A living city is built together.

LIVINGCITY

"We will also remember 2017 for the merger of YIT and Lemminkäinen, which was announced in the summer. The merger is a strategically important step for YIT on its path to becoming one of the leading urban developers in the Northern European construction market."

YIT in 2017

YIT creates better living environments by developing and constructing housing, business premises, infrastructure and entire areas. Our vision is to bring more life in sustainable cities.

We want to focus on caring for our customers, visionary urban development, passionate execution and inspiring leadership.

Our growth engine is urban development involving partners. Our operating area covered Finland, Russia, the Baltic countries, the Czech Republic, Slovakia and Poland.

In 2017, we operated in eight countries: Finland, Russia, the Baltic countries, the Czech Republic, Slovakia and Poland.

Year 2017

Key figures 5 Indicators 6 Financial targets in 2017 7 President and CEO's review 8 Strategy 10 Merger of YIT and Lemminkäinen 14 Operating environment 17 Segment reviews 18 Housing Finland and CEE 18 Housing Russia 20 Business Premises and Infrastructure 22 Point of view: Urbanising Finland needs urban design 24

BRATISLAVA, SLOVAKIA

Key figures

1–12/17	1–12/16	Change
1,908.6	1,783.6	7%
102.3	52.9	93%
5.4	3.0
122.3	79.9	53%
6.4	4.5
81.2	13.8	489%
62.8	7.4	748%
0.50	0.06	747%
0.25	0.22	14%
164.5	-43.1
8.8	4.7
35.1	35.1
2,568.5	2,613.1	-2%
5,427	5,261	3%

1 The figure for 2017 is the Board of Directors' proposal to the AGM

IFRS	12/17	12/16	Change
Gearing, %	88.7	112.3
Equity ratio, %	33.2	31.2
Net interest-bearing debt, EUR million	455.0	598.6	-24%
Balance sheet total, EUR million	2,193.3	2,284.0	-4%
Invested capital, EUR million	1,155.4	1,263.4	-9%

Indicators

No. of reportable accidents at work per million working hours, last 12 months. Our goal is 0 accidents.

NUMBER OF EMPLOYEES AT THE END OF THE YEAR

5,427

NUMBER OF TRAINEES AND THESIS WORKERS DURING 2017 OVER

800

NPS, or Net Promoter Score (scale -100% – 100%), reflects the degree to which customers are prepared to recommend the company in question. The score is affected by the proportion of Promoters and Detractors among all respondents. Weighted NPS has been calculated from segment spesific results weighted by revenue volumes.

Q-factor reflects the proportion of consumer customers who have no complaints when the apartment is handed over. Flawless handovers are a strategic objective for us.

YIT'S SUSTAINABLE URBAN ENVIRONMENTS INDICATORS

ACCESSIBILITY OF SERVICES FROM OUR APARTMENTS

DISTANCE FROM A GROCERY SHOP

DISTANCE FROM PUBLIC TRANSPORTATION

Our biggest impact on the society comes from our products, or apartments, business premises and infrastructure creating urban environment. We follow Sustainable Urban Environments indicators in self-developed residential production. The figures include all the self-developed apartment bulding projects in all of our operative countries that has received a start-up decision during the year.

Financial targets in 2017

I n conjunction with revising the strategy in autumn 2016, YIT's Board of Directors decided on the Group's financial targets. The cash flow target was specified as having sufficient operating cash flow after investments to pay dividends. The aim is to not increase net debt, and the investment reserve will be used to accelerate growth. It has been estimated that key indicators will be improved primarily by improving the company's profitability and operative results. Other long-term targets have remained unchanged.

New preliminary financial targets were set for the merged company along with the merger. Read more.

REVENUE GROWTH IN THE CEE COUNTRIES

In accordance with our strategy, we are pursuing growth in the CEE countries, which are seeing strong growth in demand. We have increased our revenue in the CEE countries for several consecutive years and, in 2017, they already accounted for 22% of the Housing Finland and CEE segment's revenue. Profitability in the CEE countries has also been higher than the industry average. We have also been involved in establishing YCE Housing I fund, that invests in housing projects in the CEE countries. To date, we have sold 10 projects to the fund.

Long-term target	Target level	Outcome 2017
Revenue growth	5–10% annually on average	7%
Return on investment	15%	8.8%
Operating cash flow after investments¹	Sufficient for dividend payout	EUR 164.5 million
Equity ratio	40%	35.1%
Dividend payout	40–60% of the net profit for the period	50.0%2

All figures are based on the percentage of

completion segment reporting method (POC).

1 Excluding discontinued operations

2 The Board of Directors' proposal to the Annual General Meeting

President and CEO's review

T he year 2017 was a success for YIT in many ways. All of the Group's business segments achieved positive development, and earnings per share more than tripled compared to the previous year. The year 2017 will also be remembered for the merger of YIT and Lemminkäinen, which was announced in the summer and completed at the beginning of February.

The year as a whole was excellent, and we improved our performance further towards the end of the year. In terms of the Group's profitability, the final quarter was one of the best in YIT's entire history. With respect to our strategic objectives, we achieved the targets set for our revenue growth and cash flow. We also took large strides towards our long-term target for return on investment.

AS. OY VANTAAN PILETTI, TIKKURILA, VANTAA

"I am confident that our customers will also benefit from our increasingly diverse expertise and our desire to develop industry-wide practices while also developing our competitiveness, our products and our services."

The revenue of the Housing Finland and CEE segment increased by 15 per cent and its adjusted operating profit grew by 37 per cent year-on-year. The operating profit margin was close to 10 per cent and exceeded 12 per cent in the final quarter. We improved profitability by increasing consumer sales and responding to consumer demand by building affordable and flexible apartments in growth centres. Housing demand and YIT's growth continued to be strong in the CEE countries, with profitability remaining at a good level. We have already established a significant foothold in the Czech Republic and Slovakia, as exemplified by our position as the largest housing developer in Bratislava.

The Russian economy returned to growth after several years of recession, and residential sales picked up late in the year. However, we anticipate that the growth in housing demand will be slow and that prices will remain moderate. Our euro-denominated revenue was on a par with the previous year and our adjusted operating profit margin was 2.4 per cent for the full year. We also reduced our capital tied up in Russia by selling roughly half of the Novo-Orlovsky plot in St. Petersburg.

In the Business Premises and Infrastructure segment, the highlight of the year was the successful completion and sale of the Kasarmikatu 21 office building in cooperation with our partners. In the spring, we signed a significant agreement on the lease and sale of the Tripla project's hotel, which will be one of Helsinki's largest. We also completed all of our other pending property transactions in December. Our order backlog has remained strong, and the major projects, such as Tripla, progressed according to plan.

During the year, we prepared the launch of the new Partnership Properties segment. The new segment became operational on January 1, 2018. The new segment focuses on financing the development phases of major development projects and on the ownership and subsequent realisation of plots and developed properties at the right moment. This improves our capacity to carry out large and diverse projects and enhances the transparency of our reporting.

We will also remember 2017 for the merger of YIT and Lemminkäinen, which was announced in the summer. The merger is a strategically important step for YIT on its path to becoming one of the leading urban developers in the Northern European construction market. The merger significantly strengthens our balance sheet, increases and diversifies our resources, and improves our tolerance for cyclicality. I believe the merger will create significant value for our shareholders by opening up diverse growth and development opportunities and supporting increased dividend expectations. I am confident that our customers will also benefit from our increasingly diverse expertise and our desire to develop industry-wide practices while also developing our competitiveness, our products and our services.

Two large corporations coming together in a merger means many changes and the need to harmonise operating methods. Our aim is to carry out the internal integration processes gradually and minimise disruptions to our customer service, as well as to the day-to-day operations at our offices and construction sites. Despite the internal changes taking place, it is extremely important to us that our customers and partners can continue to count on our skilled professionals and excellent quality.

The shared journey of the new YIT began on February 1, 2018. We are tremendously excited by the opportunities the merger presents for our personnel and the Group as a whole. Our ways of working are very alike, and we have more similarities than differences. This is an excellent foundation on which we can build a common corporate culture and our future.

I would like to take this opportunity to express my warmest thanks to our customers for their trust and cooperation, as well as to our personnel and partners for working with such commitment and enthusiasm to achieve our goals.

KARI KAUNISKANGAS PRESIDENT AND CEO

Creating better living environments

We revised our strategy in autumn 2016, highlighting project development in growth centres, in collaboration with partners, as the engine of growth and profitability improvement. We want to focus on caring for our customers, visionary urban development, passionate execution and inspiring leadership. Our vision is to bring more life in sustainable cities.

SOLUTIONS FOR URBAN LIVING

We develop and construct self-developed residential projects in cities and other growth centres. We improve profitability in our housing segments by increasing consumer sales and using new product concepts to respond to customer demand even better than before. We have introduced flexible innovations from the Smartti residential concept into traditional residential production as well. We believe that housing will become more service-oriented in the future, and we develop related new concepts in our Living Services development programme. Read more about the development programme.

HIGHER ADDED VALUE FOR CUSTOMERS

We will further enhance project development in growth centres and expand co-operation with partners to innovate, finance and execute projects. We have a strong track record of investing resources in innovating long-term development projects. At the beginning of 2018, we established a new Partnership Properties segment. The properties and projects we own together with partners will be centralised in the new segment.

We will improve the profitability of the Business Premises and Infrastructure segment by increasing the number of projects with longer value chains, both in self-developed and tender-based business. Our Renovation Services development programme is aimed at growing our service offering. In late 2017, we acquired a majority stake in Talon Tekniikka Oy to strengthen our position in renovation services. Read more about the development programme.

PERFORMANCE LEAP

We are aiming to achieve a significant reduction in production costs through closer co-operation between design management, procurement and production. The Performance Leap development programme aims to reduce waste in current processes and ways of working. Improving capital efficiency is an important aspect of our business. Read more about the development programme.

OUR GOALS

The new Partnership Properties segment supports growth in urban project development

Strengthening our project development competence is an important strategic goal for us. Among other things, this requires higher investment capacity and risk-carrying capacity. Our aim is to continue to make the majority of our large and long-term investments with partners. On June 19, 2017, we announced a significant step towards achieving this goal: establishing a new Partnership Properties segment effective from the beginning of 2018.

Partnership Properties segment focuses on creating financing structures and ownership

T he Partnership Properties segment began its operations on January 1, 2018. The segment focuses on financing the initial phases of major development projects and on the ownership and subsequent realisation of plots and developed properties at the right moment. From the perspective of capital efficiency and risk management, it iis justified to carry out large development projects through financial partnership models and YIT's own property management unit.

The new segment enables YIT to increase its investment capacity and manage risks more effectively. The purpose of the segment is to improve the Group's growth capabilities, clarify the execution and reporting of partnership projects and enable the creation of a project portfolio that generates stable cash flows.

We estimate that the total value of project development investments may increase from the current level of EUR 1 billion to exceed EUR 2 billion by the end of 2020. YIT's current investments and commitments in joint ventures amount to approximately EUR 180 million, and the goal is to increase this figure to approximately EUR 300–400 million by the end of 2020 within the framework of the Group's financial targets.

YCE HOUSING I FUND SUPPORTS GROWTH IN THE CEE COUNTRIES

We were involved in establishing YCE Housing I, a fund that invests in residential development projects in the CEE countries. We are an investor in the fund, with a 40% stake. We also sell projects we have developed to the fund, we build the projects and we also act as an intermediary. In over a year of co-operation to date, we have sold a total of 10 projects to the fund. This speeds up capital turnover, significantly reduces the need for financing and reduces sales risk.

THE GOALS OF THE NEW BUSINESS AREA

1 IMPROVE GROWTH POTENTIAL	IMPROVE THE TRANSPARENCY 2 OF THE PROJECT DEVELOPMENT PORTFOLIO'S VALUE	CREATE A PROJECT 3 PORTFOLIO THAT GENERATES A STABLE CASH FLOW
• Participating in sizable urban development projects • Significant investment capacity through partnerships	• Important information on projects • Clearer earnings model • Fair value measurement	• Diverse portfolio of property and area development projects • Long-term customer relationships and living services

INCREASING INVESTMENT CAPACITY FROM EUR 1,000 MILLION (3/2017) TO MORE THAN EUR 2,000 MILLION (12/2020)

Including the equity of YIT and its partners and the share of debt in joint ventures, the share of YIT's equity will increase from EUR 180 million to EUR 300–400 million

ALL INVESTMENTS IN LARGE AND LONG-TERM PROJECTS WILL BE MADE WITH PARTNERS

Share of equity on YIT's balance sheet

Merger of YIT and Lemminkäinen

T he most significant strategic step in 2017 was the announcement of the merger between YIT and Lemminkäinen. The merger was completed on February 1, 2018.

On June 19, 2017, we announced the merger of YIT and Lem minkäinen. The merger was implemented as a statutory absorption merger, whereby Lemminkäinen was merged into YIT. The name of the combined company is YIT. As merger consideration, Lemminkäinen's shareholders received 3.6146 new shares in YIT for each share in Lemminkäinen owned by them, corresponding to an ownership in the

combined company post-completion of 60 per cent for YIT shareholders and 40 per cent for Lemminkäinen shareholders.

As a merged company, our goal is to become a leading player in urban development in Northern Europe. Our aim is to create a financially strong company with urban development as the engine for growth and profitability. The companies' business areas complement and balance each other and decrease sensitivity to economic cycles. Our reporting segments are Housing Finland and CEE, Housing Russia, Paving, Infrastructure projects, Business premises, and Partnership properties.

The total synergies from the merger are estimated to be approximately EUR 40 million annually, and we expect them to materialise in full by the end of 2020. The costs of integration are expected to amount to approximately EUR 40 million in total.

THE PRELIMINARY FINANCIAL TARGETS OF THE MERGED COMPANY:

Return on capital employed over 12 per cent (ROCE >12%)
Equity ratio above 40 percent
Positive cash flow after dividends
Annual growth in dividends per share

MERGER TIMELINE

Prior to the merger, both YIT and Lemminkäinen were construction companies operating in the Northern European market, with a significant foothold in Finland and operations in the Nordic countries, Russia and Eastern Europe. In recent years, both companies have streamlined their operations with a focus on profitability and strengthening the balance sheet. The enhanced efficiency of their operations has put the two companies in a good position to take advantage of the improved market situation and strengthen their market position, thereby increasing their profitability. With improved operating capabilities, the companies are seeking new opportunities for growth and new ways to create a stronger company.

The merger creates a strong foundation for future growth in many ways, including a stronger balance sheet, improved business balance and geographical expansion. It opens up new markets and the opportunity to carry out new projects. The combined company has an extensive presence in several economic areas, enabling the company to accelerate its growth while reducing its sensitivity to country-specific construction cycles. The businesses complement and balance each other, and there are ultimately very few overlapping operations.

The increased size and strengthened capital base of the combined company is also expected to improve financing options and reduce financial costs. The larger size enables specialisation and agility, as a large organisation can contain small specialised units or start-up hubs. The availability of resources has been a bottleneck in recent times, and the competition for competent professionals is intense. We believe that together we are an even more attractive employer.

The merger also sees YIT's shareholder base complemented by strong new Finnish shareholders, such as members of the Pentti family and their investment companies, as well as the family-owned investment company Onvest Sijoitus Oy.

THE PAST FEW YEARS OF YIT AND LEMMINKÄINEN IN BRIEF

The combined portfolio of YIT and Lemminkäinen in 2017

T he merger is a strategically important step that will create the foundation for growing into one of the leading urban developers in the Northern European construction market. The annual revenue¹ of the combined company was over EUR 3.8 billion and adjusted operating profit¹ approximately EUR 152 million in 2017. The combined company operates in 11 countries (Finland, Russia, Sweden, Norway, Denmark, Estonia, Latvia, Lithuania, the Czech Republic, Slovakia and Poland) and has a strong position in its business areas. The even more balanced product and service offering and the wider geographical reach are expected to present new growth opportunities and provide stability against cyclicality.

GEOGRAPHIC REVENUE SPLIT, 2017¹ (EUR MILLION)

Real estate development

ILLUSTRATIVE COMBINED REVENUE SPLITS IN 2017¹

Operating environment

Consumer confidence continued to pick up in Finland, which was reflected in good consumer demand. In addition to the demand focusing on affordable apartments in growth centres, the demand for bigger apartments improved. Residential investors were more selective.
In the CEE countries, consumer confidence was at a good level, and residential demand was mainly brisk. The prices of new apartments increased slightly on average.
Mortgage interest rates were at a low level in all operating countries and the availability of financing was good. In Finland, the volume of new mortgages increased slightly from the previous year.
The decline in consumer purchasing power levelled off during the year and consumption turned to slight growth late in the year. Russian consumers were cautious in their apartment purchasing decisions in spite of the economy improving.
Residential demand was moderate but started to improve during the year in the Moscow region and, towards the end of the year, also in St. Petersburg.
The Russian Central Bank lowered its key rate several times during the year and may lower it further in the early part of 2018, which was partly reflected in the residential demand. The interest rates for mortgages for new apartments fell below 10 per cent. Residential prices remained stable on average and supply remained high.

RETAIL SALES AND REAL WAGES, ANNUAL CHANGE BY MONTH, %

HOUSING FINLAND AND CEE HOUSING RUSSIA BUSINESS PREMISES AND INFRASTRUCTURE

Investor interest in business premises located in the most central growth centres stayed in good level. The yield requirements of office and retail properties decreased in the Helsinki metropolitan area, and the rental levels for prime properties increased in central Helsinki.
The favourable market climate in Finland supported private investments. The business premise contracting market and the infrastructure construction market were active especially in the Helsinki metropolitan area and other Finnish growth centres.
In the Baltic countries and Slovakia, investor demand for business premises was strong and rental levels remained stable. The contracting market has remained stable in the Baltic countries.

VOLUME OF NEW CONSTRUCTION IN FINLAND,

CONSUMER AND BUSINESS CONFIDENCE IN FINLAND, BALANCE

Housing Finland and CEE

BUSINESS OPERATIONS

We construct and develop apartments and entire residential areas

OPERATING COUNTRIES

Finland, Estonia, Latvia, Lithuania, the Czech Republic, Slovakia, Poland

MARKET POSITION

Market leader in Finland, one of the major operators in the CEE countries, excluding Poland, where operations began in 2016

CUSTOMERS

Households, private and institutional investors

MAIN COMPETITORS

SRV, Skanska, Bonava, Lehto Group, Lapti, JM, Lujatalo, Hartela, Merko, Nordecon, Central Group, Finep, Dom Development, Robyg and smaller local operators in different cities, (Lemminkäinen)

MARKET SIZES

Housing start-ups, units (2017 estimate): Finland 40,500

Czech Republic 31,200 Slovakia 21,300 Poland 206,000

Completed apartments, units

(2017 forecast): Estonia 5,700 Latvia 2,200 Lithuania 11,900

THE NEW RANTA-TAMPELLA – ONE STEP FROM THE SHORE, TWO STEPS FROM THE CITY CENTRE

The construction of the new Ranta-Tampella residential area as an extension of Tampere's city centre, by the shore of Lake Näsijärvi, began in 2016. We have started several new projects in the area that have seen strong demand. When completed in just over 15 years' time, the area will be home to 3,500 people.

FINNISH BRAND HELD IN HIGH REGARD IN PRAGUE, THE CZECH REPUBLIC

In Prague, the Czech Republic we have developed the Suomi Hloubětin area development project, consisting of sub-projects named after Finnish towns. Finnishness is an asset in the CEE housing markets. Finland is associated with the welfare society, reliability, high quality and caring about the environment, among other things.

Housing Finland and CEE

The segment's revenue increased 15% year-on-year thanks to good consumer sales and plot sales.
The segment's adjusted operating profit increased 37% year-onyear, and the adjusted operating profit margin was 9.8%. The operating profit increased thanks to strong residential sales, especially consumer sales were good.
According to its strategy, YIT increased consumer sales in Finland, and they represented 65% of total sales. Start-ups directed to consumers were increased by 30% year-on-year and unit sales to consumers grew by 21%
CEE countries had a strong impact on revenue growth with high profitability. In the end of 2016, YIT involved in establishing the YCE Housing I fund that supports the company's growth strategy in the CEE countries by investing in housing development in the area. In 2017, YIT has sold eight projects to the fund in total.
The solutions and innovations of Smartti residential concept were started to be implemented in other residential production as well. YIT presented new living services, such as Smartpost lockers for food and e-commerce deliveries in connection with the new YIT Homes.

RESIDENTIAL CONSTRUCTION IN FINLAND, UNITS

RESIDENTIAL CONSTRUCTION IN THE CEE COUNTRIES, UNITS

APARTMENTS UNDER CONSTRUCTION AND COMPLETED, UNSOLD, UNITS

Housing Russia

BUSINESS OPERATIONS

We construct and develop apartments and entire residential areas, and we operate in the maintenance and service business

OPERATING COUNTRIES

Seven regions in Russia: Rostovon-Don, Yekaterinburg, Kazan, Moscow, Moscow region, St. Petersburg, Tyumen

MARKET POSITION

Largest foreign housing developer

CUSTOMERS

Primarily households

MAIN COMPETITORS PIK Group, LSR Group, Etalon Group and local operators in different cities

MARKET SIZES Completed apartments, units (2017 forecast): Moscow 48,000 Moscow region 125,000 St. Petersburg 57,000 Russia 1,120,000

FUNCTIONAL AND EFFICIENT SPACE IN THE MOSCOW REGION

The first phase of the Novyi Noginsk apartment building project in the Moscow region has been completed. Special attention has been paid to functional and efficient layouts in the project. The area represents YIT's first foray into the newly developed, modern and energy-efficient batch production of housing.

Housing Russia

The segment's revenue remained stable year-on-year. At comparable exchange rates, revenue decreased by 11%.
The adjusted operating profit was EUR 6.3 million and the adjusted operating profit margin was 2.4%. Improved gross margins of projects has a positive impact on the development of the segment's adjusted operating profit, however the result was weighed down by weak residential sales and low revenue recognition.
Housing sales decreased by 18% year-on-year, but improved towards the year-end. The ending of the mortgage subsidy programme at the end of 2016 increased the expectations of a decreased in interest rates, which was reflected in residential demand. In 2017, the share of residential deals financed with mortgages was 51%.
YIT continued its target of releasing approximately RUB 6 billion worth of capital invested in Russia by the end of 2018 by selling apartments and plots. In December, YIT sold a part of a plot in Novo Orlovsky in St. Peterburg. Half of the total price of approximately EUR 36 million was recognised as revenue in 2017.
At the end of the year, YIT was responsible for the service and maintenance of over 34,000 apartments, 5,500 parking spaces and 2,000 business premises in Russia, totalling almost 42,000 clients.

SEASONS PROJECT IN ROSTOV-ON-DON SHINES IN THE COLOURS OF THE FOUR SEASONS

We started a residential project in 2017 in the Leninsky district of Rostovon-Don, Russia. Built in four phases, the Seasons project will comprise almost 1,100 apartments to be completed by the end of 2021. The colour design of each phase represents one of the four seasons.

ORDER BACKLOG, EUR MILLION

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED, EUR MILLION, %

RESIDENTIAL CONSTRUCTION, SOLD APARTMENTS, UNITS

APARTMENTS UNDER CONSTRUCTION AND COMPLETED, UNSOLD, UNITS

Business Premises and Infrastructure

BUSINESS OPERATIONS

We build offices, shopping centres, care facilities, roads, bridges, rail and metro stations, harbours and more. We also operate in the area of road and street maintenance.

OPERATING COUNTRIES

Business premises: Finland, Estonia, Latvia, Lithuania, Slovakia Infra: Finland

MARKET POSITION:

One of the major operators in Finland, strong foothold in the Baltic business premises market. A small but growing business premises constructor in Slovakia and the Czech Republic.

CUSTOMERS

Businesses, the public sector and institutional investors

MAIN COMPETITORS

NCC, Skanska, Destia, VR Track, Peab, Graniittirakennus Kallio, Kreate, Jatke, SRV, Lehto Group and local operators in different countries, (Lemminkäinen)

MARKET SIZES

Slovakia 2,100

Business premises construction, EUR million (2017 estimate): Finland 12,100 Baltic countries 4,100

Infrastructure construction, EUR million (2017 estimate): Finland 6,500

SUCCESSFUL NAANTALI MULTI-FUEL POWER PLANT (CHP) INAUGURATED

The Naantali multi-fuel power plant built by an alliance consisting of YIT, Turun Seudun Energiatuotanto Oy, A-Insinöörit Suunnittelu Oy and Insinööritoimisto AX-LVI Oy was inaugurated in December. The project, which previously won the Construction Site of the Year award, was Finland's first industrial project implemented using the alliance model.

SEGMENT REVIEWS

Business Premises and Infrastructure

The segment's revenue remained stable year-on-year.
Adjusted operating profit grew by 48% and the adjusted operating profit margin rose to 6.9%. The profitability was boosted especially by the completion of Kasarmikatu 21 office property sales transaction.
The Tripla project progressed as planned and in the end of the year, the occupancy rate of Mall of Tripla was approximately 63%. In spring, the agreement on the implementation of the Tripla hotel was signed. In addition, the first significant long-term tenancy of the Tripla office spaces was signed in autumn.
In October, the candidate coalition consisting of YIT and VR Track was selected as the construction contractor for the Jokeri Light Rail. The project partners have signed an alliance contract on the development stage.
YIT and HGR Property Partners' joint venture Regenero acquired properties at the end of the year in Keilaniemi, Espoo, Finland for a development project.
YIT announced to have signed a set of agreements of the acquisition of Projektipalvelu Talon Tekniikka Oy to strengthen its position in renovation services. The acquisition will be implemented during the first quarter of 2018.

TÖÖLÖNKADUN PYSÄKÖINTILAITOS

We have been developing the Töölönkadun Pysäköintilaitos parking facility since late 2015. Estimated to be completed in spring 2019, the parking facility will be located underground in the middle of a vibrant urban environment. Broad-based project management expertise has made it possible to implement this challenging project in accordance with the targets set for it.

1 2015 figures restated due to transfer of YIT's equipment business from Other items to Business Premises and Infrastructure.

ORDER BACKLOG, EUR MILLION

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED¹, EUR MILLION, %

1 2015 figures restated due to transfer of YIT's equipment business from Other items to Business Premises and Infrastructure.

Töölönkadun Pysäköintilaitos will provide about 800 heated, supervised and ecological parking spaces in a prime location in Helsinki.

"Public discussion is

the local residents accept the changes. There is less resistance to new ideas when the local residents participate in the planning process," Dovey adds.

POINT OF VIEW

Urbanising Finland needs urban design

The father of urban design, Professor Kim Dovey from the University of Melbourne, visited Finland in early November to deliver the keynote address at our Sustainable Urban Environments event.

Over the course of his long career, Dovey has created a theoretical framework of urban design that he refers to as DMA: density, mix and access.

"DMA is like DNA. It does not determine outcomes, whether we are

talking about a person or a city, but it creates a framework for what is possible and impossible. As the deep underlying structure of urban districts and cities, DMA influences things on many levels: the density of the city, how we move around it, and what functions are available in different districts," Dovey says.

With Finland undergoing a rapid process of urbanisation, Finnish cities are in urgent need of the principles of urban design. It is not enough to simply fit

homes and workplaces into cities. Moving between these places must be efficient. At the same time, cities should strive for low emissions to mitigate climate change.

In 2017, Dovey's home city of Melbourne was rated by The Economist as the world's most liveable city for the seventh year running. We decided to find out what advice this Melbourne-based professor of urban design would give to Finnish urban developers.

YOU MUST UNEARTH THE CITY'S HIDDEN CAPACITY

"In Melbourne, we identified an opportunity in the form of suburban

shopping centres. Surrounded by vast parking lots, they were not served by public transport, or at least not by anything other than buses. As we move towards a low-emission society, the old suburban shopping centres that are only accessible by cars start to look like mistakes. This is when we have to think big. We wondered whether it would be possible to build small urban centres around these shopping centres. We looked at various models of replacing parking lots by public spaces, new streets, apartments, offices and even small-scale industry. The shopping centres were left in place and they became

pedestrian centres surrounded by lively urban areas. These opportunities are out there, you just have to dig them up by comparing different alternatives," Dovey explains. important for ensuring that

"Suburban railway stations were another opportunity we found. They also had large parking lots on municipal land. We saw this as a major opportunity to build apartments with public transport just a lift ride away," Dovey adds.

MULTIPLE SCENARIOS NEEDED TO PRIME DISCUSSION

"Instead of one grand plan, you need multiple scenarios representing different alternatives. You can even gamify them and find out what types of outcomes can be achieved with different combinations. These alternatives can serve as the basis for proper public debate," Dovey says.

EXPERIMENT WITH TEMPORARY SOLUTIONS: TURN THE CITY INTO A TEST LABORATORY

"One example of an experiment done in Melbourne was when the city centre was covered with grass sod for one weekend in the 1980s. At the time, the central business district was a typical eight-to-five place

where people came to work. The point of the experiment was not to suggest that the city centre needed to have a park. The point was that the city can be seen in a different light. People thought very differently about the city centre after that weekend. While urban design solutions have a long-term impact, temporary experimentation allows for boldness and is not met with as much resistance," Dovey explains.

THE END RESULT IS CREATED BY THE LOCAL RESIDENTS – AND THAT TAKES TIME

"Urban design is like gardening. You sow the seeds and create favourable conditions for the plants to grow. Then you just hope for the best. You never know for sure what the outcome will be. It also takes time for life to find its way into new urban areas. Politicians need to keep their hands off and not interfere with the city's organic development," Dovey concludes.

Business operations

Urban development trends as the starting point of our operations 26 Value creation model 27 Self-developed business 28 Contracting 29 Financing solutions 30 Development programmes 31 Performance Leap 32 Living Services 34 Renovation Services 36

YIT SUOMI HLOUBĚTIN, PRAGUE, CZECH REPUBLIC

Urban development trends as the starting point of our operations

Value creation model

OUR KEY RESOURCES

Production resources:

Materials Equipment IT systems Natural resources Offices Construction sites Plots

Human resources:

Personnel Subcontractors Investments in development and occupational health

Intangible resources:

Brand Competence Research and development Product range References

OPERATING MODEL AND STAKEHOLDERS

OUR GROWTH ENGINE: URBAN DEVELOPMENT INVOLVING PARTNERS

RESULTS AND IMPACTS IN 2017

Revenue, IFRS EUR 1,993.8 million (1,678.3)

Customers:

Weighted NPS 51% (62%) Apartments under construction1 11,407 (12,511) The Business Premises and Infrastructure segment's order backlog1 EUR 1,238.0 million (1,316.3)

Investors:

Dividends EUR 52.4 million2 (27.6) Interest and financial costs EUR 14.6 million (20.1)

Suppliers:

Raw materials and consumables EUR 276.8 million (245.2) External services EUR 985.9 million (892.4)

Personnel:

Average number of personnel 5,533 (5,361) Wages and salaries EUR 223.5 million (203.8) Pension costs EUR 3.6 million (7.5)

Society:

Income taxes EUR 14.3 million (4.7) 40 Good Deeds (over 10) Energy consumption (MWh) / revenue, EUR million, POC, 87.8 (84.5)

Product development:

R&D expenditure EUR 18.9 million (15.8)

At the year-end The Board of Directors' proposal to Annual General Meeting, considering the number of shares after the merger of YIT and Lemminkäinen

K3 Logistics is located next to Helsinki Airport.

Self-developed business

I n self-developed business, we are responsible for project planning, plot acquisition, construction, rental operations and/or sales. We construct apartments, business premises and various hybrid projects on a self-developed basis. Self-developed business ties up more capital than contracting and, because the value creation chain is longer, it offers higher profitability than traditional contracting. One of our most significant competitive advantages is our ability to carry out large self-developed hybrid projects, such as Tripla. These types of projects allow us to leverage our diverse expertise in residential, business premises and infrastructure construction. Our large plot portfolio provides a strong foundation for the development of new projects and entirely new residential areas in growth centres.

HOUSING

We build homes to suit various housing needs. Our flexible Smartti concept is an example of affordable housing that combines efficient layouts with smart spatial solutions. Our new philosophy is living design philosophy, which uses versatile space and smarter services to deliver greater convenience in everyday life for people who live in YIT Homes. We also offer homes of various sizes in unique locations with good transport links and services.

"We build housing, business premises and various hybrid projects on a self-developed basis."

We provide diverse financing solutions to homebuyers in our residential projects. Flexible housing corporation loans make owner-occupied housing accessible even to those with less available capital. In addition, in certain residential developments, we offer the optional purchase right model, which allows people to either buy the apartment directly or sign a lease and then buy the apartment at a suitable later date, within five years of the project's completion, at a fixed price.

BUSINESS PREMISES

We develop and lease business premises ranging from office properties suitable for use as company headquarters to business and logistics premises of various sizes. Our business premises projects combine versatile solutions with central locations and good transport links. We also develop day-care centres, assisted living facilities and housing solutions for senior citizens under the YIT Care concept.

K3 LOGISTICS – A LARGE LOGISTICS AREA IN VANTAA, BETWEEN RING III AND RUNWAY 3 OF HELSINKI AIRPORT

Developed by YIT, the K3 Logistics business area is located in Vantaa, between Ring III and Runway 3 of Helsinki Airport, hence the name K3. With approximately 140,000 square metres in building rights, the logistics area will provide versatile premises for users of all sizes. The tenants include Posti and Wihuri, among others.

The City of Helsinki is developing the campus for use by Metropolia University of Applied Sciences.

Contracting

Under the contracting model, the customer chooses a contractor to carry out the project for a contract price. Our contracting projects include public facilities, industrial properties, business premises and infrastructure. The typical customers of these projects are cities, municipalities and industrial enterprises. Public sector projects in Finland are governed by the Act on Public Procurement and Concession Contracts, which stipulates that contracts that exceed a certain size must be subject to competitive tendering. Contracting does not tie up large amounts of capital, the value creation chain is short and competition for projects is intense, which makes the profitability of contracting lower than that of self-developed business. Our competitive advantage in contracting stems from our strong references, competent personnel and international procurement.

DIFFERENT CONTRACTING MODELS FOR DIFFERENT NEEDS

We use different contracting models to suit the needs of different kinds of customers and projects. In turnkey contracting, for example, the contractor is responsible for all contract stages, starting from planning and design, under the turnkey principle. We are currently implementing the Point College project in Porvoo as a turnkey contract. In project management contracts, the customer is responsible for project planning, while the contractor is responsible for other project management. One recent example of our project management contracts is the West Harbour terminal in Helsinki, which was completed five weeks ahead of schedule.

The life-cycle model includes a commitment to maintain the property after construction has been completed. PPP projects (Public-Private Partnerships) are one form of the life-cycle model, with a private operator assuming responsibility for the implementation and maintenance of a public project. The life-cycle model is often used in major road construction projects, such as the E18 Hamina–Vaalimaa motorway, as well as renovation projects, including the renovation of schools in co-operation with one or more partners. The advantage of the life-cycle model is

focusing on the full life cycle of the project, with a single party responsible for planning the construction, use and maintenance of the property.

In projects implemented under the alliance model, the client and contractor commit to shared cost and quality targets to ensure the best possible outcome for the project. The model relies on transparency, mutual trust and teamwork. Examples of our alliance projects include the Tampere light rail project, in which the alliance partners are YIT, VR Track and Pöyry, and the Jokeri Light Rail project, with YIT and VR Track as the alliance partners. Another example is the Naantali multi-fuel power plant completed in December, implemented under the alliance model in partnership with A-Insinöörit Suunnittelu Oy, AX-LVI Consulting Ltd and Turun Seudun Energiantuotanto. It was Finland's first industrial project in which the alliance model was used to carry out the engineering work.

In the alliance model, the choice of contractor is affected by factors such as references. The alliance model is best suited to large and complex projects. Our aim is to introduce the co-operative operating models created under the alliance model into other forms of contracting as well. For example, we are carrying out the Rimpi area deep tunnel construction project at the Kittilä gold mine using a co-operative form of contracting, which will be be jointly developed with the customer to establish a new operating model for the mine.

METROPOLIA'S MYLLYPURO CAMPUS IS BEING BUILT ON TOP OF THE METRO TRACK

We are implementing Metropolia University of Applied Sciences' Myllypuro campus project as a project management contract. The value of the contract is more than EUR 70 million and, when completed, the campus will provide facilities to approximately 6,000 students. The campus is being built partly on top of the metro track in the heart of Helsinki's Myllypuro district, in the vicinity of Ring 1 and the Liikuntamylly Recreation Centre.

Financing solutions

DIVERSE FINANCING SOLUTIONS SUPPORT OUR BUSINESS

Our financing structure is guided by the financial targets set by the Board of Directors. In 2017, the equity ratio target was 40% (segment reporting, POC). During the year, YIT further improved its financial operating space by creating partnerships and diversifying its sources of financing. The most significant financing transactions during the review period included bilateral credit agreements totalling EUR 110 million with two different banks and, as part of the preparations for the merger between YIT and Lemminkäinen, an agreement for a revolving credit facility of EUR 300 million to replace a previous credit facility, and bridge financing agreements for EUR 240 million.

Debt financing plays a key role in supporting return on equity in a business that ties up significant capital. YIT's financing is managed on a centralised basis at the Group level, and a significant proportion of financing comes from the Finnish market. Short-term financing is drawn within the framework of the commercial paper programme of EUR 400 million. In addition to the issued bonds, YIT also has bilateral loans from banks and insurance companies, as well as construction stage financing in the form of receivables sold to banks and housing corporation loans. In order to ensure its liquidity, at the end of the year, YIT also had access to an undrawn revolving credit facility of EUR 200 million, EUR 73.7 million in account overdraft facilities, and EUR 89.7 million in cash reserves.

CONSTRUCTION STAGE FINANCING AND FINANCING FOR LARGE PROJECTS

In the fourth quarter, YIT changed its method of financing its housing production sold to domestic consumers in Finland. Previously, YIT has sold the project's contract receivables to the financing bank, and the contract debt was paid off with the housing corporation loan drawn

when the project is completed. As this model no longer offered the same benefits as before, YIT adopted a different financing model in line with current market practices, where the housing corporation loan is drawn according to the project's percentage of completion to finance construction. As the proportion of the drawn housing corporation loan allocated to sold apartments does not burden YIT's balance sheet, this model has a positive impact on the reported net debt.

The financing of large-scale projects deviates from YIT's Group-level financing due to its independent structure. The independent financing structure means that project-specific income serves as the security for the interest and repayment of both equity financing and debt financing. RAKENTEILLA OLEVAT JA VALMIIT MYYMÄTTÖMÄT

In projects implemented as joint ventures, YIT always has a dual role. We act as both one of the capital investors in the project as well as the main contractor responsible for construction work. As an implementation model, a joint venture that brings together partners serving different roles, as well as financiers, is often contractually complex and may require extended negotiations.

THE UNIQUE KASARMIKATU 21 OFFICE PROPERTY WAS CREATED BY CO-OPERATION

In late December, we sold the Kasarmikatu 21 office property to an international investor. This unique new building in central Helsinki was developed as a joint venture between YIT, Ahlström Capital and HGR Property Partners, dividing the risk and capital commitments between the venture partners.

DEVELOPMENT OF INTEREST-BEARING NET DEBT (EUR MILLION)

Development programmes support our strategy

We launched three development programmes related to our revised strategy in autumn 2016: Performance Leap, Living Services and Renovation Services.

The development programmes expedite our renewal and adaptation to the changing market environment through internal changes in operating methods, building partnerships, deeper co-operation with customers and investments in innovations that help us increase our competitiveness.

The Performance Leap programme reduces waste in our processes and ways of working. Living Services develops new business operations to support housing and digitalises and improves the customer experience, while the Renovation Services programme strengthens our position as a renovator by utilising our extensive expertise in project development and contracting.

Read on for more information on our closer interaction with strategic partners, the results of reducing waste, services that make our customers' daily lives easier and the creation of a versatile urban environment. These were the hallmarks of our progress in our development programmes in 2017.

PERFORMANCE LEAP

The significance of co-operation is highlighted in modern construction

T he Performance Leap development programme helps us reduce waste in our current operating practices and processes, thereby improving our competitiveness.

For the Performance Leap programme, 2017 was a year of closer interaction both within YIT and with our external partners. We want to operate in a network with our strategic partners because co-operation increases and develops our expertise, opens new opportunities, improves our efficiency and creates value. Going forward, we will continue to develop and grow our strategic partnership network.

VISUAL MANAGEMENT AND CO-OPERATION AS AN OPERATING METHOD

Co-operation and interaction are key aspects of modern construction. At our construction sites, co-operation is evident in the visual management practices used. Visual management and co-operation are our current operating method and no longer dependent on the contracting model.

Kick-off events arranged at the start of projects, for example, provide an opportunity to agree on shared targets and ensure that all project parties are committed to them. Production management is enhanced by Last Planner, a scheduling technique that makes workflows more predictable. All of the project's key personnel participate in the planning.

"When all project parties are involved in the planning, it is easier to identify and eliminate bottlenecks and waste. In this context, waste refers to anything that does not create value and takes up working hours, such as waiting," says Maarit Sääksi, Head of the Performance Leap programme.

ELECTRONIC SITE INDUCTION AND ACCESS CONTROL IMPLEMENTED FOR PROJECT SITES LOCATED IN FINLAND

One of the goals of the Performance Leap programme is to facilitate daily routines at our sites and improve their performance through the introduction of shared, clear operating models that are supported by mobile solutions and digital tools. The solutions are linked to our modern project management systems to ensure that data collected on-site is compiled and utilised as effectively as possible.

In 2017, we introduced electronic site induction and access control, as well as Tilaajavastuu Valttikortti cards, at all of our Finnish sites where it was possible. The solutions are currently being piloted in Russia and the CEE countries. Our induction practices exceed the standards required by the authorities. They cover not only occupational safety, but also quality, our values, ergonomics and our strategy.

ENSURING COMPETENCIES DESIGN MANAGEMENT

PARTNERSHIPS AND PREFABRICATION

CONSTRUCTION SITE EFFICIENCY 15% REDUCTION

IN PRODUCTION COSTS

Our new compact yet accessible bathroom and sauna unit is manufactured entirely off-site, down to the millimetre, in dry conditions using high-quality materials, and then transported as a fully sealed and completed unit to the construction site.

BETTER PRODUCTION FLOW, SHORTER TURNAROUND TIMES

In practice, eliminating waste means better production flow and shorter project turnaround times without increased resources. One practical example is an infrastructure project whose turnaround time was reduced from 20 months to 16 months with the help of the Last Planner technique. In a pilot housing project for the Performance Leap programme, the turnaround time of the interior building phase of an apartment building was reduced by nearly 50 per cent as a result of pace scheduling.

Shorter turnaround times do not mean lower quality. On the contrary, pace scheduling means more real-time quality inspections and immediate detection of possible defects.

To ensure high quality, we also invest resources in strengthening the key competencies of our personnel on a continuous basis. For example, we have enhanced moisture control by implementing the Kuivaketju10 dry chain management model developed by the Construction Quality Association. One aspect of the model is training our own moisture control co-ordinators in various units.

"Production turnaround times are also affected by the increased use of prefabricates in construction."

THE USE OF PREFABRICATES WILL INCREASE

Production turnaround times are also affected by the increased use of prefabricates in construction. This has already been done in the Smartti housing concept developed as a response to the growing demand for affordable apartments.

The first Smartti homes with faster-than-average turnaround times were completed in summer 2017. More than 500 Smartti homes have been sold to date. Smartti innovations are now also being adopted in our traditional production models.

LIVING SERVICES

Growing demand for services that make daily life easier

T he Living Services development programme creates new business operations to support housing while also supporting the digital transformation and improvement of our customer experience.

The construction industry is undergoing a major transformation, which is reflected in housing construction developing towards the housing business. At the same time, the demand for services that make everyday life easier and more convenient is constantly increasing.

The Living Services development programme is aimed at providing digital services and solutions to our customers at every stage of the customer path, from inspiration to enthusiasm and buying a new home, and from designing the home to living in it and eventually renovating it.

Important steps taken in the development of the digital customer path included our website redesign in early 2017 and the launch of the YIT

Plus service in the Russian market late in the year. Customers can now buy additional services, order maintenance services and pay for services via the YIT Plus portal in Russia.

OUR REDESIGNED WEBSITE PROVIDES ASSISTANCE AND INSPIRATION On our new-look website at www.yit.fi, our customers can easily find information on a variety of topics, from the practical aspects of buying a home to legal issues and tips for interior decoration. The website also features a comprehensive range of images and information on all of our housing projects. A growing number of projects are also introduced with the help of videos, 3D illustrations and VR headsets. "Customers can easily get more information from our sales representatives via the chat function on our website, without having to make an appointment. We also provide peer-to-peer information on residential areas via our Neighbourly Guides service, which was expanded to cover 11 cities last autumn," says Pekka Helin, the Senior Vice President in charge of the Living Services development programme.

The digital YIT Plus service gives customers who have made the purchase decision the opportunity to choose materials, review and store documents and keep track of the construction of their apartment.

"For legal reasons, it is not yet possible to make the apartment buying process fully digital, but this is likely to change in the near future. YIT

DIGITAL CUSTOMER PATH SERVICE GROWTH IN RUSSIA

SERVICE BUSINESS BUSINESS BASED

ON DATA

REVENUE GROWTH FROM THE FULL CUSTOMER LIFE CYCLE

introduced an electronic reservation system for apartments late last year. Electronic documentation is already being planned in the industry," Helin adds.

PARTNERS HELP MAKE DAILY LIFE SMOOTHER

The daily lives of our customers are also made easier by our current and future co-operation projects with partners such as Posti, Fortum and KONE.

Almost all of our future apartment building projects will feature Posti's Smartpost lockers for receiving deliveries from online retailers. The lockers are at the residents' disposal around the clock. Parcels and other items purchased from online retailers are delivered to locked cabinets, allowing the residents to pick them up when it suits them. Grocery deliveries by Kauppahalli24 are included in the service to make online grocery retail conveniently available to our customers in the Helsinki metropolitan area.

The Fortum SmartLiving cloud service being piloted at As. Oy Klovinseppä in Espoo represents the next step towards a smart home. Our YIT Plus service has already given customers the opportunity to monitor their water consumption, but this new service also allows them to monitor the energy consumption of their home in real time, adjust the room temperature and receive alerts in the event of a water leak. SmartLiving also makes it possible to adjust lighting and, in the future, it will feature other functions that increase the comfort of living.

"Our aim is that, in the future, as many YIT Homes as possible will have the capacity to implement smart services chosen by the customer to make daily life easier," Helin promises.

We are piloting the KONE Residential Flow solution in a residential building in a former paper mill in Kangas, Jyväskylä. Residential Flow makes residents' movement within their building easier by allowing them to operate the building's outer doors, lifts and apartment intercoms with their smartphones.

Our optional purchase right model represents a response to consumers' hopes for more diverse housing solutions. The model allows people to either buy the apartment right away or sign a lease and then buy the apartment later, within five years of the project's completion, at a fixed price. The first pilot site for the model is As. Oy Helsingin Agronomi in Viikki.

In Russia, the YIT Service maintenance and service concept is now available to some 40,000 customers. New housing-related services provided by partners, such as renovation services, have been introduced to complement apartment finishing services. New services are being developed continuously.

MULTIPLE PERSPECTIVES ON DAILY LIFE IN THE FUTURE

Making everyday life easier is the sum of many things. It involves everything from urbanisation, the digital transformation and a sense of community to the sharing economy and customers. The overarching goal is smooth and easy everyday life, convenient transport, flexible services, healthiness, safety and eco-friendliness. These are the keywords that our experts, along with those representing our partners Posti, KONE and Fortum, use to describe our future.

HACK THE LIVING PROMOTED THE CREATION OF INNOVATIVE NEW SOLUTIONS

In early 2017, we organised the Hack the Living innovation competition in order to find new business models, services and digital solutions to make everyday life and housing easier. The selected teams were given the opportunity to familiarise themselves with YIT's operations and participate in a two-day hackathon. The winning ideas were implemented as pilot projects with a budget of EUR 20,000.

SMARTPOST

RENOVATION SERVICES

We want to be the preferred renovation partner in the Finnish market

T he Renovation Services development programme strengthens our position as a renovation company by utilising our extensive project development and contracting expertise and strong position in these areas.

Megatrends such as urbanisation, more compact urban structures and the ageing of the existing building stock constructed in the 1960s and 70s are creating a growing need for sustainable urban development and renovation under various contracting models.

"Renovation projects are carried out in co-operation with the customer. One growing part of the customer base is municipalities, which will make increasing investments in renovation projects in the future," says Kari Alavillamo, the Senior Vice President in charge of the Renovation Services development programme.

Our future goal is to be Finland's best-known and most sought-after partner in renovation and property development. To achieve this objective, we will continuously develop the competence of our personnel and our flexible operating models.

The target of the Renovation Services development programme is to double our renovation revenue by 2019 and to develop new business, business models and concepts for YIT.

CLOSER INVOLVEMENT IN THE RENOVATION PROJECTS OF HOUSING COMPANIES

The Renovation Services development programme consists of four components: property development, area development, renovation contracts and renovation projects for housing companies.

In December 2017, we announced the signing of a set of agreements on the acquisition of Projektipalvelu Talon Tekniikka Oy, a company specialising in apartment building pipe renovations and renovation contracting.

The acquisition forms a majority-owned subsidiary of YIT. The acquisition, which supports YIT's strategic goal of growing the renovation business, will be implemented in the first quarter of 2018.

SCHOOLS IN ESPOO RENOVATED USING THE LIFE-CYCLE MODEL

The Viherlaakso, Kirsti and Päivänkehrä schools in Espoo, Finland will be renovated using the life-cycle model. This provides a predictable and reliable solution for ensuring that the old school buildings, which are important for the local community, meet current requirements. For the municipality, the life-cycle model is a safe alternative: a single agreement covers the renovation as well as the responsibility for the maintenance period.

INCREASING THE RENOVATION PROJECT VOLUME GROWTH FROM THE DEVELOPMENT OF EXISTING PROPERTIES

RENOVATION PROJECTS FOR HOUSING COMPANIES

INFILL DEVELOPMENT AND RENOVATION OF URBAN AREAS

NEW CONCEPTS FOR DOUBLING REVENUE

The Käärmetalo building in Helsinki's Käpylä district is exceptional in that its interior is protected.

The transaction will increase our involvement in the renovation projects of housing companies. We will carry out facade and pipe renovations, roof repairs as well as zoning and supplementary construction projects.

"Our operating method in renovation projects for housing companies is based on four principles: interest, service, professionalism and responsibility. Instead of the usual two-year warranty, YIT's renovation services come with a five-year warranty," Alavillamo adds.

AREA DEVELOPMENT AND PROPERTY DEVELOPMENT CREATE VIBRANT CITIES

The Renovation Services development programme works closely with our Urban Development unit in developing our area renovation concept. The concept supports our strategy of further strengthening project development in growth centres.

Area development and property development inject new life into old areas, thereby increasing their value. This also transforms old residential areas into fixed parts of a sustainable and lively city.

In late October 2017, we announced the first significant tenancy of the office spaces at the Tripla urban centre in Pasila after Otavamedia Oy signed a long-term lease. The lease agreement covers over 6,000 square metres on four different floors of the Tripla middle block. The agreement also includes YIT purchasing two buildings owned by Otavamedia Oy in Pasila.

"Our goal is to develop and renovate the properties for new purposes and new users. The renovation is scheduled to begin in 2018 and 2020," Alavillamo explains.

CREATING A VERSATILE URBAN ENVIRONMENT IN KEILANIEMI

Another significant announcement made in late October concerned Regenero, a joint venture formed by YIT and HGR Property Partners, "Renovation projects are carried out in co-operation with the customer. One growing part of the customer base is municipalities, which will make increasing investments in renovation projects in the future."

acquiring a property located in Espoo's Keilaniemi district for a development project. The property is Fortum's current head office, which the company will vacate. The project will give Regenero the opportunity to create a highly versatile urban environment in a location with excellent public transport links.

Another good example of area development is the Siltamäki infill development game created by YIT in spring 2017 in co-operation with FCG and the City of Helsinki. The digital game gave local residents the opportunity to find out how different infill development alternatives would affect the potential development of the area.

The game was accessed from more than 2,000 terminals, and a total of 515 people submitted entries. The renovation and area development possibilities of Siltamäki are still under investigation.

KÄÄRMETALO IS A RENOVATION SHOWPIECE

Käärmetalo (English: Serpentine House) is a great example of the kind of expertise required in renovation projects. Completed in 1952, the building is located in Helsinki's Käpylä district. The apartments' bathrooms, kitchens and interior surfaces will be refitted and the building's roof structures, exterior plastering, balconies and doors renovated. Windows and doors will be refurbished and those in poor condition will be replaced in the same style. The building's common areas and HVAC systems will also be renovated.

A living city is built together

The working community provides the foundation for growth, success and happiness 39 360-degree view on housing 42 We increasingly serve our customers in co-operation with partners 45

PILIAMIESTIS, KAUNAS, LITHUANIA

PERSONNEL

The working community provides the foundation for growth, success and happiness

Our success depends on the diverse professional skills of our personnel, their desire to develop the organisation and themselves, rewarding work, shared successes and a strong corporate culture. These are the cornerstones on which we are building a working community that supports happiness. We use open dialogue and a proactive approach to ensure customer satisfaction, as well as safe, healthy and high-quality work. This is what makes YIT the most attractive employer in its industry.

Controlled resource allocation and recruitment played a significant role during the past year from the perspective of the construction industry's shortage of supervisory personnel, the special skills required for challenging projects, personnel development and project success. Our diverse projects offered new career paths and development opportunities, which are supported by various training and coaching programmes. We have invested resources in job satisfaction and created a strong foundation for our employees to be happy and to

feel that their work is meaningful. We have also developed our operating methods and aimed to ensure that our professionals can use their working hours on what is truly important. In addition to an active recruitment process, we have promoted a good application experience, managerial support and co-operation with our recruitment partners.

We updated YIT Voice, the annual personnel

survey we conduct in all of our operating countries, based on our revised strategy. We focused particularly on supporting dynamic teams, open and participatory dialogue, caring for people and the customer experience. The feedback showed that the elements reflecting commitment among YIT employees have strengthened further, which is a fine achievement in a rapidly growing industry. Areas highlighted for development included issues related to the sharing of information and best practices, among other things.

FOCUS ON QUALITY MANAGEMENT

Proactive measures and open dialogue are key themes in our occupational safety and health and the development of quality. The focus areas of our revised occupational safety strategy are safety management and supervisory work, proactive measures, smooth day-to-day operations and effective tools. In accordance with our Group-level quality policy, we invest in quality management in all stages of the construction and service process. We measure customer satisfaction and the rate of flawless handovers and we also utilise customer feedback surveys. In the Housing Finland and CEE segment, we introduced the Kuivaketju10 (Dry Chain 10) operating model for new projects.

We hired new professionals with different backgrounds through, among other things, international recruitment and our Employee to Supervisor training programme in Finland. With an average of 21 years of work experience at YIT, the 15 supervisors who have graduated from the training programme have brought strong practical know-how to our supervisory staff. They have continued their training in our project management coaching programme. "In accordance with our Group-level quality policy, we invest in quality management in all stages of the construction and service process."

Educating talented young professionals to work in the construction industry has been a strategic choice for YIT for several years now. We provided a record number of trainee and summer job positions, to more than 800 young people in total.

The YIT Studies programme, an advanced study module in the field of construction, is currently offered at seven universities of applied sciences and one university in Finland. Nearly 30 new graduates completed the YIT Studies programme during the year and will join YIT as employees upon finishing their degrees. More than 150 students have already completed the YIT Studies programme.

YIT STILL THE MOST ATTRACTIVE EMPLOYER IN 2017

Sharing tacit knowledge and best practices ensures the increase of competence in our organisation. We invest resources in internal development paths and mentoring. Nearly 20 pairs started our mentoring programme during the past year to receive support in work-related challenges and in relation to personal development. Approximately 100 YIT employees have already participated in mentoring.

In occupational health and well-being, we focus on prevention as well as supporting the individual's work ability and health in different career stages. In addition to workplace surveys, occupational health questionnaires and inspections, we provide guidance related to ergonomics, working methods and work arrangements aimed at supporting work ability. We piloted Inject Energy into Your Life well-being paths as a new operating method in Finland: day-to-day well-being and resources at work, sleep and recovery, energy-boosting food and alertness from physical exercise. We provide rehabilitation paths related to musculoskeletal disorders, mental health issues and substance abuse problems.

Our long-term investments in students, HR development and our diverse career opportunities are reflected in our attractiveness as an employer. Students of technology ranked YIT as the most ideal employer in the construction industry for the seventh consecutive time in the Universum Student Survey. We were also ranked as the most ideal employer in the construction industry for the fourth straight year in the Universum survey of university-educated professionals.

"We provided a record number of trainee and summer job positions, to more than 800 young people in total."

QUALITY POLICY GUIDES THE WAY TO THE BEST CUSTOMER EXPERIENCE

Our Group-level quality policy, confirmed in August, documents our quality management principles. The cornerstones of the quality policy are our values, business principles and customer care. We are committed to managing quality throughout the construction and service process. Our prerequisites for high quality include a quality culture combined with professional pride and well-functioning, up-to-date and evolving processes, also on the part of our partners and subcontractors. We aim to deliver the best customer experience.

RENOVATING KAISANIEMI COMPREHENSIVE SCHOOL WITH A PROACTIVE AND PROFESSIONAL APPROACH

Kaisaniemi comprehensive school, the second-oldest school in Helsinki, was in need of renovation. Open co-operation and having planning and implementation schedules prepared in advance ensured the project's success. The aim was a flawless outcome. The surprises that emerged during the demolition stage were quickly responded to and the challenges were resolved in a positive spirit. The project's top priorities were to ensure the comfort of teachers and pupils, create effective school premises and guarantee the safety of the children.

BUSINESS STUDENTS BRING NEW COMPETENCIES TO CONSTRUCTION SITES

Digitalisation and new ways of working challenged us to develop our project execution and bring people representing new skills and disciplines to our construction sites. In co-operation with Haaga-Helia University of Applied Sciences and Metropolia University of Applied Sciences, we launched the YIT Studies for Business Students programme in Finland. The study module aims to introduce the logistics, IT, marketing, communication and language-related skills and business knowledge of business students in the fields of finance and IT to our construction sites.

CUSTOMERS

360-degree view on housing

Combining and analysing large amounts of data creates the foundation for insightful and customer-oriented operations that benefit our customers the most.

Customer insight is the path to good customer service, a good customer experience and their continued development. When we know what our customers want, we can provide them with the right products at the right time and place.

Progress in customer insight and analysing the data we collect is currently the farthest along in the Housing Finland and CEE segment, where we can now boast having a 360-degree view on housing and the residential market. Our analyses focus on the housing markets, customer behaviour in digital channels and the customer experience related to our purchasing process, products and services.

TAMMI DÚBRAVKA, BRATISLAVA, SLOVAKIA

A good customer experience is essential for us.

We also look to the future of the housing market by analysing market data as well as changes in customer motives. Among other things, we conducted a new round of our Tribe interview survey in 2017 to assess consumer attitudes and motives related to housing.

The effective analysis of the data we collect is facilitated by our shared data platform DataHub, which houses all of the data from our systems and makes it easier to process, combine and report on. We also complement our own data with information acquired from external sources.

Combining and analysing large amounts of data creates the foundation for our insightful, well-planned, data-driven and customer-oriented operations, ultimately benefiting our customers the most.

FASTER SHARING OF FEEDBACK AND BEST PRACTICES

Analysing data and customer feedback helps us not only provide better products for our customers, but also develop our customer service and operate more efficiently.

One good example of this is the initiative launched in the Housing

Finland and CEE segment about a year ago to make the collection, processing, receiving and archival of customer feedback faster and easier. Supported by DataHub and a new reporting tool, it makes customer feedback and related reports more transparent, up-to-date and comparable as well as faster to produce. This also

"When we know what our customers want, we can provide them with the right products at the right time and place."

"Combining and analysing large amounts of data creates the foundation for our insightful, well-planned, data-driven and customer-oriented operations."

speeds up the sharing of customer feedback and best practices within the YIT organisation, both at offices and construction sites, which contributes to the development of our day-to-day operations. Automating the previously manual processes of analysing feedback has freed up our employees' resources for other tasks.

The more effective utilisation of collected data and analytics has now also begun in the Business Premises and Infrastructure segment. The customer feedback collected by the segment will influence, among other things, the future work environments that we build.

ALL OF OUR EMPLOYEES CONTRIBUTE TO THE CUSTOMER EXPERIENCE

A good customer experience is essential for us. We have selected the Net Promoter Score (NPS) as our customer experience indicator throughout the Group.

NPS is a common and industry-independent method used worldwide for measuring the customer experience. It reflects our customers' opinions of us and indicates how likely they are to recommend us to a friend.

We believe that every YIT employee can influence our NPS through their own actions. With this in mind, we have decided to display our NPS on the front page of our intranet for all employees to see. In 2017, our weighted Net Promoter Score was 51

LIVING DESIGN PHILOSOPHY SETS OUT THE DIRECTION FOR THE DEVELOPMENT OF YIT HOMES

The changing needs of day-to-day life have led YIT to revise its housing solutions. Instead of using traditional design, YIT will respond to housing trends by applying the new philosophy of living design. The philosophy of living design sets out the direction for the development of YIT Homes. Customers experience living design particularly in the form of greater consistency and functionality. The solutions that have proved useful are repeated and developed with a long-term view. For the developer, the change is important with respect to productivity and quality.

BUYERS GIVEN A PREVIEW OF THEIR HOMES IN THE CONSTRUCTION PHASE

In Russia, YIT is known for its high-quality Finnish construction. Customers can experience this for themselves, first hand. YIT organises homebuyer events in the Moscow region to invite buyers to get a preview of their future homes in the late stages of the construction process.

WOW PROGRAMME PUTS EMPLOYEES IN THE CUSTOMERS' SHOES

The goal of the WOW development programme, which has been under way at YIT for nearly five years, is to understand customer needs, see things from their perspective and thereby improve our customer service. The WOW programme started in the Housing Finland and CEE segment and was expanded to include the Business Premises and Infrastructure segment in early 2016. The training has already been completed by some 1,200 employees in the Housing Finland and CEE segment and 500 employees in the Business Premises and Infrastructure segment. The training programme is ongoing.

PARTNERS

We increasingly serve our customers in co-operation with partners

Partners and partnerships are often mentioned, but the meaning of these words is not always clear. Sometimes, even customers may be referred to as partners. For us, homebuyers and the tenants of business premises are customers to whom we provide products and services, either alone or with partners. This is increasingly done with partners. Why?

URBAN DEVELOPMENT PROJECTS REQUIRE VERSATILE EXPERTISE

Urban development projects have grown in size in recent years, and they have become increasingly complex and challenging, particularly when operating within an existing urban structure. Examples of such projects include the Tripla project in Pasila, the Tampere light rail project, the Jokeri Light Rail project and the Suomi Hloubětin project in Prague. Trains must run, people must have access and businesses must continue to operate even when construction is under way.

These types of projects require a wide range of expertise and it is not possible to have all of the necessary competencies within a single organisation. The projects are often also highly capital-intensive, which means that the balance sheet of a single company cannot support several major projects at the same time. Partners solve this issue by sharing project risks and bringing in the necessary expertise and capital.

HELSINKI CENTRAL LIBRARY OODI

SUCCESS IS ACHIEVED THROUGH HONESTY, OPENNESS AND RESPECT

While partnerships are always based on contractual arrangements, the contracts themselves do not create trust, learning and commitment to shared goals. These can be promoted by using suitable operating models and methods, such as an alliance, or by having appropriately set incentives. Ultimately, it comes down to collaboration between people, where success is achieved through honesty, open communication and having respect for each other's work.

The benefits of partnerships are multiplied when there is sufficient repetition, either through co-operation structures or by carrying out several projects together. This allows the partners to learn to know each other's operating methods, special competencies and, most importantly, the people who do the work.

At YIT, we have used several different approaches. We have established Regenero, a joint venture with HGR Property Partners, to implement large-scale real-estate development projects. Regenero is currently developing the Keilaniemi district, acquired from Fortum, in Espoo. YIT is working with VR Track and a couple of other partners to construct the tramway in Tampere, and we are also about to start construction of the Jokeri Light Rail project in the Helsinki metropolitan area. We also have experience of good co-operation with partners in the Housing Finland and CEE segment; for example, related to participation in various competitions.

ORGANISATIONAL LEARNING IS KEY

Our experiences of partnerships are entirely positive. They have made it possible for us to be involved in several projects at the same time. They have also enabled us to participate in the execution of largescale projects.

In recent years, and during the past year in particular, we have strengthened our competitiveness through partnerships and learned a lot about partnerships. Particularly important is the organisation's learning process becoming faster through repeated partnerships. In accordance with our strategy, we will continue these efforts in the coming years.

FOR MORE INFORMATION ON PARTNERSHIPS, PLEASE REFER TO THE FOLLOWING PAGES OF THIS ANNUAL REPORT:

Sustainability

Sustainability creates added value 48 Highlights of sustainable cities 49 Sustainable development at YIT 50 Risks and risk management 56 GRI Index 59

DANUBE RIVER, BRATISLAVA, SLOVAKIA

Sustainability creates added value

Our vision is to bring more life in sustainable cities. The key premise of YIT's approach to sustainability is to create added value for all stakeholders through the company's core business.

The megatrends of urbanisation and sustainable development create a need for the design and development of sustainable urban environments. Our expertise in housing, business premises and infrastructure construction enables us to redevelop urban structures; for example, by implementing large-scale hybrid and mixed-use projects. Effective public transport and a diverse service environment featuring both public and private service providers reduce the need for transport, and especially the need for passenger cars.

We report on our responsibility in our GRI report, in our statement of non-financial information and, on an integrated basis, as part of our Annual Report. We develop our operations with a long-term view, taking our stakeholders' expectations into consideration.

Our values, Business Principles and management principles constitute the foundation for our sustainability.

WHAT DOES A SUSTAINABLE CITY LOOK LIKE AND WHAT IS IN IT FOR ME?

SOCIAL	ENVIRONMENTAL	ECONOMIC
• A pleasant place for the city's residents to live • Local services and effective public transport • A strong community where people feel an attachment to their neighbourhood • The city feels like a safe place and daily life is smooth	• Public transport is efficient and inviting, the need for private cars is minimal • Lower greenhouse gas emissions and reduced use of natural resources • More places for thriving nature as part of the city • Biodiversity is protected	• An attractive area to live in, the building stock holds its value and is a safe investment for people • The technical solutions used in buildings are made to last, and build ings are easy to maintain • Sufficient population density and flow of people to support business activity • A vibrant and innovative environment

For city representatives, a sustainable city means attractive urban areas that support the future of the entire city as a sustainable place to live and work
Reliable partnership in urban development

Highlights of

BUILDING SMOOTH PUBLIC TRANSPORT

YIT was chosen to build the Jokeri Light Rail project in partnership with VR Track. A fast light railway connection enables more compact regional development. The parties to the project are the client organisation consisting of the cities of Helsinki and Espoo, the design parties (Ramboll, Sito and VR Track) and the coalition of contractors. YIT's other major public transport project, the Tampere light rail project, entered the construction phase during the year. The Tampere light rail alliance consists of the City of Tampere, YIT, VR Track and Pöyry.

CONGRATULATIONS TO 100-YEAR-OLD FINLAND — MORE LIFE IN YARDS

In Finland's centenary year, we wanted to bring more life into sustainable cities and turn yards into environments where everyone enjoys themselves. Good planning and construction can assist in the creation and development of comfortable, safe neighbourhoods. Functional surroundings, carefree daily life, familiar neighbours and a sense of community make people attached to the area in which they live. These are the environments we want to build.

YIT PILOTS THE KONE RESIDENTIAL FLOW SOLUTION IN KANGAS, JYVÄSKYLÄ

We are introducing the KONE Residential Flow solution in a residential building in the former paper mill area of Kangas, Jyväskylä, Finland. The solution makes residents' movement within their building easier by giving them the chance to operate the building's outer doors, lifts and apartment intercoms with their smartphones. Kangas is the most significant area development project in Jyväskylä. The construction in the area utilises the cultural percentage principle to introduce art to the area.

Sustainable development at YIT

I n addition to the sustainability of the urban environments we build, our operations and communications involve aspects that are of material significance to our key stakeholders.

MATERIAL ASPECTS FROM THE PERSPECTIVE OF YIT AND OUR STAKEHOLDERS

. Customer satisfaction and quality
. Sustainability of the built urban environment
. Preventing negative environmental impacts
. Developing employee competence
. Occupational health and safety
. Ethical operating methods
. Responsibility in the subcontracting chain
. Prevention of the grey economy and corruption

The identification and selection of stakeholders is based on a materiality analysis from both YIT's perspective and the stakeholders' perspective. Due to the nature of YIT's business, the company is in daily interaction with several different stakeholder groups. These stakeholders are therefore also very significant with regard to YIT's business operations. YIT also engages in dialogue with all stakeholders to whose daily life the company's operations have material significance.

Civil society Seminars and events, mass media, social media

administration

With most stakeholders, engagement is built on regularly recurring forms of interaction, in addition to which there is also other, continuous engagement.

OUR SUCCESS IS BASED ON SKILLED EMPLOYEES AND COMPETENCE DEVELOPMENT

One of the material factors in the creation of value in YIT's business operations is personnel competence and its development. Regular and high-quality performance and development discussions create a strong foundation for competence development at YIT. They are used to monitor the development of personnel and provide encouragement at the individual level. According to YIT's 2017 personnel survey, 69% of the Group's personnel perceived the performance reviews to be useful. The survey's response rate was 89%.

PERSONNEL ON AVERAGE BY COUNTRY

PERSONNEL ON AVERAGE BY EMPLOYMENT CONTRACT TYPE

	2017	2016	2015	2014
Average number of personnel	5,533	5,361	5,613	6,116
Non-salaried/salaried employees (%)	41/59	43/57	46/54	47/53
Women/men (%)	27/73	26/74	26/74	26/74

Our response to competence development needs includes coaching programmes aimed at all personnel groups, training, seminars and other development methods. The key objectives of YIT's internal coaching programmes are to maintain and develop project management, productivity, customer insight, managerial work and occupational safety. More than 2,300 employees participated in the programmes during the year.

CONTINUOUS DEVELOPMENT OF OCCUPATIONAL HEALTH AND SAFETY

Occupational health and safety is one of the key responsibility aspects related to personnel, and it also creates the foundation for an employment relationship that is good in other respects as well. Reducing the number of accidents remains a key goal of our efforts to promote safety, but we also aim to make operations smoother by focusing particularly on proactive measures. YIT's Group Management Board defines the Group's safety targets and monitors their achievement. YIT's safety organisation develops and co-ordinates safety-related processes and supports construction sites in implementing safety practices. The responsibility for the implementation of safety measures lies with the line organisations.

We renewed our occupational safety strategy in late 2016 and selected three focus areas: safety management and leadership, proactive measures and convenience in every day life and functioning tools. Each focus area includes detailed measures. The success of these measures is measured by selected indicators. Site visits by management are one of the key indicators monitored on a monthly basis.

Site visits by management are seen as a high priority for occupational safety, as they help promote an open safety and quality culture as well as proactive risk management. The number of site visits by management increased in 2017 but was slightly below our target. The aim is to make the management's site visits more open and dialogue-oriented. A site visit model developed in response to this objective will be put into practice in early 2018.

Unfortunately, our accident frequency in 2017 did not fall below the previous year's level. Our safety-related efforts are increasingly focused on proactive measures. Chief among these are safety planning, safety observations and on-site safety briefing practices. Accidents and near misses are investigated and the results are communicated internally.

In 2017, the international health and safety certificate OHSAS 18001 covered all of YIT's operations in Finland, the Baltic countries, the Czech Republic and Slovakia.

	2017	2016	2015
Lost Time Injury Frequency, LTIF (No. of reportable accidents at work per million working hours, last 12 months.)	13	11	10
Fatal accidents1	1	1	2

1 YIT's and subcontractors' employees' deaths at YIT's construction sites

TOWARDS AN EVEN MORE OPEN OCCUPATIONAL SAFETY CULTURE

Developing a more open occupational safety culture and implementing measures that promote active dialogue are significant steps towards making day-to-day operations smoother and more predictable.

In 2017, we developed our safety training by, among other things, making our safety management coaching programme more participation-oriented. More than 300 people completed the two-day programme. The use of workshop methods has generated good dialogue and helped create an even more open occupational safety culture. We also organised occupational safety reviews for all YIT personnel via Skype. Well received among personnel, the Skype safety briefings have provided an effective channel for sharing topical information.

In 2017, we introduced electronic site induction and access control, as well as Tilaajavastuu Valttikortti cards, at all of our Finnish sites where it was possible. These changes expedite our day-to-day operations and ensure high-quality induction training.

A POSITIVE CUSTOMER EXPERIENCE IN EVERY ENCOUNTER

YIT strives for excellent customer service and an excellent customer experience in all of its business operations. In recent years, we have developed and harmonised our operating methods for measuring customer satisfaction across different functions, and have specified strategic goals of flawless deliveries and improving the customer experience.

Group-wide indicators used include the number of flawless deliveries in the housing construction business, and the Net Promoter Score in all functions across the Group. We also utilise customer feedback surveys in all of our business operations.

Customer satisfaction is regularly measured and monitored, and the development of the results is monitored by Management Boards. Customer satisfaction and quality are factors that influence the compensation and benefits of employees, and the related procedures and indicators are continuously developed further. In 2017, the share-based incentive scheme for key persons included a target related to the Group's Net Promoter Score.

The purpose of having a Group-level quality policy is to show our commitment to quality and describe our principles to our personnel and stakeholders. The content of the quality policy is assessed annually and approved by the Group Management Board.

In the Housing business, 90% (2016: 92%) of the apartments handed over to consumer customers were handed over in completely flawless condition. Over the long term, our target is a 100% flawless handover rate. The weighted Net Promoter Score, which covers all of the Group's operations, was 51% in 2017 (2016: 62%). The Net Promoter Score reflects the degree to which customers are prepared to recommend the company in question. The score is affected by the proportion of Promoters and Detractors among all respondents, and the scale is -100%–100%. YIT's long term target for the NPS index is a score above 60%. We began using Q-factor and NPS as indicators in 2014 and we developed and expanded their use further in 2017.

projects."

PREVENTING NEGATIVE ENVIRONMENTAL IMPACTS

YIT's business may involve locally significant environmental impacts; for example, in the event of a fuel leak. Our construction sites have established practices for avoiding and managing such risks.

Infrastructure construction and soil-related operations, in particular, involve risks that we manage by developing our infra services operations in line with the ISO 14001 environmental certificate we hold. In 2017, the certificate covered also our operations in the Baltic countries, the Czech Republic and Slovakia. In addition to the prevention of actual environmental damage, we also take special protection measures in our construction projects to avoid negative impacts from construction on endangered species, for example. The assessment is very project-specific in these situations.

ENVIRONMENTAL EFFICIENCY IS ALSO A COST ISSUE

The construction business involves using very large quantities of various construction materials, generates significant amounts of waste and, while YIT's industry is not particularly energy-intensive, the Group consumes a significant amount of energy. This means that environmental efficiency is also an important factor affecting cost efficiency. certification for almost all of our business premises

We manage and monitor material efficiency on a project-specific basis. Every construction project is unique, which makes it difficult to develop an unambiguous measure of material efficiency that would accurately reflect its true level. In addition to project-specific analysis, we engage in more general development of design management and technical calculation practices from the perspective of material efficiency, focusing on aspects such as the optimisation of building structures and the selection of materials.

Due to the project-intensive nature of our business, energy consumption can vary significantly from one period to the next. We focus on the energy-efficiency of our own operations, particularly at the project and unit level, by developing various energy-efficient working methods and replacing vehicles and equipment as energy efficiency improves.

A particularly large volume of waste is generated when a construction site has existing buildings that are demolished to make way for new construction. We manage and develop the reutilisation of waste, the reduction of waste and recycling on a project-specific and unit-specific basis. As a rule, YIT's construction sites sort the construction waste they generate and the focus is placed on reducing the volume of waste. Waste that can be re-utilised as material is re-used depending on the local availability of re-use methods.

LEED ENVIRONMENTAL CERTIFICATION AT YIT "We seek LEED

We seek LEED certification for almost all of our business premises projects. Among our large projects, construction progressed during the year on the Mall of Tripla and the Kasarmikatu 21 office property in accordance with Platinum level environmental

certification standards. We are also seeking a Gold level environmental certificate for Kiinteistö Oy Rantatien Kasvu, an office building located in Kalasatama, Helsinki, Finland.

The certification criteria include the sustainability of the local environment, the consumption of water, energy and materials, and the quality of the indoor environment. The Kasarmikatu 21 project achieved a significant milestone when the waste recycling rate of the demolition stage was confirmed at 98%.

The Forenom Aparthotel Leppävaara property renovated by YIT was awarded LEED Gold certification. The property achieved excellent scores in the LEED evaluation for the design and implementation of high-quality indoor air conditions, along with good scores for the

ENERGY CONSUMPTION WITHIN THE ORGANISATION

Consumption of direct energy sources, GWh	2017	2016	2015
Petrol	4.8	3.4	4.2
Diesel	30.5	25.7	22.4
Light fuel oil	20.3	22.6	14.3
Natural gas	13.8	1.5	1.5
Total	69.4	57.2	42.4

Consumption of indirect energy sources, GWh	2017	2016	2015
Electricity	61.3	59.4	55.2
District heating	36.9	34.1	29.2
Total	98.2	93.5	84.4
Total energy consumption, GWh	167.6	150.7	126.8

RATIO: ENERGY CONSUMPTION (MWH) / REVENUE (EUR MILLION)

building's location, public transport connections, energy efficiency and the efficiency of water consumption.

Tighter standards were introduced for the certification levels in late 2016. The new system applies to projects registered after October 2016. In addition to its recent measures and achievements, YIT can also be considered a pioneer in Finland due to our Dixi project being the country's first shopping centre to receive LEED Platinum certification in 2015.

ENVIRONMENTAL FRIENDLINESS AS A STARTING POINT IN THE DESIGN OF THE TRIPLA PROJECT

The Tripla project in Helsinki's Pasila district in Finland is a hybrid project that combines a shopping centre, offices, a hotel, public transport and housing. Pasila will become another centre of Helsinki and an even more important transportation hub that is expected to double its resident and job numbers by 2040.

The design of the Mall of Tripla corresponds to the preliminary draft of the regulations concerning near-zero energy buildings. The corresponding legislation will enter into force in Finland in 2018. Energy efficiency has been taken into consideration in the design of the Mall of Tripla in many respects, including ventilation, heating and lighting. Ecological criteria were a key requirement in the Tripla design and implementation competition. The life cycle co-ordinator is responsible for ensuring that the criteria are met. Environmental friendliness and energy efficiency have been the starting points in the planning. A third of the roof area will be covered by parks and green roofs. Ecological transportation is supported by providing parking places for approximately 3,400 bicycles and charging stations for more than 300 electric cars. Eco-friendliness is also reflected in other aspects of Tripla, such as recycling solutions, environmentally friendly materials and efficient water consumption.

"We conducted approximately 1,700 supplier assessments in Finland in 2017, focusing on aspects such as functionality, safety and quality."

RESPONSIBILITY IN THE SUPPLY CHAIN

YIT uses suppliers and subcontractors extensively in its operations in all of the countries in which it operates. The materials used in construction come from an extensive network of suppliers located mainly

in Europe, particularly in the Group's current operating countries, but also on a small scale from suppliers in Asia. With regard to subcontractors, operating models vary slightly by country and business unit: in some operating countries, all of the workforce used in construction, with the exception of project management, comes from the subcontractor network, while in Finland, for

example, the workforce of subcontractors mainly complements YIT's own workforce in the area of construction. Subcontractors and their workforces are largely from the Group's operating countries and their neighbouring countries.

Supplier assessment and monitoring practices vary slightly between operating countries, but the background of each supplier is checked. In Finland, we utilise a country-wide information system to continuously ensure that both Finnish and Estonian subcontractors take care of their employer obligations in compliance with the law. Subcontractors from other countries are required to supply corresponding information manually to YIT. The same information is evaluated for all foreign subcontractors for whom the information is available. However, the proportion of subcontractors used in Finland who are from countries other than Finland and Estonia is very small.

A corresponding information system is not available in other operating countries for the time being, but the background of new suppliers and subcontractors is always checked before co-operation begins. We also emphasise the importance of strict occupational safety practices in the selection of suppliers and in supplier operations. Matters related to wages, working hours and occupational safety are communicated as part of the drafting of each subcontracting agreement, and separately if necessary, should any deficiencies or gaps in knowledge be observed. Cases of misconduct are considered on a case-bycase basis and, where necessary, the co-operation is terminated with immediate effect.

The aim is to audit all strategically significant suppliers and subcontractors at regular intervals. A further aim is to audit all new significant suppliers before the first agreement is signed with them. Audits cover factors related to labour practices and working conditions, environ-

mental issues, as well as the quality and reliability of operations. The selection of suppliers is also affected by YIT's continuous internal monitoring of complaints and supplier feedback.

During the year, we paid special attention to increasing the number of supplier assessments conducted by construction sites in Finland. We

conducted approximately 1,700 supplier assessments in Finland in 2017, focusing on aspects such as functionality, safety and quality.

YIT Supplier Code of Conduct

MANAGING MISCONDUCT RISKS

YIT operates in an industry that is susceptible to misconduct. YIT also operates in regions where the management of misconduct risks requires special attention. Our strategy confirms a zero tolerance policy regarding the grey economy. Throughout the Group, we operate in accordance with our values and Business Principles, which address the typical risks of misconduct. Every YIT employee is, for their part, responsible for complying with our Business Principles. Superiors are responsible for making sure their subordinates follow the principles. YIT Business Principles must always be complied with throughout the YIT organisation.

Employees are encouraged to discuss the Business Principles and any related questions with their supervisors. YIT employees must report any suspected breach of YIT Business Principles to their immediate supervisor. If the immediate supervisor does not treat the matter with sufficient gravity or fails to take action to investigate the matter, or if the matter itself is related to the immediate supervisor, the employee can report the matter to another organisational level or take advantage of the independent ethics reporting channel (Ethics Point), which can be used either verbally or online. Reports can also be made anonymously. The Group's ethics committee engages in development efforts related

to the management of misconduct risks and takes charge of significant investigations and reviews.

In Russia, where the risk of misconduct is elevated, the Group pays special attention to corporate security in key operating processes, such as plot acquisition, purchasing, recruitment and site security. YIT provides training to its personnel on the management of misconduct risks on a continuous basis. Our values are reviewed as part of the orientation training for new employees, and the practical implementation of the values is assessed with the help of the annual personnel survey. By the end of the year, about 80% of the personnel had completed YIT Code, the online training programme on responsible corporate culture. (2016: approx. 80%)

As subcontracting represents a significant share of production, the management of misconduct risks related to procurement is particularly important.

IMPROVING THE TRANSPARENCY OF PROCUREMENT IN RUSSIA

Procurement must be based on rules that ensure an open and transparent basis for competition. Greater transparency enables more efficient procurement and helps prevent the grey economy in the supply chain. These are some of the principles behind YIT's development of the transparency of its procurement process in Russia.

The development measures are particularly related to the process of requesting quotations, in which various IT solutions play a key role. The process involves an electronic pricing platform that is used in the selection of more than half of all procurement contracts. The materials related to the request for a quotation, including the schedule, documentation and the information on the selected supplier, are uploaded and made available to all of the suppliers who participated in the bidding process. YIT uses its internal database to share information on suppliers. The Group organises an annual competition on transparency between the procurement units, based on evaluating their operations using various indicators.

Risks and risk management

YIT's risk management policy aims to identify major risk factors and manage these factors so that the company achieves its strategic and financial objectives responsibly. The starting point is to manage the Group's total risk exposure, not merely the management of individual risk factors. One key perspective in risk management is also to identify opportunities and actively take advantage of them.

RISK MANAGEMENT POLICY IN 2017

YIT's risk management policy aims to identify key risk factors in the company's operations and manage these in a balanced manner to enable the company to achieve its strategic and financial objectives and ensure the continuity of its operations. The starting point is to manage the Group's total risk exposure, not merely the management of individual risk factors. One key perspective in risk management is also to identify opportunities and actively take advantage of them. Risk management must be proactive, co-ordinated and systematic.

YIT's Board of Directors approves the company's risk management policy and its objectives, including the risk tolerance and risk appetite. The Board of Directors guides and supervises the planning and execution of risk management. The Audit Committee of the Board of Directors assists the Board of Directors in supervisory duties related to YIT

Group's accounting and reporting processes, including internal control, risk management, internal audit and guiding and supervising the audit. The Audit Committee also monitors and evaluates the effectiveness, sufficiency and appropriateness of risk management systems.

The Group's President and CEO retains overall responsibility for risk management. The President and CEO is responsible for the organisation and the design, development, co-ordination and monitoring of the risk management strategy, as well as its implementation and communication throughout the organisation. The heads of business segments and support functions identify, assess and monitor the major risks facing their respective areas of responsibility, draw up contingency plans for those risks and attend to the implementation and supervision of risk management. The management of the business segments and support functions report to the President and CEO.

Risk management planning and the evaluation of the overall risk position are part of the annual strategy process. Risk management is included in all of the Group's significant operating, reporting and management processes. Material changes in risks are monitored on a monthly basis and reported in accordance with the Group's management and reporting practices. When proposals or development projects are evaluated, their significant risks and how they should be taken into consideration are also assessed. The Board of Directors reviews and, if necessary, updates the Group's defined risk levels and, among other things, the decision-making authorisations defined for the management of risks and investments. The President and CEO may implement stricter definitions.

The Group's financial and financing management is responsible for identifying and assessing financial risks. The Group's internal audit organisation supports YIT's management in ensuring the effectiveness of risk management and internal control. The internal audit reports to the Audit Committee of the Board of Directors and to the President and CEO.

THE GROUP'S RISKS

YIT has categorised the risks that are significant to its operations into strategic, operational, financial and event risks.

Strategic risks are risks that might endanger the achievement of the Group's strategic and financial goals if they should materialise. A strategic risk review is carried out at the Group level once a year in connection with the review of the strategy and also as part of annual planning. As a result of the risk review, the major risks of the business segments, Corporate Services and the Group level are identified and classified into a risk matrix based on their likelihood of occurrence and possible impacts. The management of strategic risks is guided by the risk tolerance and risk appetite defined in annual planning.

Operational risks and event risks are related to the nature of business operations, and they are managed by, among other things, developing operating methods and decision-making procedures. Operational risks and event risks are assessed and reported monthly as part of normal management.

Financial risks include risks related to the sufficiency of financing, currency and interest rates, credit and counterparty risks, and risks related to the reporting process. Financial risks are monitored on a monthly basis as part of the normal monitoring of results. The risks associated with the financial reporting process are identified and assessed annually.

Risk management is an inseparable part of the preparation and implementation of projects and other operations. The primary objective of the management of event risks is the prevention of damage. A responsible operating model takes economic, social as well as environmental perspectives into consideration.

The Group's business development function is responsible for steering the practical development of risk management. The implementation

THE GROUP'S RISKS

Strategic risks	Management methods
Changes in the operating environment	• Geographical diversification, diversification of the business and project portfolio • Foresight, monitoring and analysis processes and ability to react • Development of new services inspired by megatrends and anticipated changes in the operating environment • Large-scale area development projects and contracting provide flexibility in different market situations
Management of capital	• Efficient allocation of capital based on centralised decision-making and investment policy • Partnership models • Monitoring processes and simulation models, flexible market analyses and monitoring
Product and service portfolio	• Ensuring an attractive product offering that takes different customer segments and changes in customer behaviour into consideration • Agility in switching between different methods of implementation
Acquisitions	• Selected based on the strategic frame of reference and pre-defined criteria • Improving integration competencies and effective integration processes
Operational risks	Management methods
Project management	• A method of organisation that ensures the sufficient expertise of project personnel and effective steering group work • Harmonised decision-making processes and operating systems, regular auditing and procedures related to decision-making authorisations • In self-developed projects, a phased gate model in which the decision points involve specifically created control tools, decision-making authorisations and decision-making criteria • Continuous monitoring and control of profitability and degree of completion • Co-operation and communication with the authorities and other stakeholders to ensure that building rights are refined in a trouble-free manner and that construction projects proceed as planned • Project management systems that enable advanced and harmonised production management and transparency • Partnerships, fixed-term agreements and capacity reservations • Improving project management expertise and interaction skills, developing

Operational risks	Management methods
Building rights management	• Analysis of property- and plot-related terms and conditions and opportunities • Market analyses and profitability control methods • Contractual terms
Sales risk	• Adjustment of self-developed start-ups according to the sales volume • Design management and profitability control practices, including market-based pricing • Contractual arrangements • Improving customer understanding and advance marketing
Contract tenders and service agreements	• Tender and risk analyses • Contractual expertise
Personnel risks	• The corporate culture, values and management principles, harmonised operating methods, training and career planning, internal job rotation, succession planning, recruitment, orientation training, co-operation with educational institutions, trainees, building the employer image, well-being at work and compensation and benefits
Financial risks	Management methods
Liquidity risks Interest rate and currency risks Credit and counterparty risks Risks related to the reporting process	• Accounting and financing policies, diverse sources of finance and balanced maturity structure, continuous cash flow planning and forecasting, internal and external audit • More information on financial risks and their management is provided in Note 28 to the financial statements.
Event risks	Management methods
Damage and accidents related to personnel, property or information security Sudden and unforeseen damage to project sites, business premises and other property	• Group-wide security policy and contingency plans complete with relevant procedures • Group-wide insurance policies and programmes IT policies that include, among other things, guidelines on data networks, anti-virus protection and licences • Ongoing occupational safety training and monitoring

of the annually selected development themes is spread out across the organisation.

YIT's most significant short-term risks are described in more detail in the Report of the Board of Directors on pages 89–90. Risks related to corporate responsibility are described in more detail in the Report of the Board of Directors under YIT's statement of non-financial information on page 98.

FOCUS AREAS IN THE DEVELOPMENT OF RISK MANAGEMENT IN 2017

The objective of risk management development projects is to make the company's risk management processes and operating methods even more systematic, thereby supporting the implementation of the company's strategy. In 2017, the company defined three focus areas for the development of risk management, the implementation of which was steered and supervised by senior management. Responsible persons and key performance metrics were defined for each focus area.

PROJECT MANAGEMENT

The Group has continued to make the management of project risks more systematic, with the aim of achieving greater transparency and consistency. The areas assessed have included, among other things, the principles and practices related to tender and cost calculations, design management, procurement and production.

MANAGEMENT OF CAPITAL

The aim is to eliminate factors that restrict the use of capital, while simultaneously managing the related risks. Co-operation with partners plays a key role in this effort. Regenero, the joint venture established by YIT and HGR in 2016 to focus on demanding urban development projects, started its first projects in 2017. In summer 2017, the Group announced it will establish Partnership Properties as a new segment in order to increase its investment capacity and share risks with partners. The new segment began its operations on January 1, 2018. The capital release programme concerning the Group's Russian operations, announced in autumn 2016, has not progressed according to plan due to the weak sales performance in 2017. YIT did, however, sell part of the Novo Orlovsky plot in St. Petersburg, which generated approximately EUR 16 million in revenue in the fourth quarter. The goal is to release RUB 6 billion (approx. EUR 100 million) in capital in Russia by selling apartments and plots of land.

REPORTING PRINCIPLES AND ETHICS

The goal of more real-time, transparent and coherent reporting that meets external and internal requirements remained in place throughout 2017.

IN ADDITION, THE GROUP PLACED SPECIAL FOCUS ON THE FOLLOWING AREAS DURING THE YEAR:

TRIPLA

Tripla is a significant hybrid project whose risk management requires special attention due to the large size of the project. The project's risk level has declined significantly as investor sales and leasing have progressed and the foundation work has been completed. The risk level will decrease continuously as construction and leasing progress further. Thanks to excellent planning and execution, the project's progress is even ahead of the original schedule.

DATA SECURITY AND GDPR-RELATED MEASURES

The classification of information and the rules governing access have been improved further. Increasing awareness and skills among personnel has been a key aspect of improving information security. Attention has been placed on the effective management and resolution of disturbances. The Group has also taken measures related to compliance with the EU General Data Protection Regulation (GDPR) during the year.

PREDICTING DEMAND

In order to better manage uncertainties arising from future market development, YIT is developing a data-driven machine learning model for predicting demand and sales, particularly for use by the Housing Finland and CEE segment.

CORPORATE SECURITY

In the improvement of corporate security, the measures taken were based on the focus areas established in 2015. The development efforts have focused on areas such as enhancing occupational safety, particularly through influencing attitudes and developing observation procedures. Further focus areas include general information security and improving related competencies. Measures have also been implemented to ensure ethical procurement and increase personnel safety.

THE GROUP'S SHORT-TERM RISKS

Risks
Market change New operators, operating models and concepts
Merger Failure in integration, failing to achieve synergies. More information on the risks of the merger is provided in the Merger Prospectus
Market uncertainties Sustainability of demand for Finnish housing production, decline of the market for residential projects sold to investors (apartments for sale)
Employee attrition Failed resource management
Decline in housing prices
Plot availability and permits (including funds)
Wrong sales portfolio and inventory (unattractive products)
Overheating markets in the CEE countries
Weak demand among residents and investors
Information leaks Cybersecurity deficiencies
Increasing Stable Decreasing

GRI Index

General disclosures		Page
	STRATEGY AND ANALYSIS
G4-1	CEO's statement	p. 8
	ORGANISATIONAL PROFILE
G4-3	Name of the organisation		YIT Corporation
G4-4	Primary brands, products and services	p. 18–23
G4-5	Location of organisation's headquarters		YIT's headquarters is located in Helsinki, Finland
G4-6	Number of countries and location of operations	p. 18–23
G4-7	Nature of ownership and legal form	p. 65–66
G4-8	Markets served	p. 17–23
G4-9	Scale of reporting organisation	p. 5
G4-10	Basic information on employees	p. 51, 88
G4-11	Percentage of employees covered by collective bargaining agreements		YIT complies with the general collective bargaining agreements in effect in all countries in which collective bargaining agreements are generally used, including Finland. In Russia, the Group complies with company-specific agreements in line with local legislation. YIT has traditionally had very good employer–employee relationships based on negotiation and co-operation.
G4-12	Supply chain description	p. 55
G4-13	Significant changes during the reporting period	p. 81–84, 92–93
G4-14	Addressing the precautionary approach in environmental issues	p. 98, 101
G4-15	Voluntary charters and other initiatives		No significant commitments to voluntary charters and other initiatives.
G4-16	Memberships of associations		Memberships include the Confederation of Finnish Construction Industries RT and associations under it, FIBS ry, Confederation of Finnish Construction Industries RT is a member of Construction Quality Association, through which YIT is involved.

General disclosures		Page
	MATERIAL ASPECTS AND BOUNDARIES
G4-17	Coverage of the report		The report covers all of the Group's functions, unless otherwise mentioned.
G4-18	Process for defining report content		The definition of report content and the identification of material aspects are based on consideration of the economic, social and environmental impacts of YIT's business operations, YIT's strategy and stakeholder dialogue.
G4-19	Material aspects	p. 50
G4-20	Internal coverage of the material aspects		The aspects identified as material are material for all Group functions, unless otherwise indicated in the section in question.
G4-21	External coverage of the material aspects		More details on the materiality of various aspects are provided in the section on each aspect.
G4-22	Restatements of information provided in previous reports		There are no restatements of information provided in previous reports.
G4-23	Significant changes from previous reporting periods		No significant changes from previous reporting periods.
	STAKEHOLDER ENGAGEMENT
G4-24	List of stakeholder groups		YIT has identified the following as its key stakeholders: customers, personnel, shareholders and investors, municipalities and public administration, partners and civil society.
G4-25	Identification and selection of stakeholders	p. 50
G4-26	Approach to stakeholder engagement	p. 50
G4-27	Key topics raised through stakeholder engagement	p. 50
REPORT PROFILE
G4-28	Reporting period		The reporting period is the calendar year, January 1, 2017–December 31, 2017.
G4-29	Date of most recent previous report		The most recent previous report was published on February 22, 2017.
G4-30	Reporting cycle		The report is published annually.
G4-31	Contact point	back cover
G4-32	GRI Content Index	p. 59–63	This report contains Standard Disclosures from the GRI G4 Sustainability Reporting Guidelines.
G4-33	External assurance		The report has not been subject to third-party assurance.
GOVERNANCE
G4-34	Governance structure	p. 65–66
	ETHICS AND INTEGRITY
G4-56	Organisation's values, principles, standards and norms of behaviour	p. 10, 72

General disclosures		Page
	ECONOMIC RESPONSIBILITY
	Economic Performance
G4-DMA	Management approach		YIT's operations have a major economic impact on the surrounding society and the company's key stakeholders. YIT employs a significant number of personnel and creates business for suppliers and subcontractors. YIT's business operations are very long-term in nature, which is also reflected in the company's co-operation with stakeholders where possible, and stakeholders' economic stability.
G4-EC1	Direct economic value generated and distributed	p. 27
CORPORATE INCOME TAXES PAID IN 2017 PER AREA 7% 66% 27%			YIT's approach to taxes YIT is committed to being a responsible taxpayer in all of its operating countries. YIT complies with local and international tax regulations, practices and interpretations, as well as requirements concerning tax returns and other documentation. YIT applies the market price principle pursuant to the OECD Transfer Pricing Guidelines and local transfer pricing regulations in the Group's internal business transactions.
	Finland Russia CEE		YIT's tax strategy supports decision making in business operations. YIT does not engage in aggressive tax planning or use artificial tax avoidance arrangements. All business transactions must have a business reason or commercial justification, but they may not supersede compliance with tax regulations. The most important goal of YIT's tax management is to manage YIT's overall tax position to avoid surprises and unnecessary tax disputes.
			YIT pays, collects, remits and reports taxes and tax-like payments pursuant to local legislation in order to make the legally required contributions to the societies in which YIT operates. In addition to corporate income taxes, YIT pays and collects other taxes and payments, such as capital taxes, value added taxes and taxes on wages.
			YIT develops and maintains open and honest relationships and up-to-date communication with the tax officials and other authorities in its operating countries.
Market presence
G4-DMA	Management approach		From the perspective of some of YIT's stakeholders, it is important that the company uses a substantial amount of local labour and local subcontractors. However, this is not always feasible on the scale the stakeholders would want. In some situations, a sufficient amount of skilled labour is not available locally, in which case YIT will utilise labour that is available from elsewhere in the labour market. In the EU, with freedom of movement for workers, YIT cannot discriminate against subcontractors or workers based on nationality. Correspondingly, YIT does not tolerate discrimination based on the nationality or origin of workers in any other cases either. YIT always complies with local collective bargaining agreements and labour law in its operating countries, regardless of where the workers originate from.
	Significant indirect economic impacts
G4-DMA	Management approach	p. 48	YIT's business operations are very closely linked to the local societies in which the company operates. YIT has numerous indirect impacts on these local societies' functionality, safety and comfort. In many operating countries and municipalities, zoning sets a strict framework for the design and construction of projects, but YIT introduces its own expertise to the planning of residential neighbourhoods, for instance, where possible. In these cases, YIT increasingly considers a broad range of social, economic and environmental factors related to the urban environment, such as the long-term attractiveness of areas, their comfort, convenience in daily life, environmental efficiency, and creating a sense of community. This allows YIT to contribute to promoting the economic, social and environmental well-being of society by creating urban environments that support the other goals of society.
G4-EC7	Infrastructure investments and services	p. 22–23	In Russia, YIT is involved in building the so-called social infrastructure. The construction of social infrastructure, such as schools and day-care centres, is a condition for being granted building rights for residential neighbourhoods. In Russia, YIT's projects often include other work such as the construction of road infrastructure. In other operating countries, society manages infrastructure development by means of competitive bidding between vendors. In Finland, for instance, YIT builds public facilities, day-care centres, schools, assisted living facilities, traffic infrastructure and energy infrastructure as part of the company's business operations.
G4-EC8	Significant indirect economic impacts	p. 27	The value creation involved in YIT's business operations is described in the figure on page 27 of the Annual Report.

Material Aspect		Page
	ENVIRONMENTAL RESPONSIBILITY
Materials
G4-DMA	Management approach	p. 53
Energy
G4-DMA	Management approach	p. 53
G4-EN3	Energy consumption within the organisation	p. 53
G4-EN5	Energy intensity	p. 53
Waste
G4-DMA	Management approach	p. 53
Compliance
G4-DMA	Management approach	p. 53
G4-EN29	Significant fines and sanctions for non-compliance with environmental regulations		No significant fines and sanctions for non-compliance with environmental regulations during the period.
	SOCIAL RESPONSIBILITY
	LABOUR PRACTICES AND DECENT WORK
	Occupational health and safety
G4-DMA	Management approach	p. 51
G4-LA6	Rates of injury, fatalities and absenteeism	p. 51
G4-CRE6	Coverage of internationally recognised health and safety management system	p. 51
Training and Education
G4-DMA	Management approach	p. 39–41, 51
G4-LA11	Employees receiving regular performance and career development reviews	p. 51
	Labour practices of subcontractors and suppliers
G4-DMA	Management approach	p. 55

Material Aspect		Page
SOCIETY
Anti-corruption
G4-DMA	Management approach	p. 55
G4-SO4	Communication and training on anti-corruption policies and procedures	p. 55
G4-SO5	Confirmed incidents of corruption and actions taken		YIT investigates all suspected cases of misconduct and corruption and decides on further action based on the results. A total of 98 investigations were conducted in 2017, some of which continued from one year to the next. The number of investigations increased substantially from the previous year. The figure includes investigations related to external as well as internal factors. The majority of the investigations concerned site wastage or other disruptions involving YIT's construction sites or completed housing projects. The region with the largest number of investigations was Russia, and the increase from the previous year was also mainly attributable to Russia. One factor in the increase was the growth in Russia of the post-construction YIT Service business, for which YIT produces security services. In Finland, a multi-year criminal case was concluded for YIT's part, with one former YIT employee being found guilty of fraud. YIT has a zero tolerance policy regarding the grey economy; following investigations, if warranted by the circumstances, co-operation with the subcontractors or suppliers in question, and any YIT employees involved, is terminated.
Political contributions
G4-DMA	Management approach		YIT is strongly linked to the local administration in its operating countries, from public officials to politicians, in contexts such as land use and building permit processes. Local administrative bodies make many decisions that affect the company's business operations. It is therefore important that relationships with them are completely neutral, and that there is no need to question the impartiality of their decisions due to actions taken by YIT. The YIT Business Principles, which are complied with throughout the Group, specify that YIT does not make financial contributions of any kind to political parties.
G4-SO6	Contributions to political parties and related institutions		YIT does not support any politicians, political parties or other political institutions.
	PRODUCT RESPONSIBILITY
Customer satisfaction
G4-DMA	Management approach	p. 42–44, 52
G4-PR5	Results of surveys measuring customer satisfaction	p. 43, 52

Corporate Governance

Corporate Governance 65 Operating principles and control systems 72 Board of Directors 74 Management Board 75

B66 BUSINESS CENTRE, KAUNAS, LITHUANIA

Corporate Governance

YIT Corporation aims for open, transparent and responsible corporate governance. We are committed to good corporate governance through compliance with applicable legislation and the rules and regulations governing listed companies, as well as by implementing best practices. We comply with the recommendations of the Finnish Corporate Governance Code approved by the Securities Market Association in October 2015, which took effect on January 1, 2016.

GOVERNING BODIES

YIT Corporation's highest decision-making body is the Annual General Meeting, which is composed of the company's shareholders. The management of the company is the responsibility of the President and CEO, guided by the Board of Directors. Other management personnel assist and support the President and CEO in his tasks. The Board of Directors decides on the Group's governance systems and ensures that the company complies with good corporate governance principles.

ANNUAL GENERAL MEETING

YIT's highest decision-making body is the General Meeting, where the shareholders participate in the supervision and control of the company and exercise their right to speak and vote. The Annual General Meeting is held each year by the end of March on a date determined by the Board of Directors. Extraordinary General Meetings can be held when the Board of Directors deems it necessary or when required by legislation.

The Annual General Meeting makes decisions on matters falling within its scope of responsibilities by virtue of the Limited Liability Companies Act and the company's Articles of Association, such as:

The approval of the financial statements
The distribution of profits
Discharging members of the Board of Directors and the President and CEO from liability
The election of the Chairman, Vice Chairman and members of the Board and the remuneration paid to them
The election of the auditors and the auditors' fees
Amendments to the Articles of Association
Decisions leading to changes in the share capital
The purchase and transfer of company shares

The Chairman of the Board of Directors, the members of the Board of Directors, the President and CEO and the external auditor are all present at the General Meeting. Persons nominated to seats on the Board of Directors must always participate in the General Meeting deciding on their election.

THE RIGHTS OF SHAREHOLDERS

Every YIT shareholder has the right to participate in a General Meeting. Participation requires that the shareholder is registered in the shareholder register on the General Meeting's record date, which is eight working days prior to the meeting, and that the shareholder registers for the meeting not later than the time mentioned in the notice of the meeting.

One share confers one vote at the General Meeting. Shareholders have the right to have matters falling within the competence of the General Meeting by virtue of the Limited Liability Companies Act included on the agenda, provided they demand, in writing, the Board of Directors to do so early enough so that the item can be included in the notice of meeting. The company will publish on its website well in advance the date by which shareholders must present their requests.

The notice of meeting is published no later than three weeks before the meeting on the company's website. The notice contains the agenda and the Board's proposals to the General Meeting, as well as the names of the persons nominated for seats on the Board of Directors and the nominated auditor. The minutes of the General Meeting with voting results are available on our website no later than two weeks after the General Meeting.

ANNUAL GENERAL MEETING 2017

The Annual General Meeting was held on March 16, 2017, in Helsinki. A total of 575 shareholders participated in the General Meeting personally or by proxy (2016: 506), representing a total of 52,837,051 (47,181,346) shares and voting rights, which is approximately 41.5 (37.09) per cent of the company's shares and voting rights. The members of the Board of Directors, the President and CEO and the auditor were present at the meeting.

The resolutions of the General Meeting are presented as a summary in the Report of the Board of Directors on page 86, and they can be viewed in full on our website.

EXTRAORDINARY GENERAL MEETING 2017

The Extraordinary General Meeting was held on September 12, 2017, in Helsinki. A total of 447 shareholders participated in the meeting personally or by proxy, representing 59,160,996 shares and voting rights, which was approximately 46.5 per cent of the company's shares and voting rights. All members of the Board of Directors, the President and CEO and the auditor were present at the meeting. The Extraordinary General Meeting resolved on the statutory absorption merger of Lemminkäinen Corporation into YIT Corporation and passed other resolutions, including the amendment of the Articles of Association, the merger consideration to be distributed to the shareholders of Lemminkäinen, the composition of the Board of Directors, the remuneration of the Board of Directors and a temporary deviation from the Standing Order of the YIT Shareholders' Nomination Board.

The resolutions of the Extraordinary General Meeting are presented as a summary in the Report of the Board of Directors on pages 86–87, and they can be viewed in full on our website.

BOARD OF DIRECTORS

The Board of Directors supervises and controls the management and operations of the company. The duty of the Board is to promote the interests of all shareholders and the Group by seeing to the administration and proper organisation of operations.

YIT's Corporate Governance, December 31, 2017

GENERAL MEETING 43,619 shareholders on December 31, 2017

BOARD OF DIRECTORS Chairman, Vice Chairman, four members

BOARD COMMITTEES Personnel Committee and Audit Committee

PRESIDENT AND CEO

MANAGEMENT BOARD Chairman (President and CEO) seven members

BUSINESS SEGMENTS ON DECEMBER 31, 2017 Housing Finland and CEE Housing Russia Business Premises and Infrastructure

The Board of Directors comprises the Chairman and the Vice Chairman and three to five members elected by the general meeting of shareholders for one year at a time. The Articles of Association have no special provisions on the members of the Board of Directors. The majority of the members must be independent of the company. In addition, it is required that at least two of these members are independent of the major shareholders of the company. The President and CEO cannot be elected as the Chairman of the Board. Both genders must be represented on the Board of Directors.

The Board of Directors convenes regularly as summoned by the Chairman. A quorum is established when more than half of its members are present. An opinion supported by more than half of the members present becomes the decision. When the votes are even, the Chairman has the casting vote. The CEO as referendary and the Corporate General Counsel as secretary of the Board are present at Board meetings. Other Management Board members and heads of business units and functions attend the meetings when necessary. The CEO and the

ADDITIONAL INFORMATION ONLINE

Limited Liability Companies Act: www.finlex.fi/en
The rules of NASDAQ OMX Helsinki: www.nasdaqomx.com
The Finnish Corporate Governance Code issued by the Securities Market Association: www.cgfinland.fi/en

YIT'S WEBSITE

www.yitgroup.com/corporategovernance

Investor information pursuant to the Securities Market Association's Finnish Corporate Governance Code, including, among other things, the Corporate Governance Statement and the Remuneration Statement for 2017.
Articles of Association
YIT Business Principles

secretary of the Board prepare the meetings with the Chairman of the Board and draw up the agendas. They also ensure that the Board is provided with sufficient information on matters such as the structure, operations, markets and competitive situation of the company in order to carry out its tasks. The meeting agendas and materials are sent to Board members in good time before the meeting.

The Board of Directors and its committees have ratified standing orders. The members of the Board evaluate the operation of the Board and its committees each year, and the results are taken into account in the Board's work and its development.

KEY TASKS OF THE BOARD OF DIRECTORS

Among other duties, the Board of Directors:

ensures that the supervision of accounting and asset management is organised appropriately
reviews and approves the company's Financial Statements and the Board of Directors' report as well as interim reports and half-yearly reports
supervises and controls operating management
elects and dismisses the CEO and his deputy, decides on their salaries and fees and agrees on the other terms of their employment
convenes the Annual General Meeting and makes proposals on matters to be included on the agenda
specifies the dividend policy and makes a proposal to the General Meeting on the dividend to be paid annually
approves the Group's strategy, strategic goals and risk management principles
approves budgets and action plans and oversees their implementation
approves significant acquisitions and other investments
confirms the functional structure of the Group
ensures the functioning of the management system
ratifies the Group's values and management principles
monitors the Group's audit and monitors and evaluates the auditor's independence and the provision of non-audit services by the auditor
prepares a proposal for the election of the auditor

BOARD MEMBERS' ATTENDANCE AT MEETINGS IN 2017

	Board of Directors	Personnel Committee	Audit Committee
Matti Vuoria	18/18	5/5
Juhani Pitkäkoski	18/18		7/7
Satu Huber¹	17/18	5/5	1/1
Erkki Järvinen	17/18		7/7
Inka Mero	17/18	5/5
Tiina Tuomela²	16/17		6/6
Board members'
average attendance rate	96%	100%	100%

Satu Huber was a member of the Audit Committee until March 16, 2017. The Audit Committee convened once before March 16, 2017. 2. Tiina Tuomela was a member of the Board of Directors and the Audit Committee starting from March 16, 2017. The Board of Directors and the Audit Committee each convened once before March 16, 2017.

BOARD OF DIRECTORS 2017

The members of YIT Corporation's Board of Directors between January 1 and March 16, 2017, were Matti Vuoria as the Chairman, Juhani Pitkäkoski as the Vice Chairman and Satu Huber, Erkki Järvinen and Inka Mero as members. The Annual General Meeting held on March 16, 2017, elected four (4) ordinary members to YIT's Board of Directors in addition to the Chairman and the Vice Chairman. As the Chairman of the Board of Directors, the Annual General Meeting elected Matti Vuoria, born 1951, BA, LL.M.; as Vice Chairman Juhani Pitkäkoski, born 1958, LL.M.; and as members Satu Huber, born 1958, M.Sc. (Econ.), Chief Executive Officer of Elo Mutual Pension Insurance Company; Erkki Järvinen, born 1960, M.Sc. (Econ.); Inka Mero, born 1976, M.Sc. (Econ.), co-founder of the startup accelerator and investment company Pivot5 Oy; and Tiina Tuomela, born 1966, M.Sc. (Eng.), Executive Vice President of Fortum, Generation Division.

YIT CORPORATION'S BOARD OF DIRECTORS ON DECEMBER 31, 2017

Matti Vuoria (Chairman) Juhani Pitkäkoski (Vice Chairman) Satu Huber Erkki Järvinen Inka Mero Tiina Tuomela

AUDIT COMMITTEE

Erkki Järvinen (Chairman) Juhani Pitkäkoski Tiina Tuomela

PERSONNEL COMMITTEE

Matti Vuoria (Chairman) Satu Huber Inka Mero

All of the members of the Board of Directors were independent of YIT and its major shareholders. The Board of Directors convened 18 times during 2017. The members' total attendance rate was 96 per cent. The Board of Directors conducted a self-evaluation of its work during the period, assessing matters such as the efficiency of its work, the quality of information and materials submitted to the Board, the focal areas of its work and the targets set for management. The results of the evaluation are to be used in developing the Board's work.

A significant part of the Board´s work in 2017 comprised preparations for and monitoring of the merger of YIT Corporation and Lemminkäinen Corporation as well as the decisions made with regard to the merger. Other key focus areas included matters pertaining to the company´s financing, business in Russia, major projects under preparation and the foundation of a new business segment. Corporate General Counsel Juha Jauhiainen served as the secretary of the Board of Directors.

Presentations of members of the Board are on page 74 and our website.

SHAREHOLDERS' NOMINATION BOARD

The 2016 Annual General Meeting of YIT Corporation resolved to establish a Shareholders' Nomination Board for the company to prepare proposals on the election and remuneration of the members of the Board of Directors for the Annual General Meeting, and confirmed the proposal for the standing order of the Nomination Board.

The Shareholders' Nomination Board is a body comprised of the company's shareholders or their representatives, the duty of which is to prepare, in accordance with the Board's diversity principles, proposals on the election and remuneration of the members of the Board of Directors for the Annual General Meeting and, where necessary, for the Extraordinary General Meeting. The primary purpose of the Nomination Board is to ensure that the Board of Directors and its members have sufficient expertise, competence and experience in view of the

company's needs, and to prepare proposals, with justifications, on the election and remuneration of members of the Board of Directors to the General Meeting for this purpose.

The Nomination Board comprises the company's three major shareholders or the representatives nominated by these shareholders. The right to nominate members to represent shareholders rests with three shareholders who are registered in the shareholders' register maintained by Euroclear Finland Ltd or another operator on the last weekday of August in the year preceding the General Meeting, and who hold the largest number of votes conferred by shares according to the shareholder register.

The Nomination Board has been established to serve until further notice. The term of office of the Nomination Board members ends at the appointment of new members every year.

The Nomination Board shall submit its proposal to YIT's Board of Directors every year, by the last weekday of January preceding the next Annual General Meeting. The proposals of the Nomination Board are published in a stock exchange release and included in the notice of meeting. Furthermore, the Nomination Board shall present and justify its proposals and give an account of its operations to the Annual General Meeting.

SHAREHOLDERS' NOMINATION BOARD 2017

In 2017 (selected in 2016) the Nomination Board comprised Risto Murto, CEO of Varma Mutual Pension Insurance Company, Kalle Saariaho, CEO of OP Fund Management Company Ltd., and Antti Herlin. The Chairman of YIT Corporation´s Board of Directors, Matti Vuoria, served as an expert member on the Nomination Board, and Risto Murto served as Chairman of the Nomination Board.

The Nomination Board convened twice in 2017. Between meetings, the Nomination Board prepared its proposals under the leadership of its Chairman. The members´ total attendance rate was 100 per cent.

In the Extraordinary General Meeting of YIT Corporation held on September 12, 2017, it was decided to make a one-time exception to the standing order of the Shareholders´ Nomination Board of YIT.

Pursuant to the one-time exceptional decision, the right to nominate members to the Nomination Board, which prepares proposals for General Meetings to be held during 2018 shall rest, in accordance with the standing order, with the three largest shareholders who are registered in the shareholders´ register on the registration date of the execution of the merger of YIT Corporation and Lemminkäinen or, if not a business day, on the first business day following such registration date.

Further, it was stated that the Nomination Board shall have a reasonable time to prepare its proposals before the Annual General Meeting 2018 instead of having time until the end of January 2018 and that the Nomination Board shall in such case publish its proposals as soon as practically possible. In all other respects, the Nomination Board shall follow the current Standing Order.

COMPOSITION OF THE BOARD OF DIRECTORS ON THE DATE OF COMPLETING THE MERGER, FEBRUARY 1, 2018

In accordance with the proposal of the Nomination Board, the Extraordinary General Meeting that resolved on the merger of YIT Corporation and Lemminkäinen on September 12, 2017, decided to provisionally elect eight (8) members, including the Chairman and Vice Chairman, to the Board of Directors for a term beginning on the date the completion of the merger is registered and ending at the close of YIT's following Annual General Meeting. YIT's current Chairman of the Board of Directors, Matti Vuoria, was elected as the Chairman of the Board of Directors. Lemminkäinen's current Chairman of the Board of Directors, Berndt Brunow, was elected as the Vice Chairman of the Board of Directors. YIT's current Board members Erkki Järvinen, Inka Mero and Tiina Tuomela were elected as members of the Board of Directors, and Lemminkäinen's current Board members Harri-Pekka Kaukonen, Juhani Mäkinen and Kristina Pentti-von Walzel were also elected as members of the Board of Directors. All of the elected persons are presented on the company website.

COMPOSITION OF YIT CORPORATION'S NOMINATION BOARD 2018

YIT's Extraordinary General Meeting, which approved the merger on September 12, 2017, resolved that, in deviation from the current standing order of the YIT Shareholders' Nomination Board, the right to nominate members to the Nomination Board shall rest with the three largest shareholders who are registered in the shareholders' register on the registration date of the execution of the merger. According to the mentioned standing order, a shareholder group can agree on appointing a joint representative to the Nomination Board. The following shareholders have agreed on appointing a joint representative: PNT Group Oy, Noora Forstén, Fideles Oy, Kristina Pentti-von Walzel, Eva Pentti-Kortman and Kristian Pentti.

YIT's three largest shareholders on February 1, 2018, in accordance with the shareholder register maintained by Euroclear, including the shareholder group, are the above mentioned shareholder group, Varma Mutual Pension Insurance Company and Onvest Sijoitus Oy.

The following person have been nominated as their representatives to YIT's Nomination Board:

Juhani Mäkinen, Counsellor of Law, the shareholder group (14.89% of shares and votes)
Risto Murto, President and CEO, Varma Mutual Pension Insurance Company (7.55% shares and votes)
Maarit Toivanen-Koivisto, Chair of the Board of Directors, Onvest Oy (4.21% shares and votes)
The Chairman of YIT Corporation's Board of Directors, Matti Vuoria, serves as an expert member on the Nomination Board. The Nomination Board's Chairman is Risto Murto.

PROPOSAL ON THE COMPOSITION OF THE BOARD OF DIRECTORS IN 2018

The Nomination Board proposes to the 2018 Annual General Meeting that a Chairman, a Vice Chairman and five (5) ordinary members be elected to the Board of Directors. The Nomination Board proposes that Harri-Pekka Kaukonen be elected as the Chairman,

Eero Heliövaara (new) as the Vice Chairman and Erkki Järvinen, Olli-Petteri Lehtinen (new), Inka Mero, Kristina Pentti-von Walzel and Tiina Tuomela as members, for a term ending at the close of the next Annual General Meeting following their election. All candidates have consented to being elected. All candidates are presented on the company's website.

COMMITTEES FOR THE BOARD OF DIRECTORS

The Board of Directors has two committees: the Personnel Committee and the Audit Committee.

The Board of Directors elects the members and Chairmen of the committees from among its members at its constitutional meeting following the Annual General Meeting. The committees have written standing orders ratified by the Board of Directors. The committees report to the Board of Directors on the matters dealt with by them and the required actions on a regular basis at the Board meeting following each committee meeting.

PERSONNEL COMMITTEE

The task of the Personnel Committee is to assist the Board of Directors in issues related to appointing and rewarding key personnel. Among other things, the Personnel Committee prepares proposals for the development of the Group's corporate culture and HR policy, remuneration and incentive schemes, the rules for performance-based bonuses, and the performance-based bonuses paid to the management. In addition, identifying talents, the development of key personnel and planning for management replacements fall under the preparation responsibility of the Committee.

The Committee convenes as necessary and as summoned by the Chairman. It has a minimum of three and a maximum of five members, who all have knowledge of our business operations and business segments, as well as HR and reward-related matters. The majority of the members of the Personnel Committee must be independent of the company. The President and CEO and other members of the company´s executive management cannot be members of the Personnel

Committee. The Senior Vice President, Human Resources, serves as the Committee's secretary.

PERSONNEL COMMITTEE IN 2017

The members of the Personnel Committee of the Board of Directors of YIT Corporation in 2017 were Matti Vuoria as the Chairman and Satu Huber and Inka Mero as members. The Committee convened a total of five times in 2017. The members' total attendance rate was 100 per cent. Pii Raulo, Senior Vice President, Human Resources, served as the Committee's secretary.

In 2017, the Personnel Committee prepared rules for performance-based bonuses and the annual targets, key personnel categories and key personnel allocation of the long-term incentive scheme. The Personnel Committee also followed the progress of the HR strategy, supported the implementation of the HR plan, monitored the remuneration levels of senior management and, in conjunction with organisational changes, presented appointments of key personnel for confirmation by the Board of Directors.

AUDIT COMMITTEE

The Audit Committee assists the Board of Directors in the supervision of the Group's reporting and accounting processes. Its tasks include overseeing the financial reporting process of the company, the effectiveness of internal control, internal audit and risk management systems, as well as monitoring and assessing the audit. The Committee participates in the preparation of the Group's financing policy, financing plan and financing arrangements. The Committee reviews the company's Financial Statements, Interim Reports and Half-Year Reports and monitors auditing. It evaluates compliance with laws and regulations and follows the Group's financial position.

The Committee convenes at least four times per year and more often if necessary. The Committee comprises 3–5 members, the majority of whom must be independent of the company, and at least one of the members must be independent of major shareholders.

Persons with extensive knowledge of the Group´s business operations and business segments and sufficient knowledge of accounting and accounting principles are elected as members. The Corporate General Counsel acts as the secretary of the Audit Committee.

AUDIT COMMITTEE IN 2017

The members of the Audit Committee between January 1 and March 16, 2017, were Erkki Järvinen as Chairman and Satu Huber and Juhani Pitkäkoski as members. At its organisational meeting on March 16, 2017, the Board of Directors elected Erkki Järvinen as Chairman and Juhani Pitkäkoski and Tiina Tuomela as members of the Audit Committee.

The Audit Committee convened seven times in 2017. The members' total attendance rate was 100 per cent. Corporate General Counsel Juha Jauhiainen served as the Committee's secretary. The company's President and CEO Kari Kauniskangas, the Internal Audit Director Ari Ladvelin and, as the company's chief auditor, APA Juha Wahlroos (PricewaterhouseCoopers) also participated in the Committee's meetings, as did members of the company's management and experts, depending on the matters dealt with by the meeting.

During the financial period, in addition to its main tasks, the Audit Committee regularly discussed among other things, preparations pertaining to the implementation of the IFRS 15 standard. Preparations for, and the monitoring of, the merger of YIT Corporation and Lemminkäinen Corporation as well as the preparation of matters and decisions pertaining to the merger also played a major role in the word of the Audit Committee. In addition, the Audit Committee monitored the progress of disputes and legal proceedings, and discussed, for instance, the Group´s decision-making authorisations.

PRESIDENT AND CEO

The President and CEO attends to the day-to-day administration of the company in accordance with the instructions and regulations laid down by the Board of Directors. The Board of Directors appoints and discharges the CEO and supervises his operation. It also decides on the President and CEO's salary and fees and other terms of employment. The CEO ensures that the company's accounting is lawful and asset management is organised reliably. YIT's President and CEO serves as the Chairman of the Group's Management Board.

MANAGEMENT BOARD AND GROUP INVESTMENT BOARD

YIT Group's Management Board is the highest operational decision-making body and is responsible for allocating resources to the business segments. The Group Management Board is also responsible for assessing the performance of the business segments. The President and CEO and other members appointed by the Board of Directors make up the Group's Management Board. The President and CEO appoints the Management Board's secretary. The Group Management Board, which meets on a regular basis, approximately once a week, assists the Group CEO with operational planning and management and prepares matters that are to be processed by the Board of Directors. Among other duties, the Management Board formulates and co-ordinates the Group's strategic and annual planning, supervises the implementation of plans and financial reporting, and prepares significant investments, mergers and acquisitions. The development of the Group's internal co-operation and the promotion of joint development projects are among the Management Board's key duties.

In addition to the Management Board, a separate Group Investment Board assists the President and CEO in the planning of capital use, investments and the preparation of acquisitions. The President and CEO is responsible for the decisions made by the Management Board and the Group Investment Board. The task of the members of the Management Board is to implement the decisions in their respective areas of responsibility. The Management Board and Group Investment Board have standing orders ratified by the Board of Directors.

MANAGEMENT BOARD IN 2017

Kari Kauniskangas served as YIT Corporation's President and CEO.

The Group Management Board as of January 1, 2017:

Kari Kauniskangas, Chairman, President and CEO
Tero Kiviniemi, Vice Chairman, Executive Vice President, Head of Business Premises and Infrastructure segment (until October 9, 2017)
Teemu Helppolainen, Head of Housing Russia segment
Antti Inkilä, Head of Housing Finland and CEE segment
Juha Kostiainen, Senior Vice President, Sustainable Urban Development
Esa Neuvonen, Chief Financial Officer
Juhani Nummi, Secretary to the Management Board, Senior Vice President, Business Development
Pii Raulo, Senior Vice President, Human Resources

Effective from October 9, 2017, and until the completion of the merger between YIT and Lemminkäinen, the deputy to the President and CEO was CFO Esa Neuvonen, and the Head of the Business Premises and Infrastructure segment was Timo Lehmus.

Presentations of the members of the Management Board are on page 75 of the separate Annual Report and on our website.

The Management Board convened (12) times during the year for actual Management Board meetings. The focus areas of the Management Board's work in 2017 included the revision and implementation of strategy, assessments and reviews related to market development, risk management, controlling investments, controlling strategic development programmes and focusing other development and information management efforts on strategically important areas. Key content themes included HR development, the development of the corporate culture, the product offering, sales and customer relationship management, customer orientation, customer experience and the brand, profitability control, cash flow and capital efficiency. In addition to controlling common development programmes, the Management Board led the development of quality and occupational safety.

INTERNAL AUDIT

YIT Group's internal audit organisation supports the management in the development and supervision of risk management, internal control and good corporate governance. The internal audit reports to the Audit Committee of the Board of Directors and administratively to YIT's President and CEO. The targets of the internal audit are selected semi-annually based on risk. The focus of the internal audit has typically been on project risk management, new geographic or functional operating areas and semi-annually defined risk areas. The internal audit's work is co-ordinated with other Group functions and financial auditing. The internal audit also works closely together with the Group's corporate security organisation and, with respect to misconduct risks, participates in the work of the Ethics Committee.

INTERNAL AUDIT IN 2017

The focus areas of the internal audit were CEE (Central Eastern Europe) large projects and area concepts, as well as capital management. The Group also continued to engage in active audit work in Russia.

AUDIT

YIT has one auditor, which must be an approved auditing firm pursuant to the Auditing Act (1141/2015). The Board's Audit Committee prepares the draft resolution concerning the election of the auditor and the Annual General Meeting elects the auditor based on the draft resolution. The auditor audits the company's accounting, Board of Directors' report, Financial Statements and administration for the financial year. The parent company's auditor must also audit the consolidated financial statements. The auditor reports regularly to the Board of Directors and its Audit Committee and gives YIT's shareholders an Auditor's Report as required by law.

Pursuant to the decision of the Annual General Meeting, the auditor's fee is paid as per the invoice approved by the company. We comply with the provisions of the Auditing Act and the EU Statutory Audit Directive with regard to the maximum duration of the auditor's terms of office and, in electing the auditor, we also take into consideration that

the total duration of the consecutive terms of office of the auditor with main responsibility must not exceed seven years.

AUDIT IN 2017

The Annual General Meeting in 2017 elected PricewaterhouseCoopers Oy as the auditor. The auditor with main responsibility was Juha Wahlroos, Authorised Public Accountant. The Auditor's Report for the financial year 2017 is presented in the Financial Statements section of the Annual Report.

AUDIT FEES IN 2017

EUR million	2017	2016
Audit fee	0.8	0.8
Statements	0.1	0.0
Tax services	0.0	0.0
Other services	0.8	0.1
Total	1.7	0.9

INSIDER ADMINISTRATION

The Board of Directors of YIT Corporation has ratified for the company "Guidelines for Insider Matters and Trading in Financial Instruments" in order to explicate and supplement the provisions of the Market Abuse Regulation (EU No 596/2014, the "MAR") and laws and regulation based on it as well as the rules and Guidelines for Insiders of Nasdaq Helsinki Ltd, which YIT as a public listed company is required to comply with.

YIT's Guidelines for Insider Matters and Trading in Financial Instruments regulate among other issues managing of insider matters, delaying of disclosure of inside information, insider lists and disclosure of management trading within YIT and thereby aim for their part to further strengthen general confidence in the securities market, enhance investors' equal access to information and prevent abuse in the marketplace.

YIT has determined that the managers (including their closely associated persons), whose transactions with YIT´s financial instruments shall be notified and published based on MAR, consist of members of the Board of Directors of YIT Corporation and the President and CEO of YIT Corporation and the members of the Group Management Board (as of February 1, 2018 members of the Board of Directors of YIT Corporation and the President and CEO of YIT Corporation and CFO). These managers shall not conduct any transactions on his/her own account or for the account of a third party relating to YIT Financial Instruments during a closed window of 30 calendar days before the announcement of an interim financial report or financial statements bulletin.

The company has also defined to be also subject to the 30 days trading restriction (closed window) those employees other than those discharging managerial responsibilities who regularly participate in preparing, drawing up or disclosing interim reports, half-year reports or financial statements bulletins or receive information of their incoming contents during the preparing or drawing up prior to their disclosure. In addition, the company maintains project-specific insider lists for persons involved in insider projects when necessary.

Information on the shares and options held by managers is presented on our website.

Operating principles and control systems

YIT complies with the legislation of Finland and its operating countries, as well as the regulations and guidelines for listed companies in all of its operations. Operations are also guided by the company's values and business principles, which all of the employees must comply with at all times. The company has ratified the following guidelines and policies, among others: YIT Business Principles, YIT's values and leadership principles, the standing orders of the YIT Group and administrative bodies, YIT's Guidelines for Insider Matters and Trading in Financial Instruments, the Group's financing policy, guidelines on the accounting and reporting policies, risk management policy, corporate security policy, disclosure policy and investment guidelines.

YIT BUSINESS PRINCIPLES

YIT's mission, vision and values are the foundation of YIT's operations and ways of working. Our jointly defined values and Leadership Principles create the basis for everything we do in our daily work at YIT. YIT has defined Business Principles that help make the right choices every day at work. Knowing the Business Principles, applying them and discussing them is part of our culture of responsibility. Commitment to our values, Leadership Principles and Business Principles promotes the long-term success of our business and strengthens our responsible corporate culture.

Success in business requires that we respect our stakeholders and produce value for various stakeholders, from our customers to our shareholders. YIT Business Principles include the principles that guide our operations in relation to customers, employees, shareholders, business partners, competitors, society and the environment. Every employee is, for their part, responsible for complying with the YIT Business Principles.

Since 2015, YIT has used the YIT Code, an online training programme with uniform content for everyone at YIT. The training uses case exercises and concrete scenarios to make participants think about day-today decisions, ways of working and choices from the perspective of our values and Business Principles. YIT Code supports and strengthens conduct, decisions and operations in accordance with common rules. As a company, we have also made a promise to comply with our Business Principles. This is a promise we have made publicly to our customers, partners, stakeholders and to each other. This promise can be fulfilled only by all of us making a contribution.

INTERNAL CONTROL AND RISK MANAGEMENT CONNECTED WITH THE FINANCIAL REPORTING PROCESS

Financial reporting and supervision are based on budgets drafted and ratified every six months, as well as on monthly performance reporting. The Group's financial reporting is based on financial data on the profitability of business provided by each cost centre, combined with segment-level and Group-level data. YIT Corporation's business is characterised by project-type operations, due to which financial reporting applies the percentage of completion method (POC) in accordance with the degree of completion and sales, for example. Accurate information on the degree of completion and sales of the project and the final cost estimate are essential for the reliability of financial data in project business.

The Group´s financial management board convenes on a monthly basis. It is composed of the segments´ chief financial officers as well as representatives from Group accounting, Group financing and IT administration. The Group´s Corporate General Counsel, Tax Director and the head of internal audit can also participate in meetings of the financial management board. The financial management board addressess all process and development issues concerning the business segments.

IN 2017

The Group's financial and financing management is responsible for identifying and assessing risks in relation to financial reporting. The processes and systems of financial reporting are developed and their effectiveness analysed continuously. Risks related to financial reporting are managed with the help of the Group's accounting manual, financing policy, investment guideline, acquisition instructions and internal audit.

In 2017, the Group harmonised its accounting principles and accounting systems. Preparations continued for the financial service centre of the Housing Russia segment. The finance function was actively involved in the development of new project and financing models.

The internal control and risk management systems connected with the financial reporting process are described in more detail in YIT Corporation's Corporate Governance Statement available on our website.

We also publish a separate annual Remuneration Statement on our website. The statement includes a description of the key remuneration principles, as well as information on the fees and benefits paid to the Board of Directors, President and CEO and the Group Management Board.

Board of Directors 2017