ANNUAL REPORT 2008

FCG Finnish Consulting Group is a multi-industry consulting company operating in several countries

around the world. Our services combine unique, versatile expertise and competence with solid experience,

particularly in the fields of infra and environment consulting, public administration development, capacity

building and human resources development.

We produce services that support good life for our customers, ranging from decision-making support and

operational development to community planning with due attention to environmental values. The Group

employs over 850 people in Finland and internationally.

FINNISH CONSULTING GROUP

ANNUAL REPORT 2008

Editorial 1

FCG-Group’s Year 2008 2

Group’s Key Ratios 5

Development of Public Administration 6

Infra, the Environment and Communities 8

Training and Education Sector Development 14

Personnel: Working for Wellbeing 16

Financial Statements 18

Organisation 23

Proposal of the Board of Directors on measures concerning profit 24

EDITORIAL

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Dear Reader,

2008 was a good year for FCG. The Group’s turnover developed positively, and the personnel increased from the previous year. The global economic fluctuations did not affect FCG Group’s operations or order books yet. However, we are keeping a close eye on the financial developments and their impact on our customers both in Finland and at the international level.

FCG is one of the biggest Finnish training and consultancy companies. In Finland, our biggest customer group comprises municipalities and organisations working in close cooperation with them. FCG played a strong role in the reforms of municipalities and municipal services. The foundation of our service is consulting and training to support strategic decision-making and the development of services, industries, and competencies. The decisions made by the public administration also affect community planning and physical structures, which we can support with our consulting and planning services. FCG also serves a great deal of private-sector customers, both in Finland and abroad.

In addition to its traditional services, FCG has been persistently working to develop new product and service concepts that enable combining the multi-disciplinary competencies possessed in major corporations into flexible service packages. These concepts are being developed in close co-operation with our customers, and several such projects have already been successfully implemented. We have been involved in a land-use development project and tourist-service development, and have conducted various service network surveys. Our international projects include the development of rural areas and industry structures, environmental protection, natural resource use, etc.

Committed and motivated employees are in a key position in all our activities. In 2008, FCG launched new values – responsibility, openness, and reform – and a new slogan: FCG – Working for well-being. This slogan also refers to our employees: our services are produced by people who are committed to providing services that, ultimately, make life good, healthy, and safe, both in Finland and at the international level.

My personal goal as FCG’s new CEO is to promote professional competence, co-operation, and the creating of a competitive edge for us and our customers. I would like to thank our customers, stakeholders, and employees for the successful year 2008!

Paul PaukkuCEOFCG Finnish Consulting Group

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FCG-Group’s

The FCG Group is one of the largest multi-industry consultancy firms in Finland. Its operations

combine unique, versatile expertise and competence with solid experience, particularly in the development of infrastructure, the environment, communities and public administration, in Finland as well as internationally.

FCG Group produces services that support good life for our customers, ranging from decision-making support in the form of consultation or training and operational development to community and infrastructure planning

with due attention to environmental values.

The Group’s business has been divided into three business units: FCG Management and Consulting, FCG International Consulting, and FCG Infra and Environment.

To complement its range of traditional services, the FCG Group has actively sought to commercialise and market new services. The main idea behind their production is to combine the Group’s multi-industry expertise into versatile service packages. There is demand for new types of service concepts in the ongoing municipal and service structure change, for example. Examples of the new projects

implemented so far include municipal service network surveys and area, land use and tourism development projects.

The parent company of the Group, FCG Finnish Consulting Group Oy, is responsible for the Group’s overall strategy, strategic planning, administration and general employment issues, financial issues, financing and investor relations, and the Group’s communication and marketing, competence development and ICT services.

The systematic building of the FCG brand continued in the form of reforming the appearance of Internet services and harmonising the signposts of the Group’s regional offices. FCG

Year 2008

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launched a new slogan in 2008 entitled ”FCG – Working for well-being”. The Group’s personnel also participated in a value discussion, on the basis of which responsibility, openness and innovativeness were set as its new values.

On 1 February 2009, Paul Paukku started as the new CEO of FCG Group’s parent company. Seppo Mäki, the previous CEO, retired in March 2009.

Finance

FCG Group’s turnover in 2008 was EUR 79.4 million (EUR 73.2 million in 2007). The profit for the financial year was EUR 2.4 million (EUR 1.8 million).

The FCG Infra and Environment business unit made up 45 % of FCG’s turnover, FCG International Consulting 39 % and Management and Consulting 16 %.

In terms of market area, the Group derives most of its turnover, a total of 67 %, from the EU countries (60 % in 2007). The share of Asian and Pacific operations is 17 % (18 % in

2007) and that of Eastern Europe and the CIS countries 8 % (10 %). Other market areas are Africa, Latin America, the Middle East and North Africa.

The global economic change that commenced in 2008 did not have any appreciable impact on the volume of orders of the FCG Group during the year. In international development consulting, positive development was limited by the change taking place in directing national development aid towards more locally managed tendering processes.

The economic recession will affect the operations of the FCG Group in 2009, for example, in the form of tougher competition.

FCG Management and Training

FCG Management and Training offers multi-industry training and consulting, especially targeting public administration, with the aim of supporting the development of customers’ know-how, structures and operational methods. The business

unit consists of FCG Efeko Oy and its subsidiary FCG MentorIT Oy, which specialises in ICT services.

FCG Efeko Oy’s business continued to be profitable. The municipal service structure reform was a visible theme in the company’s operations in 2008. A survey of Finnish training companies, which was conducted by Talouselämä magazine in the summer of 2008, rated FCG Efeko the best of 46 training companies operating in Finland.

FCG Efeko Oy purchased ISAI Consulting, a Joensuu-based consultancy firm (Itä-Suomen Aikuisinstituutti Oy), in April 2008. The deal strengthened FCG Efeko Oy’s expertise connected with assessment and project training in particular. ISAI Consulting will be merged with the parent company in March-April 2009.

FCG MentorIT Oy’s turnover increased as a result of the expansion of its clientele and the stock of projects. During the year the company received new customers from the public and private sectors and from outside Finland.

The Group’s personnel also participated in a value discussion,

on the basis of which responsibility, openness and innovativeness

were set as its new values.

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FCG Infra and Environment

FCG Infra and Environment is a regional and international, multi-industry operator that provides expert services connected with infrastructure, the environment and communities. The business unit consists of FCG Planeko Oy with its St.Petersburg-based subsidiary OOO ManNet Partners, and OÜ Projektkeskus, an associated company located in Tallinn.

In terms of volume, FCG Infra and Environment is the largest business unit of the FCG Group. Its turnover and profitability developed favourably in 2008.

FCG IP-Tekniikka Oy, which had been part of the FCG Group since 2007, was merged with FCG Suunnittelukeskus Oy on 1 March 2008, at which point the name of the parent company was changed to FCG Planeko Oy.

The rest of the personnel of FCG IP-Tekniikka Oy in Helsinki moved to the FCG building in February 2008 and those in Jyväskylä to the premises of FCG Planeko Oy locally. The offices in Kuopio, Lappeenranta and Seinäjoki moved to new premises.

FCG Planeko Oy’s operations are divided into the following sectors: Architectural and regional development, Geotechnology and structural engineering, Traffic and routes, Water maintenance and research, and Environmental consulting. Operations that combine sectors have been carried out in the Construction and maintenance services division, alongside of which Energy and climate services started as a new division from the start of 2009. At the same time, a new FCG office was opened in Vaasa.

FCG International Consulting

The FCG International Consulting business unit focuses on consulting, the aim of which is to provide capacity building and human resources development services worldwide and in this way contribute to economic, social and environmental development in different parts of the world. The business unit is made up of FCG International Oy and its international subsidiaries.

Konsulttitoimisto Terra Oy, a subsidiary, was merged with FCG International Oy in April 2008. The operations of FCG Ukraina LCC, a Ukraine subsidiary, were abolished in the autumn of 2008 due to changes in the development consulting market in the CIS countries and the economic recession in Ukraine that forced the FCG Group to discontinue the private sector training launched in 2008. A representative office was founded for the parent company in Kyrgysztan in 2008.

New presidents were appointed to JP Development Ltd in New Zealand (Marlene Fuentes), SIPU International AB in Sweden (Anders Olin) and Finnish Consulting Group srl in Romania (Cantemir Radu). In Estonia, Peeter Puskai, the President of Invicta AS, was also appointed the President of Ariko AS. The name Audentes Ariko AS was changed to Ariko AS.

The profitability of the business unit declined slightly from the previous year. Adjustment measures have been launched in order to secure profitability.

The FCG International

Consulting business unit

focuses on consulting, the

aim of which is to provide

capacity building and human

resources development

services worldwide.

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Association of Finnish Local and Regional Authorities

University of Helsinki

Other universities and higher education institutions

Government of Finland

Tapiola GroupProfita Fund Others

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Turnover by market area 2007–2008, %

Group’s key ratios (M€)

2008 2007

• Operating profit • Turnover

Main owners of the Group on 31 December 2008

Group’s key ratios 2008 2007Turnover, M€ 79.4 73.2Operating profit, M€ 2.9 3.0Share of operating profit of turnover, % 3.7 4.1Return on equity, % 9.7% 7.4%Equity ratio 67.8% 65.0%Average personnel 859 816

Turnover by market area 2008 2007EU countries 66.6% 60.4%Eastern Europe and CIS 7.5% 9.5%Latin America 2.9% 3.4%Africa 4.7% 7.3%The Middle East and North Africa 1.0% 1.6%Asia and the Pacific 17.3% 17.8%Total 100.0% 100.0%

Turnover by sectors 2008 2007Management 7.3% 18.5%Finance and administration 14.5% 5.2%Health and social sector 6.3% 7.0%(Culture in 2007) 0.0% 8.8%Training 4.9% Education sector development 5.3% Environment 20.3% 21.8%Water and wastewater engineering and research * 16.1% 16.9%Architectural and regional development ** 8.0% 6.0%Traffic planning and infrastructure 6.4% 8.2%Geotechnology and structural engineering *** 8.9% 6.5%Construction management and maintenance 2.0% 1.1%Total 100.0% 100.0%

Main owners of the Group on 31 Dec. 2008 Shares PercentageAssociation of Finnish Local and Regional Authorities 11,604,729 59%University of Helsinki 3,513,018 18%Other universities and higher education institutions 917,565 5%Government of Finland 1,206,431 6%Tapiola Group 1,129,978 6%Profita Fund 877,306 4%Others 429,973 2%Total 19,679,000 100%

Group’s Key Ratios

* Water and environmental engineering in 2007 ** Land use and development in 2007

*** House planning in 2007

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FCG has a long tradition in consulting related to the development of public administration.

In Finland, the group has strong competence in projects related to the merger of municipalities and the reform of service structures. FCG has functioned not only as a strategic consultant in projects to integrate municipalities and their operations, but has also supported municipalities in the planning of service networks, the development of industries and new kinds of service concepts.

There is a constant demand for flexible and cost-effective service concepts in the ongoing structural change of Finnish municipalities. This period of change requires the leaders of public administration to have a new kind of competence. One of the cornerstones of FCG’s development of domestic public administration in 2008 was the competence related to the management of municipalities. The development of municipal administration also played a key role in large forums organised by FCG, such as the Municipal Leadership Days,

the Municipality-State Forum and the Economic and Finance Forum.

FCG cooperates actively in Finland with the state administration, the Association of Finnish Local and Regional Authorities and networks of experts close to the municipalities. Internationally it works with local authorities, actors in public administration and international financiers such as the World Bank, the EU and bilateral financiers. The networked operating model is a prerequisite for FCG’s successful operations. In the domestic market, studies of public administration consulting and training indicate that FCG is the market leader, and its services, competence and cost-effectiveness are appreciated.

Consulting projects are supported by FCG’s research competence, which provides clients with various services, forecasting models related to personnel, questionnaire surveys and studies. For example, in 2008, a traditional survey of the services of towns was carried out, in which 19 municipalities participated.

International public administration development projects are typically

related to the reform (decentralisation) or development of local administration, strategic planning, financing, regional development and the development of organisations and staff. Consulting can also concern matters related to democracy and human rights. International public sector projects are primarily managed by FCG’s Swedish subsidiary. In international consulting, FCG aims in the future to increase the share of the private sector in the company’s customer base.

FCG has also strengthened its position in Finland and internationally as a developer of services related to the utilisation of data and communications technologies. This consulting work focuses on the strategic planning of ICT services, data management and competence that combines the perspectives of practical data management and the user of the services. The utilisation of best practices in expert networks and IT management are a material part of the development of data management. In international business, data management projects in the teaching sector have become an important consulting area.

PublicDevelopment of

Administration

Consulting projects are supported by FCG’s

research competence, which provides clients with

various services, forecasting models related to

personnel, questionnaire surveys and studies.

FCG has exclusive rights to a number of products used in the field of social and healthcare services, for example, prognosis tools for medical care and rehabilitation. In the photo: Professor Ilkka Vohlonen, Scientific Director of social and health care consulting at FCG.

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SIPU International and FCG International support the Government of the Former Yugoslav Republic of Macedonia and especially the Ministry of Finance by assisting 23 Macedonian municipalities to meet financial criteria to enter into the second phase of fiscal decentralization, adding the 11 municipalities that have just recently entered into fiscal decentralization.

The primary purpose of this EU funded project “Public Finance Management Support to Municipalities” is capacity building in the area of tax administration,

CASE

Strategic Action Plan for the Social and Health Services of the City of Järvenpää

CASE

Supporting Macedonian Municipalities in Public Finance Management

budget preparation, budget execution, accounting, internal audit and financial management & control, addressed to the target municipalities, aimed at assisting them in mastering the challenges brought by the second phase of the decentralization process.

The Project’s strategy for addressing these issues consists of a capacity building methodology based on extensive on-the-job training and learning-by-doing, complemented by workshops tailored to the specific needs of the target group in order to achieve sustainability. All activities are conducted close to the beneficiaries.

FCG’s consultants also participated in this project with the key task of meeting and discussing with key employees of the municipality in working meetings and other such events in order to survey and summarise their expertise and opinions and, consequently, define the joint strategic goals and actions. At the same time, they generated comparison data to support decision-making. It was particularly important to define actions for balancing the economy of the City’s social and health services and to have people commit to these actions.

FCG’s products of standardisation in the field of healthcare, such as the RAVA index, were also utilised in the project. FCG also consulted in the compilation of strategic action plans by other sectors of the City of Järvenpää,

and the materials created in these processes are currently being used in a significant role in the preparation of the revamped Järvenpää City Strategy.

FCG is also currently functioning as a consultant in the Board work development process in Järvenpää. The City Board is the political leader, and thus the nerve centre, of the municipality, and efficient board work is a key prerequisite for municipal development. The development project aims at drawing up rules of good City Board work in cooperation with the City Board members and the municipal management board.

Efficient Board work and its connection to strategic leadership have been chosen as areas of active development in many municipalities. FCG has functioned as a strategic consultant for municipalities in several municipal reform projects related to developing municipal management and administration and reorganising service structures and processes.

The cost-efficient provision of social and healthcare services is a key development area in many municipalities. Social and healthcare services take up more than one-half of municipalities’ budgets. Last year, the City of Järvenpää implemented a project, whose main goal was to compile a strategic action plan on developing social and healthcare services and lowering their costs.

FCG’s competence includes nearly all planning and consulting activities

related to infrastructure, the environment and community planning.

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CommunitiesInfra, the Environment and

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CASE

Turku’s Wastewater Treatment PlantThe wastewater treatment plant quarried into solid rock in Kakolanmäki in Turku and the Kaarina transfer sewer were completed last year. In the future, this plant will treat the waste water of about 280,000 residents. 95% per cent of the phosphorus and organic material, 90% of solid material, and 70% of nitrogen will be removed from the water before it is discharged into the Baltic Sea. The waste water is treated in a process that involves units handling physical, chemical, and biological processing.

FCG won the design competition to build the wastewater treatment plant in 2003. The main criteria, besides the price, were the competence of staff and references on similar projects. The project was completed on schedule and on budget, which was a strong indication of FCG’s competence as a designer and developer.

The construction of the Kakolanmäki wastewater treatment plant was exceptional as the plant was quarried underground in the middle of the town. The quarrying and blasting called for a high level of precision and professional

skill, as did the removal of the blasted material. The site is close to a densely populated area and a school with 750 pupils.

Press conferences were held during the construction phase and residents of nearby areas were informed of the progress of the project. Through the well-handled public relations, it was also possible to manage criticism of the project and acute needs for information. Once the new wastewater treatment plant quarried into rock is taken into use, the area used by the old wastewater treatment plant will be freed up for other uses.

Out-of-the-ordinary solutions have been implemented in the structure and processes of the Kakolanmäki wastewater treatment plan. Based on the information obtained from rock engineering measurements carried out during the building work, the processing pools had to be quarried down to an unusual depth: the depth of water in the pools is 15 metres. A separate bypass water processing unit ensures that waste water arriving at the plant can be

FCG’s competence includes nearly all planning and consulting activities related to

infrastructure, the environment and community planning. In individual planning projects, it is often possible to utilise the competence of various divisions and group companies. In Finland, FCG is market leaders in many technical sectors. FCG has

implemented development projects in over 150 countries around the world.

Architecture and Regional Development

FCG is the leading actor in land use planning in Finland, with a market share of 40% according to the invoicing statistics of the Finnish Association of Consulting Firms (SKOL). This sector provides services

for comprehensive planning of the built environment, such as landscape planning. In addition, FCG provides consulting know-how for interactive project development and architecture.

FCG has won interesting orders through project development. One example is a development project in the centre of Iisalmi, in which the services of the area are developed in cooperation with the property owners of the town and city centre.

processed to an adequate degree even during times of peak inflow. This part of the plant is still under construction while the main process has already started.

The mass of rock surrounding the wastewater treatment plant’s processing areas ensures that the temperature of the waste water being processed is stable, which is an advantage for the plant’s operations. The closed-off nature of the plant also helps to manage possible odour problems and provides the employees with a work environment that does not depend on weather conditions.

The Kakolanmäki wastewater treatment plant is one of the largest projects designed by FCG. In addition to the design, FCG was responsible for choosing the contractors for the plant project and for development and control tasks. During the construction of the plant, the town of Raisio also decided to use the Kakolanmäki plant, and the work of connecting waste water from Raisio and preparing for its treatment will continue this year. FCG will also draw up the plans related to these functions.

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FCG is the market leader in

Finland in the field of water

maintenance and research,

with a market share of 38%.

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Geotechnical Engineering and Construction Technology

The Geotechnology and Structural Engineering sector provides services in the following industries: Geotechnology and measurement technology, building technology, structural technology, foundation engineering planning and rock planning. The work of the sector has included building site planning tasks related to building technology, repair and construction work and community development, such as sewage treatment, power plants and gas lines.

The sector’s competence also covers planning sites that are more demanding than normal, for example the Stockmann department store project to be built in the centre of St. Petersburg in Russia. FCG provides energy efficiency calculations as a new service to its clients.

Assignments in 2008 included, for example, the planning of a gas pipeline for Gasum between Riihimäki and Tammela and the measurements and ground surveys of the natural gas line related to the same project. The sector also participated in national road projects. The geotechnology and measurement technology division has also invested to increase operations in Russia.

Traffic Planning and Infrastructure

In 2008, the operations of the Traffic Planning and Infrastructure sector primarily involved the provision of services related to the planning, study and water-system measurement of roads, streets and ports, and consulting related to the procurements and projects. In 2008, one of the sector’s most important projects was the Ring Road 1 STU1 project, in which FCG has been responsible for structural planning and traffic planning during construction. Assignments have also been carried out for the Finnish Rail Administration, the cities of Helsinki and Kerava and the Finnish Road Administration.

Water and Wastewater Engineering & Research

According to SKOL’s invoicing statistics, FCG is the market leader in Finland in the field of water maintenance and research, with a market share of 38%. This area of FCG’s competence is divided into the following areas: Network and general planning, plant and automation design and processes and research. The sector has annual contracts for water maintenance planning with several

towns. FCG has also provided its know-how in network and general planning to various towns as part of the annual contract offers in street and area technology.

The sector has worked on a range of plans, at various stages, related to water maintenance and sewerage around Finland. The planning of the construction of the Raisio-Turku transfer sewer has started, which is the largest line planning project in Finland. Mergers between municipalities resulted in many planning needs in water maintenance. The design of plants and automation in water maintenance continued at a brisk pace. Tightening permit conditions will maintain demand for the planning of renovations of sewage treatment plants in the future.

FCG’s laboratory operations continued to be active. In 2008, the total number of samples of the accredited environmental laboratory was about 6,700 (from 200 different customers).

Water sector projects lasting several years, funded by the Asian Development Bank, the foreign ministries of Finland and Sweden and the EU, were implemented in Vietnam, Nepal, Pakistan, Romania, Kenya, Mozambique, China and Tanzania.

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In 2008 FCG International started three new projects in Honduras. Together with our German partner GFA we started the EU-funded “Programme to Support Decentralisation, PROADES”. The project supports central and local authorities of the country to strengthen their capacities in order to implement the new decentralisation process.

FCG International has worked in the environment sector in Honduras since 1991 and last year started two

Nepal – draped along the greatest heights of the Himalayas – is one of the poorest countries in the world. With difficult geographical conditions and a complicated political situation, project work in the country is quite a challenge. Despite the difficulties FCG, with its 20 year experience in Nepal, has achieved successful results in its (currently four) projects in the country.

An FCG-led team carried out a project preparation technical assistance (PPTA) assignment in 2008 for the Asian Development Bank for ‘Preparing the Improved Water Quality, Sanitation and Service Delivery in Emerging Towns Sector Development Program in Nepal’. This multi-level project exercise included both urban water sector policy development as well as planning of a sector project for improving water supply and sanitation situation in emerging small towns in Nepal. The objective was to prepare a sector programme and a sector project

new projects in natural resources management.

The EU-funded programme “Strengthening of Local Management of Natural Resources in the Watersheds of Patuca and Choluteca Rivers” (FORCUENCAS) has four sub-projects, two of which are implemented by FCG. Sub-project 3 is working in the regions of Francisco Morazán and Gracias a Dios, and sub-project 2 in the region of Danli. Both projects promote initiatives

which will be financed with an ADB loan in the near future.

At policy level the most concrete output of the assignment was the third draft of the National Urban Water Supply and Sanitation Sector Policy for Nepal. At the project level a plan was prepared to cover water supply, sanitation and wastewater services in about 20 small towns. Detailed planning with thorough engineering, land use, environmental and socio-economic studies were carried out for three pilot towns.

SEAM-N is a project supported by the Finnish government and aims to improve environmental administration and management in the Eastern Development Region of Nepal. During the first 6 years the project concentrated on developing environmental management and administration in the Biratnagar-Dharan industrial corridor. The Governments of Nepal and Finland agreed in 2008 to continue the

at the level of local communities to enhance the productive activities through sustainable management of natural resources. They also promote projects to provide services of drinking water, sewerage and irrigation to communities as well as projects for protection of the watersheds. In addition, the local governments at municipal level are strengthened in their land-use planning, land administration and control capacities.

Project for three additional years with geographical expansion to an additional seven districts in the same development region. FCG as a lead consultant will continue to provide technical assistance for the project, together with the Finnish Environment Institute.

SEAM-N will continue developing working methods for the local level environmental administration and monitoring, which will serve as a model for the whole country. It will also go on with finding regional solid waste management solutions and industrial environmental improvements. As new features, adoption of spatial planning and air quality issues will be integrated in the project.

The other ongoing projects of FCG in Nepal are the Rural Village Water Resources Management Project and the Support to Multilingual Education, both supported by the Ministry for Foreign Affairs of Finland.

CASE

Environmental Consulting in Honduras

CASE

On the Top of the World

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Environmental Consulting

Environmental consulting is a field that combines all of FCG’s business groups.

In Finland, this field is divided between consulting on contaminated areas and waste disposal, and environmental studies. There is demand for FCG’s know-how on environmental consulting and water maintenance in new EU countries in particular. Environmental consulting is a key part of the work of FCG’s Bulgarian unit, for example.

In Finland, operations in the environmental consulting sector included studies of contaminated areas, rehabilitation planning, risk assessment, control of rehabilitation and reporting. The number of environmental technical property assessments increased. In waste disposal, the focus was on the general planning and studies of waste treatment sites. The main clients in this field have been municipal sewage treatment plants. In environmental studies, in addition to environmental impact assessments (EIAs), FCG carried out various studies related to groundwater, the extraction of soil resources and noise.

Projects related to energy conservation and climate change were also started in 2008. FCG bought a stake in Cleen Oy, the strategic expertise cluster in energy and the environment, which will enable FCG

to participate in product development projects in the sector.

International projects in the environmental sector included the protection of natural resources and coastal areas, surveying of forest resources, and development of administrative structures in the environmental sector. These projects were implemented in Honduras, Romania, the Solomon islands and in the Caribbean islands region.

Construction Management and Maintenance

FCG provides construction and maintenance services to support its technical sector planning and consultancy activities. FCG has been responsible for the building development and control of many different kinds of very large scale building development projects. The group has competence in procurement and tendering to support the projects of clients.

During 2008, the largest projects in this sector included the artificial groundwater project for Turun Seudun Vesi, which encompassed a 100 km transfer line from the untreated water intake facility to a water container quarried into rock.

Energy and Climate Services

At the beginning of 2009, Energy and Climate Services was separated

from the environmental consulting operations as its own business unit. This business unit concentrates on providing tools for increasing energy efficiency and clean forms of energy, and the planning and implementation of decentralised energy production and increased energy self-sufficiency. Energy and climate issues are key factors in the planning of accommodation, transport and land use, for example.

Economic Development

In Finland, FCG has participated in numerous development projects in tourism and services, in which one of the key perspectives has been the development of economic development. In its international consulting projects, FCG is also specialised in small and medium sized enterprise development, rural development and agriculture. In 2008, the development of the economy and public sector of Vietnam’s Thua Thien Huen Province continued; the project has been funded by Finland’s Ministry for Foreign Affairs since 1999. The preconditions for the operation of agricultural companies were developed in Pakistan, while in a project implemented in Honduras, the target was increasing the diversity of economic structures of the Lempa River area. In Argentina, the focus was on SME development in the forest sector.

Environmental consulting

is a field that combines all

of FCG’s business groups.

CASE

FCG did the Research for the New Sea Route in Oulu

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The sea route currently leading to the Port of Oulu has a draught of 9 m. The port is located in the delta area of the Oulujoki river, and streams of water carry sediment to the bottom of the deep-water channel. Furthermore, the propeller streams of boats using the route also detach material from the route sides. This route is currently being dredged back to its original draught of 10 metres.

FCG carried out the research

Since July 2008 FCG International has implemented the National Forest Demarcation and Bio-Physical Resource Inventory project in St Lucia (EC, 2008-2009), a tropical island in Caribbean. The project conducts a comprehensive biophysical inventory/assessment of the status of the forest ecosystem, biodiversity (species richness and diversity) and all existing vegetation types at the watershed, range, and national level, and prepares a management system of forest resources (including a forest resource

needed for the new sea route construction planning for the Port of Oulu. The new route would have a draught of 13 metres. The route will be needed for the increasing transportation of iron ore from the mines of northern Finland, which requires sufficient draught.

The Port of Oulu and the Finnish Maritime Administration sought a completely new line for the route on the north side of the current route.

monitoring system). In addition to the vegetation inventory, the assessment also includes an inventory of mammals, snakes and insects.

The work includes a GIS and remote sensing component. The collection of data will serve as the basis for strategic sustainable planning and management of forest resources. The project will advise on the most optimal measures for the sustainable management of forest resources, and recommend relevant silvicultural and utilization prescriptions for planning

In order to precisely determine the route location, some measurements had to be carried out. FCG’s research measures covered an area of approximately 16 square kilometres, with a length of 42 kilometres and a width of 250–600 metres. The sea bottom depth was surveyed using high-frequency scanning, and bottom quality was examined using a seismic reflection survey.

and management of forest resources. The project will produce spatial and statistical data for estimating the nature, magnitude and geographical scope in relation to timber and non timber forest products (NTFP) yield and volume, biodiversity and carbon storage. An important component is a training programme to develop the capacity of a cadre of persons in forests resource assessment and inventory method and forests management system using scientific and modern technology.

CASE

National Forest Demarcation Project in Saint Lucia

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FCG is the market leader in public administration training and consulting. In

Finland, FCG has been named the best training and consulting company two years running in an extensive survey by the magazine Talouselämä. In Estonia, FCG’s subsidiary has been named the best training company and is Estonia’s market leader in private sector training. FCG aims to maintain its status as market leader in Estonia during the economic recession.

FCG offers a very wide range of training services. In Finland, the training is divided between public courses and tailor-made training to meet the needs of the client. In international training, the target

group includes clients in public administration and corporate clients. As in FCG’s international consulting, the aim of the group’s training operations is also to increase the share of private sector clients.

In Finland, FCG organised about 730 training events which attracted over 33,000 participants. About 600 open training events were held, and about 130 client-specific training events were ordered.

Part of FCG’s training events are so-called large forums, which gather decision-makers in public administration once a year to discuss contemporary issues and network with each other. The municipal sector economic and financing forum is the most visible of these forums, and attracted about 500 participants in

February 2008.With 400 participants, the secretary

and customer service staff training forum attracted almost as many people. Computer-assisted online training increased. A total of 31 courses on the Web were held during the year, on various subject matters.

FCG’s Swedish subsidiary is specialised in the training of public sector experts arriving from developing countries. The participants in these training events come from 20–30 countries in Africa, Latin America, Asia and Europe. The training addresses environmental management, democratic administration and human rights issues.

In 2008, the main themes of international consulting related to development of education sector were teacher training, development of

Trainingand Education Sector Development

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CASE

Palestinian–Finnish Education Programme Continues

CASE

Developing Inclusive Education in Kosovo

The Palestinian–Finnish Education Programme, PALFEP III, is the third phase of the cooperation between the Palestinian Authority and the Government of Finland.

“When assessing the impact of the cooperation, which started already in 1997, we have all the reasons and evidence to say, that PALFEP has been a pioneer programme in the education sector in Palestine. During more than 10 years of implementation it has been addressing the major aspects of the development of quality education and it has been and is an important framework for the Ministry of

FCG International Ltd has just completed nine years working in special/inclusive education support in Kosovo. The last phase of the ‘Finnish Support to the Education Sector in Kosovo’ (FSDEK II) financed by the Ministry for Foreign Affairs of Finland ended in December 2008.

Inclusive education is a developmental approach to the learning needs of especially those with visual or hearing impairments or development delays. The project aimed to make the inclusive education philosophy central to all professional development programmes within the

vocational and university education and information management. We are implementing long term education projects in Palestine, Cyprus, Sudan, Kyrgyzstan, Romania, Tanzania, Nepal, Kosovo and Montenegro.

Training in Social Welfare Services and Health Care

During 2008, FCG’s social welfare services and health care unit provided training services for municipal

organisations such as health centres, hospitals and social services units as well as for private sector actors such as pharmacies, insurance companies and companies providing ambulance services. A total of about 6,000 experts in social welfare services and health care participated in these approximately 200 training events.

The special characteristics of the social welfare service and health care training services provided by FCG – significant at a national level – include

the application of international social welfare and health care classification models, and a training programme lasting nearly two years leading to an interdisciplinary university diploma in social welfare services and health care management, which has been started in Finland and is being implemented in cooperation with various universities. This kind of programme is currently under way in the Vaasa area and will be launched in Savonlinna in the autumn of 2009.

education sector in Kosovo and to bring all children with special needs under the school system.

This project, which was implemented in co-operation with the University of Jyväskylä, has successfully achieved its objective to promote inclusion with the range of beneficiaries, including: the Ministry of Education, Science and Technology (MEST), the students and teachers at the Faculty of Education (University of Pristina), the teachers, directors and administrators of schools, as well as other educational professionals; and of course the children with special needs, along

with their parents. In addition to teacher training and direct activities with schools, parents and children, the project supported the doctorate and master study programmes of university students who specialised in special/inclusive education. The project also started a resource centre reform in the country (turning former special schools – one for learners with visual impairments, one dealing with development delays and one for those with hearing impairments – into resource centres) and conducted a wide awareness raising campaign involving the national TV and radio.

Education and Higher Education”, says Mr. Basri Saleh, the Assistant Deputy Minister from the Ministry of Education and Higher Education of the Palestinian Authority in January 2009.

The current phase of the programme aims at improving the quality of education through Human Resource Development. It is focused e.g. on capacity building of educational administrators and managers, assessment and evaluation, inclusive education, and pedagogical use of ICT.

Year 2008 was so far the most active in the PALFEP programme implementation. In component one,

the support to the development of the National Institute of Educational Training (NIET) continued. Component two, Assessment and evaluation, focused on improving the capacities of the Ministry in assessment and evaluation, including Inclusive education and TVET. In addition national achievement tests were developed and implemented and the curriculum evaluation was started.

In component 3, Development of Planning and Aid Coordination, the work was closely linked to the preparation of the new Education Sector Strategic Plan for Palestine. The new 5 Year Plan for 2008–2012 was launched in summer 2008.

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The number of FCG’s personnel continued to increase in 2008. In Finland and abroad, the group

employed an average of 859 people (816 in 2007). Of these, a total of 774 people were employed on average by FCG companies operating in Finland while an average of 85 people were employed by foreign subsidiaries.

During 2008, the personnel of FCG Group took part in a discussion about values, on the basis of which new values were defined for the group: responsibility, openness and reform.

As part of the discussion about values, a new slogan was chosen for FCG: “FCG – Working for wellbeing.” The new slogan describes not only FCG’s services, the objective of which is to support a safe and good life, but also the group’s expertise and employees. According to the annual

work community questionnaire, FCG’s staff is well motivated and committed to their tasks.

FCG’s recruitment process was developed and a recruitment application was launched on the group’s website, to which all job applications are directed.

At FCG, the continual development of competence is a key way of implementing strategy. The first management programme tailored for FCG was launched and a total of 21 employees participated in it as students. During 2008, a training day for managers was held again, which dealt with personnel management, as well as two info days addressed to all the group’s new employees. Employees were also offered training in matters related to quality, project operations and contract law. At the end of the year, FCG chose a language training partner to deliver training in 2009.

PERSONNEL

Workingfor

A teleconferencing system was launched during 2008, which allows meetings to be held between different offices and, for example, allows briefings held at FCG headquarters to be broadcast to other offices. The launch of the teleconferencing system also supports FCG’s networked way of operating and reduces travel between offices. The system is also used in international communication, thus avoiding unnecessary carbon emissions.

FCG cooperates with several colleges and the group’s experts are regular lecturers at several colleges and universities. FCG also participated in several recruitment fairs during 2008. Some of FCG’s divisions continue to have a shortage of competent and experienced designers and experts.

Well-being

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Number of personnelNumber of personnel, average 859Employed by domestic companies * 774Employed by international companies 85

*) The figure includes persons working on international projects

Structure of FCG’s domestic personnel 31 Dec 2008Domestic personnel 533Women 249Men 284Percentage of personnel who are women 47%Average age of personnel 42 years

Educational breakdown of domestic personnelResearcher education 3%Higher university degree 33%Lower university degree 5%Lowest level of tertiary education 14%Secondary education 41%Primary education 5%Total 533 people 100%

NUMBER OF PERSONNEL, AVERAGE

Employed by domestic companies

Employed by international companies

STRUCTURE OF FCG’S DOMESTIC PERSONNEL

Women 47%Men 53%

EDUCATIONAL BREAKDOWN OF DOMESTIC PERSONNEL

Researcher education

Higher university degree

Lower university degree

Lowest level of tertiary education

Secondary education

Primary education

Key Figures

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STATEMENT OF INCOME (EUR 1,000) Group Group 1 Jan.–31 Dec. 1 Jan.–31 Dec. 2008 2007NET TURNOVER 79,448 73,193Other operating income 153 492Raw materials and services Raw materials and consumables Purchases during the financial year 1,266 1 257 Variation in stocks 15 1 External services 18,615 18,923Staff expenses Wages and salaries 27,295 24,881 Social security expenses Pension expenses 4,029 3,470 Other social security expenses 1,808 1,507Depreciation and reduction in value Depreciation according to plan 1,577 1,772Other operating charges 22,074 18,844OPERATING PROFIT 2,922 3,031

Financial income and expenses Result on non-consolidated participations -10 -2 Income from other investments held as non-current assets 0,6 34 Other interest and financial income 509 791 Reduction in value of investments held as non-current assets 374 Interest and other financial expenses 204 289PROFIT BEFORE APPROPRIATIONS AND TAXES 3,218 3,190Income taxes 824 1 383PROFIT FOR THE FINANCIAL YEAR 2,394 1,807Minority Interest 8 45GROUP PROFIT FOR THE FINANCIAL YEAR 2,386 1,761

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BALANCE SHEET (EUR 1,000) Group Group 1 Jan.–31 Dec. 1 Jan.–31 Dec. Assets 2008 2007 NON-CURRENT ASSETS Intangible assets Group Goodwill 2,280 3,115 Goodwill 248 402 Other capitalised long-term expenses 1,077 1,094Tangible assets Land and waters 97 97 Buildings 234 252 Machinery and equipment 2,351 2,433Investments Participating interests 58 69 Other shares and similar rights of ownership 1,174 1,220 Other receivables 8 517NON-CURRENT ASSETS TOTAL 7,527 9,199 CURRENT ASSETS Stocks Raw materials and consumables 2 20Debtors Loan receivables 11 17 Trade debtors 16 775 17,713 Amounts owed by group undertakings 75 173 Amounts owed by participating interest undertakings 1 Loan receivables 6 6 Other debtors 1,553 1,093 Prepaymants and accrued income 4,578 6,210Investments Other investments 1 Cash in hand and at banks 11,892 7,916CURRENT ASSETS TOTAL 34,893 33,147Assets total 42,420 42,346 Liabilities 31 Dec. 2008 31 Dec. 2007CAPITAL AND RESERVES Subscribed capital 19,679 19,679 Retained earnings 3,084 2,647 Profit for the financial year 2,386 1,761 25,148 24,087 MINORITY SHARE 100 59NEGATIVE GOODWILL 83 829PROVISIONS Other provisions 32 39CREDITORS Deferred tax liability 245 243Long-term Loans from credit institutions 2Short-term Advances received 5,199 5,227 Trade creditors 2,178 2,909 Amounts owed to group undertakings 237 227 Other creditors 2,752 2,782 Accruals and deferred income 6,446 5,943Creditors Total 17,057 17,333Liabilities Total 42,420 42,346

In 2008 the Board of Directors of FCG Group consisted of (front row, from left) Marketta Kokkonen, Risto Parjanne (Chairman of the Board) and Ilkka Hyvärinen. Standing in the back row, Pentti Kotiranta (left), Jorma Kielenniva, Timo Kietäväinen and Eero Piipponen.

20

The consolidated financial statements have been prepared using the acquisition cost method. Intra-group transactions, internal receivables and debt and internal distribution of profit have been eliminated. Affiliated companies are consolidated using the equity method. The share of the affiliated company’s result for the period in accordance with the group’s ownership stake is presented in the financial items.

Receivables and debt denominated in foreign currencies have been converted into euros at the exchange rate on the reporting date. The income statements of foreign group companies have been converted at the average exchange rate of the accounting period and balance sheets have been converted into euros at the rate on the reporting date, and the exchange rate difference is contained in the profit for the accounting period.

The translation difference resulting from the elimination of the group’s internal ownership is presented under retained earnings for previous years.

Income derived from goods and serviced produced requiring a long term projects is recognised as income according to the degree of completion. Projects requiring a long manufacturing period are considered to include projects with an estimated invoice value of at least EUR 35,000 and the manufacturing period of which is forecast to be at least three months or which lasts beyond the turn of the year. The degree of completion of long-term projects is determined according to the proportion of realised

person-work costs as a fraction of the estimated total person-work costs.

Shorter-term projects, shorter than the above, are entered as income continuously according to the invoicing and care has been exercised in the accrual in the accounting period.

The consolidated financial statements comprising FCG Finnish Consulting Group Oy and its subsidiaries are included in the Suomen Kuntaliitto ry Group, the parent company of which is Suomen Kuntaliitto ry (The Association of Finnish Local and Regional Authorities), registered office Helsinki.

Planned depreciation is calculated using the group’s common principles as depreciation items of equal sizes from the original procurement prices according to the useful economic life of the fixed assets.

The planned depreciation periods are:Buildings 20 yearsMachinery contained in buildings,measurement and research equipmentand laboratory equipment 7 yearsOffice furniture 7 yearsVehicles 4 yearsComputers 3 yearsSoftware 5 yearsGoodwill 5 yearsGroup goodwill 5 yearsOther long-term expenses 5 years

The Scope and Principles of the Consolidated Financial Statements

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Outlook

The group’s turnover in 2009 is expected to be at the same level as in 2008. No material changes are expected in operational profitability. The group’s order book in planning and consulting operations is at a normal level.

Research and Product Development

The group’s consulting and planning business is customer-oriented and designed to meet the special needs of the customer so the products are service products. A corresponding service product principle also applies to the provision of open training.

The group invested about EUR 1.4 million in development projects in 2008, which is the same amount as in 2007. Part of the development work was carried out as cooperation projects with companies that are not part of the group.

Risks and Factors of Uncertainty

The group strives to eliminate possible financial risks through reliable reporting and by following common group operating principles.

The difficulty of passing on increases in the personnel costs of a labour-intensive organisation to prices poses a risk to the profitability of operations. The challenge of the organisation of experts is to replace resources that retire with new competent resources.

If the market situation deteriorates materially, operations will be adjusted accordingly. The economic recession is expected to have an impact on operations, especially in 2010.

Financial Position and Result

The group’s turnover in 2008 was EUR 79.4 million. The group’s operating profit in 2008 was EUR 2.9 million. Self-sufficiency and liquidity remained good.

Key figures of Business Operations and the Financial Position and Result

FCG Finnish Consulting Group OyGroupThe financial position and result are described by the following key figures (€m):

2008 2007Turnover 79.5 73.2Operating profit 2.9 3.0Operating profit as a percentage of turnover 3.7 4.1Return on equity, % 9.7 7.4Equity ratio, % 67.8 65.1

Personnel

FCG Finnish Consulting Group OyGroupThe key figures related to personnel are as follows: 2008 2007Average number of personnel 859 816Total salaries and fees, €m 27,3 24,9In 2008, the domestic companies employed an average of 774 people and the foreign subsidiaries employed an average of 85 people.

Impact on the Environment

The group’s operations have only a slight impact on the environment due to the nature of the services it provides. This impact has been minimised through the sorting and recycling of paper and other waste and energy saving measures. The amount of travel has been reduced by the use of teleconferences.

We are also committed in our operations into taking environmental perspectives into account in the services we provide to our clients.

Annual Report

22

Number of the Company’s Shares

The company’s equity capital is divided as follows: 2008 2007shares (one vote per share) 19 679 000 kpl 19 679 000 kpl All the shares have the same right to a dividend and the company’s funds. The company’s shares have a redemption right which concerns all acquisitions.

Foreign Branches

The group has a branch in Kyrgyzstan.

Treasury Shares

The parent company holds 100 (0% of the share capital) of the company’s own shares.

The Management group of FCG Group. Standing in the back row, from left; Markku Oksanen (President, FCG International Ltd), Matti Ojala (CEO, FCG Planeko Oy), Harri Koponen (CFO, FCG Finnish Consulting Group Oy), Ari Kolehmainen (CEO, FCG Efeko Ltd). In the front, Paul Paukku (left), President and CEO of FCG Finnish Consulting Group Oy from 1.2.2009 and retiring CEO Seppo Mäki. Since March 2009, Eeva Kokki, Director, Communications & HRD, FCG Finnish Consulting Group Oy, is also a member of the Management group

23

Organisation 31 December 2008FC

G FI

NN

ISH

CON

SULT

ING

GROU

P OY

FIN

LAN

D

FCG Efeko Oy, Finland

FCG International Ltd, Finland

FCG Planeko Oy,Finland

FCG MentorIT Oy, Finland

FCG Itä-Suomen Aikuisinstituutti Oy, Finland

FCG Rapro Oy, Finland

JP Development Ltd, New Zealand

POVVIK OOS OOD, Bulgaria

SIPU International AB, Sweden

Finnish Consulting Group Ukraine LCC, Ukraine

Oy FEG – Forest and Environment Group Ltd, Finland

Invicta A/S, Estonia

Finnish Consulting Group srl, Romania

Projektkeskus OÜ, Estonia

OOO ManNet Partners, Russia

Anzdec Ltd

Agrico Ltd

Groome Poyry Ltd

LI (2006) Ltd

Ariko AS, Estonia

100%

100%

100%

100%

100%

59,9%

100%

100%

89%

90%

37%

90%

95%

27%

10%

100%

100%

89%

Board of Directors of FCG Finnish Consulting Group OyRisto Parjanne, Chairman of the Board of DirectorsJorma KielennivaTimo KietäväinenMarketta KokkonenEero PiipponenIlkka HyvärinenToivo Vainiotalo, until 7 April 2008Pentti Kotiranta, starting from 8 April 2008

Managing Director, CEOSeppo Mäki was the company’s Managing Director and CEO during the 2008 accounting period.

FCG Group’s Management TeamSeppo Mäki, M.Sc. Techn (Managing Director and CEO of FCG Finnish Consulting Group Oy)Ari Kolehmainen, Master of Administrative Sciences (Managing Director of FCG Efeko Oy)Markku Oksanen, Doctor of Technology (President of FCG International Ltd)Matti Ojala, M.Sc. Techn (Managing Director of FCG Planeko Oy)Harri Koponen, M.Sc. Econ (Director of Finance and Administration of FCG Finnish Consulting Group Oy)

AuditorThe company’s auditor during the accounting period was PricewaterhouseCoopers Oy, Authorised Public Accounting Company, and the responsible auditor was Pekka Kaasalainen, Authorised Public Accountant.

Proposal of the Board of Directors on Measures Concerning Profit

The parent company’s funds eligible for profit distribution were EUR 2,097,818.81, of which the profit for the accounting period was EUR 646,063.53.

The Board of Directors proposes to the Annual General Meeting that the funds eligible for profit distribution be used as follows:EUR 0.06 per share is distributed as dividends, a total of EUR 1,180,740.00left in equity EUR 917,078.81

EUR 2,097,818.81

Signatures

Helsinki, March 9, 2009

Board of Directors

Risto ParjanneChairman of the Board

Ilkka Hyvärinen Jorma Kielenniva Timo Kietäväinen

Marketta Kokkonen Pentti Kotiranta Eero Piipponen

CEO

Paul Paukku

Statement

The financial statements have been drawn up in accordance with current regulationsand are equal to accounting records, official income statements and balance sheets

Helsinki, March 13, 2009

PricewaterhouseCoopers OyAuthorized Public Accountants

Pekka KaasalainenAPA

24

FCG GROUP’S INTERNATIONAL OPERATIONSFCG has project experience in over 150 countries in Europe, the NIS, Asia, Africa and Latin America. The Group has a wide network of companies around the world: in addition to the headquarters is Finland there are subsidiaries in Sweden, Estonia, Russia, Romania, Bulgaria and New Zealand.

• Subsidiary / Local representation• Project reference

FCG – Working for well-being

FCG Finnish Consulting Group OyOsmontie 34, P.O.Box 950 FIN-00601 Helsinki, FinlandTel. +358 10 4090 Fax. +358 10 409 5001www.fcg.fi