46.6	-197.5	-58.4	-17.6	-25.6	-44.4
Group, total	3.6	3.7	1.3	1.6	2.2	2.6	4.1	2.1

Profit before taxes

	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS
EUR million	10–12/2010	7–9/2010	4–6/2010	1–3/2010	10–12/2009	7–9/2009	4–6/2009	1–3/2009
Business premises	4.1	4.3	4.5	4.2	4.2	2.9	4.4	5.6
Housing	3.5	1.0	0.4	2.1	1.5	0.8	1.5	-1.1
International	-2.2	-1.0	-3.1	-4.3	-2.1	-1.4	-2.4	-3.0
Other operations	-0.9	-0.7	-1.8	-2.4	-1.3	18.9	-0.5	-1.0
Eliminations	-0.3	-0.1	-0.1	0.5	-0.2	-20.0	0.0	-0.1
Group, total	4.1	3.5	-0.1	0.2	2.2	1.1	2.9	0.3

Order backlog

	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS
EUR million	31.12.2010	30.9.2010	30.6.2010	31.3.2010	31.12.2009	30.9.2009	30.6.2009	31.3.2009
Business premises	324.6	338.5	358.2	331.7	255.3	252.0	224.3	252.8
Housing	249.9	242.6	220.5	174.3	201.7	187.5	206.1	174.3
International	19.2	23.1	25.7	24.0	24.6	26.3	30.7	31.5
Group, total	593.7	604.3	604.4	530.0	481.6	465.8	461.1	458.5
sold order backlog	441	443	426	389	317	325	306	291
unsold order backlog	153	162	178	141	165	141	155	168

Group key figures

	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS
EUR million	10–12/2010	7–9/2010	4–6/2010	1–3/2010	10–12/2009	7–9/2009	4–6/2009	1–3/2009
Revenue	157.2	115.3	117.3	95.0	120.1	87.3	96.0	87.0
Operating profit	5.7	4.3	1.5	1.6	2.7	2.3	3.9	1.8
Financial income and expenses, total	-1.6	-0.8	-1.6	-1.4	-0.5	-1.2	-1.0	-1.5
Profit before taxes	4.1	3.5	-0.1	0.2	2.2	1.1	2.9	0.3
Order backlog	593.7	604.3	604.4	530.0	481.6	465.8	461.1	458.5
New agreements	120.1	112.6	186.7	140.6	120.4	86.2	98.2	91.3
Earnings per share, EUR	0.10	0.08	0.02	-0.01	0.03	0.01	0.04	0.00
Equity per share, EUR	4.55	4.47	4.38	4.36	4.48	4.45	4.44	4.40
Share price, EUR	6.63	6.14	6.16	6.41	5.89	5.64	4.18	3.00
Equity ratio, %	35.1	35.0	35.1	37.0	41.3	40.9	40.1	40.5
Net interest bearing debt	220.9	227.7	216.7	199.8	179.9	189.8	186.8	172.6
Net gearing, %	140.6	146.7	142.3	132.3	109.8	116.3	116.6	107.1

Invested capital

	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS
EUR million	31.12.2010	30.9.2010	30.6.2010	31.3.2010	31.12.2009	30.9.2009	30.6.2009	31.3.2009
Business premises	54.4	79.2	75.8	56.2	42.0	61.0	77.0	69.2
Housing	125.3	127.7	127.7	121.6	122.9	124.1	137.0	136.7
International	185.3	175.2	177.2	173.6	176.3	165.6	152.0	150.5
Other operations and eliminations	22.0	8.2	4.2	6.0	7.7	6.2	-12.2	-14.0
Group, total	387.0	390.2	384.9	357.5	349.0	356.9	353.8	342.3

Housing

Finland, pcs	10–12/2010	7–9/2010	4–6/2010	1–3/2010	10–12/2009	7–9/2009	4–6/2009	1–3/2009
Start-ups	133	110	300	0	247	0	0	4
Sold	163	164	102	95	86	43	51	27
Completed	171	14	0	16	64	37	93	58
Completed and unsold 1)	137	90	105	138	171	161	185	156
Under construction 1)	1,629	1,183	1,064	996	966	783	694	625
- negotiation and consruction con
tracts 1)	1,024	540	517	749	703	703	576	414
- developer contracting 1)	605	643	547	247	263	80	118	211
- of which unsold 1)	284	361	400	169	231	79	100	180

1) At the end of the period.

Information for shareholders

Basic information on the share

SRV Group Plc's shares are quoted on NASDAQ OMX Helsinki. Trading commenced on the Prelist on 12 June 2007 and on the Main List on 15 June 2007.

The shares are listed on the NASDAQ OMX Helsinki under the industry heading Industrial Products and Services in the mid-cap group. The share's trading code is SRV1V. The ISIN code of the share is FI0009015309.

Shareholders' changes of address

Shareholders are requested to make notification of changes in name and address to the branch office of the bank or securities broker where the shareholder's book-entry account is handled.

Financial information in 2011

The Annual General Meeting will be held on 15 March 2011. Interim Report January–March 2011: 4 May 2011 at 8.30 a.m. Interim Report January–June 2011: 3 August 2011 at 8.30 a.m. Interim Report January–September 2011: 2 November 2011 at 8.30 a.m.

Quiet periods

SRV Group Plc does not make statements on the company's financial trends and does not meet with capital market representatives during the two weeks prior to the publication of its annual earnings statement or interim reports.

Investor relations contact person Senior Executive Vice President, CFO

Hannu Linnoinen Tel. +358 201 455 990 E-mail: hannu.linnoinen@srv.fi

Ordering publications

SRV's annual reports and other financial bulletins can be ordered from Group Communications: SRV Group Plc/Group Communications P.O. Box 500 FI-02201 Espoo, Finland Tel. +358 201 45 5200 Internet: http://srv.fi/news/order_publications

SRV Group Plc Annual Report 2010

This report is printed on Maxi Offset paper. Covers: 240g/m2 , inside pages: 120/100g/m2 Printing house: Lönnberg Painot Oy, Helsinki Design and realisation: Miltton Oy Portraits: Riitta Supperi Project images: SRV (p. 9, 15, 17), Voitto Niemelä (p. 13), Arno Chapelle (p. 21) and Holiday Club Resorts (p. 23)

SRV Group Plc Niittytaival 13 P.O. BOX 500, FIN-02201 Espoo Finland Telephone +358 201 455 200 VAT No.: FI 1707186-8 firstname.surname@srv.fi www.srv.fi