PVCS.L Regulatory News (PVCS)

PV Crystalox Solar PLC

Preliminary Results

For the year ended 31 December 2015

PV Crystalox Solar PLC and its subsidiaries (the "Group"), a long established supplier of photovoltaic ('PV') silicon wafers, today announces preliminary results for the year ended 31 December 2015.

Highlights

Shipment volumes broadly unchanged at 203MW (2014: 212MW)

Strategy review period extended in view of improved market conditions

Further restructuring measures to reduce fixed costs

Burden of major long term polysilicon contract removed

ICC arbitration evidentiary hearing scheduled for July 2016

Overview of results

Revenues €64.5m (2014: €53.3m)

LBT of €(13.7)m (2014: €(4.7)m)

Net cash from operating activities €(12.9)m (2014: €(15.7)m)

Net Cash €12.7m (2014:€ 24.6m)

Inventories €23.2m (2014: €28.6m)

Iain Dorrity, Chief Executive Officer commented

"The spot price for wafers, the Group's primary product, has shown some modest recovery during recent months while the price of polysilicon, the key raw material, has fallen to historic lows. The net result of these divergent trends is that wafer prices now exceed the Group's cash cost of production. A recent report from Bloomberg New Energy Finance has highlighted that while considerable surplus capacity exists in the polysilicon, cell and module sectors, the wafer sector could be a potential bottleneck with capacity closely matched to demand. Consequently the tight wafer supply situation and higher wafer prices are expected to persist in the short term."

John Sleeman, Chairman, commented

"The Board remains mindful of the need to protect shareholder value and accordingly believes that extending the period of the strategic review is in the best interest of shareholders. Whilst the Board believes that the long term outlook for the solar industry remains positive and our short term commitment remains strong, our longer term participation remains dependent upon sensible trading conditions in the solar marketplace."

Enquiries:

About PV Crystalox

PV Crystalox Solar is a long established supplier to the global photovoltaic industry, producing multicrystalline silicon wafers for use in solar electricity generation systems.

Our customers, solar cell producers primarily in Asia, process these wafers into solar modules to harness the clean, silent and renewable power from the sun. We continue to contribute to making solar power cost competitive with conventional hydrocarbon power generation and, as such, continue to seek to drive down the cost of production whilst increasing solar cell efficiency.

CHAIRMAN'S INTRODUCTION

Dear Shareholder

Photovoltaic market conditions have been extremely challenging for several years with industry overcapacity depressing prices across the value chain. As a result the Group has since November 2011 been operating under a cash conservation strategy to protect shareholder value whilst preserving the Group's core production capabilities. At the time of the 2015 Interim results the Group announced that it intended to carry out a strategic review of the business. The review was to take account of the Group's cash position and production cost structure, industry overcapacity and the prospects for rational pricing returning to the market. In view of changes in market conditions during recent months that have positively impacted the Group's competitive position the Board considered it sensible to extend the review period. This extension will also provide time to take full account of the outcome of the ongoing dispute with a long term wafer contract customer where we have filed for ICC arbitration. The judgment of the arbitral tribunal is expected later in the year and while the outcome is uncertain, the value of any award if our claim is upheld could be a multiple of the Group's market capitalisation.

During 2015 the Group has carried out further restructuring in order to reduce its fixed costs and has made continued progress in achieving manufacturing cost reductions. Under the current improved market conditions the Group's cash cost of wafer production is now below the market price. The Group has also concluded successfully its obligations under the larger of its two polysilicon purchase contracts which has been a financial burden for several years.

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In 2015 wafer shipments of 203MW were broadly similar to the previous year. Under the cash conservation strategy we trade excess polysilicon and in 2015 we sold significantly higher volumes than in 2014 with the overall result that our total revenues of €64.5 million were 20.9% higher than in 2014. We remain, however, loss making and the loss before tax increased to €13.7 million compared to €4.7 million in 2014 as the levels of other income and exchange gains experienced in 2014 were not repeated in 2015. Net cash at the year end was €12.7 million which was €11.9 million lower than the €24.6 million held at the end of 2014.

Our employees remain one of the Group's key strengths and are vital in ensuring that we retain our core production capabilities. I would like to thank all our employees for their commitment and contribution during these challenging times. In particular, I thank our Japanese employees for their professionalism following the Group's decision to wind up its Tokyo based subsidiary at the end of 2015 and wish them well in the future. Japan had previously been the Group's major wafer manufacturing centre and was our major market until 2013. The decision to wind up operations in Japan followed a marked decline in cell manufacturing and the Group's lack of an active customer base there.

The Board remains committed to maintaining governance levels above those required for a company with a standard listing to ensure that the right people, systems and processes are in place to manage risk and to deliver the Group's agreed strategy. Our internal review found that the Board is operating effectively, and full details of our governance activities can be found in the Corporate Governance section of the Annual Report.

The Board remains mindful of the need to protect shareholder value and accordingly believes that extending the period of the strategic review is in the best interest of shareholders. Whilst the Board believes that the long term outlook for the solar industry remains positive and our short term commitment remains strong, our longer term participation remains dependent upon sensible trading conditions in the solar marketplace.

John Sleeman

Chairman

16 March 2016

STRATEGIC REPORT - OPERATIONAL AND FINANCIAL REVIEW

Operational review of 2015

Market Environment

2015 was another year of strong growth for global PV installations but difficulties persisted for manufacturers as excess capacity, primarily in China, continued to depress prices across the value chain. Prices fell to historic lows during the first half of the year following a short lived recovery seen at the end of 2014. The market environment improved for cell and wafer companies during the second half of the year with prices recovering back to the levels seen at the beginning of the 2015.

The situation for polysilicon producers further worsened in the second half of the year with oversupply and anti dumping duties in China causing prices to plummet. Spot prices fell by 30% during 2015 and week on week declines have continued into 2016. With spot market prices of $13/kg now well below cash costs of production and little prospect of recovery in the short term, some polysilicon producers have been forced to take drastic action. In recent weeks some companies have opted to write down production assets while others have temporarily or permanently shut down production. However, at the same time new production capacity has been brought on stream.

Chinese companies continue to dominate the global PV market: seven out of the world's top ten module manufacturers are based there and account for around 45% of global output. However, several companies suffer from excessive debt levels with one major company collapsing into insolvency in 2015 and others surviving only with support from state or local government owned banks.

Wafers

The spot price for wafers, the Group's primary product, has shown some modest recovery during recent months while the price of polysilicon, the key raw material, has fallen to historic lows. The net result of these divergent trends is that wafer prices now exceed the Group's cash cost of production. A recent report from Bloomberg New Energy Finance has highlighted that while considerable surplus capacity exists in the polysilicon, cell and module sectors, the wafer sector could be a potential bottleneck with capacity closely matched to demand. Consequently the tight wafer supply situation and higher wafer prices are expected to persist in the short term.

Group operations in 2015

Operational capabilities

In recent years the Group's strategy has been to maintain a balance between cash conservation and managing its contractual obligations whilst maintaining a limited market presence and retaining its core production capabilities in UK, Germany and Japan until sensible market conditions return.

During 2015 the Group has carried out further restructuring and made further cuts to its fixed costs by ceasing operations in Japan. The Group's has shifted its focus from wafering at sub-contractors in Japan to increasing its in-house wafer production in Germany where considerable progress has been achieved in cost reduction.

The Group has also cut its fixed costs by permanently closing its oldest ingot production facility in the UK which had been mothballed since 2011 in order to align better its capacity with anticipated future demand. Despite the closure, ingot capacity of 450MW remains and is significantly greater than current production levels.

Japan

The Group's subsidiary in Japan was set up in 2002 to manage both local productions of wafers from ingots/blocks shipped from the UK and wafer sales to end-customers. At that time Japan was the major manufacturing centre for the global solar cell industry with several leading PV companies based there. Japan also provided a thriving sub-contract wafering industry and the majority of the Group's total wafer output throughout the last decade was produced in Japan.

Japan remained the Group's major geographical market until 2013 but by the end of 2013 the Group no longer had an active customer base in Japan as PV companies there were increasingly outsourcing cell production to China and Taiwan. The Group maintained wafering operations in Japan but wafers were instead supplied to customers in Asia. Production was eventually suspended during 2015. As a consequence of these changes the Group decided to wind up its Tokyo based subsidiary at the end of 2015.

Polysilicon Contracts

In common with most PV companies the Group has been burdened by long term polysilicon purchase contracts with prices considerably in excess of market prices. The Group has enjoyed good support from its two suppliers and has been able to negotiate adjustments to contract pricing.

The Group has now concluded its obligations under the largest contract and took delivery of the final shipment of polysilicon under that contract in December 2015. Annual volumes under the remaining contract are significantly lower and are consistent with current production volumes. Shipments are now scheduled to continue until late 2018.

Wafer supply contracts

The Group has a significant outstanding long term sales contract with one of the world's leading PV companies which has failed to purchase wafers in line with its obligations since 2013. The supply contract was signed in 2008 and related to wafer shipments over a seven year period with prices which reflected market prices at that time and which are considerably above current levels. Despite extensive negotiations it has not been possible to reach a mutually acceptable agreement and a request for arbitration was filed in March 2015 with the International Court of Arbitration of the International Chamber of Commerce. The evidentiary hearing of the arbitral tribunal is now scheduled to take place in Frankfurt in July 2016.

One other wafer supply contract remains with a customer which entered insolvency and where shipments stopped in 2012. Claims had been registered with the administrator and a small settlement had been expected before the end of 2015 but should now be received during 2016.

Revenues

Wafer shipments in 2015 of 203MW (2014:211MW) were broadly in line with those in the previous year despite the suspension of wafering in Japan. Monthly production output in Germany during H1 2015 was 43% higher than the average run rate during 2014 and was increased by a further 25% during H2. Shipments were further boosted by running down wafer inventory.

The Group's wafer customers are in Taiwan, which has the largest cell manufacturing base outside China, and in Europe where a few companies have survived the shakeout in recent years. Our wafers are particularly valued for use in modules for the French PV market where incentives in the form of higher feed in tariffs are offered when two out of the three parts of the manufacturing process (wafer/cell/module) are carried out in the EU. In December 2015 the French government announced the results of its CR3 tender which will replace the current scheme and awarded 800MW of PV projects which must be completed within a two year period. The carbon footprint of the complete module is a critically important factor for these projects. Accordingly, the Group expects to maintain its competitive position as the low carbon footprint of our wafers is more favourable than product from competitors based in China and Taiwan.

As in previous years, polysilicon deliveries under the polysilicon contracts during 2015 were considerably in excess of the Group's reduced production requirements and surplus volumes were traded on the spot market in order to manage inventories and maintain cash flows. Trading prices were much lower than the previous year but conditions were more favourable and enabled traded volumes to be significantly higher. Nevertheless inventory levels still increased during the year.

During 2015 the Group commenced selling blocks to third party customers. Block shipment volumes were equivalent to around 9MW and are expected to be higher during 2016.

Strategic Review

At the time of the Group's interim results on 27 August 2015, the Board indicated that it was to carry out a strategic review of the business which it intended to complete by the end of 2015. The review was to take account of the Group's cash position and production cost structure, industry overcapacity and the prospects for rational pricing returning to the market. A very high level summary of the review is as follows:

• At the end of 2015 the Group had €12.7 million of cash and €23.2 million of inventories.

• The Group has been successful in achieving both variable and fixed cost reductions.

• Wafer prices have improved in recent months while excess capacity continues to depress polysilicon prices.

• The divergent trends in polysilicon and wafer prices mean that wafer prices now exceed the Group's cash cost of production, but do not cover all the overheads.

• The Group has significant polysilicon inventory and under current circumstances conversion into wafers is now a more favourable option than trading the surplus polysilicon at market prices.

• The Group has filed for ICC arbitration in March 2015 in a dispute with a long term wafer contract customer who had failed to honour its purchase obligations. The evidentiary hearing of the arbitral tribunal is scheduled for July with a judgment expected before the end of the year.

In view of the recent positive developments in the PV market environment the Board have decided that it would be prudent for the Group to extend the review period to assess the ongoing impact of these changes on the Group's business. Meanwhile the Group will continue its strategy of maintaining a balance between cash conservation and managing its contractual obligations whilst maintaining a limited market presence and retaining its core production capabilities.

Financial review

In 2015 Group revenue increased by 20.9% to €64.5 million (2014: €53.3 million). This was mainly due to an increase in the level of trading of surplus polysilicon feedstock compared to 2014.

During 2015 the Group recognised other income of €1.2 million which was €10.9 million lower than in 2014 when customer compensations included a settlement from the administrator of one of the long-term contract customers in insolvency.

The positive gross margin in the year was €0.2 million whereas in 2014 there was a negative gross margin of €12.4 million. This was driven by changes in the onerous contract provision ("OCP") element within cost of materials and services partially offset by an inventory write down. In 2015 there was a net €17.4 million release in this element of the OCP whilst 2014 was negatively impacted by net charges of €8.2 million. Due to IFRS requirements changes to the OCP are recorded in costs of materials and services, currency gain and finance cost. Details of the onerous contract provision are discussed later in this review. During 2015 there was an inventory write down of €5.5 million as a result of the fall in spot price of polysilicon feedstock during the year.

Within personnel expenses, gross wages and salaries at €7.3 million were 25.9% higher than in 2014 due primarily to a 16% increase in the average number of Group employees associated with 63% increase in wafer production volumes in Germany and additional compensation costs of €0.6 million as a result of the wind up of the Japanese subsidiary. The impact of shift from wafer production at sub-contractors in Japan to in-house wafer production on the income statement is that the direct cost of labour is reported in personnel costs whereas wafer production costs at the subcontractor in Japan were recorded in costs of material and services.

Other expenses at €5.4 million were €1.2 million higher than in 2014 mainly due to legal costs, bad debts and land and building operating lease charges. Of these other expenses, legal costs incurred as a result of the arbitration case involving the customer with the outstanding long term sales contract have resulted in those costs being €0.6m more than in the previous year.

The Group's annual depreciation charge in 2015 remained modest at €0.4 million. During the year the Group surrendered the leases at one of its two production sites and disposed of the furnaces. These furnaces were fully depreciated and last produced ingots in 2011. It should be noted that the Group's remaining plant and equipment, which was largely written down between 2011 and 2013, remains available for use and a significant increase in ingot production can be achieved without a significant increase in capital expenditure or an increase in the annual depreciation charge.

Currency gains and losses, which are significantly impacted by the OCP, were a loss of €0.2 million in 2015 compared to a gain of €9.0 million in 2014.

Net interest expense was €0.6 million (2014: €2.3 million) mainly due to the unwinding of the discount rate used in the calculation of the Group's OCP.

Overall the Group generated a loss before taxes of €13.7 million (2014: €4.7 million). This increased loss of €9 million was driven mainly by €11.0 million reduction in other income, €9.2 million lower currency gains, together with higher personnel costs (€1.8 million) and other expenses (€1.2 million) partly offset by an improvement in gross margins of €12.6 million and €1.7 million lower finance costs.

The Group's cash position at year end of €12.7 million was €11.9 million lower than the net position of €24.6 million at the start of the year. €12.9 million of this was from net cash out flows on operating activities. This was partially offset by positive foreign exchange rate changes on cash of €0.8 million and €0.2 million proceeds from sale of property, plant and equipment.

Inventories decreased during the year by €5.4 million from €28.6 million at the end of 2014 to €23.2 million at the end of 2015. Finished product reduced by €4.0 million as wafer inventory was sold down. Work in progress reduced by €3.4 million primarily due to the cessation of wafer production in Japan which has eliminated the need for lengthy sea freight shipments of ingots from the UK Consolidating wafer production in Germany greatly reduces time taken to turn polysilicon feedstock into multi-crystalline silicon wafers in our three-stage production process. Raw materials inventory increased by €1.9 million compared to 2014 as the increased volume of polysilicon in stock was partially offset by the lower price per kg at the year end. Closing polysilicon feedstock inventory was written down to reflect a reduction in the spot price at the end of 2015. This resulted in a €5.5 million inventory write down in 2015.

Onerous contract provision ("OCP")

In common with many PV companies, the Group previously entered into long-term contracts with two suppliers of polysilicon, which were both in operation during 2015. These contracts were made to secure the supply of raw material necessary to service the Group's long-term wafer supply contracts. However, since the middle of 2011, the market prices of wafers and polysilicon have fallen significantly below the prices agreed in the original contracts meaning that these commitments to purchase polysilicon became onerous.

In previous years, an onerous contract provision has been required in line with IAS 37, however as a result of changes in the underlying assumptions no provision is necessary in the current year. The provision has been removed from the financial statements, due to numerous variables changing within the industry, leading to the Group being able to sell wafers at a positive gross margin at this point of time. The key change is the increase in wafer sales prices during Q4 2015 means the Group is able to sell wafers at a positive gross margin. The completion of the larger contract in December 2015 also eliminated a large percentage of the provision seen in the prior year.

The total reduction in the provision of €15.5million in the year has been driven by a number of factors. These include:

• €10.4 million of the provision from the prior year was utilised during 2015. This reflects the fact that the majority of the prior year provision was attributable to the larger contract which ended in 2015.

• €7.1million of the provision was released. €5.5million of this was due to favourable price negotiations on the larger contract in the period. The remaining €1.6million reflects the ability of the Group to manufacture wafers at a positive gross margin using polysilicon from the remaining contract. This leads to the continuing contract no longer being considered onerous.

• The remainder of the movement is a €0.7 million increase due to the unwinding of the discount rate and a €1.2 million foreign exchange translation movement.

In determining the closing level of provision required in the current year, assumptions were made as to how the polysilicon is expected to be used and subsequently to calculate any losses that will be generated from that use. In 2014 the Group strategy was to both produce wafers for sale, subject to demand, and to trade excess polysilicon as opposed to trading all future purchases of polysilicon. This strategy continued in 2015, although the price at which the excess polysilicon could be traded declined by one third throughout the year.

In 2016 the Group expects to continue to both produce wafers for sale and to trade excess polysilicon which is currently held in inventory. Due to the increase in the wafer sales price in Q4 2015, wafers can now be sold for a price higher than the production costs (excluding overheads). This has formed the basis for management's conclusion that no onerous contract provision is required.

Going concern

The Group's directors continue to operate a cash conservation strategy to enable the Group to manage its operations whilst market conditions remain difficult. The recent improvement in market conditions mean that the Group's cash cost of wafer production is now below the market price. A description of the market conditions and the Group's actions to conserve cash are included in the Strategic Report.

As part of its normal business practice, the Group regularly prepares both annual and longer-term plans which are based on the directors' expectations concerning key assumptions. The assumptions around contracted sales volumes and prices and contracted purchase volumes and prices are based on management's expectations and contractual terms from the remaining polysilicon supply contract and are consistent with the Group's experience in the first part of 2016. The Group looked at the sensitivity in the model by considering different sales volumes and prices and noted that a significant drop in either would leave the Group in a cash positive position in March 2017.

The nature of the Group's operation means that it can vary production levels to match market requirements. As part of the cash conservation measures and the associated planning assumptions, production output currently remains reduced to match expected demand. In line with the Group's strategy of retaining flexibility in production levels, production can be brought back on stream should market conditions allow. In order to manage inventory levels the Group continues to sell excess polysilicon into the spot market.

On 31 December 2015 there was a net cash balance of €12.7 million, including funds held by an employee benefit trust. The value of the polysilicon inventory was €20.3 million.

Therefore, whilst any consideration of future matters involves making a judgement at a particular point in time about future events that are inherently uncertain, the directors, after careful consideration and after making appropriate enquiries, are of the opinion that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Thus the Group continues to adopt the going concern basis of accounting in preparing the annual financial statements.

As a result of these modelling assumptions the base plans indicate that the Group will be able to operate within its net cash reserves for the foreseeable future.

Outlook

Even on a conservative basis, analysts again forecast double digit growth for global PV installations in 2016 and 2017. With the Group's cost structure now aligned better with market prices than for several years the Board takes a slightly more optimistic view of the industry environment. The Board remains acutely aware that such favourable conditions may only be temporary but believes that extending the period of the strategic review is in the best interest of shareholders, especially in view of the judgement of the arbitral tribunal which is expected later in 2016.

Iain DorrityChief Executive Officer16 March 2016

Consolidated statement of comprehensive income

For the year ended 31 December 2015

The accompanying notes form an integral part of these financial statements.

Consolidated balance sheet

As at 31 December 2015

The accompanying notes form an integral part of these statements.

The financial statements on pages • to • were approved by the Board of directors on 16 March 2015 and signed on its behalf by:

Iain Dorrity Company number

Chief Executive Officer 06019466

Consolidated statement of changes in equity

For the year ended 31 December 2015

Consolidated cash flow statement

For the year ended 31 December 2015

The accompanying notes form an integral part of these financial statements.

Notes to the consolidated financial statements

For the year ended 31 December 2015

1. Group accounting policies

Basis of preparation

The Consolidated Financial Statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial information has also been prepared under the historical cost convention except that it has been modified to include certain financial assets and liabilities (including derivatives) at their fair value through profit and loss. These policies have been consistently applied to all years presented unless otherwise stated.

PV Crystalox Solar PLC is incorporated and domiciled in the United Kingdom.

The financial statements for the year ended 31 December 2015 were approved by the Board of directors on 16 March 2016.

Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The functional currency of the parent company is Sterling. The financial information has been presented in Euros, which is the Group's presentational currency. The Euro has been selected as the Group's presentational currency as this is the currency used in its significant contracts. The financial statements are presented in round thousands.

Foreign currency translation

Transactions in foreign currencies are translated into the functional currency of the respective entity at the foreign exchange rate ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the date the fair value was determined. Exchange gains and losses on monetary items are charged to the Statement of Comprehensive Income.

The assets and liabilities of foreign operations are translated to Euros at foreign exchange rates ruling at the balance sheet date. The income and expenses of foreign operations are translated into Euros at the average foreign exchange rates of the year that the transactions occurred in. In the Consolidated Financial Statements exchange rate differences arising on consolidation of the net investments in subsidiaries are recognised in other comprehensive income under "Currency translation adjustment".

Use of estimates and judgements - overview

The preparation of financial statements in conformity with adopted IFRS requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income, expenses and contingent liabilities. Estimates and assumptions mainly relate to the useful life of non-current assets, the discounted cash flows used in impairment testing, the establishing of provisions for onerous contracts, taxes, share-based payment and inventory valuations. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. Actual values may vary from the estimates. The estimates and the assumptions are under continuous review with particular attention paid to the life of material plant.

Critical accounting and valuation policies and methods are those that are both most important to the depiction of the Group's financial position, results of operations and cash flows and that require the application of subjective and complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent years. The critical accounting policies that the Group discloses will not necessarily result in material changes to our financial statements in any given year but rather contain a potential for material change. The main accounting and valuation policies used by the Group are outlined in the following notes. While not all of the significant accounting policies require subjective or complex judgements, the Group considers that the following accounting policies should be considered critical accounting policies.

Use of estimates - property, plant and equipment impairment

Property, plant and equipment are depreciated over their estimated useful lives. The estimated useful lives are based on estimates of the period during which the assets will generate revenue. The carrying amount of the Group's non-financial assets, other than inventories, are subject to regular impairment testing and are reviewed annually and upon indication of impairment.

Having considered the current and, lack of certainty of, future profitability of other Group companies, the majority of property, plant and equipment has previously been written down to scrap value.

Although we believe that our estimates of the relevant expected useful lives, our assumptions concerning the business environment and developments in our industry and our estimations of the discounted future cash flows are appropriate, changes in assumptions or circumstances could require changes in the analysis. This could lead to additional impairment charges or allowances in the future or to valuation write-backs should the expected trends reverse.

Use of estimates - deferred taxes

To compute provisions for taxes, estimates have to be applied. These estimates involve assessing the probability that deferred tax assets resulting from deductible temporary differences and tax losses can be utilised to offset taxable income in the future.

Due to the lack of certainty around future profits, all deferred tax assets continue to be unrecognised in the year's balance sheet.

Use of estimates - provisions - onerous contract provisions

In keeping with normal practice in the industry at the time, the Group entered into long-term supply contracts for its raw material, polysilicon, with two major suppliers of which one is remaining at the end of 2015. Given the significant unexpected decline in market prices for polysilicon and silicon wafers, the resultant cost of polysilicon under these contracts has meant in recent years the Group expecting losses on these contracts. However, the spot price for wafers has shown some modest recovery during recent months while the price of polysilicon, the key raw material has fallen to historical lows and is still declining. The net result of these divergent trends is that wafer prices now exceed the Group's cash cost of production.

Consequently the financial statements no longer include a provision (2014: €15.5 million) for the discounted total of currently anticipated losses under these contracts.

Use of estimates - inventory valuation

Given the significant unexpected decline in market prices for polysilicon and silicon wafers, the carrying amount of inventory has been reduced to net realisable value.

Net realisable value has been determined as estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Any improvement in anticipated selling prices would reduce the level of writedown necessary and would be taken as profit in 2017.

Basis of consolidation

The Group financial statements consolidate those of the Group and its subsidiary undertakings drawn up to 31 December 2015. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

The results of any subsidiary sold or acquired are included in the Consolidated Statement of Comprehensive Income up to, or from, the date control passes.

Consolidation is conducted by eliminating the investment in the subsidiary with the parent's share of the net equity of the subsidiary.

On acquisition of a subsidiary, all of the subsidiary's separately identifiable assets and liabilities existing at the date of acquisition are recorded at their fair value reflecting their condition at that date. Goodwill arises where the fair value of the consideration given for a business exceeds the fair value of such net assets. So far no acquisitions have taken place since inception of the Group.

Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. All intra-group transactions, balances, income and expenses are eliminated upon consolidation.

Going concern

The Group's directors continue to operate a cash conservation strategy to enable the Group to manage its operations whilst market conditions remain difficult. The recent improvement in market conditions mean that the Group's cash cost of wafer production is now below the market price. A description of the market conditions and the Group's actions to conserve cash are included in the Strategic Report.

As part of its normal business practice, the Group regularly prepares both annual and longer-term plans which are based on the directors' expectations concerning key assumptions. The assumptions around contracted sales volumes and prices and contracted purchase volumes and prices are based on management's expectations and are consistent with the Group's experience in the first part of 2016.

During the year one of the Group's two long-term contracts with external suppliers for purchase of polysilicon, our main raw material, for volumes in excess of current reduced production requirements ended. The Group's management has been successful in reaching accommodation with these suppliers to secure periodic contract amendments and adjust prices and volumes. As a result, these amendments have brought the terms more in line with current market pricing. To manage inventory levels the Group continues to sell excess polysilicon into the spot market.

The nature of the Group's operation means that it can vary production levels to match market requirements. As part of the cash conservation measures and the associated planning assumptions, production output currently remains reduced to match expected demand. In line with the Group's strategy of retaining flexibility in production levels, production can be brought back on stream when market conditions allow.

As a result of these modelling assumptions, coupled with the recovery in wafer pricing seen in the fourth quarter of 2015, the base plans indicate that the Group will be able to operate within its net cash reserves for the foreseeable future.

On 31 December 2015 there was a net cash balance of €12.7 million ((2014: €24.6 million), including funds held by an employee benefit trust.

Therefore, whilst any consideration of future matters involves making a judgement at a particular point in time about future events that are inherently uncertain, the directors, after careful consideration and after making appropriate enquiries, are of the opinion that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Thus the Group continues to adopt the going concern basis of accounting in preparing the annual financial statements.

Effects of new accounting pronouncements

Accounting standards, IFRICs and other guidance in effect or applied for the first time in 2015

· Annual improvements 2013

· IFRIC 21, 'Levies'

The above have not made a material difference to the financial statements.

In issue, but not yet effective

The following interpretations are in issue, but not yet effective. The Group does not believe that any will have a material impact on the Group's financial positions, results of operations or cash flows.

· Amendment to IAS 19 regarding defined benefit plans

· Annual improvements 2012

· Amendment to IFRS 11, 'Joint arrangements'

· Amendment to IAS 16, 'Property, plant and equipment' and IAS 38, 'Intangible assets'

· Amendments to IAS 16, 'Property, plant and equipment'

· IFRS 14, 'Regulatory deferral accounts'

· Amendments to IAS 27. 'Separate financial statements'

· Amendments to IFRS 10, 'Consolidated financial statements' and IAS 28, 'Investments in associates and join ventures'

· Annual improvements 2014

· Amendment to IAS1, 'Presentation of financial statements'

· Amendment to IFRS 10 and IAS 28 on investment entities

· IFRS 9, 'Financial instruments'

· IFRS 15 'Revenue from contracts with customers'

Intangible assets

Intangible assets are stated at cost net of accumulated amortisation. The Group's policy is to write off the difference between the cost of intangible assets and their estimated realisable value systematically over their estimated useful life. Amortisation of intangible assets is recorded under "Depreciation and impairment of property, plant and equipment and amortisation of intangible assets" in the Consolidated Statement of Comprehensive Income.

Acquired computer software licences and patents are capitalised on the basis of the costs incurred to purchase and bring into use the software.

The capitalised costs are written down using the straight-line method over the expected economic life of the patents and licences (five years) or the software under development (three to five years).

Internally generated intangible assets - research and development expenditure

Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding is recognised in the Consolidated Statement of Comprehensive Income.

Property, plant and equipment

Property, plant and equipment is stated at acquisition or construction cost, net of depreciation and provision for impairment. No depreciation is charged during the period of construction. The cost of own work capitalised is comprised of direct costs of material and manufacturing and directly attributable costs of manufacturing overheads. All allowable costs up until the point at which the asset is physically able to operate as intended by management are capitalised. The capitalised costs are written down using the straight-line method.

The Group's policy is to write off the difference between the cost of property, plant and equipment and its residual value systematically over its estimated useful life. Reviews of the estimated remaining lives and residual values of individual productive assets are made annually, taking commercial and technological obsolescence as well as normal wear and tear into account.

The total useful lives range from five to ten years for plant and machinery and up to 15 years for other furniture and equipment. Property, plant and equipment are reviewed for impairment at each balance sheet date or upon indication that the carrying value may not be recoverable.

The gain or loss arising on disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the Consolidated Statement of Comprehensive Income.

Impairment

The carrying amount of the Group's non-financial assets, is subject to impairment testing upon indication of impairment.

If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs of disposal and value in use based on an internal discounted cash flow evaluation. The asset is subsequently reviewed for possible reversal of the impairment at each reporting date.

Leased assets

Leases are categorised as per the requirements of IAS 17. Where risks and rewards are transferred to the lessee, the lease is classified as a finance lease. All other leases are classed as operating leases.

Rentals under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term. Lease incentives are spread over the total period of the lease.

The obligations from operating lease contracts are disclosed among financial obligations.

For the reporting year, no assets were recorded under finance leases.

Other income

Income other than that from sale of silicon products is recognised at the point of entitlement to receipt and shown as other income.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are recorded initially at fair value net of transaction costs if changes in value are not charged directly to the Consolidated Statement of Comprehensive Income. Subsequent measurement depends on the designation of the instrument, as follows:

Amortised cost

• short-term borrowing, overdrafts and long-term loans are held at amortised cost; and

• accounts payable which are not interest bearing are recognised initially at fair value and thereafter at amortised cost under the effective interest method.

Held for trading

• derivatives, if any, comprising interest rate swaps and foreign exchange contracts, are classified as held for trading. They are included at fair value, upon the valuation of the local bank.

Loans and receivables

• non-interest bearing accounts receivable are initially recorded at fair value and subsequently valued at amortised cost, less provisions for impairment. Any change in their value through impairment or reversal of impairment is recognised in profit or loss net of any advance payment held by the Group where a right of offset exists; and

• cash and cash equivalents comprise cash balances and call deposits with maturities of less than three months together with other short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Interest and other income resulting from financial assets are recognised in profit or loss on the accruals basis, using the effective interest method.

Inventories

Inventories are stated at the lower of cost or net realisable value.

Acquisition costs for raw materials are usually determined by the weighted average method.

For finished goods and work in progress, cost of production includes directly attributable costs for material and manufacturing and an attributable proportion of manufacturing overhead expenses (including depreciation) based on normal levels of activity. Selling expenses and other overhead expenses are excluded. Interest is expensed as incurred and therefore not included. Net realisable value is determined as estimated selling price for silicon wafers or polysilicon less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Contingent liabilities

Provisions are made for contingent liabilities where there is an obligation at the balance sheet date, an adverse outcome is probable and associated costs can be estimated reliably. Where no obligation is present at the balance sheet date no provision is made, although, where material, the contingent liability will be disclosed in a note.

Current and deferred taxes

Current tax is the tax currently payable based on taxable profit for the year, including any under or over provisions from prior years.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.

Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Consolidated Statement of Comprehensive Income, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

Public grants and subsidies

As the German wafering operation is located in a region designated for economic development, the Group received both investment subsidies and investment grants. Government grants and subsidies relating to capital expenditure were credited to the "Deferred grants and subsidies" account and released to the Consolidated Statement of Comprehensive Income by equal annual instalments over the expected useful lives of the relevant assets under "Other income".

Government grants of a revenue nature, mainly for research and development purposes, were credited to the Consolidated Statement of Comprehensive Income in the same year as the related expenditure.

All required conditions of these grants have been met and it is the Group's intention that they will continue to be met.

Provisions

Provisions are formed where a third party obligation exists, which will lead to a probable future outflow of resources and where this outflow can be reliably estimated. Provisions are measured at the best estimate of the expenditure required to settle the obligation, discounted to present value. The resulting charge upon the discounting being unwound is recorded as a finance cost.

Accruals

Accruals are recognised when an obligation to meet an outflow of economic benefit in the future arises at the balance sheet date.

Accruals are initially recognised at fair value and subsequently at amortised cost using the effective interest method.

Revenue recognition

Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer. Ownership is considered to have transferred once products have been received by the customer unless shipping terms dictate any different. Revenues exclude intra-group sales and value added taxes and represent net invoice value less estimated rebates, returns and settlement discounts. The net invoice value is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied.

The Group has outsourced some elements of production to external companies. In cases in which the Group retains power of disposal over the product or product element, a sale is only recognised under IFRS when the final product is sold. The final product is deemed to have been sold when the risks and rewards of ownership have been transferred to a third party.

Finance income and costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested and dividend income and gains.

Interest income is recognised in the Consolidated Statement of Comprehensive Income as it accrues, using the effective interest method.

Defined contribution pension plan

For defined contribution plans, the Group pays contributions to pension insurance plans on a contractual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are incurred.

Employee benefit trust

All assets and liabilities of the Employee Benefit Trust ("EBT") have been consolidated in these financial statements as the Group has de facto control over the trust's net assets as the parent of its sponsoring company.

Deferred revenue and other long-term assets

As is common practice within the sector, the Group, where appropriate, both seeks to receive deposits from customers in advance of shipment and makes deposits in advance of supplies of silicon tetrachloride and polysilicon feedstock.

These deposits are held on the Balance Sheet and matched against revenue/cost as appropriate.

Deposits received from customers are not discounted, as the effect is not considered to be material.

Share-based payments

The Group has applied the requirements of IFRS 2, 'Share-based payments'. The Group issues equity-settled share-based payments to certain employees. These are measured at their fair value at the date of the grant using an appropriate option pricing model and are expensed over the vesting year, based on the Group's estimate of the number of shares that will eventually vest. Grants of shares made during 2008 and 2007 are not subject to performance criteria and were valued at the date of the grant at market value. During 2011 awards were granted under the Performance Share Plan to employees. The share options granted are subject to performance criteria required for the option to vest and are considered in the method of measuring fair value. Fair value is assessed using the Black-Scholes method.

Charges made to the Consolidated Statement of Comprehensive Income in respect of share-based payments are credited to the share-based payment reserve.

Shareholders' equity

Shareholders' equity is comprised of the following balances:

• share capital is comprised of 160,278,975 ordinary shares of 5.2 pence each;

• share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of share issue;

• other reserves arising from the issue and redemption of B shares in 2013;

• investment in own shares is the Group's shares held by the EBT that are held in trust for the benefit of employees;

• share-based payment reserve is the amount charged to the Consolidated Statement of Comprehensive Income in respect of shares already granted or options outstanding relative to the vesting date or option exercise date;

• the reverse acquisition reserve is the difference between the value of the assets acquired and the consideration paid by way of a share for share exchange on 5 January 2007;

• accumulated losses/retained earnings is the cumulative profit retained by the Group; and

• currency translation reserve represents the differences arising from the currency translation of the net assets in subsidiaries.

2. Other income

Customer compensations relate to settlements with two of the Group's previous contract wafer customers.

3. Cost of materials and services

The cost of materials is attributable to the consumption of silicon, ingots, wafers, chemicals and other consumables as well as the purchase of merchandise.

4. Personnel expenses

Included within pension costs is €nil (2014: €nil) relating to actuarial losses on defined benefit pension obligations.

Employees

The Group employed a monthly average of 141 employees during the year ended 31 December 2015 (2014: 122).

The Group employed 136 employees at 31 December 2015 (31 December 2014: 138).

The remuneration of the Board of directors, including appropriations to pension accruals, is shown in the Directors' Remuneration Report•.

5. Other expenses

Amounts payable to the Group's auditors:

6. Finance income and costs

Finance income and costs are derived/incurred on financial assets/liabilities and recognised under the effective interest method.

The resulting charge upon unwinding the discount charge on provisions is recorded as a finance cost.

7. Income taxes

The total tax rate for the German companies is 32.275% (2014: 32.275%). The effective total tax rate in the United Kingdom was 20.25% (2014: 21.5%) and the total tax rate in Japan was 35.07% (2014: 39.91%). These rates are based on the legal regulations applicable or adopted at the balance sheet date.

The rate of corporation tax in the UK will fall to 19% with effect from 1 April 2017 and to 18% in 2020. The German rate will be unchanged in 2016 and in Japan it is expected the rate will fall to 31.33% from April 2016 onwards.

The impact of these further changes is not expected to be material.

The tax on the Group's results before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the losses of the consolidated entities as follows:

8. Segment reporting

The chief operating decision-maker, who is responsible for allocating resources and assessing performance, has been identified as the Group Board. The Group is organised around the production and supply of one product, multicrystalline silicon wafers. Accordingly, the Board reviews the performance of the Group as a whole and there is only one operating segment. Disclosure of reportable segments under IFRS 8 is therefore not made.

Geographical information 2015

* Excludes: financial instruments, deferred tax assets and post-employment benefit assets.

Two customers accounted for more than 10% of Group revenue each and sales to these customers are as follows (figures in €'000):1. 27,254 (Taiwan) and2. 20,462 (Canada).

Geographical information 2014

* Excludes: financial instruments, deferred tax assets and post-employment benefit assets.

Three customers accounted for more than 10% of Group revenue each and sales to these customers are as follows (figures in €'000):1. 22,154 (Taiwan);2. 10,509 (Taiwan); and3. 6,289 (Rest of Europe).

9. Earnings per share

Net earnings per share is computed by dividing the net loss for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted net earnings per share is computed by dividing the loss for the year by the weighted average number of ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including share options.

As the Group is currently loss making, the diluted loss per share is equal to the basic loss per share.

Basic shares and diluted shares for this calculation can be reconciled to the number of issued shares (see note 28) as follows:

10. Cash and cash equivalents

All short-term deposits are interest bearing at the various rates applicable in the business locations of the Group.

11. Trade accounts receivable

All receivables have short-term maturity. During the year net receivables of €418k were written off (2014: €nil).

None of the unimpaired trade receivables are past due at the reporting date. The age of financial assets past due but not impaired is as follows:

These amounts represent the Group's maximum exposure to credit risk at the year end. All amounts outstanding as at 31 December 2015 and due at date of signing had been received.

12. Inventories

Inventories include finished goods and work in progress (ingots and blocks), as well as production supplies. The change in inventories is included in the Consolidated Statement of Comprehensive Income in the line "Cost of materials".

Inventory writedowns of €5.5m are included in cost of materials in 2015 (2014: €nil).

13. Prepaid expenses and other assets

Prepaid expenses primarily comprise polysilicon feedstock deposits.

14. Current tax assets

Income tax recoverable relates to reclaimable capital gains tax on interest received.

15. Intangible assets

Intangible assets relate to software licenses.

16. Property, plant and equipment

17. Other non-current assets

18. Deferred taxes

Analysis of deferred tax assets and liabilities:

Deferred tax assets arising as a result of losses are recognised where, based on the Group's budget, they are expected to be realised in the foreseeable future.

As at 31 December 2015 there were unrecognised potential deferred tax assets in respect of losses of €56.6 million (2014: €49.5 million).

19. Trade accounts payable

The book value of these payables is materially the same as the fair value.

20. Accrued expenses

21. Provisions

Movement in provisions is shown below:

Warranty provisions unwound over a year from the date of sale, per the terms of the warranty agreement with customers.

The onerous contract provision was an allowance for the loss arising on the difference between raw material costs under these contracts and the anticipated selling price of the Group's end product. This is discussed further in note 1.

22. Deferred grants and subsidies

The grants from governmental institutions are bound to specific terms and conditions. The Group is obliged to observe retention periods of five years for the respective assets in the case of investment subsidies as well as of five years for assets under investment grants, and to retain a certain number of jobs created in conjunction with the underlying assets. In cases of breach of the terms, the grants received must be repaid. In the past, the grants received were subject to periodic audits, which were concluded without significant findings or adjustments.

The deferred grants and subsidies in the year under review consist of the following:

23. Current tax liabilities

Current tax liabilities comprise both corporation and other non-VAT tax liabilities, calculated or estimated by the Group companies, as well as corresponding taxes payable abroad due to local tax laws, including probable amounts arising on completed or current tax audits.

24. Other current liabilities

25. Deferred revenue

Where appropriate the Group enters into long-term contracts with its customers and may request payment deposits from them ahead of the supply of goods. At 31 December 2015, such deposits amounted to €3.2 from one customer (2014: €3.2 million from one customer). Additionally €0.3m revenue from one customer was deferred as required by IFRS 15 (2014: nil).

26. Share capital

Summary of rights of share capital

The ordinary shares are entitled to receipt of dividends. On winding up, their rights are restricted to a repayment of the amount paid up to their share in any surplus assets arising. The ordinary shares have full voting rights.

Shares held by the EBT

At 31 December 2015, 3,853,910 ordinary shares of 5.2 pence were held by the EBT (2014: 3,853,910). The market value of these shares was €0.471 million (2014: €0.640 million). Additionally, the cash balance held by the EBT on 31 December 2015 was €0.739 million (2014: €1.015 million).

In December 2014 the Directors agreed to write down the value of the shares held by the EBT to the market value at 31 December 2014. The share price was 13 pence per ordinary share of 5.2 pence each. This adjustment altered the value of the shares held by the EBT and reduced retained earnings by €6.868 million.

27. Share-based payment plans

The Group established the PV Crystalox Solar PLC EBT on 18 January 2007, which has acquired, and may in the future acquire, the Company's ordinary shares for the benefit of the Group's employees.

The Group currently has four share incentive plans in operation which are satisfied by grants from the EBT.

PV Crystalox Solar PLC Performance Share Plan ("PSP")

This plan was approved by shareholders at the 2011 AGM under which awards are made to employees, including executive directors, consisting of a conditional right to receive shares in the Company. The awards will normally vest after the end of a three year performance period, to the extent that performance conditions are met as detailed in the Directors' Remuneration Report (see pages • and •)

No awards were made during 2015 (2014: nil).

On 26 May 2011 awards over up to 3,038,454 ordinary shares were granted to key senior employees including the three executive directors on the Board at that time. These awards were subject to achieving growth in both total shareholder return and earnings per share in the performance period ending on 31 December 2013. In view of the failure to achieve the minimum required performance as described in the Remuneration Report these awards lapsed.

PV Crystalox Solar PLC Executive Directors Deferred Share Plan ("EDDSP")

At the AGM on 28 May 2009 a bonus plan (with deferred share element) for executive directors was approved by the Company's shareholders in the context of bringing the arrangements more in line with market practice and aligning executive directors' pay more closely with the interests of the Company's shareholders. Half of each bonus was to be payable in cash and the other half deferred and payable in shares under the EDDSP which vests three years after the award date. Awards of deferred shares under the EDDSP are to be satisfied on vesting by the transfer of shares from the existing PV Crystalox Solar PLC Employee Benefit Trust.

No awards were made during 2015 (2014: nil). On 24 March 2011 awards over 358,423 shares were made to executive directors, as detailed in the Directors' Remuneration Report the award over 246,416 shares vested in May 2014.

PV Crystalox Solar PLC Long Term Incentive Plan ("LTIP")

This is a long-term incentive scheme under which awards are made to employees consisting of the right to acquire ordinary shares for a nominal price subject to the achievement of specified performance conditions at the end of the vesting period which is not less than three years from the date of grant. Under the LTIP it is possible for awards to be granted which are designated as a Performance Share Award, a Market Value Option or a Nil Cost Option. To date Performance Share Awards and Market Value Options have been granted.

Market Value Option ("MVO")

An MVO is an option with an exercise price per share equal to the market value of a share on the date of grant. The vesting period of each award is three years from the date of grant and the award must be exercised no later than ten years following the date of grant.

On 24 November 2008 an MVO over 200,000 ordinary shares was granted to a senior employee and this option is exercisable from 24 November 2011 at £1.00 per share subject to an agreed performance criteria. This option is now exercisable at any time until 23 November 2018.

On 26 March 2009 an MVO over 200,000 ordinary shares was granted to a senior employee and this option is exercisable from 26 March 2012 at 76 pence per share subject to an agreed performance criteria, and on 25 September 2009 MVO awards over 1,200,000 ordinary shares were granted to key senior employees and these options are exercisable from 25 September 2012 at 76.9 pence per share subject to agreed performance criteria.

No awards were issued in 2015 (2014: nil).

PV Crystalox Solar PLC Share Award Bonus plan ("SABP")

This plan was approved by the Board in January 2014 under which awards can be made to employees, excluding the executive directors. Under the SABP conditional awards are granted for a specific number of ordinary shares which may be acquired for nil consideration. On 30 January 2014 SABP awards were granted key senior employees over 2,550,000 shares. These awards vested on 31 March 2015 and following the decision of the Remuneration Committee to permit the recipients to receive cash from the EBT to settle the awards all awards were settled in cash.

On 31 March 2015 SABP awards were granted key senior employees over 1,975,000 shares. These awards are due to vest on 31 March 2016.

PV Crystalox Solar PLC Share Incentive Plan ("SIP")

The SIP is an employee share scheme approved by HM Revenue and Customs in accordance with the provisions of Schedule 8 to the Finance Act 2000. On 26 February 2008 awards were granted to UK employees of 500 shares each over a total of 37,000 ordinary shares of 2 pence. These 37,000 ordinary shares of 2 pence each were transferred from the EBT into the SIP. The shares in the SIP were subject to the share consolidation so that each holding of 500 ordinary shares of 2 pence became a holding of 192 shares of 5.2 pence following the 5 for 13 share consolidation in 2013.

No awards vested in 2015. During 2014 awards over 4,608 shares vested due to employees leaving the Group as good leavers due to redundancy or retirement.

The Group recognised a total credit before tax of €269,000• (2014: €181,000) related to equity-settled share-based payment transactions during the year.

The number of share options and weighted average exercise price ("WAEP") for each of the schemes is set out as follows:

* The weighted average exercise price for the PSP, SABP, PSA and SIP options is £nil.

No share options were exercised during the year and no options were exercised in 2014.

29. Risk management

The main risks arising from the Group's financial instruments are credit risk, exchange rate fluctuation risks, interest rate risk and liquidity risk. The Board reviews and determines policies for managing each of these risks and they are, as such, summarised below. These policies have been consistently applied throughout the period.

Credit risk

The main credit risk arises from accounts receivable. All trade receivables are of a short-term nature, with maximum payment terms of 60 days, although the majority of customers currently have payment terms of 45 days. In order to manage credit risk, local management defines limits for customers based on a combination of payment history and customer reputation. Credit limits are reviewed by local management on a regular basis. As a supplier to some of the leading manufacturers of solar cells, the Group has a limited number of customers. In 2015 42.3% of the Group's sales are related to the largest customer (2014: 41.5%). The number of customers accounting for approximately 95% of the annual revenue was ten, which was up from seven in 2014. Where appropriate, the Group requests payment or part payment in advance of shipment, which generally covers the cost of the goods. Different forms of retention of title are used for security depending on local restrictions prevalent on the respective markets. The maximum credit risk to the Group is the total of accounts receivable, details of which can be seen in note 11.

Cash is not considered to be a high credit risk due to all funds being immediately available, consideration being given to the institution in which it is deposited and the setting of counterparty limits. All institutions used have a minimum Moody's credit rating of Ba3.

Exchange rate fluctuation risks

In the financial year 2015 95% (2014: 93%) of sales revenue was invoiced in US Dollars potentially exposing the Group to exchange rate risks.

Significant cash funds are denominated in currencies other than the presentational currency of the Group. Excess cash funds not needed for local sourcing are exposed to exchange rate and associated interest fluctuation risks, particularly so in the United Kingdom. The exchange rate risk is based on assets held in currencies other than Euros.

The spot prices of wafers and polysilicon are quoted in US Dollars and this influences the price the Group can obtain. The Group sells its products in a number of currencies (mainly US Dollars, Euros and Japanese Yen) and also purchases goods and services in a number of currencies (mainly Euros, Japanese Yen, Sterling and to a small extent US Dollars).

The following exchange rates were used to translate individual companies' financial information into the Group's presentational currency:

Hedging strategy

The Group sells to customers in the worldwide photovoltaic market and sells in two main currencies: US Dollars (95%) and Euros (5%). It operates its wafering factory within the Eurozone and during the early part of 2015 paid for the sub-contracting of wafer production in Japan in Japanese Yen. However, the ingot manufacturing operation is within the United Kingdom and therefore a relatively small proportion of overall costs are in Sterling, being mainly related to personnel costs, overheads and utilities (most of the raw materials are purchased in Euros and Japanese Yen).

During 2015 the net loss on foreign currency adjustments was €0.2 million (2014: Gain of €9.0 million). This gain was mainly related to the revaluation of balance sheet provisions (in particular the onerous contract provision, the conversion of currency balances in respect of Group advances or loans, currency debtor/creditor balances, currency advance payments to raw material suppliers and currency cash balances). These can be broken down into the following broad categories:

In addition to the above, upon translation of net assets in the consolidation, there was a positive impact in 2015 of €2.9 million (2014: positive €2.5 million) recording as a currency translation adjustment which is shown in the Consolidated Statement of Comprehensive Income as "other comprehensive income".

Interest rate risk

The Group has limited exposure to interest rate fluctuation risks, since the Group does not have any borrowings.

Sensitivity analysis of the accruals and loans outstanding at the year end has not been disclosed as these are virtually all current and paid in line with standard payment terms.

The Group had a cash balance at the end of 2015 of €12.7 million (2014: €24.6 million) and places these cash funds on deposit with various quality banks subject to a counterparty limit of €15 million. Accordingly, there is an interest rate risk in respect of interest receivable which amounted to €0.1 million in the year (2014: €0.1 million). The Group is cash positive and current interest rates are low. The risk of interest rates falling is considered small and in any case would have a small impact on the Group's income statement and cash flows. Group management considers that in the medium term it is more likely that interest rates might rise. The impact of interest rate rises would positively impact the Group's profits and cash flow.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages its exposure to liquidity risk by regularly reviewing net debt and forecast cash flows to ensure that current cash resources are available to meet its business objectives. The Group is exposed to the worldwide photovoltaic market where wafer prices have remained below industry production costs for several years. Accordingly, the market pricing of the Group's main product (silicon wafers) has been under pressure. Against this difficult market background, Group management introduced a cash conservation strategy in 2011. This cash conservation plan has been maintained, so that the Group can optimise its cash position whilst these conditions persist. Various measures have been taken to adjust production to levels appropriate to current market conditions. At the same time production capacity has been maintained so that this can be utilised when market conditions allow. The next phase of the cash conservation plan covers the period until 31 December 2015. Due to changing market and economic conditions, the expenses and liabilities actually arising in the future may differ materially from the estimates made in this plan.

On 31 December 2015 the Group had a net cash balance of €12.7 million (2014: €24.6 million) and this together with cash flow projections from the cash conservation plan indicate, assuming the projections are broadly correct, that the Group will have adequate cash reserves until at least twelve months beyond the signing of the accounts.

Financial assets and liabilities

Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns to shareholders and other stakeholders and to maintain an optimal capital structure that strikes the appropriate balance between risk and the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group from time to time uses debt as a natural hedging instrument, where amounts are borrowed in the same foreign currency as it holds assets (for instance debtors) denominated in the same foreign currency. However, these borrowings have always been lower than the balance of cash and cash equivalents in any period. Accordingly, the Group has maintained a net cash positive position. This is a different approach to others in the photovoltaic industry where being heavily indebted (particularly in China) has become the norm. The directors believe that the Group's policy of not carrying any net debt has significantly reduced the Group's risk, which has been particularly important during the current extremely difficult market conditions.

The Group defines capital as all elements of equity.

The Group's capital (plus its cash and cash equivalents) is set out in the following table. The Group is not subject to any externally imposed capital requirements.

The Group is net cash positive and therefore does not have any gearing. Accordingly, the leverage ratio has no meaning and has not been calculated.

29. Calculation of fair value

There are no publicly traded financial instruments (e.g. publicly traded derivatives and securities held for trading and available-for-sale securities) nor any other financial instruments held at fair value.

30. Contingent liabilities

The Group did not assume any contingent liabilities for third parties. No material litigation or risks from violation of third parties' rights or laws are pending at the time of approval of these financial statements.

31. Other financial obligations

Lease agreements (operating leases)

The leases primarily relate to rented buildings and have terms of no more than six years. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

There were no significant purchase commitments at the year end.

32. Related party disclosures

Related parties as defined by IAS 24 comprise the senior executives of the Group and also companies that these persons could have a material influence on as related parties as well as other Group companies. During the reporting year, none of the shareholders had control over or a material influence in the parent company.

Transactions between the Company and its subsidiaries have been eliminated on consolidation.

As part of a settlement with the administrators of a previous customer, Iain Dorrity is one of three directors of a subsequently formed SPV.

The remuneration of the directors, who are the key management personnel of the Group, is set out in the audited part of the Directors' Remuneration Report

33. Dividends and return of cash

No dividends were paid in 2015 (2014: €nil).

34. Post balance sheet events

There are no significant post balance sheet events.