SOLON S.P.A. Zweigniederlassung Deutschland

Berlin

Befreiender Jahresabschluss gem. §325 a HGB
zum Geschäftsjahr vom 01.01.2017 bis zum 31.12.2017

SOLON S.P.A.

Carmignano di Brenta/Italien

Tax Code No. 04039610284 - VAT No. 04039610284

CARMIGNANO DI BRENTA, PADOVA

R.E.A. [Economic and Administrative Index] No. 356827

PADOVA Companies Register No. 04039610284

Share Capital EUR 3,899,177.00 fully paid up

FINANCIAL STATEMENTS AS AT 31 DECEMBER 2017

The amounts herein are expressed in Euro

FINANCIAL STATEMENTS AS AT 31/12/2017

Amounts expressed in Euro

STATEMENT OF ASSETS AND LIABILITIES	31/12/2017	31/12/2016
A DUE FROM SHAREHOLDERS FOR CAPITAL NOT PAID IN
a) Uncalled subscribed capital
b) Called capital and not paid
B
B.I INTANGIBLE ASSETS
1) Incorporation and subsequent expenses	-	-
2) Research and development costs and advertising expenses	-	-
Research and development costs and advertising expenses	261.596	261.596
Research and development costs and advertising expenses accumulated amortization	(261.596)	(261.596)
3) Industrial patent and intellectual property rights	-	-
4) Licences, trademarks and similar rights	0	7.289
Licences, trademarks and similar rights	528.618	528.618
Licences, trademarks and similar rights accumulated amortization	(528.618)	(521.329)
5) Goodwill	-	-
6) Intangibles in progress and payments on accounts	-	-
7) Other intangible assets	0	0
Total Intangible Assets (B.I)	0	7.289
B.II TANGIBLE ASSETS
1) Land and buildings	716.761	819.308
Land and buildings	716.761	819.308
	-	-
2) Plant and machinery	851.844	935.006
Plant and machinery	2.856.933	2.868.433
Plant and machinery accumulated depreciation	(2.005.089)	(1.933.427)
3) Production and commercial equipment	-	9.435
Production and commercial equipment	90.866	90.866
Production and commercial equipment accumulated depreciation	(90.866)	(81.430)
4) Other tangible assets	-	38.814
Other tangible assets	1.277.358	1.373.619
Other tangible assets accumulated depreciation	(1.277.358)	(1.334.805)
5) Tangibles in course of construction and payments on account	-	-
Total Tangible Assets (B.II)	1.568.605	1.802.563
B.III FINANCIAL ASSETS
1) Investments:
a) subsidiaries	581.750	581.750
b) affiliated companies	-	90.000
c) parent companies	-	-
d) other companies	-	110.678
Total Investments (B.III. 1)	581.750	782.428
2) Receivables:
a) subsidiaries	9.060.523	11.290.982
b) affiliated companies	280.000	1.151.376
c) parent companies	-	-
d) other companies	576.098	576.075
3) Other securities	-	-
4) Own shares	-	-
Total Financial Assets (B.III)	10.498.371	13.800.862
Total Fixed Assets (B)	12.066.977	15.610.714
C CURRENT ASSETS
C.I INVENTORIES
1) Raw materials and consumables	-	2.204
2) Work-in-progress and semi-finished goods	-	-
3) Contract work-in-progress	-	-
4) Finished goods and goods for resale	-	77.054
5) Advances	-	20.000
Total Inventories (C.I)	-	99.258
C.II RECEIVABLES
1) Trade receivables	3.003.608	3.650.215
2) Subsidiaries	1.352.720	2.954.955
3) Affiliated companies	-	44.100
4) Parent company	3.122.709	3.122.709
5) Companies subject to control by the parent companies	3.574.442	3.649.057
5)bis Tax receivables	1.036.466	1.003.722
5)ter Deferred tax	-	-
5) quater Other receivables	174.785	69.867
Total Receivables(C.II)	12.264.731	14.494.625
C.III FINANCIAL ASSETS NOT REPRESENTING FIXED ASSETS
1) Investments in subsidiaries	6.392.993	6.421.857
2) Investments in affiliated companies	90.000	-
3) Investments in parent company	-	-
3- Investments in companies subject to control by the parent
bis) companies
4) Other investments	30.699	-
5) Own shares	-	-
6) Other securities	234.781	-
Total Financial Assets not representing Fixed Assets (C.III)	6.748.473	6.421.857
C.IV CASH AT BANK AND ON HAND
1) Bank and post office deposits	270.158	61.672
2) Checks	-	-
3) Cash and valuables on hand	4.047	758
Total Cash at Bank and On Hand (C.IV)	274.205	62.430
Total Current Assets (C)	19.287.409	21.078.169
D PREPAID EXPENSES AND ACCRUED INCOME
1) Prepaid Expenses	-	-
2) Accrued income	26.380	562.471
3) Discount on loans	-	-
Total Prepaid Expenses and Accrued Income (D)	26.380	562.471
TOTAL ASSETS	31.380.766	37.251.355

Balance sheet Liabilities

A SHAREHOLDERS' EQUITY
I. Share capital	3.899.177	3.899.177
II. Share premium reserve	-	-
III. Revaluation reserves	-	-
a) Revaluation reserves Law No. 413/91	-	-
IV. Legal reserve	-	-
V. Statutory reserves	-	-
VI. Reserve for own shares	-	-
VII. Other reserves	1.154.620	1.154.620
a) Extraordinary reserve	-	-
b) Covering losses reserve	1.154.620	1.154.620
c) Capital contribution reserve	-	-
d) Reserve	-	-
e) Reserve	-	-
f) Reserve	-	-
g) Reserve	-	-
h) Reserve	-	-
i) Reserve	-	-
VIII. Retained earnings (losses)	(15.307.249)	0
IX. Net income (loss)	(11.944.259)	(15.307.249)
Total Shareholder's Equity (A)	(22.197.711)	(10.253.452)
B RESERVES FOR RISKS AND CHARGES:
1) Reserves for severance indemnities and similar	8.248	8.248
a) Indemnities reserve for termination of commercial collaboration	-	-
b) Supplementary clientele allowance	8.248	8.248
2) Tax and deferred tax	190.000	330.000
3) Other provision for risks and charges	18.388.747	12.571.717
4) Others	-	-
Total Reserves for Risks and Charges (B)	18.586.996	12.909.965
C RESERVE FOR STATUTORY SEVERANCE FUND (ALSO KNOWN AS "TFR")	71.277	70.087
D PAYABLES
1) Bonds	-	-
2) Convertible bonds	-	-
3) Shareholders loans	-	-
- within 12 months	-	-
- longer than 12 months	-	-
4) Banks loans:	14.891.058	14.521.817
- within 12 months	14.891.058	14.521.817
- longer than 12 months	-	-
5) Other financers	-	-
6) Down payments	1.230.901	1.261.619
7) Suppliers	6.924.588	8.351.494
8) Payables represented by negotiable instruments	-	-
9) Subsidiaries	1.253.463	1.465.702
10) Affiliated companies	-	-
11) Parent company	7.700.746	7.685.723
- within 12 months	170.555	170.555
- longer than 12 months	7.530.191	7.515.168
11-bis) Payables to companies subject to control by the parent companies	506.299	506.299
12) Taxes	399.987	480.020
13) Social security institutions	31.136	40.196
14) Other	1.982.027	112.716
Total Payables (D)	34.920.205	34.425.585
E. ACCRUED EXPENSES AND DEFERRED INCOME
1) Premiums on loans issued	-	-
2) Accrued Expenses	-	23
3) Deferred Income	-	99.147
Total Accrued Expenses and Deferred Income (E)	-	99.170
TOTAL LIABILITIES	31.380.766	37.251.355

MEMORANDUM ACCOUNTS

TOTAL MEMORANDUM ACCOUNTS
a) a) Our guarantees to third parties	-	971.750
b) b) Our guarantees to third parties	-	-
c) b) Our guarantees to subsidiaries	3.134.969	3.134.969
Commitments:
a) a) Purchase	-	-
b) a) Lease payments	9.268.645	9.820.426
Operating Leases
a) Bonds collateral
b) Work-in-progress third parties
c) Leased	14.132.198	14.132.198
Total Memorandum Accounts	26.535.812	28.059.342

PROFIT AND LOSS	31/12/2017	31/12/2016
A A. VALUE OF PRODUCTION:
1) Revenues from the sale of goods and services	626.725	764.063
2) Change in work-in-progress, semi-finished goods and finished goods	(77.054)	-
3) Change in contract work-in-progress	-	-
4) Increase in fixed assets for internal work	-	-
5) Other revenues and income	6.140.005	3.455.208
a) Ancillary management	-	-
b) Others income	-	-
c) Grants for current expenses	-	-
d) Reimbursement	-	-
e) Capital gains on sale of property and equipment	-	-
f) .....	-	-
Total Value of Production (A)	6.689.675	4.219.271
B) PRODUCTION COSTS:
6) Raw materials and consumables	116	24.790
Total (B.6)	116	24.790
7) For services	1.414.725	1.648.133
a) Service costs	-	-
b) Purchasing services	-	-
c) Industrial services	-	-
d) General services	-	-
Sum (B.7)	1.414.725	1.648.133
8) Expenses relating to the use of third party assets
a) Rents	11.217	23.543
b) Lease	668.828	670.396
c) Others	-	-
Sum (B.8)	680.044	693.939
9) Personnel
a) salaries and wages	384.177	696.130
b) social contributions	107.429	245.095
c) employee termination indemnities	26.728	47.108
d) severance and similar charges	-	13.740
e) other	13.578	23.300
Sum (B.9)	531.911	1.025.374
10) Depreciation and write-downs
a) Amortization	106.010	122.772
b) Depreciation	120.942	186.094
c) Intangible and tangible assets devaluation	93.089	-
d) Receivables included in current assets devaluation	2.653.237	1.734.305
Sum (B.10)	2.973.278	2.043.171
11) Change in inventory of raw material, ancillary, consumables materials and goods	2.204	901.570
12) Provisions for risks	140.000	-
13) Other provisions	5.840.000	3.280.000
14) Other operating expenses	527.772	1.750.805
Total costs of production (B)	12.110.051	11.367.781
Difference between value and cost of production (A-B)	(5.420.375)	(7.148.510)
C FINANCIAL REVENUES AND EXPENSES
15) Income from investments:
a) dividends from subsidiaries	189.050	194.852
b) dividends from affiliated companies	26.896	18.865
c) dividends from other companies	-	-
Sum (C.15)	215.946	213.717
16) Other financial revenues:
a) from receivables entered as fixed asset
- to subsidiaries and affiliated companies	505.997	536.283
- to parent companies	-	-
- to other companies	-	-
b) from investments entered as fixed assets	- -	- -
c) from securities entered as current asset other than fixed assets	-	-
d) other incomes other than the above	-	-
- from subsidiaries and affiliated companies	-	-
- from parent companies	-	-
- other income	28.732	38.285
Sum (C.16)	534.729	574.567
17) Interest and other financial expenses
a) to subsidiaries and affiliated companies	-	-
b) to parent companies	-	-
c) to other companies	-	-
d) interest expense and other financial expense	(485.196)	(600.178)
Sum (C.17)	(485.196)	(600.178)
17)bis Profit and losses on exchange	-	(1)
Total financial revenues and expenses (C15+C16-C17)	265.479	188.105
D ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS
18) Revaluation:	-	-
a) of investments	1.437.396	29.979
b) of financial fixed assets other than investments	-	-
c) of securities entered as current asset other than fixed assets	-	-
Total revaluations (D.18)	1.437.396	29.979
19) Devaluations
a) of investments	-	(253.637)
b) of financial fixed assets other than investments	(8.493.367)	(8.448.787)
c) of securities entered as current asset other than fixed assets	-	-
Total devaluations (D.19)	(8.493.367)	(8.702.424)
Total adjustments to the value of financial assets (D)	(7.055.972)	(8.672.445)
Result before taxes	(12.210.868)	(15.632.849)
20) (Income taxes)	266.609	325.600
Deferred tax assets	-	-
(Deferred tax liabilities)	-	-
21) Profit (loss) for the year	(11.944.259)	(15.307.249)

MANAGEMENT REPORT

Dear Shareholders,

The financial statements closed on 31 December 2017 which we submit for your attention, consisting of the Balance Sheet, Income Statement and Notes to the Financial Statements, have been drawn up in Euro, in compliance with the provisions of the Italian Civil Code and national accounting standards (OIC).

The losses for the financial year amounted to EUR 11,944,259, following write-downs and depreciation of EUR 226,952 and write-downs and provisions for EUR 17,219,633 in compliance with the principle of prudence imposed by law; for technical comments on the financial statements, please see the Notes to the Financial Statements, which we consider adequate in that respect.

During financial year 2017 the company continued to focus its activities on dealing with issues pertaining to debt restructuring and measures of internal reorganisation. In consideration of the foregoing we shall dispense with an analysis of the global macroeconomic context which have not had any direct and/or significant impact on the events which characterised the financial year under analysis.

With the intention of accompanying this report with indispensable elements for understanding performance and dynamics during the financial year ended on 31 December 2017, we recalled that already in 2015 the Company had not been able to fully fulfil the obligations set forth in the agreement Law signed between the Company and Banks during 2012 pursuant to Article 67 of the Italian Bankruptcy, Law in particular in the first quarter of 2015, where there was a breach of covenant of a binding financial obligation.

In order to remedy that covenant breach, in the first half year of 2015 the Company, assisted by its financial and legal advisors, commenced drafting of a new business plan based on two guidelines:

A)	Downsizing of operational activities
B)	Financial measures to deal with the indebtedness.

As regards the downsizing of operational activities, the business plan provided for:

A.1) disposal of three business units (BU) through:

•	discontinuance of operations of the Bus Components and Systems (completed in 2016)
•	sale to Manni Energy S.r.l. of the assets connected to the BU Services (completed in September 2015 by means of lease of a going concern with undertaking to sell, which then resulted in the definitive sale of the BU in February 2017)

A.2) sale of part of the corporate shareholdings (also formalized in September 2015 and which resulted in the sale of the shareholdings of four companies belonging to Manni Group S.p.A. in April 2018, a transaction that will be discussed further below).

A.3) maintenance of the activities related to the Utilities BU only (management of the holdings of owned photovoltaic parks, hereinafter "Special Purpose Vehicles" or "SPVs").

A.4) discontinuance of operations in the German market implemented through the Solon S.p.A. branch office and the affiliated company Solon Operations GmbH (measures taken, respectively, in 2016 and 2017).

In relation to the financial measures, on the other hand, the business plan provided for:

B.1) full repayment of the debts due to suppliers and the signing of a new agreement with the banks pursuant to Article 67(3)(d) of the Italian Bankruptcy Law, which would govern:

•

repayment of the debt exposure towards the banks within a time span of 7 years in addition to a moratorium of 12 months from signing of the agreement;

•

early withdrawal from the lease agreement with Mediocredito Italiano S.p.A. (formerly Leasint S.p.A.) in view of the simultaneous sale of the property to third parties, with the consequent assumption by Solon S.p.A. of the difference between the sale price and the discounting the instalments of the lease about to expire, repayment of the latter amount together with the debts to the banks within the time span of 7 years in addition to a 12-month moratorium.

With the aim of making the chain of events occurring in the financial year 2017 more intelligible - which led the company to file a request for the opening of an arrangement with creditors in July 2017, with a reserve pursuant to Article 160 and 161 of the Italian Bankruptcy Law - we consider it essential to review what happened in 2016, by summarizing it in a concise manner. For further details regarding the last financial year, please refer to the report of the financial statements closed on 31 December 2016.

As mentioned, in 2015 (when the covenant breach was identified) the company had already, with the aid of legal and financial consultants, prepared a draft business plan on which a renewal of the pre-existing agreement pursuant to Article 67 of the Italian Bankruptcy Law, and in the summer of 2015 promptly started negotiations with the lenders also mandating the Vicenza firm Omassi-Girardello to certify the business plan that was drafted. In November 2016, the lending institutions and the leasing company, albeit informally, replied to our draft business plan proposal, exhorting the company to pursue an attempt to liquidate a larger part of the assets (compared to what is referred above sub A.1-A.4), with the intention of shortening the duration of the proposed seven-year repayment plan for the debt.

In order to meet the requirements of the lenders, in December 2016 the company therefore started further negotiations with the Manni Group (which, as recalled, had already shown interest in taking over the company's assets), with a view to the sale of a greater number of shareholdings to those contractually agreed in September 2015. This negotiation ended positively in February 2017, with the signing by Manni Energy S.r.l. of a letter of intent for the possible purchase of the shares of an additional 5 SPVs. This letter of intent then resulted, at the end of the related due diligence, in a binding proposal by Manni Energy S.r.l. for the purchase of the shares in three (compared to the initial 5) SPVs for a price of EUR 5.5 million.

Adding this amount to that resulting from the promise of sale signed in the agreement with Manni Energy in September 2015, the Company could have had more than EUR 10.5 million of cash in hand to use for full repayment of the debts to suppliers, as well as partial repayment of the debts to the lenders, using in part future cash flows generated by the Utilities BU, that is, by the activities of management of the portfolio of the equity investments (SPVs) for repayment of the residual indebtedness towards the lenders.

However, already during the first quarter of 2017, initial indications emerged of events which would constrain the company to change the parameters of the recovery on the basis of a desired agreement pursuant to Article 67 of the Italian Bankruptcy Law, which at the date was still in negotiation with the banks, but for which the certifier of the plan had already expressed a positive opinion as to the relevant certification.

We summarise below the most relevant of the above-mentioned events, referring the reader to the content of the Notes to the Financial Statements for more in-depth coverage of the individual events:

1.	Sistema Solare S.r.l.: following an inspection by Gestore dei Servizi Energetici (ESM) [the Italian electricity services market operator] of the systems owned by the company Sistema Solare S.r.l., in which Solon S.p.A. holds a shareholding of 51%, the ESM informed the parties responsible for the agreement pursuant to the Feed-in Tariff (the municipalities of Tolve and San Chirico) of suspension of the agreement for payment of incentivised tariffs. Following this decision, already in the financial statements closed on 31.12.2016 provisions for a write-down of receivables and write-down of equity investments were recognized for an amount of EUR 3.5 million, a value which, in addition to the impact on the financial statements, has obviously had a negative impact on provisional cash flows which in the recovery plan were destined for repayment of the existing debt.
2.	Eolo Costruzioni S.r.l. (company whose assets are subject to confiscation as a company connected to activities linked to organized crime): Solon S.p.A. has accounts receivable for supplies due from the company Eolo Costruzioni S.r.l. amounting to EUR 3,205,138 (plus VAT at 10%), in respect of which a prudent provision was made as at 31 December 2015 for EUR 2,105,138. A turn of events initially caused us to believe that there was a real possibility of recovery of at least a part of the accounts receivable. However, at present, recent judgments of the Court of Trapani relating to criminal law aspects involved in the anti-mafia rules and of the Venice Court of Cassation which is hearing the civil law litigation thereon, led us to allocate the entire amount of the receivable to the full extent of the write-down. Incidentally, the adverse opinion we received in March 2018 from the European Commission to which we turned to report a violation of E.U. rights, confirms the need to maintain the provision for write-downs.
3.	Energy Italia 01 S.r.l.: shareholder of 49% of the company Sistema Solare S.r.l., referred to subparagraph 1 of this section. Solon S.p.A. has accounts receivables totalling EUR 501,575.51 from Energy Italia 01 S.r.l. During 2016 an agreement was reached in general terms based on which Energy Italia 01 S.r.l., offsetting its existing debt towards Solon S.p.A., would assign accounts receivable claimed from the common subsidiary Sistema Solare S.r.l. Due to events involving Sistema Solare it has not yet been possible to formalise that agreement. From an analysis made it appears that our creditor does not have the means to deal with its commitments, for which, already in the financial statements as at 31.12.2016, a provision was made of an amount equal to the creditor position to the receivables write-down reserve.
4.	Potential enforcement of product guarantees for backsheet defects: in the first few months of 2017 there were a series of requests for the enforcement of product guarantees products with the notice of replacement of photovoltaic modules for manifest defects on the back cover of the modules (backsheet). Initially we believed that the risk of exposure due to enforcement of the product guarantees for defective backsheets could be limited to a part of the 2011 production batch because requests for replacement were connected to that year of production. However, in 2017 it would become evident that the product degradation also affected the 2009 and 2010 productions, although we are not yet able (even with the intervention of accredited engineering institutes) to establish the causes of such degradation, nor to identify the timeframe of manifestation of said defect.

Due to the effects on prospective cash flows of that which is set forth above, the debt restructuring plan pursuant to Article 67 Italian Bankruptcy Law was promptly amended. The new draft was submitted to the banks in April 2017. The reduction in prospective cash flows compared to initial forecasts led the company to propose to the lenders a full and final settlement, with a payment of the 53% of indebtedness at the time of signing of the agreement.

In an initial informal response, the banks requested supplementation of the proposal with a cash-sweep agreement with validity for 4-5 years from signing of the agreement, declaring that they were willing to take into consideration a settlement but only on expiry of the cash-sweep agreement in question.

However, the company was not able to comply with that request and therefore, giving detailed reasons why a cashsweep was not negotiable, submitted to the bank a slightly better offer in relation to repayment of the balance, insofar as the parent company Solon International LL FZE in the meantime declared that it could consider a contribution of EUR 500,000 of new funding in the event of approval by the banks.

The latter proposal was submitted to the banks on 22 June 2017.

In the meantime, from the processing of the data for the draft 2016 financial statements it emerged that due to provisions for risks and write-downs of items posted to assets within the series of events indicated above and performed in compliance with principles of prudence, the losses attributable to financial year 2016 gave rise to negative equity.

At the meeting of the Board of Directors of 19 June 2017 the measures to be taken pursuant to Article 2447 of the Italian Civil Code were discussed and in the next meeting on 4 July 2017 it was decided that an ordinary general meeting of the shareholders for 27 July 2017 would be convened for approval of the financial statements for 2016 and an extraordinary general meeting to pass the resolutions pursuant to Article 2447 of the Italian Civil Code.

In the meantime, informal and off-the-record negotiations with the individual banks continued, performed also with the assistance of our financial advisor, leading us to believe that conditions for arriving at an agreement were definitely taking shape in line with our proposal of 22 June 2017 were finally materializing. In addition, in the meantime, Manni Energy S.r.l.'s offer for the purchase of the three additional SPVs resulted in a sale contract that was subject to the condition precedent of entering an agreement with the lenders, so that all the conditions seemed to exist at the time for:

•	a settlement of the capital deficit thanks to the capital gains deriving from the prospect of a debt write-off to banks;
•	complying with existing commitments to banks and suppliers thanks to the contribution of financial resources guaranteed by the transaction with Manni Energy S.r.l.

However, unexpectedly on 14 July 2017 the management of the company Interporto Solare S.r.l. let us know informally that Interporto Solare and the company Raggio di Puglia S.r.l. were preparing an action for enforcement of the product guarantee due to problems connected to the backsheets for a volume of modules of overall power of around 9 MWp.

As these modules were both manufactured prior to 2011, there was the urgent need to commence all the necessary checks on the risk of potential product defects, in order to estimate the potential impact of the problem.

It was decided to submit some modules that showed the defect to an expert technical evaluation, both at a primary German analysis and measures laboratory specialized in photovoltaics, and at the Quality Control department at the Group's production site in Fujairah (UAE). While waiting to receive the results of the aforementioned evaluations - being that the preparation of the draft financial statements for 2016 were still in progress - and with the aim of taking into account the existence of an unknown factor, provisions were set aside for risk from the financial statements 2016 EUR 3,280,000, to fully cover the liabilities deriving from the potential risk of replacing the modules, linked to the enforcement of guarantees on products as at June 2017 if there was concrete evidence.

The aforementioned event and the related provision, in addition to increasing the loss for the year as at 31 December 2016 and consequently the equity deficit, due to the effects on the prospective cash flows related to the event, definitively terminated the prospect of agreement pursuant to Article 67 of the Italian Bankruptcy Law with the lenders.

In the absence of the possibility on the part of the Parent Company (which was also in a manifest situation of financial strain and lack of liquidity) to face the capital deficit, integrating the financial means necessary to honour outstanding debt, the only instrument available to the company was a composition with creditors pursuant to Article 161 et seq of the Italian Bankruptcy Law or the conclusion of a restructuring agreement to be approved pursuant to Article 182 bis of the Italian Bankruptcy Law, instruments that the Company's Administrative Body has utilized, submitting on 31 December 2017 an application for the opening of a pre-composition with creditors before the Court of Padua.

Below is a brief overview of the progress of the composition procedure from 31 December 2017 request for the opening of the pre-composition - which also refers to events occurring in 2018 - up to the most recent date, prior to the conclusion of the preparation of these financial statements.

On 30 November 2017, Solon S.p.A. filed the application for admission to the pre-composition with creditors pursuant to Italian Royal Decree Articles 160 and 161 16.03.1942 No. 267.

Following the request for additional information with respect to the proposal filed on 30 November 2017, with a ruling dated 9 February 2018 (filed with the Registry of the Court on 20.02.2018) the Court of Padua declared the pre-composition procedure against Solon S.p.A. to be open.

The proposed composition with creditors to be submitted to the creditors' approval at the time of the meeting (initially scheduled for 24 May 2018 and subsequently deferred to 23 October 2018 by decree of the Court) is structured as follows:

The preferred debt of the composition with creditors and the pre-deducted charges are equal to EUR 4.7 million.

The unsecured debt of the composition with creditors is EUR 40.7 million.

The assets of the composition with creditors are projected to be EUR 14.3 million.

The proposal to the creditors provides for:

The payment of 100% of the preferred debt of the composition and the pre-deducted charges;

The payment of 25.1% of the unsecured debt; of this amount the payment of 91% is provided for upon approval of the proposal, the remaining 9% will be scheduled by 31 December 2021.

We point out that in relation to the closing of the sale transaction of equity investments in Manni Group S.p.A., an updated composition plan was requested by the bodies of the composition procedure. This updated plan was filed on 7 May 2018 and, without prejudice to the guidelines of the proposed composition, brought the percentage of satisfaction of unsecured creditors from 25.1% to 27%.

In consideration of the deferment provided by the Court of the creditors' meeting, the Company decided to prepare a further update of the composition plan which, at the date of preparation of this report, is currently being certified. In relation to events that have occurred in the meantime, the percentage in the composition (as noted, it had initially increased from 25.2% to 27%) should be at a level slightly above 28%. In any case, we would like to point out that the percentage in the composition may be subject to changes in the methods and terms provided for by Italian Bankruptcy Law.

As already mentioned, the proposed composition for which Solon S.p.A. has been admitted to the composition procedure is a pre-composition with the company as a going concern. For further considerations, refer to the following paragraph in which we express our assessments regarding the business continuity.

Assessment on the Continuity of the Business

Even in analysing the assumption of business continuity on which the preparation of the present financial statements are based, we cannot avoid mentioning some key events, which we have discussed in greater detail in the reports accompanying the previous financial statements, to which we shall refer.

To remedy the situation of covenant breach, which occurred in the first half of 2015, the Company prepared a new business plan (the "Plan"), the feasibility of which was subject to the certification by an independent expert.

Based on this Plan, the company started negotiations with its own banks to arrive at a restructuring agreement pursuant to Article 67 of the Italian Bankruptcy Law.

The long negotiations with financial institutions that had not yet resulted in an agreement in June 2017 had obviously raised doubts about the company's ability to continue operating as a going concern, and the Board of Directors has obviously always taken due account of the foregoing.

However, in relation to the fact that:

•	the company had assets available to support a debt restructuring plan;
•	the Manni Group has declared itself a counterparty interested in taking over part of this asset, and had for this purpose already formalized this interest in 2015 with offers that, in relation to the succession of events, assumed characteristics of ever greater irrevocability, most recently also in the composition scenario pursuant to Article 161 of the Italian Bankruptcy Law;
•	the lenders, aware of the above, continued to demonstrate their willingness not to take enforcement action against the company and to consider the possibility of partial settlement of the debt;

the administrative body, including in the preparation of the financial statements as at 31 December 2016, expressed a positive opinion regarding the existence of business continuity conditions.

These assumptions, in light of what is known to the administrative body at the date of preparation of these financial statements, are even more strengthened being that:

•	The feasibility of the composition plan while operating as a going concern has been the subject of certification and the continuation of the company's activity has been certified as functional in order to attain the best satisfaction of the creditors;
•	The composition plan accompanying the proposal was admitted to the composition procedure through the relevant decree of the Court of Padua;
•	More than 90% of the cash payable to satisfy unsecured creditors - resulting, inter alia, from the successful conclusion of the sale of assets to Manni Group S.p.A. - is already available to creditors on a specific account under the name of the procedure;
•	The percentage in the composition proposed to unsecured creditors is above average and also provides for immediate payment of 91% upon approval.

The foregoing allows us to reasonably believe that - barring unforeseen contingencies the have not been identified - the proposed composition can be accepted by the creditors (we point out that the main unsecured creditor - representing 62 %% of the unsecured debt - is the Intesa Sanpaolo Group, which is being constantly updated on the positive developments of events and has not yet expressed reservations about what we have proposed).

In this desirable scenario, we therefore believe that approval of the proposed composition is likely to take place in the first few months of 2019.

In this situation of substantial cancellation of the previous debt, the Board of Directors believes that there are grounds for Solon S.p.A. to concentrate on asset management and advisory services as envisaged in the business plan for the period 2018-2021 and therefore takes the position of preparing the financial statements for the financial year ended 31 December 2017 on the basis of business continuity.

The Board of Directors in any event observes that said opinion is expressed on the basis of the information available and represents a good faith evaluation, conducted with diligence in a reasonable manner by a party who cannot be exempt from making forecasts about future, and therefore uncertain facts. That subjective option regarding the presumption of continuity of the business is obviously susceptible to contradiction by development of the facts.

Events of significance which took place during the financial year

February

•	Definitive sale of Energy Italia 04 S.r.l. to the MLandS Group following the waiver by the latter of the condition precedent of the closure of an agreement with the lenders pursuant to Article 67 of the Italian Bankruptcy Law.
•	Definitive sale to Manni Energy S.r.l. of the O & M company branch following the waiver by the latter of the condition precedent of the closure of an agreement with the lenders pursuant to Article 67 of the Italian Bankruptcy Law.
•	Revocation by the ESM of the incentive rates for the portion of the Sistema Solare S.r.l. plants included in the agreement with the Municipality of San Chirico di Lucania (Potenza).

March

•	Revocation by the ESM of the incentive rates for the portion of the Sistema Solare S.r.l. plants included in the agreement with the Municipality of Tolve (Potenza).
•	Binding offer by Manni Energy S.r.l. for the purchase of an additional 3 SPVs for a total price of EUR 5.5 million (net of the NFP and price adjustments to be carried out at the time of closing).

April

•	Presentation to the lenders of a draft agreement pursuant to Article 67 of the Italian Bankruptcy Law.

June

•	Meeting of the Board of Directors in which a first draft of the financial statements is discussed that shows negative equity and therefore the onset of problems governed by Article 2447 of the Italian Civil Code.
•	Presentation to the lenders of an improved draft agreement pursuant to Article 67 of the Italian Bankruptcy Law.

July

•	Meeting of the Board of Directors at which a decision was taken to convene an extraordinary meeting of the shareholders for 27 July 2017, in order to pass the resolution pursuant to Article 2447 of the Italian Civil Code.
•	Communication by the companies Interporto Solare S.r.l. and Raggio di Puglia S.r.l. of the intention to bring an action for enforcement of product guarantees for replacement of the modules with backsheet defects.
•	Meeting of the Board of Directors on 27 July 2017 in which, in relation to the unexpected risk deriving from the significant volume of the possible litigation proceedings related to Interporto Solare S.r.l. and Raggio di Puglia S.r.l., a decision was taken to apply for a precomposition procedure with reserve pursuant to Article 161 paragraph 6 of the Italian Bankruptcy Law.
•	Sale of the 6% interest held by Solon S.p.A. in Soleagri S.r.l. as part of a settlement agreement.
•	Notice of claim dated by Interporto Solare S.r.l. regarding the existence of degradation of the photovoltaic modules installed on the roofs of Interporto di Padova.

August

•	By ruling of 1 August 2017, the Court of Padua grants a 120-day time limit for submitting documentation pursuant to Articles 161 paragraphs 2 and 3 of the Italian Bankruptcy Law.
•	Notice dated 9 August 2017 from Raggio di Puglia S.r.l. on the presence of signs of deterioration of the photovoltaic modules installed on its plants.
•	Assignment to PI Photovoltaik Institut of Berlin of the task of analysing possible causes and timeframes of backsheet degradation in the Solon S.p.A. production modules.

November

•	Delivery by PI Photovoltaik Institut of Berlin of the expert opinion aimed at identifying the degradation of the backsheet. The expert opinion concludes without the unequivocal identification of the causes of the phenomenon of deterioration, nor the standard timeframes of the development of the phenomenon itself.
•	Signing of an initial contract for consulting and provision of asset management services with a duration of 36 months and effective starting from June 2018.
•	Filing of the application, on 30 November 2017 pursuant to Articles 160 and 161 Italian Royal Decree 16 March 1942 no. 627 with request for the opening of an pre-composition with creditors on a going concern basis.

December

•	Request, dated 21 December 2017, to clarify the composition plan by the Court of Padua, with granting of a 31 January 2018 deadline for the filing of clarifications.

Analysis of the Financial Situation

FINANCIAL SITUATION	31.12.2017	31.12.2016
Revenue from sales	626,725	764,063
Other revenue	6,140,005	3,455,208
Changes in inventories	(77,054)	-
Value of the Production	6,689,675	4,219,271
Consumption of raw materials, consumable materials and supplies	(2,320)	(926,359)
Other external operating costs	(2,622,541)	(4,092,877)
Personnel costs	(531,911)	(1,025,374)
EBITDA	3,532,903	(1,825,339)
Amortisation and depreciation	(226,952)	(308,866)
Provisions and write-downs	(8,726,326)	(5,014,305)
EBIT	(5,420,375)	(7,148,510)
Financial charges	(485,196)	(600,178)
Other financial revenues charges	(6,305,297)	(7,884,162)
EBT	(12,210,868)	(15,632,849)
Income tax	266,609	325,600
Net earnings	(11,944,259)	(15,307,249)

Revenues from sales and services during 2017, according to Italian accounting principles (OIC), result in a value of production value of EUR 6,689,675, a considerable increase with respect to the amount of preceding financial year of EUR 4,219,271. However, this net increase can be traced back to the release of provisions for a write-down of receivables linked to the conclusion of the operation for the sale of shares in companies owned by Gruppo Manni S.p.A.

Consumption of materials in the year 2017 reflects the reduction in operational activities and amounts to EUR 2,320 compared to EUR 926,359 in 2016.

External operative costs, connected principally to the purchase of services in 2017, were reduced by almost 50% compared to the previous year, reaching EUR 2,622,541.

A similar significant reduction in personnel costs, from EUR 1,025,374 to EUR 531,911, as a consequence of the staff reduction policy. For the above reasons, the trend reversal recorded in the Company's EBITDA during 2017 reflects the effect of the increase in the value of production and above all of the containment of costs. The results prior to financial management, extraordinary management and taxes (EBIT), although improved with respect to the preceding financial year, was still negative at EUR -5,420,375, after accounting for depreciation and amortization of EUR 226,952, as well as write-downs of fixed assets and receivables and provisions for risk for a total of EUR 8,726,326.

Earnings before taxes (EBT) is equal to EUR -12,210,868, and takes into account financial charges (mainly interest payments and bank charges) for EUR 485,196 as well as other financial charges for EUR 6,305,297. The latter item includes revaluations of investments in subsidiaries for EUR 1,437,396 as well as write-downs of financial receivables from subsidiaries for EUR 8,493,367.

Net of taxes amounting to EUR 266,609, the year closed with a loss of 11,944,259, improving the result in the financial statement by 22% over the previous year.

Analysis of the Balance Sheet

BALANCE SHEET	31.12.2017	31.12.2016
Warehouse	-	99,258
Customers	3,003,608	3,650,215
Suppliers	(6,924,588)		(8,351,494)
Other net working capital	2,931,417	6,177,295
Working Capital	(989,562)	1,575,273
Intangible non-current assets	0	7,289
Tangible non-current assets	1,568,605	1,802,563
Financial non-current assets	10,498,371	13,800,862
Fixed Capital	12,066,977	15,610,714
Reserves	(18,658,272)		(12,980,053)
Net Invested Capital	(7,580,858)	4,205,935
Shareholders' Equity	22,197,711	10,253,452
Net Financial Position	(14,616,853)		(14,459,387)
Shareholders' Equity + Financial indebtedness	7,580,858		(4,205,935)

As at 31 December 2017, the company's working capital turned negative by EUR 989,562 compared to the positive value of EUR 1,575,273 in the previous year.

Trade receivables reduced to around EUR 3,003,608 by virtue of activities of recovery of overdue payments, reductions in sales volumes and write-downs performed during adjustments and settlement. The reduction in payables to suppliers is almost entirely attributable to the reduction in exposure to the supplier ML & S GmbH & Co KG, with which a settlement agreement was entered into.

Fixed capital amounted to EUR 12,066,977 and was substantially affected by the reduction of the value of financial non-current assets, which went from EUR 13,800,862 in 2016 to EUR 10,498,371 as at 31 December 2017. For a specific examination of that variation see the specific section of the Notes to the Financial Statements in which details are provided of the changes which took place.

As at 31 December 2017, the Net Financial Position was EUR 14,616,853, substantially unchanged compared to the previous year. In terms of accounting for the loss for the year, the company shows a Negative Shareholders' Equity of EUR 22,197,711. When the company is involved in a pre-composition with creditors, the effects of Article 2447 of the Italian Civil Code shall be suspended.

Analysis of the Cash Flow Statement

	TOTAL 31/12/2017	TOTAL 31/12/2016
Profit (loss)	-11,944,258	- 15,307,249
Taxes	266,609	325,599
Interest income (expenses)	49,532	8,964
(dividends)	- 215,946	- 213,717
1) Profit (loss) before taxes, interest, dividends and capital gains	- 12,476,347	- 15,837,872
Provisions	7,242,618	3,350,000
Depreciation/Amortization of Assets	128,231	308,866
Permanent impairment of value	9,748,076	8,702,424
Other adjustments for increase (decrease) in non-monetary items	- 1,437,396	- 29,979
Total adjustments for non-monetary items that did not have a counterpart in the working capital	15,681,529	12,331,311
2) Cash flow before changes in working capital	3,202,182	- 3,506,561
Changes in taxable income	99,258	48,397
Changes in trade receivables	1,860,353	- 7,195,485
Changes in trade payables	- 1,654,841	3,798,889
Changes in accrued income and prepayments	536,091	73,545
Changes in accrued expenses and deferred income	- 99,170	96
Other changes in working capital	1,910,355	- 147,330
Total variation in working capital	2,652,047	- 3,421,888
3) Cash flow after the changes in working capital	5,857,229	- 6,928,449
Interest received (paid)	49,532	- 8,694
(Income taxes paid)	-	- 325,600
(Dividends collected)	215,946	213,717
(Use of reserves)	- 5,736,426	- 2,701,536
Total adjustments	- 5,470,947	- 2,170,913
CASH FLOW GENERATED (ABSORBED) BY OPERATIONS (A)	386,282	- 9,099,362
Tangible non-current assets
(Investments)	-	-
Disposals	19,927	15,651
Intangible non-current assets
(Investments)	-	- 98,721
Disposals	-
Financial non-current assets
(Investments)	- 1,142,040
Disposals	807,505	7,902,271
Other current financial assets
(Investments)	- 1,695,400
Disposals	1,466,260
CASH FLOW GENERATED (ABSORBED) BY INVESTMENT ACTIVITIES (B)	- 543,748	7,819,201
Changes in short-term bank payables	369,241	578,716
Opening of loans
Repayment of loans
Capital increase		-
CASH FLOW GENERATED BY FINANCING ACTIVITIES (C)	369,241	578,716
Changes in cash (A+-B +-C)	211,775	- 701,445
Cash or cash equivalents start of year	62,430	763,875
Cash end of year	274,205	62,430

While in the financial statements of past years, the focus was on the change in the net financial position (NFP) as a financial resource to study financial trends, the financial statements drawn up in the preparation of the financial statements as at 31 December 2017 focuses on the analysis of the trend of the changes in liquid assets, using the indirect method.

The cash flow statement illustrates, in particular, the financial trends of the three areas of activity (operating activities, investment activities, financing activities) starting from the financial result for the year.

As can be seen from a first reading of the document, the financial trend of the company in 2017 was strongly influenced by the combination of supplementation and adjustment of entries that took place during the year and during the preparation of the financial statements.

Below we shall examine the main components of the report:

CASH FLOW GENERATED (ABSORBED) BY OPERATIONS (A): the area in question generated a positive flow of EUR 386,282, the most significant changes are related to:

Adjustments for non-monetary items that had no counterpart in the working capital: the amount of EUR 15.6 million was affected by allocations for provisions for risks of EUR 7.2 million as well as to a considerable extent the writedowns of receivables from subsidiary companies, included in the item "write-downs for long-term impairment losses" for EUR 9.7 million.

Total variation in working capital: working capital decreased by EUR 2.6 million.

Total adjustments: this item includes EUR 5.7 million, such as for the use (or release) of funds in relation to writedowns related to the sale of shares in Manni Group S.p.A., a transaction described in detail in the Notes to the Financial Statements, which we consider to be exhaustive on this subject.

CASH FLOW GENERATED (ABSORBED) BY INVESTMENT ACTIVITIES (B): the area in question usually absorbs liquidity, in our case EUR 543,748; the financial flow in question is generated by:

Financial non-current assets-Investments: this relates to the reclassification from trade receivables to non-current receivables of the credit exposure to the subsidiary Energy Italia 03 S.r.l. for EUR 1.1 million.

Financial non-current assets-Disposals: this item includes the sale of the shareholding in Soleagri S.r.l. for EUR 79,000, collection of trade receivables for EUR 347,000 and reduction of receivables from subsidiary companies to cover losses.

Other current assets - Investments: this amount of EUR 1.6 million refers to the recognition in the assets of the surface rights granted to Solon S.p.A. by the Municipality of Chiarano, a transaction that is described in greater detail in the Notes to the Financial Statements, which we deem to be thorough on the subject.

Other current assets - Disposals: this relates to the sale of the shareholding held by Solon S.p.A. in Energy Italia 04 S.r.l. for EUR 1.4 million.

CASH FLOW GENERATED BY FINANCING ACTIVITIES (C): in the area at hand, in relation to the situation in which the Company is involved, no significant flows took place, except those related to the increase in debt to the lenders for expenses and interest of EUR 369,000.

The net balance of the cash flows generated in the three areas examined is EUR 211,775, which corresponds to the increase recorded in the liquid assets in the Balance Sheet for the period 1 January 2017 - 31 December 2017.

Performance of the markets in which the Company operates and future developments

In the context of the operational downsizing, the Company has ceased operations in most of the sectors in which it had operated in the past (production and sale of photovoltaic modules, construction and supply of turnkey photovoltaic plants, maintenance of photovoltaic systems on its own behalf and for third parties), while maintaining the administrative management activity of SPVs holding photovoltaic plants.

Over the last few years, the Italian photovoltaic market has been strongly affected by regulatory changes in the sector, which have provided - at least for professional and/or institutional investors - fewer advantages linked to the payment of incentive rates for new construction of medium-sized plants (a sector in which Solon has traditionally operated).

In addition, legislative and regulatory uncertainty has made it unattractive for new investors to enter a market that, despite being the subject of incessant proclamations in the political arena, has very poor prospects at the moment.

That said, one cannot however ignore that the photovoltaic sector in Italy - with over 19 GW in installed power - is currently in fourth position in the world. In this market we are witnessing a dynamic interest from investors in the so-called secondary sector (purchase of plants holding incentive rate agreements under the pre-existing Electric Power Exchange). We believe that Solon can carve out a space in this market, extending the offering of both sector advisory services and administration and asset management services to third parties; services that it currently provides to SPVs in which it has an ownership interest.

These service provision activities, together with the management of company shareholdings, are the basis of the expected business continuity, upon which agreed business plan is based.

Currency performance

During 2017, as the company operated solely in the Euro area and no foreign currency transactions were performed, we do not implement any analysis of currency market performance.

Relationships with subsidiaries, affiliates, parent companies and companies subject to the control of the latter

Solon S.p.A. forms part of an international group and in general terms has relationships of both a commercial and financial nature with the other companies of the group as well as with subsidiaries and affiliates.

During financial year 2017, the company did not generate purchase volumes of photovoltaic modules from Solon International LL FZE.

As provided by Article 2497-bis (4) of the Italian Civil Code, we have set out hereunder the consolidated financial data from the latest approved financial statements available in relation to the company which performs activities of direction and coordination, Solon International LL FZE; the values are expressed in AED currency (United Arab Emirates Dirham - Foreign exchange as at 31 December 2016 1 EUR = 0.2575 AED).

Assets	31.12.2016	31.12.2015
Non-current assets	AED	AED
Plant and machinery	413,415,192.00	426,623,492.00
Intangible assets	10,834,235.00	14,572,742.00
Equity investments	90,896,334.00	89,968,948.00
Total non-current assets	515,145,761.00	531,165,182.00
Current assets
Inventory	12,589.156.00	12.587.308.00
Trade receivables	91,330,242.00	88,582,900.00
Receivables from subsidiaries	52,733,451.00	63,904,603.00
Other financial assets	3,233,369.00	3,145,931.00
Ready cash and cash equivalents	439,859.00	1,812,370.00
Total Current Assets	160,326,077.00	170,033,112.00
Total Assets	675,471,838.00	701,198,294.00
Liabilities
Shareholders' Equity
Share capital	333,150	333,150
Share premium reserves	48,951,850	48,951,850
Statutory reserves	166,575	166,575
Profits brought forward	73,708,052	98,067,136
Total Capital	123,159,627	147,518,711
Capital contributions	91,501,088	91,501,088
Total Shareholders' Equity	214,660,715	239,019,799
Non-current Liabilities
Employee severance indemnity	2,044,774	2,504,942
Medium and long-term payables	167,154,174	151,642,703
Total Non-current Liabilities	169,198,948	154,147,645
Current liabilities
Trade payables	81,661,639	78,536,148
Payables to affiliated companies	4,905,332	21,202,163
Short-term payables	205,045,204	208,292,539
Total current liabilities	291,612,175	308,030,850
Total Liabilities	460,811,123	462,178,495

Solon International LL FZE	31.12.2016	31.12.2015
INCOME STATEMENT	AED	AED
Revenue	68,226,327	36,764,773
Cost of sales	(64,283,812)	(57,201,375)
Contribution Margin	3,942,515	(20,436,602)
Other revenues	19,090,443	4,910,320
Directors' salaries	(423,236)	(281,464)
General administrative and sales costs	(24,101,117)	(12,875,054)
EBIT	(1,491,395)	(28,682,800)
Financial charges	(22,867,689)	(20,175,316)
Earnings for the Financial Year	(24,359,084)	(48,858,116)

Number and nominal value both of own shares and shares or shareholdings in parent companies owned by the company, including through trust companies or intermediaries, with indication of the corresponding share capital percentage

Pursuant to Article 2428(3)(3) of the Italian Civil Code, it is specified that the company does not hold, even through trust companies or intermediaries, own shares or shares or shareholdings in the parent company.

Number and nominal value both of own shares and shares or shareholdings in parent companies acquired or disposed by the company, during the financial year, including through trust companies or intermediaries, with indication of the corresponding share capital percentage, the consideration and the reasons for acquisition or disposal.

Pursuant to Article 2428(3)(4) of the Italian Civil Code, it is specified that the company has not acquired or disposed during the financial year, even though trust companies or intermediaries, own shares or shares or shareholdings in parent companies.

Financial uncertainties and risks

In compliance with Article 2428(3)(6-bis) of the Italian Civil Code, we shall set out hereunder some information intended to formulate a more precise evaluation of the financial and equity position.

a) Currency risk: the Company does not make purchases of materials in foreign currency

b) Interest Rate Risk: the Company is exposed to interest rate risk associated to the short-term and medium-long-term financing; the cost of money in 2017, it remained constant with the 3-month Euribor at -0.33%, with a continuation of the downward trend in rates already noted in financial year 2016.

c) Price risk: relates principally to purchase of marketed products that are affected by market performance. Since the company does not perform direct marketing activities, the risk is largely non-existent.

d) Credit risk: since the commercial activity in the business units (components, O&M, systems) is substantially at a standstill, credit risk is limited to the portfolio of trade receivables in existence. However, for protection from possible insolvency of remaining customers, the company has made prudential provisions; the matter is discussed in the Notes to the Financial Statements, to which the reader is referred.

e) Liquidity risk: with the intent of resolving capital and financial imbalances, consequently keeping liquidity risk under control, in July 2017 the Company filed an application for the opening of a pre-composition with creditors. Solon S.p.A. was admitted to the composition procedure in February 2018. With regard to the content of the composition plan, we refer to what was previously stated in this report. We point out that the management of liquidity risk can be guaranteed only in the presence of a favourable concurrence of factors, the most relevant being:

I.	Favourable confirmation of a pre-composition with creditors which provides for a wiping out of the debt following the approval of the composition.
II.	Continuous capacity for repayment of the financing from shareholders and the payment of dividends by the subsidiary companies (SPVs)
III.	The development of the provisions of consultancy and asset management activities in favour of third parties.

Regarding the three factors set forth above, we would point out the following:

I.	As already mentioned above in the analysis of the business continuity assumptions upon which these financial statements were based, the Board of Directors believes that at the moment all the conditions have been properly met for the proposed composition to be accepted. However, if this does not happen and the proposed composition with the related write-off of debts to the unsecured creditors is not accepted by the creditors, the liquidity risk would manifest itself in full, with consequent probable insolvency of the company.
II.	Solon S.p.A.'s shareholdings in SPVs generate liquidity, above all, thanks to the collection of incentivised rates governed by the agreements signed by the SPVs with the Gestore dei Servizi Energetici (ESM), in respect of electricity put onto the grid, which is generated by the photovoltaic systems owned. Starting from the beginning of 2016 the ESM started up a massive inspection campaign on photovoltaic systems. ESM's inspection policy has proven to be particularly aggressive and aimed at the challenging of irregularities connected to formal, apparently irrelevant aspects. In this scenario it cannot be ruled out that the agreements between the SPVs and the ESM may be subject to rate reductions or revocation. This could involve a decrease or even an interruption of the liquidity flows generated by the SPVs, with evident repercussions on liquidity risk for Solon S.p.A.
III.	Obviously, in a scenario of a company operating in a composition procedure in the absence of an approval, it is not easy to attract clients willing to sign consultancy and/or asset management agreements. At the moment, however, we have been able to reach an agreement for a 36-month contract for the provision of asset management services and investment portfolio analysis consulting services in the photovoltaic sector. Should this contract be terminated before maturity and in the absence of a development of such activity, the liquidity risk would tend to increase, although it remains substantially manageable on the basis of the assumptions set out in the composition plan.

Information on environmental protection and workplace safety

There is no mandatory information to be reported in this respect.

Significant events which took place following the closure of the financial year and foreseeable developments

January 2018

•	Submission of additional information regarding the application filed on 30 November 2017.

February 2018

•	Order of the Court of Padua by which the Company was admitted to the pre-composition with creditors, with the meeting of the creditors set for 24 May 2018.

March 2018

•	Hearing before the Court of Padua for a ruling on the request pursuant to Article 169 bis of the Italian Bankruptcy Law of early dissolution of the real estate leasing contract between Solon S.p.A. and Mediocredito Italiano S.p.A.

April 2018

•	Authorization by the Court of Padua for early dissolution of the real estate lease contracts between Solon S.p.A and Mediocredito Italiano S.p.A.
•	Ruling of the Court of Padua which provides for the postponement of the date of the meeting of creditors from 24 May 2018 to 23 October 2018.
•	Signing of the contract for the sale of the shares held in the companies Gifa S.r.l., VS 1 S.r.l., Energia e Impresa S.r.l. and Fotosintesi 6 S.r.l. to Manni Group S.p.A. Proceeds from the sale price of is EUR 10.9 million is deposited on the account in the name of the composition procedure and remains immediately available to creditors in the event of approval, covering 100% of the financial exposure towards preferred creditors and approximately 90% of the agreement percentage proposed to unsecured creditors.
•	Deposit of supplement to the proposed composition in relation to the conclusion of the contract with Manni Group S.p.A. The percentage agreement for unsecured creditors goes from 25.1% to 27%.

May 2018

•	Return to Mediocredito Italiano of the buildings in which the Company had its headquarters and consequent transfer of its offices and headquarters to new premises, more suitable to the company's situation in size and cost.
•	Reception by Sinloc S.p.A. and Fondaco Sgr S.p.A. of an offer for the purchase of the 4% shareholding held by Solon S.p.A. in Interporto Solare S.r.l. The total price of the offer is EUR 700,000.00.
•	Preparation by the Company of a supplement to the proposed composition as a result of events that have occurred and in particular the postponement of the expected date for the meeting of creditors from 24 May 2018 to 23 October 2018. Without prejudice to the 100% share for the preferred and pre-deducted creditors, the percentage agreement for unsecured creditors rose from 25.1% to 27.0%.

June 2018

•	Delivery to Mr. Omassi the attester of the above-mentioned supplement to the proposed composition with request for the issuance of the supplement to the attestation already issued when the application was filed on 30 November 2017.

For comments on any developments of the company, please refer to what is stated in the section in which the assumptions of business continuity are analysed.

Company premises

Pursuant to Article 2428 of the Italian Civil Code, we wish to note that as at 31 December 2017 the business activities are performed on the following premises:

―	Carmignano di Brenta (Padua), Piazza del Popolo 11 (administrative headquarters, became the registered office in 2018)
―	Carmignano di Brenta (Padua), Viale dell'industria e dell'artigianato 6/8 (warehouse)

The buildings listed herein are held on the basis of lease or rental agreements.

Following the return to Mediocredito Italiano of the premises of Via dell'Industria e dell'Artigianato, starting from June 2018 the new administrative and legal headquarters of the company is: Piazza del Popolo 11, 35010 Carmignano di Brenta.

Proposal for resolution

Dear Shareholders,

We invite you to approve the financial statements for 2017 by calling your attention to the terms of Article 2447 of the Italian Civil Code relating to the loss for the financial year of EUR 11,944,259, which erodes the share capital bringing the net assets to a value of EUR - 22,197,712. As a result of the pending composition procedure with creditors, the recapitalization obligation referred to in the aforementioned law pursuant to Article 182-sexies (1) of the Italian Bankruptcy Law and, consequently, the provision pursuant to Article 2484, no. 4, of the Italian Civil Code is not applicable.

Carmignano di Brenta, 27.07.2018

The Board of Directors:

Kasi Viswanathan

Rolando Gennari

Notes to the Financial Statements

General Company Information

Company Data

Denomination:	SOLON SPA
Office:	PIAZZA DEL POPOLO 11 - 35010 CARMIGNANO DI BRENTA (PD)
Share capital:	3,899,177
Fully paid in share capital:	yes
Companies' Register Code:	PD
VAT No.:	04039610284
Tax No.:	04039610284
REA (Administrative Economic Index No).:	000000356827
Legal form:	SHARE COMPANY
Main sector of activity (ATECO):	432909
Company in liquidation:	no
Sole shareholder company:	yes
Company subject to other company's management and coordination activity:	yes
Name of the company or entity carrying out the management and coordination activity:	SOLON INTERNATIONAL LLFZE
Group membership:	yes
Name of the parent company of the group:	SOLON INTERNATIONA LL FZE
Country of the parent company:	FUIJAYRAH
Registration number with the cooperatives' register:

Balance sheet

Balance sheet	31-12-2017	31-12-2016
Assets
B) Non-current assets
I - Intangible non-current assets
4) concessions, licenses, trademarks and similar rights	0	7,289
Total intangible assets	0	7,289
II - Tangible non-current assets
1) land and buildings	716,761	819,308
2) plant and machinery	851,844	935,006
3) industrial and commercial equipment	0	9,435
4) other goods	0	38,814
Total tangible assets	1,568,605	1,802,563
III - Financial non-current assets
1) equity investments in
a) subsidiaries	581,750	581,750
b) affiliated companies	0	90,000
d-bis) other companies	0	110,678
Total equity investments in	581,750	782,428
2) accounts receivable
a) receivables due from subsidiaries
Payable after end of next financial year	9,060,523	11,290,982
Total receivables due from subsidiaries	9,060,523	11,290,982
b) receivables due from affiliated companies
payable after the end of next financial year	280,000	1,151,376
Total receivables due from affiliated companies	280,000	1,151,376
d-bis) due from others
payable after end of next financial year	576,098	576,075
Total receivable due from others	576,098	576,075
Total accounts receivable	9,916,621	13,018,433
Total financial non-current assets	10,498,371	13,800,861
Total non-current assets (B)	12,066,976	15,610,713
C) Current assets
I - Inventories
1) raw materials, subsidiary and consumables	0	2,204
4) finished products and goods	0	77,054
5) advances	0	20,000
Total inventories	0	99,258
Non-current assets destined for sale	234,781	0
II - Accounts receivable
1) due from customers
payable within the next financial year	3,003,608	3,650,215
Total customers	3,003,608	3,650,215
2) from subsidiaries
payable within the next financial year	1,352,720	2,954,955
Total subsidiaries	1,352,720	2,954,955
3) from affiliated companies
payable within the next financial year	0	44,100
Total affiliated companies	0	44,100
4) from parent companies
payable within the next financial year	3,122,709	3,122,709
Total parent companies	3,122,709	3,122,709
5) from companies subject to control by parent companies
payable within the next financial year	3,574,442	3,649,057
Total companies subject to control by parent companies	3,574,442	3,649,057
5-bis) tax credits
payable within the next financial year	1,036,466	1,003,722
Total tax credits	1,036,466	1,003,722
5-quater) from others
payable within the next financial year	174,785	69,867
Total from others	174,785	69,867
Total receivables	12,264,730	14,494,625
III - Financial assets (short term)
1) equity investments in subsidiaries	6,392,993	6,421,857
2) equity investments in affiliated companies	90,000	0
4) other equity investments	30,699	0
Total financial assets (short term)	6,513,692	6,421,857
IV - Cash in hand
1) bank and post office accounts	270,158	61,672
3) ready cash and cash equivalents	4,047	758
Total cash in hand	274,205	62,430
Total current assets (C)	19,287,408	21,078,170
D) Prepayments and accruals	26,380	562,471
Total balance sheet assets	31,380,764	37,251,354
Liabilities
A) Shareholders' equity
I - Capital	3,899,177	3,899,177
VI - Other reserves
Payments to cover losses	1,154,620	1,154,620
Various other reserves	(2)	(2)
Total other reserves	1,154,618	1,154,618
VIII - Profits (losses) brought forward	(15,307,249)	0
IX - Profit (loss) for the year	(11,944,259)	(15,307,249)
Total shareholders' equity	(22,197,713)	(10,253,454)
B) Reserves for risks and charges
1) provisions for pensions and similar obligations	8,248	8,248
2) for taxes, included deferred taxes	190,000	330,000
4) other reserves	18,388,747	12,571,717
Total reserves for risks and charges	18,586,995	12,909,965
C) Employee severance indemnities	71,277	70,087
D) Accounts payable
4) payables to banks
payable within the next financial year	14,891,058	14,521,817
Total payables to banks	14,891,058	14,521,817
6) advances
payable within the next financial year	1,230,901	1,261,619
Total advances	1,230,901	1,261,619
7) payables to suppliers
payable within the next financial year	6,924,588	8,351,494
Total payables to suppliers	6,924,588	8,351,494
9) due to subsidiaries
payable within the next financial year	1,250,241	1,462,480
payable after the next financial year	3,222	3,222
Total payables to subsidiaries	1,253,463	1,465,702
11) payables to parent companies
payable within the next financial year	7,530,191	7,515,168
payable after the next financial year	170,555	170,555
Total payables due to parent companies	7,700,746	7,685,723
11-bis) payables to companies subject to control by parent companies
payable within the next financial year	506,299	506,299
Total payables to companies subject to control by parent companies	506,299	506,299
12) tax payables
payable within the next financial year	399,987	480,020
Total tax payables	399,987	480,020
13) due to social security and welfare institutes
payable within the next financial year	31,136	40,196
Total payables due to social security and welfare institutes	31,136	40,196
14) other payables
payable within the next financial year	1,982,027	112,716
Total other payables	1,982,027	112,716
Total payables	34,920,205	34,425,586
E) Accruals and deferrals	0	99,170
Total liabilities	31,380,764	37,251,354

Income statement

	31-12-2017	31-12-2016
Income statement
A) Value of production
1) revenues from sales and services	626,725	764,063
2) variation in stocks of work in progress, semi-finished goods and finished goods	(77,054)	0
5) other revenues and income
other	6,140,005	3,455,208
Total other revenues and income	6,140,005	3,455,208
Total value of production	6,689,676	4,219,271
B) Costs of production
6) raw materials, subsidiary, consumables and supplies	116	24,790
7) services	1,414,725	1,648,133
8) rental and leasing	680,044	693,939
9) staff
a) wages and salaries	384,177	696,130
b) social security contributions	107,429	245,095
c) employee severance indemnity	26,728	47,108
d) pensions and similar obligations	0	13,740
e) other costs	13,578	23,300
Total costs for staff	531,912	1,025,373
10) amortization/depreciation and write downs
a) amortization of intangible assets	106,010	122,772
b) depreciation of tangible assets	120,942	186,094
c) other write-downs of non-current assets	93,089	0
d) write-downs of receivables (current assets) and cash in hand	2,653,237	1,734,305
Total amortizations/depreciations and write-downs	2,973,278	2,043,171
11) changes in inventories of raw materials, subsidiary, consumables and supplies	2,204	901,570
12) provisions for risks	140,000	0
13) other provisions	5,840,000	3,280,000
14) miscellaneous operating charges	527,772	1,750,805
Total costs of production	12,110,051	11,367,781
Difference between value and costs of production (A - B)	(5,420,375)	(7,148,510)
C) Financial income and expenses
15) income from equity investments in
subsidiaries	189,050	194,852
affiliated companies	26,896	18,865
Total income from equity investments	215,946	213,717
16) other financial income
a) from long term receivables
from subsidiaries	468,908	536,283
from affiliated companies	37,089	0
Total financial income from long term receivables	505,997	536,283
d) financial income other than the above
other	28,732	38,285
Total financial income other than the above	28,732	38,285
Total other financial income	534,729	574,568
17) interest and other financial charges
other	485,197	600,178
Total interest and other financial charges	485,197	600,178
17-bis) profits and losses on foreign exchange	0	(1)
Total financial income and charges (15 + 16 - 17 + - 17-bis)	265,478	188,106
D) Adjustments to the value of financial assets and liabilities
18) revaluations
a) of equity investments	1,437,396	29,979
Total revaluations	1,437,396	29,979
19) write-downs
a) of equity investments	0	253,637
b) of financial non-current assets not equity investments	8,493,367	8,448,787
Total write-downs	8,493,367	8,702,424
Total adjustments to the value of financial assets and liabilities (18 - 19)	(7,055,971)	(8,672,445)
Total earnings before taxes (A - B + - C + - D)	(12,210,868)	(15,632,849)
20) Income taxes for the year, current, deferred and advance
income (charges) from adherence to the tax integration scheme / taxation transparency regime	266,609	325,600
Total income taxes for the year, current, deferred and advance	(266,609)	(325,600)
21) Profit (loss) for the year	(11,944,259)	(15,307,249)

Cash flow statement, indirect method

	TOTAL 31/12/2017	TOTAL 31/12/2016
Profit (loss)	- 11,944,258	- 15,307,249
Taxes	266,609	325,599
Interest income (expenses)	49,532	8,964
(dividends)	- 215,946	- 213,717
1) Profit (loss) before taxes, interest, dividends and capital gains	-12,476,347	- 15,837,872
Provisions	7,242,618	3,350,000
Depreciation/Amortization of Assets	128,231	308,866
Permanent impairment of value	9,748,076	8,702,424
Other adjustments for increase (decrease) in nonmonetary items	- 1,437,396	- 29,979
Total adjustments for non-monetary items that did not have a counterpart in the working capital	15,681,529	12,331,311
2) Cash flow before changes in working capital	3,202,182	- 3,506,561
Changes in taxable income	99,258	48,397
Changes in trade receivables	1,860,353	- 7,195,485
Changes in trade payables	- 1,654,841	3,798,889
Changes in accrued income and prepayments	536,091	73,545
Changes in accrued expenses and deferred income	- 99,170	96
Other changes in working capital	1,910,355	- 147,330
Total variation in working capital	2,652,047	- 3,421,888
3) Cash flow after the changes in working capital	5,857,229	- 6,928,449
Interest received (paid)	49,532	- 8,694
(Income taxes paid)	-	- 325,600
(Dividends collected)	215,946	213,717
(Use of reserves)	- 5,736,426	- 2,701,536
Total adjustments	- 5,470,947	- 2,170,913
CASH FLOW GENERATED (ABSORBED) BY OPERATIONS (A)	386,282	- 9,099,362
Tangible non-current assets
(Investments)	-	-
Disposals	19,927	15,651
Intangible non-current assets
(Investments)	-	- 98,721
Disposals	-
Financial non-current assets
(Investments)	- 1,142,040
Disposals	807,505	7,902,271
Other current financial assets
(Investments)	- 1,695,400
Disposals	1,466,260
CASH FLOW GENERATED (ABSORBED) BY INVESTMENT ACTIVITIES (B)	- 543,748	7,819,201
Changes in short-term bank payables	369,241	578,716
Opening of loans
Repayment of loans
Capital increase		-
CASH FLOW GENERATED BY FINANCING ACTIVITIES (C)	369,241	578,716
Changes in cash (A+-B +-C)	211,775	- 701,445
Cash or cash equivalents start of year	62,430	763,875
Cash end of year	274,205	62,430

Notes to the Financial Statements, initial part

INTRODUCTION

Dear Shareholders,

These financial statements have been drawn up pursuant to the provisions of the Italian Civil Code and consist of the following documents:

1) Balance sheet;

2) Profit and loss account;

3) Notes to the Financial Statements;

4) Cash Flow statement

The financial statements for the year ending 31/12/2017 correspond to the accounting records that have been regularly held and have been prepared pursuant to Article 2423 et seq. of the Italian Civil Code.

The balance sheet has been prepared expressing figures in Euros. In particular, pursuant to Article 2423(5) of the Italian Civil Code:

- the balance sheet and the profit and loss account have been prepared expressing figures in Euros. The change from account balances, indicated in hundredths of Euros, to the budget balances indicated in units of Euros, was made by rounding up or down the amounts indicated therein pursuant to the provisions of the EU Regulation. The accounts have been balanced in the financial statements by posting, where necessary, the balances recorded in the balance sheet in a "Reserve for amounts in Euros rounded up or down" set out under item A) VII) "Other reserves", whereas the balances recorded in the profit and loss account have been posted among the other expenses;

- the data set out in the Notes to the Financial Statements have been indicated in units of Euros, insofar as they provide a better understanding of the document.

PRINCIPLES APPLIED IN DRAWING UP THE FINANCIAL STATEMENTS

In drafting these financial statements, the general clause on putting together the single items (Article 2423 of the Italian Civil Code), the principles to be applied in drafting them (Article 2423-bis of the Italian Civil Code) and the criteria for assessing them (Article 2426 of the Italian Civil Code) have been observed and, in particular:

- the said items have been assessed in a prudent manner and with a view to the company continuing as a going concern, keeping in mind the economic function of each asset and liability, as well as each item of income and expense;

- the proceeds and expenses have been recorded on an accrual basis, regardless of the date on which they were collected or paid;

- the risks and losses accrued in the financial year were recorded in such financial year even if the company became aware of them after the close thereof;

- the profits were included on an accrual basis only if they had been generated by the closing date of the financial year;

- each item of the balance sheet and profit and loss account has been accompanied by the amount recorded in the previous financial year for the same item, in compliance with the provisions set forth in Article 2423-ter of the Italian Civil Code. Any reclassifications have been explained herein;

- heterogeneous elements included in the individual items have been assessed separately.

It must, moreover, be pointed out that:

- the formats provided for under Article 2424 of the Italian Civil Code for balance sheets and Article 2425 of the Italian Civil Code for profit and loss accounts have been used, pursuant to Article 2423-ter of the Italian Civil Code, in drafting the financial statements. These formats provide sufficient information that gives a true and fair view of the company's equity and financial situation well as its operating results;

- the company has continued applying the same valuation criteria used in previous years, so that the items used in these financial statements are comparable to those used in the previous financial statements, without having to make any adjustment, except for the reclassifications required by Law-Decree 39 / 2015, which implemented the so-called "Balance Directive" that will be discussed later;

- there are no exceptional cases in the case at hand that require the law to be derogated;

- the company has not opted for grouping together those items that are preceded by Arabic numerals;

- for the sake of greater clarity, items preceded by letters, or by Arabic and Roman numerals that have been recorded as zero in the previous year and in the current year have been omitted;

- there are no assets and liabilities that have been recorded in several items of the balance sheet.

These Notes to the Financial Statements, as explained above, are an integral part of the financial statements for the year ending 31/12/2017, drawn up pursuant to the provisions of the Italian Civil Code and the IAO National Accounting Standards that are currently in force.

This commentary on the main items of the financial statements for the year ending 31 December 2017 is intended to provide additional clarifications about and additions to the said financial statements and contains the information required by Articles 2427 and 2427 bis of the Italian Civil Code and other legal provisions, which have been suitably supplemented by the recommendations made by the IAO National Accounting Standards. Information has been provided that, where necessary, supplements the information that is required to be provided under the Italian Civil Code, with a view to providing a clearer understanding of the Company's equity, financial and income situation as of 31 December 2017.

All the transactions entered into by the Company during the financial year have been reported in its accounting records and have been summarised in the financial statements.

Pursuant to Article 2497-bis of the Italian Civil Code, notice is hereby given by the company that it is managed and coordinated by Solon International LL FZE, with registered office in Fujairah, UAE. Information concerning such company has been recorded in latest approved financial statements, is set out in the Management Report and at the foot of this note.

ACTIVITIES THAT HAVE BEEN CONDUCTED

During the past years, the company faced changing situations:

- already in the financial year 2015 the company was preparing for the launch of a process of reorganization of the operational activities, aimed at renegotiating, on more solid grounds, an existing agreement with the banks, pursuant to Article 67 of the Italian Bankruptcy Law, agreement whose financial parameters agreed upon had not been complied with in the beginning of 2015. The restructuring and reorganization process had been launched negotiating with the Manni SpA Group the sale of some equity investments and the divestment to the same Industrial Group of the activities of O&M (maintenance and operation of photovoltaic plants), in the form of rental of the business unit with the promise of sale thereof;

- in the financial year 2016, as stipulated in the restructuring plan, the marketing of photovoltaic modules was finally suspended, as well as the design and construction of turn-key photovoltaic plants, with the divestment of the personnel operating in these departments and the interruption of the activity carried out by the stable organization Solon SpA in Germany.

Therefore, already in 2016 the company focused its operating activity on the holding of equity in companies that own photovoltaic plants.

Nevertheless, the positive outcomes of the reorganization process in terms of cost savings were counterbalanced, in the second half of the year 2017, by a series of events related to potential enforcement of guarantees issued by the company in relation to goods (photovoltaic modules) produced and sold in 2009-2011. The need to take into consideration the attendant risks led to the establishment of provisions for risks, which had a significant negative impact on the Company's asset and financial balance. Therefore, due to this situation, the Company had to resort to the instrument of composition with creditors on a going concern basis, in order to create the conditions necessary to attempt to achieve the recovery launched in 2015 through the continuation of trading.

On 31 July 2017 the company filed an application for composition with creditors pursuant to Article 161(6) of the Italian Bankruptcy Law, with Padova Tribunal which, on 02 August 2017, recognized the prerequisites to access the proceedings; the company filed the appeal pursuant to Articles 160 and 161 of the Italian Bankruptcy Law in due time, on 30.11.2017.

With the decree dated 09/02/2018, filed with the clerk of the bankruptcy clerk on 20/02/2018, Padova Tribunal admitted the company's access to the proceedings of composition with creditors, appointing a Delegated Judge and a Receiver, ordering the call of creditors.

At the time of approval of this balance sheet, the company carries out all the necessary activities indicated in the decree issued by Padova Tribunal.

Assessment criteria

The financial statements have been assessed on generally prudent and accrual-based criteria, with a view to the Company continuing as a going concern, in compliance with the composition with creditors required. Furthermore, account has been taken of the economic function of the assets or liabilities that have been analysed.

The assessment criteria adopted for the 2017 financial year have not been changed from those adopted in the previous year, except for the variations foreseen as a result of the introduction of Law-Decree 139/2015 regarding the adoption of the new IAOs and the elimination of the extraordinary part of the profit and loss account format. Applying the prudence principle entailed the items that made up the individual assets or liabilities being assessed in a timely fashion so as to avoid offsetting losses, which had to be recorded, with profits, which could not be recorded since they have not yet been generated. The impact of the transactions and other events was recorded in the accounts on an accrual basis and attributed the said transactions to the year in which those transactions and events referred, and not to the one in which they took place (amounts collected and paid). The continuous application of assessment criteria over time is the condition for allowing a comparison to be made between the company's financial statements for the various financial years.

The assessment criteria adopted in preparing the financial statements were as follows:

FIXED ASSETS

B) FIXED ASSETS

B)I Intangible fixed assets

Intangible Fixed Assets have been historically recorded at the cost of acquisition or production - inclusive of ancillary costs - and have been systematically depreciated on the basis of their estimated residual probable use, as provided for under Article 2426, paragraph 5 of the Italian Civil Code. More specifically:

a) Computer programmes (software) have been depreciated over a period of three to five years.

b) Licenses and grants have been depreciated over for the term of the contract or at a higher rate when its future usefulness is reduced.

c) Improvements on third party assets have been depreciated at rates that pertain to the duration of the respective contracts.

Fixed assets, which, on the closing date of the financial year, are of a permanently lower value, are accordingly written down for such value. Should the assumptions of the said write-down no longer apply in subsequent financial years, the original value will be recorded in the books.

B) Tangible Fixed Assets

Tangible fixed assets have been recorded at the cost of purchase or construction, including ancillary costs and costs that are directly attributable to the relevant asset.

Ordinary Maintenance costs have been recorded in their entirety under item B)7) of the profit and loss account. Incremental maintenance costs have been recorded as being part of the assets to which they relate, in the event that they increase their production efficiency or outstanding life and have been depreciated with them on the basis of the residual possibility of using them. Tangible fixed assets have been systematically depreciated on a straight-line basis in each financial year at a rate commensurate with their useful life and taking into account the asset's physical wear and tear; in the financial year in which the said assets start working, the rates are reduced by half because it is considered a more representative measurement of participation in the production process which can be expected to have taken place on average by the middle of the financial year. Depreciation rates, which have been recorded in the profit and loss account, have been calculated by using the same rates as those used in the previous year:

- plant and machinery:	12%
- equipment:	25%
- light constructions:	5.50%
- vehicles:	20/25%
- electronic office equipment:	20/25%
- office furniture:	12%

Instrumental assets that have an aggregate cost of less than EUR 516.46 and have a reduced suitable life have been fully depreciated in the year of acquisition. No discretionary or voluntary revaluations have been made and the upper limit of the value that has been recorded is the objectively determined value of use of the said fixed asset. In the event that, regardless of the depreciated amount that has already recorded, there has been a lasting loss of value, the asset has been accordingly written down for the said value; should the assumptions of the said write-down no longer apply in subsequent financial years, the original value will be recorded in the books. No discretionary or voluntary revaluations have been made and the upper limit of the value that has been recorded is the objectively determined value of use of the said fixed asset. Tangible fixed assets granted under a financial lease agreement have been recorded in the balance sheet on the basis of the equity method. . The information required by Article 2427, paragraph 22) of the Italian Civil Code about the impact on the Company's equity and income that would have been produced had the financial reporting method been adopted has been provided in the Notes to the Financial Statements.

B) III Financial Fixed Assets

The equity investments held by the Company, which have been recorded as fixed assets, since they are long-term, strategic investments, have been recorded at their purchase or subscription cost (Article 2426 No. 1 of the Italian Civil Code), including incidental expenses: these are investments that are intended to be held on a long-term basis, and are strategic for the Company's business development. The value that has thus been determined can be written down to take account of any lasting loss of value, if any. The original value will be reinstated in subsequent years should the reasons for the write-down have ceased. The equity investments held in the previous financial year that are to be sold subsequently have been recorded as working capital, and more specifically as financial assets that are not fixed assets, and have been recorded at cost, adjusted by any lasting loss in value that might occur and, finally, have been compared with the market value, as recommended by the version of IAO 21, paragraph 58, letter A) that is being applied to these financial statements. Receivables recorded as financial fixed assets relate to: - loans granted to subsidiaries or investee companies through a minority shareholding. They have been evaluated on the basis of the estimated sale value, or at the lower nominal value of the write-downs, which have been recorded in light of the amount that is foreseen cannot be recovered; - security deposits provided for service contracts, which have been recorded at their nominal value, insofar as they are deemed to indicate the estimated sale value thereof.

C) CURRENT ASSETS

C)I Inventories

Stock inventories - which are made up of raw materials, products that are in the process of being manufactured, finished products and sold products - are recorded at whichever is the lowest of the following values:

•

the purchase cost thereof, determined according to the criterion of the average purchase cost (including ancillary costs that can be charged directly) or the production cost thereof. More specifically, raw materials, ancillary and consumer goods, as well as semi-finished products and goods are valued on the basis of the purchase costs plus ancillary costs method, using this method for raw materials, ancillary and consumer goods, and the average weighted cost for semi-finished products and goods. Products that are in the process of being manufactured and finished products are valued at the production cost thereof, considering the purchase cost plus the industrial production costs;

•

the expected sale price thereof estimated on the basis of the market trend.

Write-downs for any depreciation of the inventory value thereof have been recorded in special impairment funds for the purpose of directly reducing the value of inventories.

Receivables for advances paid to suppliers of goods have been recorded at the estimated sale price thereof, which has been determined on the basis of their nominal value and which have been adjusted in light of the losses that it is foreseen will accrue as a result of any amounts that cannot be recovered. They have been set aside in a special impairment fund. The value of the funds set aside under these principles has been adjusted in each financial year, so as to reflect any changes in the estimates on the basis of which they have been calculated.

C) II Receivables

Receivables have been recorded at their estimated sale value, or at the reduced nominal value of the write-downs recorded in light of the amount that is foreseen cannot be recovered. Receivables have been posted as assets net of the adjustments recorded in the accounts, proportionately to the extent of the risks arising from specific "nonperforming" loans and the risk of default on the receivables as a whole, which have been prudently estimated on the basis of past experience.

C) III Financial assets that are not fixed assets

Financial assets that are not fixed assets consist exclusively in investments made in subsidiaries, which have been recorded as current assets since they are intended to be held for a short period of time and are recorded at whichever is the lowest between the purchase cost or subscription cost and the sale value estimated on the basis of market trends (Article 2426 No. 9 of the Italian Civil Code). As will be highlighted in the special section of these Notes to the Financial Statements, a binding offer was made in 2016 for the purchase of some equity investments, which became a binding contract for both parties on 29 June 2017, which resulted into a contract for sale purchase of shares, within a competitive sale proceeding pursuant to Article 162bis of the Italian Bankruptcy Law, entered into, among others, by Solon SpA and Manni Group SpA on 30 April 2018.

C) IV Cash and cash equivalents

Cash and cash equivalents held at banks have been recorded at their nominal value.

D) ACCRUED AND DEFERRED INCOME AND LIABILITIES

Accrued and deferred income and liabilities have been recorded in the accounts on an accrual basis by applying the physical time criterion. They are costs incurred and revenues arisen in several financial years.

LIABILITIES

B) PROVISIONS FOR RISKS AND CHARGES

Provisions for risks and charges were made for charges or amounts payable that had already been identified and were probable or were already certain in nature on the date of closure of the financial statements, but whose extent or date of occurrence was, on such date, uncertain. The amounts set aside reflect the best possible estimate made on the basis of the available data.

General prudent and accrual-basis criteria have been adopted in estimating the value of these funds, and no generic risk funds have been established that are without any financial justification whatsoever. Contingent liabilities have been recorded in the financial statements and provision therefor has been made in reserve funds, since they are deemed probable and the extent of the related charge can be estimated with reasonable certainty.

C) STATUTORY SEVERANCE FUND

The amounts due to employees have been calculated under current employment legislation and agreements, considering the application of the options provided for under the supplementary pension scheme legislation that has been introduced.

D) AMOUNTS PAYABLE

Amounts Payable have been recorded at their nominal value and adjusted in light returned goods or invoice adjustments.

INCOME STATEMENT

A) e B) Revenues and costs

Revenues from product sales and costs for the purchase of goods were recorded when title was transferred, which was normally the date of delivery or shipment of the goods. Financial proceeds and charges, as well as revenues generated from the provision of services and costs incurred as a result thereof, were recorded only when the photovoltaic park was connected and subsequently accepted by the customer. Financial proceeds and charges, as well as revenues generated from the provision of services and costs incurred as a result thereof, were recorded in the financial year in question by the recording of the related accruals and deferrals on a prudential basis. Revenues and proceeds, as well as costs and charges, were recorded net of returned goods, discounts and rebates.

Currency conversion criteria

Revenues and proceeds, costs and charges, receivables and payables originally recorded in foreign currencies were recorded at the exchange rates that were applicable on the date when they arose. Foreign exchange gains generated, or losses incurred when the receivables were subsequently collected or the foreign currency debts, were paid were recorded in the profit and loss account. Outstanding receivables and payables at the end of the year recorded in a currency other than Euros were adjusted to the exchange rates that were applicable at the close of the financial year. Exchange rate differences arising from the collection of receivables and the payment of debts in currencies other than the euro, as well as the values recorded at the end of the year with respect to the amounts in foreign currency that were still outstanding on the date of these financial statements were drawn up, were posted under item C-17-bis) of the profit and loss account.

Guarantees, commitments, third-party assets and risks

The risks relating to collateral or sureties provided for other parties' debts have been set out in a special section of these Notes to the Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS, ASSETS

There are variations in the amount of these assets.

B) Fixed assets

Set out below are the changes that the fixed assets have undergone.

B) I Intangible assets

Intangible asset transactions

The composition and the summary of the intangible asset transactions are detailed in the table set out below.

	Development costs	Grants, licenses, trademarks and similar rights	Other intangible assets	Total intangible assets
Value at commencement of financial year
Cost	261,596	528,618	1,976,118	2,766,332
Depreciation (Depreciation fund)	261,596	521,329	1,019,568	1,802,493
Write-downs	-	-	956,550	956,550
Value recorded in financial statements	-	7,289	-	7,289
Variations recorded during financial year
Amortisation for the year	-	7,289	98,721	106,010
Write-downs made during the year	-	-	(98,721)	(98,721)
Total adjustments	-	(7,289)	-	(7,289)
End-of-year value
Cost	261,596	528,618	1,976,118	2,766,332
Amortisation (Amortisation fund)	261,596	528,618	1,118,289	1,908,503
Write-downs	-	-	857,829	857,829
Value recorded in financial statements	-	0	-	0

There has been, in respect of the previous financial year, major progress in the depreciation plan which, since it has been implemented on a systematic basis, has led to the value of the assets being gradually decreased. With a view to explaining this in a clearer manner, reference is made to an appropriate summary schedule.

It must also be pointed out that the write-down posted in the 2015 financial year was a prudential write-down (EUR 1,055,271) of the capitalised charges for improvements in the company's registered office and business premises - which are currently rented out through a financial lease agreement. The impairment fund has been adjusted, by unfreezing an amount corresponding to the provision made for write downs in 2016 (EUR 956,550); also, during the current financial year, the amount corresponding to the provision made for write downs in 2017 has been unfrozen, with a view to aligning the value of the write-downs to the actual net amount recorded in the accounts. During the year 2017 Solon Spa notified the leasing company if its intention to withdraw from the finance lease contract, filing a request with the Padova Tribunal pursuant to Article 169bis the Italian Bankruptcy Law. With its decree dated 04.04.2018 the Tribunal granted the request and the real estate was cleared and returned in good condition to its owner, Mediocredito Italiano SpA on 15 May 2018.

Due to the ongoing reorganisation and the global trading difficulties which Solon S.p.A. has faced, the company did not invest in tangible and intangible assets in 2017.

B) II Tangible fixed assets

Tangible fixed asset transactions

The composition and the summary of tangible asset transactions are detailed in the table set out below. No financial charges for tangible fixed assets were recorded during the financial year. The composition and summary of tangible fixed asset transactions are detailed in the table set out below.

	Land and buildings	Plant and machinery	Industrial and commercial facilities	Other tangible fixed assets	Total tangible fixed assets
Value at commencement of financial year
Cost	1,515,175	2,868,433	90,866	1,373,619	5,848,093
Depreciation (Depreciation fund)	248,316	1,933,427	81,430	1,334,804	3,597,977
Write-downs	447,550	-	-	-	447,550
Value recorded in financial statements	819,308	935,006	9,435	38,814	1,802,563
Variations recorded during financial year
Decreases (in the book value) as a result of sales and disposals	-	11,500	-	96,261	107,761
Depreciation in the financial year	23,577	80,709	7,077	9,580	120,943
Write-downs made during the financial year	78,970	2,453	2,359	9,308	93,090
Other variations	-	11,500	1	76,335	87,836
Total variations	(102,547)	(83,162)	(9,435)	(38,814)	(233,958)
End-of-year value
Cost	1,515,175	2,856,933	90,866	1,277,358	5,740,332
Depreciation (Depreciation fund)	271,893	2,002,635	88,507	1,268,051	3,631,086
Write-downs	526,520	2,453	2,359	9,308	540,640
Value recorded in financial statements	716,761	851,844	0	0	1,568,605

The tangible fixed assets table above shows a variation of (EUR 233,958) during 2017.

Such variation is attributable to the annual depreciation charges (EUR 120,942), to certain disposals made during the financial year net of the relevant depreciation fund (EUR 19,926) and to the value write-downs made during the financial year under the items Land and buildings, Plants, Equipment and hardware and other Goods (EUR 93,090).

Financial leasing transactions

The table below summarises, in the manner foreseen by the Italian Accounting Organisation, the effects of leasing agreements on the lessee's balance sheet and the profit and loss account.

Description of the property	Up-to-date value of accruing fees	Implied financial charges	Asset cost with financial method	Depreciation for the financial year	Depreciation fund	Outstanding value as of 31/12/2017
Building 3	4,704,744	114,745	7,072,936.44	212,188	1,803,599	5,269,338
Land -Building 3	886,099	21,611	1,332,128	0	0	1,332,128
Photovoltaic plants	637,172	15,540	957,900	38,316	325,686	632,214
Building 4	2,128,442	70,281	3,338,464	28,737	250,216	3,088,248
Land - Building 4	912,189	30,120	1,430,770	0	0	1,430,770
TOTAL	9,268,645	252,297	7,059,262	279,241	2,379,501	11,752,698

IMPACT ON BALANCE SHEET

Assets	Amount
a)Ongoing contracts
Goods being leased at the end of the previous year, net of accumulated depreciation amounting to € 1,262,536	12,031,939
Assets acquired with finance leasing agreements during the course of the financial year	0
Depreciation charges for the financial year	(279,241)
Adjustment of value on assets acquired with financial lease agreements	0.00
Assets acquired with financial lease agreements at the end of the financial year net of aggregate depreciation amounting to € 1.541.777	11,752,698
b) Redeemed goods	0
c) Liabilities	0
Implied debts for financial leasing agreements at the end of the previous financial year	9,820,426
Implied debts arising during the financial year	0
Redemption of capital shares during the financial year	(551,781)
Implied debts for financial leasing operations at the end of the financial year (of which € 523,124 due in the subsequent financial year, € 2,237,786 due in 1 to 5 years, and € 8,119,897 due after 5 years)	9,268,645
d) Total gross effect at end of financial year (a+b-c)	2,484,053
e) Net tax effect	(85,577
f) Effect on shareholders' equity at the end of the financial year (d-e)	186,962

IMPACT ON THE PROFIT AND LOSS ACCOUNT

Assets	Amount
Rebate of fees on financial leasing transactions	804,078
Reporting of financial charges	(252,297)
Depreciation charges on ongoing contracts	(279,241)
Value adjustments	0
Impact on earnings before taxes	272,540
Reporting the tax impact thereof	(85,577)
Effect on earnings for the financial year	186,962

B) III Financial fixed assets

Financial fixed assets (EUR 10,498,371) consist of shareholdings amounting to EUR 581,750 (from subsidiaries - EUR 581,750), and receivables amounting to EUR 9,916,621 (from subsidiaries - EUR 9,060,523, from affiliated companies - EUR 280,000, and from other companies - EUR 576,098). Any change occurred thereto is reported below.

Financial asset transactions: shares and other securities, own shares

Long-term securities have been recorded as fixed assets at their purchase or subscription cost, including additional charges, and have been written down in case of a lasting loss of value.

Debt securities have been recorded, one by one, at their specific purchase price, including ancillary charges; should the security's value be, on the financial year's closing date, permanently lower than its purchase price, it is correspondingly devalued and if, in subsequent years, the reasons for the devaluation no longer apply, it will be restored to its original value.

	Investments in subsidiaries	Investments in affiliated companies	Investments in other companies	Total investments
Value at commencement of financial year
Cost	1,897,707	95,228	180,699	2,173,634
Depreciations	1,315,957	5,228	70,021	1,391,206
Value recorded in financial statements	581,750	90,000	110,678	782,428
Variations in the financial year
Increases for purchases	230,275	-	-	230,275
Reclassifications (of the value recorded in financial statements)	-	(90,000)	(30,699)	(120,699)
Decreases for transfers (of the value recorded in financial statements)	-	-	150,000	150,000
Depreciations in the financial year	230,275	-	-	230,275
Other variations	-	-	70,021	70,021
Total variations	-	(90,000)	(110,678)	(200,678)
End-of-year value
Cost	2,127,982	5,228	-	2,133,210
Depreciations	1,546,232	5,228	-	1,551,460
Value recorded in financial statements	581,750	0	0	581,750

The variations compared to the previous financial year (EUR 200,678) are related to:

B III 1) a) Equity held in subsidiaries

The value of equity held in subsidiaries has not changed compared to the previous financial year. During the financial year, the value of the equity held in Solon Servizi Energetici srl increased by EUR 230,275, then it was entirely written-down during the financial year. The value increase results from the waiver to the shareholders' loan by the shareholder Solon spa.

The table set out below breaks down the equity investments held in subsidiaries:

	Equity value	Equity write-down	Net equity value ¹	Net equity of the subsidiary ¹	Net book value ¹
Estelux s.r.l. in liquidazione	331,505	331,506	0	-2,035,630	-24,842
Ambrasol 2 s.r.l.	480,500	200,000	280,500	94,338	14,859
Ambrasol 3 s.r.l.	398,500	200,000	198,500	15,337	-16,578
Msm Solar s.r.l.	86,000		86,000	197,790	87,141
Sistema Lucano 4 s.r.l.	6,750		6,750	549,960	275,702
Solon Servizi Energetici s.r.l.	324,275	324,275	0	-38,777	-89,277
Sistema Solare srl	55,000	55,000	0	153,223	-551,638
Solon Operations Gmbh	425,552	425,552	0	-747,265	-848,924
Energy Italia 03 s.r.l.	10,000		10,000	441,121	95,000
Turi Solare s.r.l.	9,900	9,900	0	-7346	-3220
Total	2,127,982	1,546,232	581,750	-1,377,249	-1,061,777

¹ the most recent available data are presented

Estelux in liquidazione S.r.l. - Via Altinate, 62 - Padova (PD) - REA PD - 368743, VAT No. and Fiscal No. 03363950241 - Share capital EUR 10,000 - 100% shareholding;

Ambrasol 2 S.r.l. - Via dell'Industria e dell'Artigianato, 2 - Carmignano di Brenta (PD), REA PD 413131 VAT No. and Fiscal No. 01200220778 - Share capital EUR 110,000 - 100% shareholding;

Ambrasol 3 S.r.l. - Via dell'Industria e dell'Artigianato, 2 - Carmignano di Brenta (PD), REA PD 413133, VAT No. and Fiscal No. 01200240776 - Share capital EUR 110,000 - 100% shareholding;

MSM Solar S.r.l. - Via Altinate, 62 - Padova (PD) - REA PD 401615, VAT No. and Fiscal No. 05769340489 - Share capital EUR 10,000 - 100% shareholding;

Sistema Lucano 4 S.r.l. - Via Barile, 13 - Locorotondo (BA) - REA PD 433209, VAT No. and Fiscal No. 01749570766 - Share capital EUR 10,000 - 100% shareholding;

Solon Servizi Energetici S.r.l. - Via Altinate, 62 - Padova (PD) - REA PD 402337, VAT No. and Fiscal No. 03421700240 - Share capital EUR 10,000 - 100% shareholding;

Sistema Solare S.r.l. - Corso Umberto I, 98/A - Genzano di Lucania (PZ) - REA PZ 137527, VAT No. and Fiscal No. 03527640241 - Share capital EUR 10,000 - 51% shareholding;

SOLON Operations GmbH - Sonnenallee 224b - Berlin GERMANY - Share capital EUR 25,000 - 100% shareholding;

Energia Italia 03 S.r.l. - Corso Umberto I, 98/A - Genzano di Lucania (PZ) - REA PZ 132663 - VAT No. and Fiscal No. 01766810764 - Share capital EUR 10,000 - 100% shareholding;

Turi Solare S.r.l. - Via Altinate, 62 - Padova (PD) - REA PD 396768. VAT No. and Fiscal No. 04523310284 - Share capital EUR 10,000 - 100% shareholding.

BIII 1) b) Equity investments held in affiliated companies

The equity investments held in affiliated companies amount to zero.

The equity investment in Cavicchi Solar srl, with a nominal value of EUR 90,000, included at this balance sheet item in the previous financial year, has been reclassified at Current Assets, being intended for sale during 2018.

The table set out below breaks down the equity investments held by the Company in affiliated companies as at 31/12/2017:

	Equity value	Equity write-down	Reclassification	Net book value
Cavicchi solar srl	90,000		-90,000	0
Sistema Lucano 1 s.rl.	1,250	-1,250		0
Sistema Lucano 2 s.r.l.	1,250	-1,250		0
Sistema Lucano 3	1,250	-1,250		0
Societa Agricola Sistema Lucano	1,250	-1,250		0
Vre solon Swazilan	228	-228		0
Total	95,228	5,228	-90,000	0

Società Agricola Sistema Lucano S.r.l. - Via Umberto I, 98/A - Genzano di Lucania (PZ), REA PZ 131376, VAT No. and Fiscal No. 01749620769 - Share capital EUR 10,000 - 50% shareholding;

Sistema Lucano 1 s.r.l. Via Umberto I, 98/A - Genzano di Lucania (PZ), REA PZ 130289, VAT No. and Fiscal No. 01734260761 - Share capital EUR 10,000 - 50% shareholding;

Sistema Lucano 2 s.r.l. Via Umberto I, 98/A - Genzano di Lucania (PZ), REA PZ 130290, VAT No. and Fiscal No. 01734270760 - Share capital EUR 10,000 - 50% shareholding;

Sistema Lucano 3 s.r.l. Via Umberto I, 98/A - Genzano di Lucania (PZ), REA PZ 130291 VAT No. and Fiscal No. 01734280769 - Share capital EUR 10,000 - 50% shareholding;

BIII 1)d-bis) Equity investments in other companies

The amount recorded in the accounts for equity investments in other companies has undergone a change of EUR 110,678 compared to the previous year. Such change is due to the sale of the equity held in Soleagri srl (EUR 150,000) net of the write-down thereof for (EUR 70,021) and the reclassification under Current Assets of the equity held in Interporto solare of EUR 30,699, for the possible sale during 2018.

The table set out below breaks down the equity investments held by the Company in other companies as at 31/12/2017:

	Equity value	Equity write-down	Reclassification	Net book value
Interporto Solare srl	30,699		-30,699	0
Total	30,699	0	-30,699	0

B) III 2) Changes and deadline of non-current receivables

Non-current financial receivables are classified as follows:

	Value at commencement of year	Changes during the year	End-of-year value	Amount due beyond the end of year
Non-current receivables from subsidiaries	11,290,982	(2,230,459)	9,060,523	9,060,523
Non-current receivables from affiliated companies	1,151,376	(871,376)	280,000	280,000
Non-current receivables from other companies	576,075	23	576,098	576,098
Total non-current receivables	13,018,433	(3,101,812)	9,916,621	9,916,621

The difference compared to the previous year (EUR 3,101,812) is given mainly by the increase of the reserve for writedown of receivables from companies for which the following financial statements are recorded.

Non-current financial receivables from affiliated companies are set out as follows:

B) III 2) a) Medium to long term receivables due from subsidiaries

	balance as at 31/12/2017
Chiarano Green Power S.r.l.	0
Ambrasol 2 S.r.l.	2,299,306
Ambrasol 3 S.r.l.	2,404,152
Energia e Impresa s.r.l.	587,034
Energy Italia 3 s.r.l.	57,314
Gifa s.r.l.	408,687
Msm Solar S.r.l.	0
Sistema Lucano 4 S.r.l.	0
V.S.1 S.r.l.	3,304,030
Total	9,060,523

B) III 2) b) Medium to long term receivables due from affiliated companies

	balance as at 31.12.2017
Cavicchi Solar S.r.l.	1,151,376
Write-down of Cavicchi Solar s.r.l	- 871,376
Total	280,000

B) III 2) d-bis) Medium to long-term receivables due from other companies

	balance as at 31.12.2017
Interporto Solare S.r.l.	576,000
Security deposits	98
Total	576,098

Changes in Medium to long term receivables due from subsidiaries

During the financial year, the analysed item decreased by a total amount of EUR 2,230,459, as follows:

•	Revenues collected for the year: 347,250
•	Write-downs: 7,322,991
•	Reclassification from receivables from clients: 1,142,040
•	Revaluations: 4,297,742.

The revaluations made are justified by the operation occurring in April 2018, whereby the company sold to Manni Spa its equity held in VS1, Gifa, Fotosintesi 6, Energia e impresa, initially realizing a gain of EUR 5.7 million.

Considering the sale of the four companies as a single operation, for a proper correlation between the costs and revenues, and taking into consideration that the gain realized in 2018 is related to subsequent facts which must be acknowledged in the balance sheet, as provided by OIC 29, it was decided to record all the economic effects of the operation in the year 2017.

Therefore, such approach materialized in the re-establishment of financial receivables from the sold companies, previously written-down, and the revaluation of some of the equity sold.

The loans provided to the investee companies were subject to write-down, due to the fact that they were not considered collectable in the amount recorded in the balance sheet.

Change in Medium and long term receivables from affiliated companies

During the financial year, the analysed item decreased by a total amount of EUR 871,376, due to the write-down of the receivables from the company Cavicchi Solar. The write-down occurs in the context of the negotiations for the sale of the equity held in such company, which provided for the waiver to part of the receivable by Solon Spa.

Details regarding the shareholding in subsidiaries

The list of shareholdings held in subsidiaries, with the information provided by Article 2427(1)(5) of the Italian Civil Code, has been indicated in a specific section dedicated thereto and reference is made, therefore, to the section on financial assets.

The equity investments made by Solon Spa, whether they be fixed assets or are recorded as current assets, do not entail any unlimited liability for the obligations arising therefrom.

Breakdown of long-term receivables by geographic area

Long-term receivables are divided by the different geographical areas in which the company operates.

The receivables due from non-national entities or entities not belonging to the euro zone are broken down by geographical area:

Geographic area	Long-term receivables from subsidiaries	Long-term receivables from affiliated companies	Long-term receivables from others	Total long-term receivables
ITALY	9,060,523	280,000	576,098	9,916,621
Total	9,060,523	280,000	576,098	9,916,621

Long-term receivables related to buy-back transactions

There are no securities with buy-back_obligations.

C) Current assets

The other asset items have undergone the following changes.

C) I Inventories

Warehouse stocks amount to zero. The following table breaks down the transactions relating to such items:

	Raw materials, subsidiary and consumables	Products in the process of being manufactured and semi-finished products	Finished products and goods	Advances	Total inventories
Value at the beginning of the financial year
Cost	23,004	3,975,673	455,023	1,633,270	6,086,971
Depreciations	-20,800	-3,975,673	-377,969	-1,613,270	-5,987,713
Value recorded in financial statements	2,204	0	77,054	20,000	99,258
Changes during the financial year
Increases as a result of purchases	-	-	-	-	-
Decreases (in the book value) as a result of sales and disposals	-	-	-139,387	-20,000	-159,387
Depreciation in the financial year	-2,204	-	62333	-	60,129
Other changes	-	-	-	-	-
Total changes	-2,204	-	-	-20,000	-22,204
End-of-year value
Cost	23,004	3,975,673	315,636	1,633,270	5,927,584
Depreciation	-23,004	-3,975,673	-315,636	-1,633,270	-5,927,584
Value recorded in financial statements	0	0	0	0	0

Warehouse stocks, as stated above, consist in:

•	raw materials, subsidiary and consumables, of which:

- Raw materials amounting to EUR 23,004, which have been written down by EUR 23,004, for which provision has been made in an appropriate reserve fund, directly deducting the value in the balance sheet. It should be noted that most of the inventories were sold at the end of the year 2015 to third parties and the related reserve fund that had been set aside to cover the impairment of the assets' value was unlocked after the sale;

•	products in the process of being manufactured and semi-finished products, amounting to EUR 3,975,673, written off in full;
•	finished products and goods amounting to EUR 455,023, sold during the financial year for EUR 139,387; the residual cost at the end of year was written off in full;
•	advance payments for supplies of goods amounting to EUR 1,633,270, written off in full and set aside in a special impairment reserve fund, thus decreasing the value of the advance payments that have been recorded as final warehouse inventories.

The variation is summarized below.

	Value at the beginning of the financial year	Variation during the year	End-of-value year
Raw materials, subsidiary and consumables	2,204	(2,204)	0
Finished products and goods	77,054	(77,054)	0
Advances	20,000	(20,000)	0
Total inventories	99,258	(99,258)	0

Tangible assets to be sold

With the contract for "establishment of surface right over state-owned land for the execution and technical and economic management of photovoltaic plants" concluded on 2 December 2010, the city hall of Chiarano granted to Solon SpA, which accepted, the surface right over certain real estates situated in Chiarano (TV) for a period of 25 years, for the payment of the amount of EUR 3,027,500 to be paid as follows: EUR 484,400 upon the execution of the contract, the remaining EUR 2,543,100 in 21 instalments of EUR 121,100 each, the first of which is due on 31.01.2011, and the last one on 31.01.2031. Upon the execution of the contract, in accordance with the accounting in force, Solon SpA opted for the booking of the contract at "cost", charging a fee of EUR 121,100 as cost related to the surface right, without entering the value of the right in rem under assets, and the value of the debt payable to the City Hall of Chiarano under liabilities. For the purpose of better representing the case in point in the creditors composition scenario, Solon spa considered it was proper to update the financial statements as at 31.12.2017, entering the value of the surface right under assets, and entering under liabilities a debt to the City Hall of Chiarano, amounting to EUR 1,695,400, equal to the residual instalments for 2018 - 2032.

The value of the above mentioned Surface Right was written off by EUR 1,460,619 following the appraisal performed upon the asset, at the request of the bodies of the composition proceedings. The surface right is to be sold in the near future. Therefore, in view of the above, the tangible assets to be sold are increased by EUR 234,781.

	Value at the beginning of the financial year	Variation during the year	End-of-year value
Tangible assets to be sold	0	234,781	234,781

C) II Receivables recorded as current assets

Variations and due date of receivables recorded as current assets

	Value at the beginning of the financial year	Variation during the financial year	End-of-year value	Amount due by the end of the year
Receivables from customers recorded as current assets	3,650,215	(646,607)	3,003,608	3,003,608
Receivables from subsidiaries recorded as current assets	2,954,955	(1,602,235)	1,352,720	1,352,720
Receivables from affiliated companies recorded as current assets	44,100	(44,100)	0	0
Receivables from parent companies recorded as current assets	3,122,709	-	3,122,709	3,122,709
Receivables from companies subjected to the control of the controlling companies recorded as current assets	3,649,057	(74,615)	3,574,442	3,574,442
Tax receivables recorded as current assets	1,003,722	32,744	1,036,466	1,036,466
Receivables from others recorded as current assets	69,867	104,918	174,785	174,785
Total receivables recorded as current assets	14,494,625	(2,229,895)	12,264,730	12,264,730

Breakdown of receivables recorded as current assets identified by geographic area

In light of the business conducted by the company on the international markets, we believe that the geographical breakdown for each receivables budget line should be shown in the table set out below:

Geographic area	NON-EU	EU	ITALY	Total
Receivables from customers recorded as current assets	-	459,993	2,469,001	3,003,608
Receivables from subsidiaries recorded as current assets	-	-	1,352,720	1,352,720
Receivables from affiliated companies recorded as current assets	-	-	-	0
Receivables from parent companies recorded as current assets	3,122,709	-	-	3,122,709
Receivables from companies subjected to the control of the controlling companies recorded as current assets	-	3,574,442	-	3,574,442
Tax receivables recorded as current assets	-	18,974	1,017,492	1,036,466
Receivables from others recorded as current assets	-	-	174,785	174,785
Total receivables recorded as current assets	3,122,709	4,128,024	5,013,998	12,264,730

The item "Receivables from customers recorded as current assets", which are all due within the next financial year (EUR 3,003,608), results from the difference between all the short-term trade receivables and the provision made for write-down.

These items include:

	Balance as at 31/12/17
Receivables from customers	1,638,919
Invoices to be issued	2,164,123
Receivables from customers with which litigation is ongoing	5,478,096
Provision for receivables from clients that have been written down	(6,277,530)

"Receivables from subsidiaries" as at 31 December 2017 (EUR 1,352,720) are all due within the next financial year, and concern trade or tax consolidation receivables.

"Receivables from affiliated companies" as at 31 December 2017 (EUR 82,178) were written off in full during the financial year, and concern trade receivables from affiliated companies.

"Receivables from parent companies" as at 31 December 2017 (EUR 3,122,709) are all due within the next financial year.

"Receivables from companies subject to the control of the controlling companies" as at 31 December 2017 (EUR 3,574,442) are all due within the next financial year insofar as they concern trade receivables from companies belonging to the SOLON International Group.

"Tax receivables" existing at 31 December 2017, fully usable within the next financial year, amount to EUR 1,036,466 and have undergone, during the administrative period 2017, the following changes:

Description	Initial amount	Variation	Final amount
Tax receivables	606,820	29,022	635,842
Regional Production Tax (IRAP) receivables	1,778	0	1,778
Corporate Income Tax (IRES) receivables for the amounts withheld by consolidated companies	325,759	0	325,759
Withholding tax on ESM contributions	9,980	3,719	13,699
Withholding tax on interest and restructuring	1,934	3	1,937
Other tax receivables	57,451	0	57,451
Total	1,003,722	32,744	1,036,466

For the sake of completeness, it should be noted that "Other tax receivables" (EUR 57,451 as at 31/12/2017) mainly comprise of: IRES (tax on corporate income) tax refund requests for IRAP (regional tax on income) that has not been deducted.

The "receivables from others" (EUR 174,785) all fall due within the next financial year and relate mainly to advances paid to suppliers of services (EUR 446,012 which have been fully written off), the feed-in tariff to be collected from ESM (EUR 32,582), various receivables (EUR 644,520 written down for EUR 534,960) and short-term down payments amounting to EUR 32,642.

C) III Financial assets other than fixed assets

Changes in financial assets other than fixed assets

They consists in shares that are foreseen to be sold or transferred, which operation has already occurred at the time of preparing the balance sheet, or is reasonably expected to occur by 31/12/2018.

Shareholdings held in subsidiaries

Whose values include an impairment fund, totalling (EUR 6,392,993):

	Stake value	Stake depreciation 2017	Revaluation 2017	Increase shareholdings 2017	Decrease shareholdings 2017	Net shareholding value 2017
Energia & Impresa s.r.l.	10,050					10,050
Gifa srl	137,000		38,842			175,842
Chiarano green Power srl	41,500					41,500
Fotosintesi 6 srl	4,476,490		398,554			4,875,044
Vs 1 srl	290,549		1,000,000			1,290,549
Energy Italia 04 srl	1,466,260				1,466,260
Sipro solare srl	290,000					290,000
Total	6,421,849	0,0	1,437,396			6,392,985

•	Energia e Impresa s.r.l.: the shareholding value as at 31/12/2017 is EUR 10,050, the shareholding was sold in April 2018;
•	VS1 s.r.l.: the shareholding value as at 31/12/2017 is EUR 1,290,549, at 31/12/2016 the net shareholding value was EUR 290,549, in 2017 its initial value was restored removing the depreciation, in April 2018 the shareholding was sold;
•	Gifa s.r.l.: the shareholding value as at 31/12/2017 is EUR 175,842, the value at 31/12/2016 was EUR 137,000, during 2017 it was revaluated by EUR 38,842, in April 2018 the shareholding was sold;
•	Chiarano Green Power s.r.l.: the shareholding value as at 31/12/2017 is EUR 41,500;
•	Fotosintesi 6 s.r.l.: the shareholding value as at 31/12/2017 is EUR 4,875,052, the value at 31/12/2016 was EUR 4,476,49, during 2017 it was revaluated by EUR 398,554, in April 2018 the shareholding was sold.
•	Energy Italia 04 srl: the shareholding (already pledged in favour of MLandS GmbH & Co. KG) has been divested in 2017
•	Sipro Solare s.r.l.: the shareholding value is zero, the initial value of the shareholding is EUR 290,000, which has already been written off in full.

Shareholdings held in affiliated companies

•	Cavicchi Solar s.r.l.: the shareholding value as at 31/12/2017 is EUR 90,000, it was reclassified under Current Assets for the sale foreseen to occur in 2018.

Shareholdings held in other companies

•	Interporto Solare s.r.l.: the shareholding value as at 31/12/2017 is EUR 30,699, it was reclassified under Current Assets during the year, for the sale foreseen to occur in 2018.

	Value in the beginning of the financial year	Changes during the financial year	End-of-year value
Current investments in subsidiaries	6,421,857	(28,864)	6,392,993
Current investments in affiliated companies	0	90,000	90,000
Other current investments	0	30,699	30,699
Total financial assets not held as fixed assets	6,421,857	91,835	6,513,692

Breakdown of shares held in subsidiaries recorded under current assets

It should be noted that there are no shares held through a third party or trust company.

C) IV Cash and cash equivalents

Cash and cash equivalents have been recorded at the actual value thereof.

	Value at the beginning of the year	Changes during the course of the financial year	Value at the end of the financial year
Bank and postal accounts	61,672	208,486	270,158
Cash and cash equivalents on hand	758	3,289	4,047
Total cash and cash equivalents	62,430	211,775	274,205

The balance consists in cash and cash equivalents at the closing date of the financial year.

D) Prepayments and accrued income

Prepayments and accrued income have been calculated on an accrual basis, taking care to record them at the closing date the portion of relevant costs and revenues pertaining thereto.

	Value at the beginning of the year	Changes during the course of the financial year	Value at the end of the financial year
Prepaid expenses	562,471	(536,091)	26,380
Total accrued income and prepaid expenses	562,471	(536,091)	26,380

It mainly consists of the prepayments regarding lump sum rental payments relating to buildings lease agreements. The amount has been fully recognized to the Income Statement in the light of the leasing company's notification regarding the termination of the relationship.

Capitalized financial charges

During the year, no financial charges were attributed to any item on the balance sheet.

NOTES TO THE FINANCIAL STATEMENTS, LIABILITIES AND NET EQUITY

Set out below are the changes in the Company's liabilities that have been recorded in the financial statements.

A) Net worth

For the purpose of a brief analysis of the Net Worth history, please note that significant changes occurred in the share capital in 2016; by the deed of 24 November 2016, the shareholders' meeting resolved to cover previous losses and reduce the share capital to EUR 3,899,177, fully subscribed and paid in, which consisted in 3,899,177 ordinary shares, each having a nominal value of EUR 1.

Due to the persistence of the negative net worth as a result of the losses incurred, related also to the establishment of risk provisions for product warranties issued upon sale to clients, the Board of Directors resolved in 2017 to launch the proceedings for agreement among creditors to enable the continuity of the business, aimed at overcoming the crisis and remove the negative equity and financial deficit for the purpose of protecting the company assets, as provided by the bankruptcy legal provisions in force.

Please note the absence of any provisions for the coverage of the losses accrued.

Changes in the net equity

The budget lines for net assets recorded in the last 3 financial years have been outlined in the table set out below, as required by Article 2427 No. 7bis of the Italian Civil Code and as specified in principle 28 of the IAO National Accounting Standards.

		Other changes
	Value at the beginning of the year	Increases	Decreases	Operating result	End-of-year value
Share capital	3,899,177	-	-		3,899,177
Other reserves
Payments to cover losses	1,154,620	-	-		1,154,620
Various other reserves	(2)	-	-		(2)
Total other reserves	1,154,618	-	-		1,154,618
Profit (loss) brought forward	0	(15,307,249)	-		(15,307,249)
Profit (loss) for the year	(15,307,249)	-	(15,307,249)	(11,944,259)	(11,944,259)
Total shareholder's equity	(10,253,454)	(15,307,249)	(15,307,249)	(11,944,259)	(22,197,713)

Breakdown of various other reserves

Description	Amount
ROUNDING UP AND DOWN RESERVE FUND	(2)
Total	(2)

The shareholders' equity recorded in the balance sheet date consists, therefore, on the one hand, in the share capital and the legal reserve fund and, on the other hand, in the losses, which are classified as such by the Italian Civil Code. The share capital is composed as follows:

Description	Number of shares	Nominal value
Shares	3,899,177	1
Total shares	3,899,177	1

The origin of each item of the shareholders' equity, as well as the possibility to use and distribute it, is shown in the following table.

Availability and use of shareholder's equity

Tax legislation governing the distribution of profit and reserves when tax payment is suspended

There is no such case.

	Amount	Origin/nature	Possibility of use	Available amount	Summary of uses during the three previous financial years for the coverage of losses
Share capital	3,899,177	SUBSCRIPTION BY SHAREHOLDERS		3,899,177	12,100,823
Legal reserve fund	-			-	593,124
Other reserve funds
Payments to cover losses	1,154,620	PAYMENTS BY SHAREHOLDERS	A,B	1,154,620	-
Various other reserves	(2)			-	-
Total other reserves	1,154,618			1,154,620	-
Use of earning from previous year	(15,307,249)			-	-
Total	(10,253,454)			5,053,797	12,693,947
Non-distributable amount				5,053,797

Legend: A: capital increase B: loss coverage C: distribution to shareholders D: other statutory constraints E: other

Origin, possibility of use and distribution of various other reserve funds

Description	Amount
ROUNDING UP AND DOWN RESERVE FUND	(2)
Total	(2)

Legend: A: capital increase B: loss coverage C: distribution to shareholders D: other statutory constraints E: other

Changes in the funds set aside for covering the expected cash flows

As at 31/12/2017, no derivative transactions had been entered into for the purpose of hedging risks that required special reserve funds to be set aside.

B) Provisions made for risks and charges

Provisions for risks and charges were made for costs or amounts payable that had already been identified and were probable or were already certain in nature on the date of closure of the financial statements, but whose extent or date of occurrence was, on such date, uncertain.

The amounts set aside reflect the best possible estimate made on the basis of the available data.

Set out below are the changes that occurred in the composition of the item "Provisions for risks and charges".

	Provision for severance pay and similar obligations	Provision for deferred taxes	Other funds	Total provisions for risks and costs
Value at the beginning of the year	8,248	330,000	12,571,717	12,909,965
Variations during the course of the financial year
Amount set aside during the course of the financial year	-	-	6,050,000	6,050,000
Use during the course of the financial year	-	140,000	232,969	372,969
Other variations	-	-	(1)	(1)
Total variations	-	(140,000)	5,817,030	5,677,030
Value at the end of the financial year	8,248	190,000	18,388,747	18,586,995

The item "Provisions for risks and charges" included the amounts set aside to cover losses or debts that had already been identified, were already certain in nature or were probable on the date of closure of the financial statements, but whose extent or date of occurrence was, on such date, uncertain.

Set out below is the breakdown of such costs:

PROVISIONS FOR RISKS AND CHARGES	31/12/2016	INCREASES	USES	UNLOCKING OF FUNDS	BANK TRANSFERS	31/12/2017
Provision for severance pay and similar obligations	8,248					8,248
Other funds for risks and charges	5,155,888	210,000	-7,768	0		5,358,120
Provision for tax risks	330,000	0	0	-140,000		190,000
General product warranty fund	1,847,766	0	0		-1,000,000	847,766
Specific product warranty fund	5,568,063	5,840,000	-225,202	0	1,000,000	12,182,862
Total	12,909,965	6,050,000	-232,969	-140,000	0	18,586,995

The provisions made for "severance pay and similar obligations" (EUR 8,248) include the Agents' Supplementary Clientele Allowance Fund.

The "Provision for Tax Risks" (EUR 330.000) was conservatively made for any potential risks of inspections that might be conducted by the relevant regulatory bodies. This reserve fund was in part unlocked for an amount of EUR 140.000, partly for uses and partly for being considered redundant.

The "Products warranty fund" (EUR 13.030.627), divided between the general product warranty fund (EUR 847,766) and the specific product warranty fund (EUR 12,182,862), reflects the amounts that have been set aside for those actions that are foreseen to be taken to fulfil the contractual warranties on products that have been sold or warranties for product defects (5 to 10 years) and the performance warranties (at least 95% of the declared performance efficiency in the first five years, 90% thereof up to the tenth year, 87% thereof until the twentieth year and 80% thereof until the end of the guarantee). ). In line with the principle of matching costs with revenues, the inherent cost is charged when the revenue is recorded. Based on the warranties provided to customers, EUR 1,000,000 was transferred from the general product warranty fund 1.000.000 to the specific product warranty fund; also, the amount of 5,840,000 EUR was set aside for the same fund. The uses made for the coverage of damages incurred during the year 2017 amount to EUR 225,202.

Under the specific product warranty fund we find the "Backsheet warranty fund", set up in the course of preparing the 2016 draft balance sheet, insofar as numerous complaints had been made about the structure of the photovoltaic panels and, in particular, a defect in the rear part of the panels (the so-called backsheet) that caused, in the most serious cases, the panel to break, with the latter's insulation capacity being impaired. Given that there were no field studies that allowed a reliable empirical approach to be adopted in relation to the problem of the backsheet's degradation and in light of the fact that both the root causes of the phenomenon and the speed of degradation of the material was unknown, at the moment there are no reliable elements to quantify the potential impact of such problem on the financial statements for the financial year. The Board of Directors started an analysis, both from a contractual standpoint, concerning the supply relationship between the Company and the manufacturers of the assembled backsheet, and from a technical standpoint, with the participation of experts in the field and the parent company. Despite the absence of such evaluation elements, but with the aim however to take into consideration the uncertain situation, it was decided to set aside the amount of EUR 3,280,000 into the specific risk fund in 2016, and EUR 6,840,000 during the year 2017. The risk management approach used for such budgetary allocation takes into consideration the actual rate of occurrence of such damages, in the cases notified by the clients, compared with the installed power of the plants, as well as the probability for such damages to be notified by the two categories of clients: Systems (institutional clients or owners of medium-large size plants) and Components (retail clients, owners of small size plants). Uses from such fund amount to EUR 209,101.

The item "Other funds" (EUR 5,358,120) comprises the amounts set aside for costs to be incurred after the contracts have been closed (such as, for example, penalties or contractual guarantees), for equity investments losses, for the costs to be incurred in disposing of the modules at the end of their life cycle and for other contingent liabilities.

C) Statutory severance pay

The liability for employees' statutory severance pay has been calculated pursuant to the current provisions governing the employment relationship for employees and corresponds to the company's actual commitment towards the individual employees on the financial statement's closing date.

	Employees' statutory severance pay
Value at the beginning of the year	70,087
Variations during the course of the financial year
Provisions during the course of the financial year	26,728
Use during the course of the financial year	-25,538
Total variations	1,190
Value at the end of the financial year	71,277

The provision made for employees' statutory severance pay is the amount owed by the company to employees on the closing date of the financial year, net of the advances that have been paid.

The statutory severance pay for expired employment contracts, the payment of which had not yet been made on the closing date of the financial year, was recorded under item D) 14) of the balance sheet "Other liabilities".

The portion set aside for the year refers to employees who, following the entry into force of the new supplementary pension system, have specifically indicated that the statutory severance pay accruing from 1 January 2007 onwards should be handled by the company.

D) Amounts payable

The depreciated cost criterion has not been applied since the effects thereof are irrelevant for the purpose of giving a true and correct representation thereof. The amounts payables have, therefore, been stated at their nominal value, unless the discounting process has been applied.

Variations and maturity dates of amounts payable

The single items have been analysed below, highlighting the main events that have affected them.

	Value at the beginning of the year	Variations during the course of the financial year	Value at the end of the financial year	Portion falling due by the end of the financial year	Portion falling due after the end of the financial year
Amounts payable to banks	14,521,817	369,241	14,891,058	14,891,058	-
Advances	1,261,619	(30,718)	1,230,901	1,230,901	-
Amounts payable to suppliers	8,351,494	(1,426,906)	6,924,588	6,924,588	-
Amounts payable to subsidiaries	1,465,702	(212,239)	1,253,463	1,250,241	3,222
Amounts payable to controlling companies	7,685,723	15,023	7,700,746	7,530,191	170,555
Amounts payable to companies controlled by parent companies	506,299	-	506,299	506,299	-
Tax payables	480,020	(80,033)	399,987	399,987	-
Amounts payable to pension and social security institutions	40,196	(9,060)	31,136	31,136	-
Other payables	112,716	1,869,311	1,982,027	1,982,027	-
Total payables	34,425,586	494,619	34,920,205	34,746,428	173,777

The aggregate "amounts payable to banks" was EUR 14,891,058, due by 31/12/2018. The current bank debts arise primarily from ordinary accounts and short-term loans. It was considered necessary to reclassify as debts payable by the next financial year the amount previously considered to be due after the end of the year, as the non-compliance with the terms of the convention pursuant to Article 67 of the Italian Bankruptcy Law dates back to the year 2015.

"Advances" refer to the amounts collected from customers as an advance on projects (EUR 1,000,000), security deposits (EUR 230,901), which are all due within one year (EUR 1,230,900).

The "amounts payable to suppliers" (EUR 6,924,588), which are all due within one year, include the liabilities relating to business transactions entered into with entities other than subsidiaries, affiliated companies and parent companies, with respect to which the invoice has already been received (EUR 6,364,467) or still has to be received (EUR 571,794), net of the credit notes that still have to be received (EUR 11,673).

"Amounts payable to subsidiaries" (EUR 1,253,462, of which EUR 3,222 is due after the next financial year) consist in liabilities relating to transactions entered into with subsidiaries or entered into for the purpose of tax consolidation.

"Amounts payable to parent companies" (EUR 7,700,746, of which EUR 170,555 is due after 31/12/2017) consist of liabilities arising from transactions (PV modules delivery) with the parent company.

"Tax payables" (EUR 399,987), which are all due within the next financial year, are composed mainly of amounts due in relation to the late payment in instalments of VAT for December 2010 (EUR 262,560), to the incorrect CNM 2011 (EUR 54,034), to liabilities for German VAT (EUR 14,641), as well as withholding tax due for employees (EUR 35,045) and free-lance workers (EUR 18,621), debts to IRAP (EUR 14,999) and a tax debt of EUR 87 for substitutive tax.

Description	Balance as at 31/12/2017
Taxes due as a result of tax inspections	240,881
Sanctions applied as a result of tax inspections	75,713
German VAT	14,640
Withholding income tax on wages and salaries	35,045
Withholding income tax on compensation	18,621
IRAP debt	14,999
Substitutive tax	87
Total	399,986

The "amounts payable to pension and social security institutions" (EUR 31,136) are all due within the next financial year and consist exclusively in liabilities for social security contributions paid to the Italian Pension and Social Security Institute - INPS (EUR 30,684), Italian Accident Prevention Institute - INAIL (euro 28) and the Managers' Pension Fund - Fasi (EUR 424).

Description	Balance as at 31/12/2017
Inps	30,684
INAIL	28
Fasi	424
Total	31,136

"Other liabilities" (EUR 1,982,027), which are all due within the next financial year, are mainly composed of amounts payable to employees for salaries due in the month of December 2017 (EUR 15,829), expenses (EUR 1,333), vacation leave and permits (EUR 31,315), other amounts payable to the personnel (EUR 27,363), amounts payable to trade union associations (EUR 45) and various liabilities (EUR 1,906,141).

Description	Final amount
Employee payrolls	15,829
Employees' accrued vacation and permits	31,315
Employees' expenses	1,333
Other amounts payable to employees	27,363
Amounts payable to trade union associations	45
Various liabilities	1,906,141
Total	1,982,026

Various liabilities are classified as follows:

•	CHIARANO CITY HALL for the surface right - EUR 1,695,400;
•	CR VENETO for the enforcement of the surety issued to guarantee the payment of the annual instalment of the surface right held by Chiarano City Hall - EUR 61,100;
•	License RIGHTS over the photovoltaic plant - EUR 23;
•	FONSAI for the enforcement of the guarantee related to the payment of the Milan Customs VAT assessment 2-EUR 149,618.

Breakdown of amounts payable by geographical area

Given that the company conducts its business in international markets, the geographical breakdown for each debt budget line has been shown in the table set out below:

Geographical area	EU	NON-EU	ITALY	Total
Amounts payable to banks	-	-	14,891,058	14,891,058
Advances	-	-	1,230,901	1,230,901
Amounts payable to suppliers	1,397,416	16,170	5,511,002	6,924,588
Amounts payable to subsidiaries	132,544	-	1,120,919	1,253,463
Amounts payable to parent companies	170,555	7,530,191	-	7,700,746
Amounts payable to companies controlled by parent companies	506,299	-	-	506,299
Tax liabilities	14,460	-	385,527	399,987
Amounts payable to pension and social security institutions	-	-	31,136	31,136
Other payables	-	-	1,982,027	1,982,027
Payables	2,221,274	7,546,361	25,152,570	34,920,205

Loans made by the company's shareholders

The company has not received funding from its sole shareholder Solon Italia Gmbh.

E) Accruals and deferred income

Accruals and deferred income are the items calculated in the financial year in question on an accrual basis.

	Value at the beginning of the financial year	Variation during the financial year	Value at the end of the financial year
Accruals	23	(23)	-
Deferred income	99,146	(99,146)	-
Total accruals and deferred income	99,170	(99,169)	0

Notes to the Financial Statements, Profit and Loss Account

Costs and revenues have been accounted for on an accrual basis, regardless of the date of collection and payment, net of returned goods, discounts, allowances and rebates.

Revenues generated from the provision of services have been posted in the accounts when the services have actually been provided.

Revenues and income, as well as costs and charges relating to currency transactions have been recorded in the accounts at the exchange rate for the date on which the relevant transaction was completed.

The collection of receivables and the payment of debts in currencies other than euros generated during the financial year a net negative balance from exchange rate transactions amounting to EUR 1. This amount was posted in Item C)17 bis) of the profit and loss account.

A) Production value

The production value item is composed as follows:

A PRODUCTION VALUE	31/12/2017	31/12/2016	Variation
1) Sales and services revenues	626,725	764,063	-137,338
2) Variations in inventories	-77054	0	-77,054
5) Other revenues and income:	6,140,005	3,455,208	2,684,797
Total	6,689,676	4,219,271	2,470,405

The increase in the value of production (EUR 2,470,405) is due mainly to the variation in other revenues and income, including, among others, the unlocking of credit write-down reserves amounting to EUR 5,457,601.

Breakdown of revenues generated from sales and services by business category

Revenues from the sales and services typically provided by the company, which have been registered under heading A) 1) of the profit and loss account, amount to EUR 626,725, and are primarily attributable to the following items:

Modules sales	77,054
Other sales	46,557
Revenues from O&M Services	386,113
Other typical revenues	117,000
Total revenues from sales and services	626,725

The variations in the closing inventories of work in progress that has been ordered - which has been recorded in Item A) 2) of the Profit and Loss Account - amount to EUR - 77,054.

The other revenues and proceeds from typical operations, which have been recorded in item A) 5) of the profit and loss account, amount to EUR 6,140,005, and are mainly attributable to the following items:

Other services that cannot be recorded in item Al	189,749
Contingent assets	398,729
Capital gains from the sale of assets	93,926
Release of funds:	5,457,601
- of which, receivables from subsidiaries and affiliated companies		4,308,263
- of which, write-down of receivables		685,416
- of which, for product warranties		225,201
- of which, for other risks		139,999
- leasehold improvements		98,722
Total other revenues	6,140,005

B) Production costs

Production costs amount to EUR 12,110,050, and are broken down as follows:

•	purchases of raw materials, consumables and goods: EUR 116;
•	services: EUR 1,414,725;
•	leases and rentals: EUR 680,044;
•	personnel: EUR 513,911;
•	depreciation and write-downs: EUR 2,973,278;
•	variation in raw materials, ancillary, consumables and goods inventories: EUR 2,204;
•	provisions for risks and other reserves: EUR 5,980,000;
•	other operating charges: EUR 527,772.

B) PRODUCTION COSTS	31/12/2017	31/12/2016	Variation
6) Raw materials, subsidiaries, consumables and goods	116	24,790	-24,674
7) Services	1,414,725	1,648,133	-233,408
8) Costs for use of third party assets	680,044	693,939	-13,895
9) Personnel costs	531,911	1,025,373	-493,462
10) Depreciation and write-downs	2,973,278	2,043,171	930,107
11) Changes in inventories	2,204	901,570	-899,366
12) Provisions for other risks	140,000	0	140,000
13) provisions for product guarantees	5,840,000	3,280,000	2,560,000
14) Other operating expenses	527,772	1,750,805	-1,223,033
Total	12,110,050	11,367,781	742,269

Costs for the purchase of raw materials, supplies, consumables and goods

The amount recorded in item B)6) of the profit and loss account (EUR 116) includes expenses attributable to the following types of purchases:

Roundings	-2
Subsidies	-9
Purchase of consumer goods	10
Stationery	117
Total	116

Service costs

The amount recorded in item B)7) of the profit and loss account (EUR 1,414,725) concerns the following items:

Purchase of IT services	30,912
Maintenance	320,056
Administrative services	1,327
Remuneration of statutory and external auditors	71,984
Insurance	50,438
Financial and tax advice	26,248
Creditor composition and judicial liquidator advice cost	334,966
Legal advice	337,446
Telephone service	21,549
Technical advice	81,930
Transportation and vehicles	328
Electrical energy	37,864
Postal services	597
Representation expenses	7,900
Cleaning and waste disposal	5,027
Bank services	23,351
Security service	3,856
Other various services	58,945
Total	1,414,725

Costs for use of third party assets

The amount recorded under item B) 8) of the profit and loss account (EUR 680,044) is made up of real estate lease payments (EUR 824,133, net of the indexing-linking of the interest paid in relation thereto amounting to EUR - 155,306), the leasing and rental of movable property (EUR 11,210), and the leasing and rental of motor vehicles (EUR 6).

Rent for leased buildings	824,133
Indexing-linked lease agreement interest	-150,306
Rent for buildings/warehouse/real estate	11,210
Vehicle expenses	6
Total	680,044

The item "Rent for Buildings" consists of the rent paid for the buildings located in Carmignano di Brenta (PD) - Via dell'Industria e dell'Artigianato 2 (FAB 3) and 6/8 (FAB 4).

The costs for leased assets also include the rents paid for internal material handling equipment and those paid for the long-term leasing of trucks and vehicles.

Personnel costs

The aggregate amount recorded under item B) 9) of the profit and loss account (EUR 531,911) consists of the following costs:

Wages and payrolls	384,177
Social security contributions - Inps	104,902
Social security contributions - Inail	977
Other social security contributions	1,550
Provision for Statutory Severance Fund	26,728
Other personnel costs	13,578
Total	531,911

Depreciation and write-downs

The item "Depreciation and write-downs" (EUR 2,973,278) includes the depreciation of intangible assets (EUR 106,010) and tangible assets (EUR 120,941), other write-downs of assets (EUR 93,089) and the write-downs of receivables recorded as current assets (EUR 2,653,237).

Depreciation of intangible assets	106,010
Depreciation of tangible assets	120,941
Other write-downs of tangible assets	93,089
Write-down of receivables recorded as current assets	2,653,237
Total	2,973,278

The depreciation rates for tangible assets are determined on the basis of the asset's useful life and its exploitation in the production phase.

Variations in raw materials, supplies, consumables and goods inventories

Pursuant to the IAO 12 accounting principles, the amount of EUR 2,204, recorded under item B11) indicates the variations in raw materials, consumables and goods inventories, and also includes the write-downs and the write-backs thereof to be made in the event that the assumptions underlying the write-downs no longer apply.

Provision for risks and other amounts set aside

The amount of EUR 5,980,000 indicated in line B13) in observance of IAO12 is related to the provision created in the light of the complaints received about the damaging of products which are still under warranty and other amounts set aside for risk reserves.

For the purpose of accurately analysing the problem, reference is made to the section on the risks and charges fund, which has described in detail the amount that has been set aside.

Various operating costs

The amount recorded in item B)14) of the profit and loss account (EUR 527,772) is made up of the following costs:

Restructuring costs	59,055
Contingent liabilities	90,307
Losses	5,382
Losses on receivables	3,555
Compensation to customers	33,777
Taxes, charges and postal expenses	74,841
Penalties and default interest paid to customers	148,049
Other costs	112,806
Total	527,772

C) Financial proceeds and charges

Proceeds from equity investments, recorded under item C)15) of the profit and loss account for an overall amount of EUR 215,946, consist of dividends earned from shareholdings in other companies.

Dividends from subsidiaries	189,050
Dividends from affiliated companies	26,896
Total	215,946

Other financial income amounting to EUR 534,729, recorded in the next item C)16), in the format provided for under Article 2425 of the Italian Civil Code, consists mainly in interest income from receivables held as financial assets (EUR 505,997), that has accrued vis-a-vis subsidiaries and affiliated companies: the remaining amount of EUR 28,732 is composed of bank interest income (EUR 12) and amounts due from customers (EUR 28,720).

Interest income from subsidiaries	468,908
Interest income from affiliated companies	37,089
Bank interest income	12
Interest on loans to customers	28,728
Total	534,729

The following are recorded as interest and other financial charges under item C) 17):

interest charged by suppliers amounting to EUR 160, bank interest amounting to EUR 479,987 and other interest expenses amounting to EUR 5,049.

Interest expenses due to suppliers	160
Bank interest expenses	479,987
Interest expenses due to others	5,049
Total	485,196

D) Adjustments of value on financial assets and liabilities

Macroclass D) of the profit and loss account, which consists in costs amounting to EUR 7,055,972, is, in observance of IAO12, composed of:

18) a) revaluations: the revaluation amounting to EUR 1,437,396 of the equity investment in:

•	V.s. 1 srl by EUR 1,000,000, as a result of the underlying assumption of the write-down recorded in previous years no longer applying;
•	Fotosintesi 6 srl - EUR 398,554;
•	Gifa srl - EUR 38,842.

Regarding the values presented above, please see the data reported under the section Long-term receivables from subsidiaries.

19) b) write-down of financial receivables recorded as current assets, due from affiliated companies, amounting to EUR 8,493,367 and related to:

Write-down of financial receivables recorded as current assets	31/12/2017
Cavicchi solar srl	871,376
Energy Italia 3 srl	1,084,726
Msm Solar S.r.l.	1,284,332
Solon Operation	21,404
Sistema Solare srl	115,314
Sistema Lucano 4 srl	4,469,533
Write-down of Chiarano surface right	646,682
Total	8,493,367

20) Current, Deferred and Prepaid Income Taxes

Income taxes

As at 31/12/2017, no taxes for the financial year in question were recorded, since Solon S.p.a. registered:

a)

an IRES tax loss that was greater than the taxable income transferred by the consolidated companies participating to the group's taxation (Articles 117-129 of Italian Presidential Decree No. 917 dated 22 December 1986), with the result that, at fiscal unit level, a tax loss was recorded. This situation has also led to a tax consolidation gain accruing that amounts to EUR 266,609, resulting in the writing off of the "contingent" IRES debt, which has been recorded for accounting purposes, from the consolidated companies to the parent company, which, nevertheless, recorded even higher tax losses;

b)

a negative net production value, for IRAP purposes, as a result of significant reductions in value being recorded and substantial deductions in 2017, which, therefore, did not lead to current regional taxes accruing in the financial year in question.

NOTES TO THE FINANCIAL STATEMENTS, OTHER INFORMATION

The company has fulfilled its obligations under the current data protection legislation (Italian Legislative Decree No. 196/2003) by certifying itself and adopting the necessary measures for the purpose of protecting personal data.

Employment data

The total number of employees of Solon Spa as at 31/12/2017 is 3. The table set out below indicates the average company employment levels, broken down by category, as well as the related changes.

Description	31/12/2017	31/12/2016	Variation
Executives	1	1	0
Clerks	2	3	-1
Workers	0	0	0
Apprentices	0	0	0
Total	3	4	-1

Compensations, advances and loans to directors and statutory auditors and their commitments

	Directors	Statutory auditors
Compensations	333,000	50,029

For the board of directors, the amount determined by the meeting is EUR 333,000, including the social contributions; for the board of statutory auditors, such amount is EUR 50,029, plus accessory legal charges.

Remuneration for external auditor or external auditing firm

Pursuant to Article 2427, paragraph 16-bis of the Italian Civil Code, set out below are the fees paid to the external auditing firm for:

•	auditing the annual accounts;
•	other auditing services.

	Value
Audit of the annual financial statements	21,955
Total fees due to the external auditor or the auditing firm	21,955

The remuneration due to the auditing firm amounts to EUR 21,955.

Categories of shares issued by the company

The share capital consists of 3,899,177 (three million eight hundred and ninety nine thousand one hundred and seventy seven) ordinary par value shares worth 1 (one) Euro each.

Securities issued by the company

There are no bonus shares, convertible bonds, notes or similar securities issued by the company.

Information about financial instruments issued by the company

The company did not issue equity instruments.

The outstanding transactions in foreign currency at year's end were measured by taking into account changes, rates and other parameters at the year's closing date. It must be noted that, in compliance with the provisions of IAO12, there are no derivative instruments hedging foreign currency transactions.

Off-balance sheet commitments, guarantees and contingent liabilities

Off-balance sheet commitments, guarantees and contingent liabilities are summarised in the following table, in which the nature of the collateral provided on company assets has been indicated:

OFF-BALANCE SHEET ACCOUNTS	31/12/2017	31/12/2016	Variation
Description	26,535,812	28,059,342	(1,523,531)
Guarantee obligations:	0.00	0.00	0.00
Our sureties to third parties	0.00	971,750	(971,750)
Our mortgages granted to third parties	0.00	0.00	0.00
Our sureties provided to subsidiaries	3,134,969	3,134,969	0.00
Commitments:	0.00	0.00	0.00
to purchase	0.00	0.00	0.00
to pay rental fees and the related redemption fees	9,268,645	9,820,426	(551,781)
Leased goods	0.00	0.00	0.00
Securities provided by way of collateral	0.00	0.00	0.00
Third party goods being processed	0.00	0.00	0.00
Leased assets	14,132,198	14,132,198	0.00

The variation in the item Our sureties to third parties for the financial year 2016 results from the restitution of sureties issued by Banca Popolare di Vicenza and Cassa di Risparmio del Veneto in relation to Solon SpA in favour of Interporto Solare srl, as well as from the removal from the statements regarding off-balance sheet accounts of the value of the surety issued by Cassa di Risparmio del Veneto in relation to Solon SpA in favour of Chiarano City Hall, due to the fact that the amount payable to the City Hall was recorded in the balance sheet (please see the information presented in the notes or comment to the item "tangible assets to be sold").

The item Our sureties to subsidiaries refers to a surety issued in relation to the subsidiary GiFa srl, whose shares were sold to Manni Group SpA under the deed dated 30.04.2018. Meanwhile, the surety has been returned and, therefore, at the time when the present Notes to the Financial Statements were drafted, the commitment no longer exists.

Information on assets and funding dedicated to specific transactions

The company has not earmarked any of the company's assets solely for a specific transaction pursuant to Article 2447- bis, letter a) of the Italian Civil Code, nor has it entered into loan agreements that come within the scope of Article 2447-bis, letter b) of the Italian Civil Code.

Information on off-balance sheet agreements

There are no agreements that have not been disclosed in the balance sheet.

Information on derivative financial instruments provided for under Article 2427-bis of the Italian Civil Code

There are no derivative financial instruments.

Summary of the financial statements for the parent company that directs and coordinates the company

Notice given pursuant to Article 2497-bis of the Italian Civil Code.

Pursuant to Article 2497-bis, paragraph 4, notice is hereby given that the company's business is directed and coordinated by Solon International LLFZE, with registered office in Fujairah, United Arab Emirates.

In compliance with the specific legislation on corporate groups, a schedule containing the essential data about the financial statements of the company that controls and coordinates Solon S.p.A. is set out below. It should be noted that the latest available financial statements are those for the year ending on 31/12/2016, in which the amounts have been indicated in Dirhams (AED) - United Arab Emirates - exchange rate of 31.12.2016: EUR 1 = AED 0.2575

Solon International LL FZE

BALANCE SHEET

ASSETS	31.12.2016	31.12.2015
Fixed assets	AED	AED
Plant and machinery	413,415,192.00	426,623,492.00
Intangible assets	10,834,235.00	14,572,742.00
Equity investments	90,896,334.00	89,968,948.00
Total fixed assets	515,145,761.00	531,165,182.00
Current assets
Warehouse	12,589,156.00	12,587,308.00
Trade receivables	91,330,242.00	88,582,900.00
Receivables from affiliated companies	52,733,451.00	63,904,603.00
Other financial assets	3,233,369.00	3,145,931.00
Cash and cash equivalents	439,859.00	1,812,370.00
Total current assets	160,326,077.00	170,033,112.00
Total assets	675,471,838.00	701,198,294.00
Liabilities
Shareholders' equity
Share capital	333,150	333,150
Share premium reserve	48,951,850	48,951,850
Statutory reserve	166,575	166,575
Retained earnings	73,708,052	98,067,136
Total Capital	123,159,627	147,518,711
Capital contributions	91,501,088	91,501,088
Total shareholders' equity	214,660,715	239,019,799
Long-term liabilities
Reserve for employee severance indemnities	2,044,774	2,504,942
Medium and long term debts	167,154,174	151,642,703
Total long-term liabilities	169,198,948	154,147,645
Current liabilities
Trade payables	81,661,639	78,536,148
Amounts payable to affiliated companies	4,905,332	21,202,163
Short-term debts	205,045,204	208,292,539
Total current liabilities	291,612,175	308,030,850
Total Liabilities	460,811,123	462,178,495

Solon International LL FZE	31.12.2016	31.12.2015
PROFIT AND LOSS ACCOUNT	AED	AED
Revenues	68,226,327	36,764,773
Cost of sales	(64,283,812)	(57,201,375)
Contribution margin	3,942,515	(20,436,602)
Other income	19,090,443	4,910,320
Directors' fees	(423,236)	(281,464)
General administration and sales expenses	(24,101,117)	(12,875,054)
EBIT	(1,491,395)	(28,682,800)
Financial charges	(22,867,689)	(20,175,316)
Profit (loss) for the year	(24,359,084)	(48,858,116)

Related party transactions

No notice has been given in relation thereto since transactions with related parties, even though significant, have been entered at arm's length (both in terms of the price and the choice of counterparty).

To have a better understanding thereof, administrative services agreements have been entered with subsidiaries which foresee that Solon S.p.A. manages the accounts and perform their obligations towards the ESM.

Off-balance sheet agreements

There are no agreements that have not been disclosed in the balance sheet.

Assets and funding to be used for a specific business

The company has not earmarked any of the company's assets solely for any specific transactions pursuant to Article 2447-bis, letter a) of the Italian Civil Code, nor has it entered into loan agreements that come within the scope of the situation provided for under Article 2447-bis, letter b) of the Italian Civil Code.

NOTES TO THE FINANCIAL STATEMENTS, FINAL PART

Further information

The evaluation criteria set forth herein are compliant with the provisions of the Italian Civil Law, and the amounts posted in the financial statements correspond to those recorded in the accounts, which have been kept in observance of current legislation. These Notes to the Financial Statements, as well as all the financial statements of which they are an integral part, give a true and accurate view of the company's equity, financial position and operating results.

The said amounts have been posted in the financial statements in the manner required by Article 2427 of the Italian Civil Code and in observance of the requirement to the principle of clarity.

On the basis of the information that has been provided, the management body invites the shareholders to approve the financial statements for the year ending 31/12/2017.

The Board of Directors remains, of course, available for any clarifications and information that might be deemed necessary by the shareholders.

Carmignano di Brenta, 27.07.2018

The Board of Directors:

Kasi Vishwanathan

Rolando Gennari

Balance Sheet Compliance Statement

Certification as to the authenticity of this document:

The undersigned, Sandro Cerato, certifies - pursuant to Article 31, paragraph 2-quinquies of Law 340/2000 - that this document is identical to its original filed at the company's offices.

Statement concerning the stamp duty:

Stamp duty paid online through the Padua Chamber of Commerce - Authorisation No. 58253/00/2T dated 30 November 2000, issued by the Ministry of Finance - Revenue Department - PADUA Revenue Agency Office.