Nasdaq Copenhagen A/S

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sonar

Announcement no. 10 2016

Contacts:

CEO Anders Wilhjelm – tel. +45 79 30 02 01

CFO Michael H. Jeppesen – tel. +45 79 30 02 62

Director, Stakeholder Relations Charlotte Risskov Kræfting – tel. +45 40 34 29 08

Annual Report 2015

Solar Group revenue and EBITA for 2015 were in line with our expectations. The Board of Directors will propose 2015 dividend distribution of DKK 10.00 per share at the annual general meeting.

CEO Anders Wilhjelm says:

"The 2015 operating profit is the best that Solar has generated in the last five years, and we are pleased with this improvement. We generated organic growth of some 5% within our installation segment, while the industry segment came to around 4%. But growth declined steadily over the year, so we are taking a cautious approach to our outlook for 2016."

Solar A/S

Executive Board

Industrivej Vest 43

DKK - 6600 Vejen

Denmark

Tel. +45 79 30 00 00

www.solar.eu

Ref. AW/crk

CVR no. 15908416

24 February 2016

Financial highlights (DKK million)*	Q4 2015	Q4 2014	2015	2014
Revenue	2,819	2,773	10,587	10,252
EBITA	99	-3	296	117
Earnings before tax	66	-166	201	-122
Cash flow from operating activities	524	306	331	187
Financial ratios (%)
Organic growth	3.2	2.2	5.2	0.4
EBITA margin	3.5	-0.1	2.8	1.1
Net working capital, year-end/revenue (LTM)	9.3	10.8	9.3	10.8
Net working capital, average/revenue (LTM)**	11.8	12.4	11.8	12.4
* Due to our divestment of the assets of Solar Deutschland GmbH, 2014 and 2015 figures in this announcement relate to our continuing operations.
** Calculated as an average of the past four quarters' inventories, trade receivables and trade payables.

Page 2 of 2

2015 revenue

Revenue matched our expectations.
Organic growth came to 5.2%, up from 0.4% in 2014. Adjusted for number of working days, organic growth was still 5.2% in 2015, up from 0.1% in 2014.

2015 EBITA

EBITA was in line with our expectations.
EBITA was up by DKK 9m due to a change in pension plans in the Netherlands and further DKK 2m owing to an adjustment to the variable part of the selling price of Aurora Group.
In comparison, 2014 EBITA saw negative effects from restructuring costs of DKK 86m, write-down of buildings of DKK 31m and Solar 8000 costs of DKK 13m but a positive effect from the adjustment of the variable part of the selling price of Aurora Group of DKK 3m.

Dividends distribution

The Board of Directors will submit a proposal to the annual general meeting, asking for dividend distribution in 2015 of DKK 10.00 per share.

2016 outlook

We expect neither market nor organic revenue growth in 2016. We expect EBITA at 2015 levels, excluding the positive one-off seen in 2015.
The MAG45 acquisition's impact on revenue is expected to be in the range of DKK 310m but limited on EBITA.
As previously announced, we plan to invest in our digital platforms to strengthen the customer experience. This will have a negative impact on 2016 profitability, and our present outlook recognises this.

Q4 presentation - audio webcast and teleconference today

The presentation of Annual Report 2015 will be made in English on 24 February 2016 at 11:00 CET. The presentation will be transmitted as an audio webcast and will be accessible via www.solar.eu. Participation will be possible via a teleconference.

Teleconference call-in numbers:

DK: tel. +45 354 455 83
UK: tel. +44 203 194 0544
US: tel. +1 855 269 2604

Yours faithfully
Solar A/S

Anders Wilhjelm

Enclosures: Annual Report 2015, pages 1-112 + Q4 2015
Quarterly information, pages 1-10. Please see Annual Report 2015 for comments on Q4 2015.

Facts about Solar

Solar Group is a leading European sourcing and services company, operating primarily within the electrical, heating and plumbing, and ventilation technology sectors. Our core business centres on product sourcing, value-adding services and optimisation of our customers' businesses.

Being a sourcing and services company, we focus on each individual customer. We always strive to understand our customers' unique and genuine needs in order to provide relevant, personal and value-adding services, turning our customers into winners.

Solar Group is headquartered in Denmark, generated revenue of approximately DKK 10.6bn in 2015 and has some 3,000 employees. Solar has been listed on Nasdaq Copenhagen since 1953, and operates under the short designation SOLAR B. For more information, please visit www.solar.eu.

Disclaimer

This announcement was published in Danish and English today via Nasdaq Copenhagen. In the event of any inconsistency between the two versions, the Danish version shall prevail.

CVR NO.: 15 90 84 16

SOLAR A/S ANNUAL REPORT 2015

solar
stronger together

SOLAR ANNUAL REPORT 2015 Contents

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

Management's review

03 Preface
04 Solar Group – in brief
05 Financial highlights

06 Results and outlook

07 Segments
08 Outlook 2016 and financial targets
09 Financial review

12 Strategy and business

13 Strategy
15 Business focus
17 Employees
19 Group structure

20 Responsibility and management

21 Risks
25 Corporate social responsibility
26 Corporate governance
27 Shareholder information
30 Executive Board and Solar Group Management
32 Board of Directors

Financial statements

34 Consolidated financial statements
36 Summary for the Solar Group
38 Statement of comprehensive income
39 Balance sheet
40 Cash flow statement
41 Statement of changes in equity
42 Notes

78 Parent's financial statements
80 Statement of comprehensive income
81 Balance sheet
82 Cash flow statement
83 Statement of changes in equity
84 Notes

109 Statements and reports
110 Statement by the Executive Board and the Board of Directors
111 Independent auditor's report

Disclaimer

This annual report was published in Danish and English via Nasdaq Copenhagen. In the event of any inconsistency between the two versions, the Danish version shall prevail.

ROCKHANNUAL REPORT 2015 MANAGEMENT'S REVIEW

ProActive

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

GED

CONTENTS

SOLAR IS MOVING IN THE RIGHT DIRECTION

Taking on a new corporate identity is a huge step and an evolutionary journey. Although these things take time, we are now on our way, moving in the right direction when it comes to generating profitable growth.

Our transformation into a fully fledged sourcing and services company is underpinned by our continuous adjustments of our business model. Through this, our customers get the best possible experiences at all times, and we sharpen our competitiveness.

We must challenge traditional thinking and factor in our customers more in all aspects of our business – we are getting better at this but there is still room for improvement. We must align our product and services offerings as well as our know-how and solutions with our customers' current and not least future needs.

Naturally, customers may not know or recognise their future needs, meaning that we need to establish dynamic dialogues where we both listen to and challenge our customers.

Some employees find this transition hard as it requires that they are highly willing to adapt and sharpen their skills. Others

are very positive in welcoming these new challenges and possibilities. At management level, however, we are determined: this transformation is a necessity.

In the management team, we also see that employees work together across the organisation and utilise each other's skills more than previously. This is a trend that we want to see more of – we want it to become a natural component of a Solar employee's make-up. So, innovative thinking and knowledge sharing across professional and national boundaries are new requirements within Solar.

Employee development and recruitment are key to Solar because these are vital in ensuring that we have the right, innovative, commercially-minded and entrepreneurial workforce to propel Solar to the next level. This world is changing at increasing speed, demanding that Solar stay in motion as well. This poses a challenge all around but it is also an opportunity for those who can and want to grow – and Solar does.

Anders Wiltheim

CEO

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW Solar Group - in brief

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

SOLAR — A SOURCING AND SERVICES COMPANY

Solar Group is a leading European sourcing and services company headquartered in Denmark.

Our core business is product sourcing, value-adding services and optimisation of our customers' businesses.

Our customer base is composed of both contractors, mainly electrical and plumbing, and a broad range of industrial customers.

Being a sourcing and services company, we focus on each individual customer. We strive to always understand our customers' unique and genuine needs in order to provide relevant, personal and value-adding services, making our customers win.

FINANCIAL RATIOS 2015

| 10,587
Revenue in DKK million | 296
EBITA in DKK million |
| --- | --- |
| 9.3%
Net working capital at year-end | 39.2%
Equity ratio |
| 45.9%
E-business share of revenue | 2,871
Employees |

OUR BUSINESS MODEL

We work with our customers:
- to bundle their spend and improve their sourcing
- to create the best offer and to proactively develop alternatives
- to optimise their productivity, optimise transportation costs and minimise required inventory
- to improve their employees' skills and efficiency

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW Financial highlights

MANAGEMENT'S REVIEW

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CONTENTS

FINANCIAL HIGHLIGHTS

Consolidated (DKK million)	2015	2014	2013	2012	2011
Revenue	10,587	10,252	10,463	12,201	11,408
Earnings before interest, tax, depreciation and amortisation (EBITDA)	362	227	307	348	381
Earnings before interest, tax and amortisation (EBITA)	296	117	225	263	291
Earnings before interest and tax (EBIT)	249	-73	160	198	199
Earnings before tax (EBT)	201	-122	106	156	146
Net profit for the year	167	-234	21	117	91
Balance sheet total	4,671	4,574	4,961	5,724	5,398
Equity	1,831	1,732	2,138	2,203	2,112
Interest-bearing liabilities, net	-184	302	316	559	897
Cash flow from operating activities, continuing operations	331	187	310	427	361
Net investments in property, plant and equipment	-25	-41	-81	-52	-17

Financial ratios (% unless otherwise stated)

Organic growth	5.2	0.4	-5.4	-0.1	3.6
Organic growth adjusted for number of working days	5.2	0.1	-5.0	0.9	-
Gross profit	20.8	21.2	21.8	21.2	21.1
EBITDA margin	3.4	2.2	2.9	2.8	3.3
EBITA margin	2.8	1.1	2.2	2.2	2.6
Effective tax rate	33.2	-47.2	17.3	33.0	37.8
Net working capital (year-end NWC)/revenue (LTM)	9.3	10.8	10.7	12.3	15.8
Gearing (net interest-bearing liabilities/EBITDA), no. of times	-0.5	1.3	1.0	1.6	2.3
Return on equity (ROE) excl. amortisation	12.0	-2.3	4.0	8.6	8.7
Return on invested capital (ROIC) excl. amortisation	10.1	0.7	6.9	6.9	6.9
Equity ratio	39.2	37.9	43.1	39.2	39.0
Share ratios (DKK unless otherwise stated)	2015	2014	2013	2012	2011
---	---	---	---	---	---
Earnings per share per share outstanding (EPS)	21.26	-29.79	2.67	14.88	11.54
Earnings per share excl. amortisation per share outstanding (EPS)	27.25	-5.60	10.95	23.15	23.30
Dividends per share	10.00	7.00	12.00	6.65	5.20
Dividends in % of net profit for the year (payout ratio)	46.8	-	421.5	44.8	45.0

Employees

Average number of employees (FTEs), continuing operations	2,871	2,898	2,943	3,505	3,200

Financial ratios are calculated in accordance with the Danish Finance Society's "Recommendations & Financial Ratios 2015".

In general, restatements have been made of income statements, cash flow and key ratios for the discontinued operations in Solar Deutschland GmbH for 2013 and 2014 and for the divestment of Aurora Group Danmark A/S for 2012 and 2013, whereas these are not adjusted for previous years. In accordance with IFRS, the balance sheet has not been restated. The key ratio interest-bearing liabilities, net, has been adjusted for interest-bearing receivables relating to the divestment of Aurora Group Danmark A/S, up until the settlement in Q1 2015.

Effective from the presentation of Annual Report 2014, Solar changed its presentation currency from EUR to DKK. Balance sheet items as at 1 January 2014 have been translated at a price of 746.030, while the 2014 income statement has been translated at a price of 745.879. Apart from this, the change will not affect earnings before tax, net profit for the year or earnings per share.

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW
Results and outlook
06
MANAGEMENT'S REVIEW
FINANCIAL STATEMENTS
CONTENTS

RESULTS AND OUTLOOK

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW Results and outlook: Segments

MANAGEMENT'S REVIEW

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CONTENTS

SEGMENTS

TRENDS - INSTALLATION AND INDUSTRY

SEGMENT REPORTING

Our segment reporting is divided into these three business segments: Installation, Industry and Others.

In explanation, these business segments are based on our customers' affiliations. The Installation segment covers electrical and heating and plumbing fitting and installation. Industry includes a number of sub-segments such as production and maintenance, marine and offshore as well as utility and infrastructure business. The third segment, Others, covers a number of small business areas.

The Installation and Industry segments differ in their varying supply requirements and diverse dynamics.

Installation is highly dependent on construction and renovation activities, while Industry's activity levels are more closely linked to overall economic performance, exports and trends in commodity prices.

TRENDS IN THE INSTALLATION SECTOR IN 2015 AND Q4

Construction activities remain low in a number of our markets, having a negative impact on installation in general. Solar generated organic growth of around 5%* in 2015 but this has been declining since Q3.

In Q4, Solar's total organic growth within Installation came to around 3%* as growth in this sector in our remaining markets offset downwards trends in Benelux and Denmark. The decline in Benelux is partly attributable to a loss of customers as Conelgro was fully integrated into Solar Nederland.

TRENDS IN THE INDUSTRY SECTOR IN 2015 AND Q4

A continued slowdown characterised the industry sector in our operating markets in 2015, markedly since Q2, and Solar realised organic growth of some 4%* over the year. The North Sea offshore industry is feeling the effects of the energy market price decreases, leading to significantly reduced activity levels within this sector.

As a result, Q4 saw 3%* negative growth, mainly attributable to this significant drop in the Norwegian offshore market, and growth in our remaining markets could not sufficiently offset this. Adjusted for the negative trend in the offshore market, industry sector growth resembled that of the installation segment.

Overall, we find that we retained our market share within the two business segments.

Organic growth adjusted for number of working days.

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW Results and outlook: Outlook 2016 and financial targets

MANAGEMENT'S REVIEW

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OUTLOOK 2016

OUTLOOK 2016 AND FINANCIAL TARGETS

OUTLOOK FOR SOLAR'S BUSINESS AREAS

Q4 went as expected for Solar. We do, however, still note a certain degree of uncertainty about market trends; in Norway particularly where the offshore sector is expected to keep to the low level seen in the second half-year.

So, we do not see any major changes to the market conditions from that reported in Quarterly Report Q3 2015.

INSTALLATION

Overall, we expect Installation activity levels in 2016 to match 2015 levels.

In the Danish market, new construction and renovation activities remain low, and market forecasts only confirm that we are not likely to see any notable improvement in 2016.

We still expect positive growth in the Swedish market but at a lower level than in 2015 as, for example, recent changes to a Swedish subsidy scheme take effect.

In Norway, there may be some natural spillover effect from the slowdown in offshore activities, but we still expect the installation segment to generate slightly positive growth.

The Dutch market remains somewhat unsteady. The number of available commercial leases remains high, while fewer planning permissions for both commercial and private housing construction are issued compared with last quarter. On the other hand, planning permission levels are still higher than in the matching 2014 period. Overall, our outlook is for modest positive market growth.

We expect the Polish market to produce positive growth, while the general outlook for our remaining markets is modest market growth.

INDUSTRY

Our industry outlook, excluding the offshore segment, is for positive growth.

Financial ratios	Financial targets
Growth	We aim to generate profitable growth above market levels.
ROIC (incl. amortisation and tax)	We aim to deliver long-term returns on invested capital of more than 10%
Equity ratio	35-40%
Gearing (NIBD/EBITDA)	1.5-2.5
Payout ratio (of earnings after tax)	35-45%

We maintain our outlook for a slightly positive trend in the Danish market, excluding offshore, and the Swedish market should also see positive growth.

Norwegian trends are hard to pin down at present. Uncertainty particularly relates to the expected low investment levels within offshore, matching those of late 2015 – with a derived negative impact on the marine sector.

Poland is expected to generate positive trends, while the overall outlook for our remaining markets is low growth.

FINANCIAL OUTLOOK

The MAG45 acquisition's impact on revenue is expected to be in the range of DKK 310m but limited on EBITA.

We expect neither market growth nor organic revenue growth in 2016, and we expect EBITA to remain at 2015 levels less the positive one-off of DKK 9m from a change in pension plans in the Netherlands that we saw in 2015.

As previously announced, we plan to invest in our digital platforms to strengthen the customer experience. This will have a negative impact on 2016 profitability, and our present outlook recognises this.

FINANCIAL TARGETS

The creation of long-term value for our customers and shareholders is what drives us. Our very simple strategy is to generate profitable growth.

This has led to the introduction of targets for growth and ROIC, bringing our financial targets from three to five. Our equity ratio, gearing and payout ratio targets all still stand.

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW Results and outlook: Financial review

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FINANCIAL REVIEW

EBITA IMPROVED BY DKK 179M

Solar generated organic growth of 5.2% and improved EBITA by DKK 179m at DKK 296m in 2015. Revenue and EBITA were in line with our expectations.

We finalised the sale of the assets of Solar Deutschland in Q1 as described in company announcement no. 6 2015. The DKK 50m profit from the divestment is recognised under profit or loss of discontinued operations.

Consequently, as was the case in Annual Report 2014, Solar Deutschland is presented as a discontinued operation and, unless otherwise stated, this report is only concerned with Solar's continuing operations.

REVENUE

Revenue was up at DKK 10.6bn from DKK 10.3bn in 2014, with a similarly positive organic growth result at 5.2%, up from 0.4% in 2014. This organic growth figure of 5.2% for 2015 still stands when adjustments have been made for number of working days, with the 2014 figure dropping to 0.1%.

EBITA

EBITA rose to DKK 296m, or 2.8% of revenue, from DKK 117m or 1.1% of revenue in 2014.

Gross profit was down at 20.8% from 21.2% in 2014. This decrease is attributable to one-off sales of low-profit products in Solar Sverige and Solar Danmark, our geographical mix and the current competitive market situations.

In 2015, staff costs saw a positive impact of DKK 9m from the change of pension plans in the Netherlands from defined benefit to defined contribution.

Part of the selling price from the Aurora Group divestment in 2013 was variable. In 2015, a DKK 2m adjustment was made to this part, while a DKK -3m was made in 2014. These figures are recognised under other operating income and costs. Also, 2014 EBITA was impacted by restructuring costs of DKK 86m, Solar 8000 costs of DKK 13m and write-down of buildings at fair value of DKK 31m.

Normalised EBITA

DKK million	2015	2014
EBITA	296	117
Effect of divestment of Aurora	-2	3
Change to pension plans in the Netherlands	-9	-
Restructuring costs	0	86
Solar 8000 costs	0	13
Write-downs at fair value	0	31
Normalised EBITA	285	250
Normalised EBITA margin in %	2.7	2.4

Organic growth in %

EBITA margin

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW Results and outlook: Financial review

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FINANCIALS

Financials, net, totalled DKK 48m against DKK 49m in 2014. In connection with the sale of a property in Denmark in 2016, a value adjustment of hedging instruments of DKK -10m has been reclassified from other comprehensive income to financial expenses in 2015.

INCOME TAX

Income tax totalled DKK 67m, up from DKK 58m in 2014, which corresponds to an effective tax rate of 33.2% against -47.2% in 2014. Adjusted for a change to the tax base of non-capitalised losses in subsidiaries, the effective tax rate was 27.4% in 2015.

NET PROFIT FOR THE YEAR

Net profit for the year came to DKK 167m, up from DKK -234m in 2014. Results of continuing operations made up DKK 134m, up from DKK -180m in 2014, while results of discontinued operations amounted to DKK 33m, up from DKK -54m in 2014. Results of discontinued operations for 2015 include profit of DKK 50m from the divestment of the assets of Solar Deutschland.

BALANCE SHEET

The balance sheet total was up DKK 97m at DKK 4,671m.

Distribution of dividends for 2014 reduced equity by DKK 55m. The resulting net effect before tax on financial instruments, used to hedge future transactions, resulted in gains of DKK 35m, up from the 2014 loss of DKK 43m. 2015 profit includes reclassified value-adjustments of hedging instruments for financial expenses of DKK 10m, deriving from the sale of a property in Denmark in 2016.

167

Net profit for the year in DKK million

39.2%

Equity ratio

331

Cash flow from operating activities in DKK million

474

Total cash flow in DKK million

Exchange differences deriving from the translation of equity in subsidiaries to Danish kroner impacted group equity negatively by DKK 7m, down from DKK 36m in 2014.

Solar's current share buy-back programme resulted in buy-back of treasury shares of DKK 19m in 2015. In all, equity was increased by DKK 99m and came to DKK 1,831 at year-end 2015.

Percentage-wise, equity came to 39.2%, staying within Solar's desired equity ratio range of 35-40%.

Invested capital totalled DKK 1,662m at year-end, down from DKK 2,172m at year-end 2014.

CASH FLOW

Net working capital dropped to 11.8% of revenue from 12.4% in 2014, when stated as a four-quarter average. Net working capital at year-end was also down at 9.3% of revenue, under the 2014 figure of 10.8%.

Cash flow from operating activities amounted to DKK 331m, up from DKK 187m in 2014. Changes to non-interest-bearing liabilities had a DKK 215m impact on cash flow from operating activities in 2015, and trade payables contributed DKK 173m.

Also in 2015, Solar received the final rates of both the fixed and variable parts of the acquisition price from the divestment of Aurora Group in 2013. The total amount came to DKK 37m, which had a positive effect on cash flow from investing activities and brought this item to DKK -24m, an increase from the DKK -58m figure in 2014.

Cash flow from financing activities amounted to DKK -125m, up from DKK -151m in 2014. Dividends distributed to the company's shareholders made up DKK 55m of this, down from DKK 94m in 2014. As mentioned above, treasury shares worth DKK 19m were also purchased in 2015.

Any existing trade payables were settled when the group divested the Solar Deutschland assets. Naturally, this had a significant impact on cash flow from discontinued operations which were DKK -53m, down from DKK -29m in 2014. The full consideration from the divestment of Solar Deutschland's assets is included under cash flow from investing activities, discontinued operations, totalling DKK 345m compared with DKK -1m in 2014.

So, total cash flow came to DKK 474m, up from DKK -52m in 2014.

As an improvement on 2014, interest-bearing debt, net, was down DKK 486m at DKK -184m, leading to gearing of -0.5, a drop from 1.3 times EBITDA in 2014.

As at 31 December 2015, Solar had undrawn credit facilities of DKK 744m. Solar's agreement with its main banker is not subject to any covenants.

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW Results and outlook: Financial review

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REMUNERATION OF EXECUTIVE BOARD AND MANAGEMENT GROUP

Solar's general meeting has adopted overall guidelines for incentive programmes. Under these guidelines, the Board of Directors has introduced an incentive scheme that, for example, includes the granting of share options to the Executive Board and Solar's Group Management team.

The exercise price of share options granted in 2016 is fixed at the average price on Nasdaq Copenhagen for the first 10 business days following the publication of Annual Report 2015. The granting will take place on 9 March 2016, when the exercise price will also be calculated. The number of options cannot be determined until this time but is expected to amount to approximately 30,000 options, counting those granted to the Executive Board.

EVENTS AFTER THE END OF THE PERIOD UNDER REVIEW

Solar A/S acquired MAG45, an integrated supply company headquartered in Eindhoven in the Netherlands, on 1 February 2016.

MAG45 will operate as a complementary business but we will pursue synergies across Solar Group. The business will continue to use the MAG45 brand, and full responsibility will remain with current management. Please see company announcement no. 6 2016 for more information.

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW

Strategy and business

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13 SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW Strategy and business: Strategy

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STRATEGY

WE WANT TO BOOST OUR CUSTOMERS' BUSINESSES

Being a sourcing and services company, Solar focuses on each individual customer. We want to work closely with them to offer tailored services that underpin their efforts to optimise daily processes, develop their skills and run more profitable businesses.

Partnerships based on shared value creation are the future and will make both our customers and Solar winners in the market.

So, we want to change our customers' focus from only looking at the prices of individual products to seeing the total costs. We want to make them better understand the overall calculations that allow for warehouse, transport, waste and administrative costs combined. Together, relying on mutual trust, we can identify solutions for each individual customer to optimise his business and improve profitability.

In a perfect world, customers of the future hold no stock. Everything is delivered on time, and customers work exclusively and efficiently with a supply chain partner such as Solar.

Services such as our one-hour Fastbox service cover the few, unplanned deliveries to contractors. And the contractor

In a perfect world, customers hold no stock in future. Everything is delivered on time, and customers work exclusively and efficiently with a supply chain partner such as Solar.

utilises the wait efficiently by, for example, conducting a service check-up of the building, upselling at the same time.

The same goes for industry where downtime is also costly. Here, customers need a partner like Solar that offers a full product range. A partner, that also knows how to package products to meet strict safety requirements, or how to package and label products in a specific way tailored to facilitate industry production processes.

For us at Solar, sourcing and services is all about optimising our collaboration with our customers because when this brings value, both parties win.

Naturally, we realise that our business model does not necessarily appeal to all customers. But we believe that

this is the way forward and that the customers who join us in believing in value-adding collaborations are the winners of tomorrow.

DIGITAL TRENDS

We invest in digital developments and have made it a strategic priority to focus on development activities that give customers improved user experiences and facilitate their routines.

It must be easy to do business with Solar. This is why our digital customer touch points – webshop, app and EDI – must be user-friendly and intuitive, underpinning our continued growth in online sales.

Indeed, we realise that our massive investments in back-end systems – SAP in particular – over the last few years have taken a front seat and that, to some extent, this has meant putting our front-end development activities on the back burner. But our focus has changed over the past year, with the SAP system platform now firmly in place.

As we expect our digital solutions to strengthen our business, we are now focusing on front-end solutions. To accomplish our goals, all customer touch points must be optimised, making it easy to do business with Solar. We appreciate that a professional customer is also a consumer – at work.

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW

Strategy and business: Strategy

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Experience tells us that customers have increasingly high expectations of digital solutions, and we strive to provide the overall best solutions in the market – making both our customers and us more efficient.

In line with this strategy, customers will also find that we focus more on digital marketing. Our aim is twofold: to reach customers on all platforms and to tailor our marketing more to the individual customer.

OUR DIGITAL TURNOVER ONLY GETS BETTER AND BETTER

E-business now makes up 45.9% of group revenue and with our digital revenue quickly approaching DKK 5bn, Solar is one of the largest e-business companies in Northern Europe.

SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW

Strategy and business: Business focus

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BUSINESS FOCUS

EVERYTHING STARTS WITH THE CUSTOMERS

WE ANALYSE DATA TO GROW OUR BUSINESS

Data plays an increasingly vital role in Solar's growth. Data analysis is on the rise because it gives us a better understanding of our customers' needs and behaviour and heightens our ability to offer them the best and most relevant solutions.

Also, we are more financially transparent and utilise our financial knowledge operationally to gain deeper insight into our profitability and the commercial focus areas to push.

PRODUCTIVE CUSTOMERS EQUAL GOOD CUSTOMERS

Our customers' productivity and profitability are closely linked. Our customers should not waste time on procurement, logistics or inefficient processes. Instead, they should focus on adding the most value to their businesses – just like we do.

Looking at procurement, our product knowledge is extensive and our sourcing capabilities broad which has made more and more customers realise the value of us buying products on their behalf. We analyse each customer's purchasing patterns to find optimisation possibilities. By reducing complexity, increasing buying volume and making better product choices, we reduce total costs.

Our success with Fastbox deliveries in Denmark led to the introduction of the concept in Sweden, the Netherlands and Norway in 2015. This spread of Fastbox is an excellent example of how we apply our skills and know-how across the organisation.

The fact that we now offer customers in all of our four main markets this core service only makes us stronger – both

Our success with Fastbox deliveries in Denmark led to the introduction of the concept in Sweden, the Netherlands and Norway in 2015.

when it comes to improving customer productivity and in giving our surroundings a better understanding of the definition of a sourcing and services company.

Certainly, customers have welcomed the concept and are starting to see the benefits of the Fastbox which meets urgent product requests. More specifically, Solar delivers within one hour wherever the customer needs it, rather than the customer spending costly time picking up materials or holding an unnecessarily large stock. This improves customer productivity and profitability.

A new addition is the digital Fastbox that allows customers to order urgently needed products with an even simpler process than normally. Just a few clicks on their mobile, tablet or computer and the order is processed.

For customers, having a trustworthy partner is key, and we will work even closer together with our customers in future to meet their needs and ensure quick response times. Those customers who are able to utilise this will increase their profitability, and, naturally, this makes sense to everyone involved.

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ACQUISITIONS

We have the financial muscle to make acquisitions and continue to work determinedly at uncovering the right opportunities that will complement our existing activities, thus expanding, developing and improving the group's business base.

However, we also have the patience necessary to ensure that we make the right acquisitions. We will only go for sensible expansions involving business activities that promote synergies by letting us utilise the skills available across the group.

So, our acquisition focus lands on two types of business activities. Either ones that enable Solar to offer existing customers additional products and services compared with today. Or completely new ones that tend to unfamiliar customer segments but where Solar's existing skills set can be utilised to underpin both activities.

Strategically, recently acquired Dutch integrated supply company MAG45 fits well with both our sourcing and services focus and with our interest in increasing our industrial exposure.

The enterprise, acquired on 1 February 2016, will operate as a complementary business but naturally, we will pursue synergies across Solar Group. The key rationale behind the acquisition of MAG45 is growth.

DIVESTMENTS

Profitability is a core priority, and the divestment of our operations in Solar Deutschland in early 2015 was in line with our profitable growth strategy.

It was hard to see a way to turn the time and again loss-making German subsidiary profitable. So, the decision

was made to sell off that business which led to improved group profitability and more determined management efforts.

SALE OF OUR FORMER GROUP HEADQUARTERS

Also, we sold our former group headquarters in Kolding, Denmark, with handing-over on 1 February 2016. We reduced costs and freed up capital with the move of our group functions to the Danish national headquarters in Vejen, Denmark.

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EMPLOYEES

WE FOCUS ON DEVELOPMENT

NEW MANAGEMENT PROFILES

We have made a targeted effort to appoint new types to our management teams, at both the group and national levels, to ensure continuous development of Solar's business.

Moreover, we focus on both competence boosts and on defining roles and responsibilities because our managers are co-responsible for developing Solar both locally and across the group.

EMPLOYEE DEVELOPMENT AND RECRUITMENT

We make active efforts to develop our employees and want to make it clear that employees at all levels can find interesting careers in Solar. To do so, we look at each individual employee's potential.

In 2015, we implemented a uniform recruitment process with identical assessment tools, and this step also led to the switch to a cross-border IT tool for recruitments. Moreover, we have launched a global introduction programme based on e-learning aimed at making new employees familiar with Solar before their first work day.

In the annual employee performance appraisals, we focus on performance, competence development, development potential, mobility and career plans.

In terms of management, career paths are made visible to all to highlight that management jobs are also obtainable for specialists or project workers, for example.

We focus on both competence boosts and on defining roles and responsibilities because our managers are co-responsible for developing Solar both locally and across the group.

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We run an internal management training programme that promotes management competences and tools, letting our managers grow.

Our efforts to develop strong community collaborations across the group paid off in 2015, furthering the ambition to enable people not situated in our group functions to drive initiatives across the whole Solar Group just the same.

DIVERSITY

The Solar Group's approach is for all employees in the individual enterprises to be treated in the same way, regardless of gender, age, race and religion so that all employees have equal opportunities when it comes to employment, employment terms, training and promotions.

We aim for a high degree of diversity as we believe that this makes us a strong business.

Solar always hires the most qualified candidate regardless of this person's political, religious or personal orientation.

We have a number of initiatives aimed at promoting career development for both managers and specialists, hereby also offering fair opportunities for any given underrepresented group to have the right prerequisites for growth and promotion to management level.

We find it important that the Board of Directors represent diversity of skills, age and gender, and that we maintain a dynamic balance between continuity and renewal through a periodic turnover of board members.

In 2013, the Board of Directors adopted a diversity policy which includes a stated objective of the composition of the board. Solar wants its board to be as diversely composed as possible, which includes an as equal representation of the two genders as possible, while still ensuring that the board represents the total skills set required.

Our aim is for neither gender to be underrepresented on the Board of Directors after Solar's annual general meeting in 2017. Consequently, women must make up at least 40% of the board members elected by the annual general meeting, which is deemed a fair distribution by law. Currently, women make up 20% of Solar's board members elected by the annual general meeting, which is the same as last year.

In 2015, Solar implemented the Mercer position grading system, and consequently defined two upper management levels: Solar Group Management (SGM) and senior level management. The latter encompasses employees in, for example, vice president or director positions who report to an SGM member.

As at 31 December 2015, SGM was all male. Women held 20% of the senior level management positions at year-end. The overall gender distribution in management is 16% women and 84% men. Solar's aim is an overall distribution of women and men of 25% and 75%, respectively, by 2018.

7%

Employee turnover

In 2015, Solar retained 93% of our employees, and we managed to maintain a positive trend over the year.

86%

Employee stick rate

We have a stick rate, i.e. employees still with the company one year after employment start, of 86% which is not satisfactory to us. We believe that by implementing our new recruitment structures and our introduction programme we will be able to increase this number to 90%.

4.4%

Absence due to illness

Solar's absence percentage due to illness totalled 4.4% in 2015, showing, however, a downward trend over the year.

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GROUP STRUCTURE

Solar A/S

Reg. no. 15908416

Share capital DKK 792,060,700

Solar Danmark A/S, Denmark

Reg. no. 15908416

Solar Sverige AB, Sweden

Reg. no. 5562410406

Share capital SEK 100,000,000

Solar Norge AS, Norway

Reg. no. 980672891

Share capital NOK 70,000,000

Solar Nederland B.V., the Netherlands

Reg. no. 09013687

Share capital € 67,000,500

All group enterprises are wholly owned.

A few enterprises without any activity are not included in this structure. Neither is MAG45, a Dutch integrated supply company acquired by Solar Group in February 2016.

Solar Polska Sp. z o.o., Poland

Reg. no. 0000003924

Share capital PLN 65,050,000

Claessen ELGB NV, Belgium

Reg. no. 0436.564.831

Share capital € 3,697,100

GFI GmbH, Austria

Reg. no. FN 44849f

Share capital € 363,365

P/F Solar Føroyar, the Faroes

Reg. no. P/F 104

Share capital DKK 12,000,000

20 SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW Responsibility and management

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RESPONSIBILITY AND MANAGEMENT

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RISKS

SOLAR IDENTIFIES AND HANDLES RISKS

RISK MANAGEMENT

Solar's risk management system consists of policies and procedures approved by the Board of Directors. The overall purpose is to manage all major business risks and risk correlations across the organisation or value chain.

Risk management is based on Enterprise Risk Management (ERM) and was established to enable Solar to run a sturdy business that will react quickly and flexibly when conditions change.

The national management teams in our main markets take a structured approach to risk management, allowing us updated risk assessments at all times. This data is then consolidated at group level and the findings are presented to the Board of Directors for approval.

This means that we analyse and identify both risks faced by the individual subsidiaries as well as group-wide risks.

ANCHORING

Solar's risk management approach observes current corporate governance principles.

The group's risk management is based on the Board of Directors' rules of procedure which place the responsibility for risk management with the Executive Board.

The Executive Board must ensure that any necessary risk management policies and procedures are available, that efficient risk management systems have been established for all relevant areas and that these are improved continuously.

Risk management reporting is made to the Audit Committee once a year. In addition, the Executive Board regularly follow up with the subsidiaries.

The sections below set out those risks that are considered to have the greatest potential impact on Solar's business. Risks are listed in no particular order.

RISKS

Our transformation into a sourcing and services company and the related internal readjustment constitute a risk as this requires an ability to change quickly in response to developments in our surrounding community and the fierce competitive situation caused by new sales channels. By employing new strategic initiatives, we work purposefully to meet any new trends.

The key geographical market area for our activities is Northern Europe, which is historically characterised by economic and political stability.

Results and equity can be affected by a number of commercial and financial risks that impact Solar's activities.

Solar has prepared policies in substantial areas. These policies have been reviewed by Internal Audit and approved by the Board of Directors.

The next sections set out a number of known risk factors that are considered to have potential impact on the results and balance sheet.

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COMMERCIAL RISKS

Solar operates on the B2B market and our business covers sourcing, sales and logistics, mostly within electrical, heating and plumbing, and ventilation technologies for installation and industry. The group has many years of experience in assessing and handling risks relating to this business area.

Solar's subsidiaries run similar activities, which are closely linked to the general activities within the business area. This allows us to establish uniform systems and procedures.

SENSITIVITY TO ECONOMIC TRENDS

As an international business, Solar is affected by global as well as local economic trends in the markets where we operate.

CUSTOMERS

The composition of the customer portfolio means that Solar can withstand any loss of individual customers. Revenue from the largest customer represents less than 3% of the group's total revenue.

SUPPLIERS

As many of Solar's suppliers are complementary, the group only depends on individual suppliers to a limited extent.

IT

Solar's activities rely heavily on IT solutions, and are, therefore, exposed to interruptions. This can result in operational and financial losses as well as loss of image. Most of the hardware is located at our two central IT data centres. All business-critical applications are mirrored at these data centres to safeguard IT operations, meaning that our business can continue to run even if one of the centres has downtime.

INSURANCE

Solar seeks to minimise the impact of unpredictable events on the group's financial results through insurance programmes.

We have taken out policies that are considered relevant and usual for the sector and for companies of Solar's size.

We continually assess insurance-related matters in respect of buildings, movables, operating loss as well as commercial and product liability to ensure that current policies are in keeping with Solar's insurance policies.

In our opinion, excess set does not exceed usual practice for the sector or for companies of Solar's size. There is no guarantee, however, that all risks have been assessed correctly, or that there is sufficient insurance cover for all potential risks to which the Solar Group may be exposed.

ACQUISITIONS

Acquisitions are included in Solar's strategy. Focus is on possible acquisitions that support our strategy on profitable growth. We have developed standardised solutions for due diligence and subsequent integration into the group.

REPUTATION

A good reputation is strategically important to Solar as it inspires loyalty towards our company in employees, customers, suppliers, investors and other stakeholders. The group is determined to create a good reputation through reliable communication.

STAFF CONDITIONS

Solar is dependent on our ability to attract and retain a qualified and committed staff of employees. Thus, the group continually dedicates resources to general recruitment initiatives and employee retention.

FINANCIAL RISKS

Results and equity are affected by a range of financial risks. All financial transactions are based on commercial activities, and no speculative transactions are made. Financial instruments are solely used for hedging of financial risks.

CURRENCY RISKS

As other international companies, Solar is exposed to currency risks in the form of translation risks since a substantial proportion of revenue derives from currencies other than Danish kroner. The currencies used are euro, Danish kroner, Swedish kroner, Norwegian kroner and, to a lesser extent, Polish zloty.

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Revenue distributed on currencies
| | 2015 | 2014 |
| --- | --- | --- |
| EUR | 30% | 30% |
| DKK | 27% | 26% |
| NOK | 17% | 19% |
| SEK | 23% | 22% |
| PLN | 3% | 3% |

The individual subsidiaries are not significantly affected by exchange rate fluctuations since revenue and costs in subsidiaries are mainly in the same currencies. Solar has a number of investments in foreign subsidiaries, where the translation of equity into Danish kroner depends on exchange rates.

Investments in subsidiaries are not hedged as such investments are regarded as long-term and because hedging is seen as unlikely to create any long-term value.

Net assets distributed on currencies
| | 2015 | 2014 |
| --- | --- | --- |
| EUR | 33% | 41% |
| DKK | 27% | 24% |
| NOK | 17% | 16% |
| SEK | 19% | 15% |
| PLN | 4% | 4% |

Management assessed that the effect of a 10% change in the exchange rates as at 31 December relative to DKK can be specified as follows

Effect on recognition of subsidiaries of any change in foreign exchange rates of 10%
| DKK million | Profit for the year | | Equity | |
| --- | --- | --- | --- | --- |
| | 2015 | 2014 | 2015 | 2014 |
| NOK | 5.2 | 3.8 | 29.0 | 27.0 |
| SEK | 6.9 | 1.1 | 31.2 | 25.3 |
| PLN | 0.1 | 0.2 | 6.4 | 6.2 |
| Total | 12.2 | 5.1 | 66.6 | 58.5 |

INTEREST RATE RISKS

We monitor and adjust interest-bearing liabilities on an ongoing basis. Loans are only raised in the currencies of the countries where Solar operates. Of total interest-bearing liabilities, Solar endeavours to ensure that a maximum of half is based on variable payment of interest fixed in accordance with current money market rates. The remaining interest-bearing liabilities are fixed-rate.

The Solar Group has no significant non-current interest-bearing assets. Solar's main banker has made no covenant demands on Solar in relation to interest-bearing liabilities. As a result of Solar's policies, a certain interest rate risk exists.

LIQUIDITY RISKS

Solar has an objective of substantial self-financing to minimise dependence on lenders and thus gain greater freedom of action. Financing is primarily controlled centrally based on the individual subsidiary's operating and investment cash requirements. Solar ensures that there are always sufficient and flexible cash reserves and diversification of maturities of both non-current and current credit facilities.

CREDIT RISKS

Solar is subject to credit risks in respect of trade receivables and cash at bank. The maximum credit risk equates to the carrying value. No credit risk is deemed to exist in respect of cash as the counterparts are banks with good credit ratings. Solar A/S' main banker is Nordea Bank Danmark A/S.

As a result of customer diversification, trade receivables are distributed so that the risk is not assessed as unusual. Credit granting to customers is regarded as a natural and important element in Solar's business operations. Solar conducts efficient credit management at all times. Solar Norge AS, Solar Sverige AB and Solar Polska Sp. z o.o. generally take out insurance to hedge against loss to the extent possible. As a result, 32% of trade receivables is covered by insurance. Loss due to credit granting is considered a normal business risk and, therefore, will occur.

CONTROL

INTERNAL CONTROL OF FINANCIAL REPORTING

Internal control systems are designed for reporting in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure requirements for annual reports of listed companies. The system contributes to Solar's financial statements, providing fair presentations without material misstatements.

In addition, the systems were established to ensure that Solar enterprises choose and apply appropriate accounting policies and accounting estimates that are reasonable under the circumstances.

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These systems only provide reasonable, and not absolute, certainty that material errors and irregularities in the financial reporting processes are detected and corrected.

The internal control systems for financial reporting may be described using the following framework:

CONTROL ENVIRONMENT

Rules of procedure for the Board of Directors and the Executive Board are in place, and the Board of Directors have set up an Audit Committee in keeping with EU legislation. The Audit Committee held 7 meetings in 2015 and has 6 meetings planned for 2016.

The Audit Committee's most important tasks are:
- To monitor financial information in the annual and quarterly reports and assess information disclosed
- To review and assess Solar's internal control and risk management procedures
- To recommend an external auditor for election by the Board of Directors.

Responsibilities and authority within key areas are defined in policies approved by the Board of Directors and/or the Executive Board. These include our communications policy, liquidity and financial policies, fraud policy, risk policy, tax policy etc. Solar's Internal Audit are seeing that these policies are adhered to.

Internal Audit is an independent department tasked with reviewing financial information in quarterly and annual reports and performing operational audits of business procedures and internal control. Internal Audit reports the results of these reviews directly to the Board of Directors and the Audit Committee, including any recommendations for improving internal controls.

Accounting rules and procedures are set out in an accounting handbook, which is available to all employees working

within finance. Internal Audit oversees that these rules and procedures are observed.

The Executive Board are represented on all our subsidiaries' boards of directors which again brings control into focus throughout the group.

Solar has a whistleblower scheme available to employees, customers and others. It is an information system that makes it possible for employees and others to confidentially report breaches of Solar's code of conduct or suspicions of such a breach.

In line with Solar joining the UN's Global Compact, we have implemented a business-ethical Code of Conduct that all employees must comply with.

CONTROL ACTIVITIES

The purpose of control activities is to prevent, uncover and correct any errors and irregularities, and these activities are integrated into Solar's accounting and reporting procedures. Activities include documentation procedures, authorisation, approval, reconciliation, result analysis, separation of irreconcilable functions, IT application controls and general IT controls.

INFORMATION AND REPORTING

Solar's IT policy and built-in IT controls as well as general controls help to ensure a fair presentation of financial reporting. Accounting handbooks and reporting instructions – including estimate and month-end closing procedures – are updated and implemented throughout the group on an ongoing basis. As with other policies relevant to internal control of financial reporting, these are available to the relevant persons.

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Responsibility and management: Corporate social responsibility
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CORPORATE SOCIAL RESPONSIBILITY

WE ARE MINDFUL OF PEOPLE, ETHICS AND THE ENVIRONMENT

CORPORATE SOCIAL RESPONSIBILITY

Seen from a global perspective, our society faces social, political and economic challenges. In Solar, we accept our responsibility to be a positive driver – also when it comes to managing the impact our business has on society.

Our primary aim is to create profitable growth for our business in a highly competitive market. And we are determined to achieve this through responsible behaviour. So, we implement socially responsible activities where it makes sense and where we see that we can create value. Some of these activities are the results of large projects, while others are small everyday actions which, nevertheless, are equally important when defining Solar as a socially responsible company.

GLOBAL COMPACT

Solar is a registered partner to the UN's Global Compact and is committed to honouring the Global Compact's 10 principles, which encompass human rights, working environment/labour, environment and anti-corruption. To meet our reporting obligations with the UN's Global Compact, the Solar Group submits an annual progress report to the UN Global Compact. In addition to expressing our continued support to the programme, the report outlines our efforts to reduce $\mathrm{CO}_{2}$ emissions and our compliance with ethical standards. The report is accessible at the Solar Group website and at Global Compact's website.

SOS CHILDREN'S VILLAGES

In 2015, the Solar Group entered into a partnership with SOS Children's Villages to ensure a sustainable energy supply for an SOS children's village in Zanzibar, Tanzania. Due to heavy rains and extensive use, the children's village's crucial electricity and water supply systems are damaged. Working closely with Siemens and Engineers Without Borders, we aim to renovate the children's village to ensure water and sustainable energy supply for the 92 orphans by the end of 2016.

Naturally, the project includes our donation of products like solar cell panels and heating and plumbing solutions, but we will also offer the locals training in energy-efficient solutions as part of the project to ensure long-term competence development within our area of expertise.

While offering up our know-how about energy-efficient solutions makes a real difference to the children in Zanzibar, it also has obvious environmental benefits. So, our contribution to a good cause is also an evident strategic match for us. In addition, the project creates customer and employee satisfaction and helps us make our surroundings see Solar as an interesting and socially responsible employer.

This partnership project was awarded the Danish CSR fund's CSR Partnership Prize in 2015. This award celebrates CSR partnerships between businesses, public organisations, associations or NGOs who have joined forces to work on projects that are useful to society in general.

CARBON DISCLOSURE PROJECT (CDP)

Solar has set up a reporting system for the company's $\mathrm{CO}{2}$ consumption, rolling this out in most group enterprises. One area measured is $\mathrm{CO}{2}$ emissions generated from the direct burning of fossil fuels, i.e. fuel consumption relating to company cars, forklifts, etc.

Other areas measured include $\mathrm{CO}_{2}$ emissions from purchased electricity and from goods distribution. All results are reported to the Carbon Disclosure Project.

RESPONSIBLE SUPPLIERS

The Solar Group collaborates with responsible suppliers, several of whom have signed up to the Global Compact, making them obliged to follow the principles above.

CODE OF CONDUCT

We have implemented a business-ethical Code of Conduct. Under the code, Solar is committed to comply with current legislation and regulations and to act in an ethical, sustainable and socially responsible way in all its business transactions.

The code is signed by all employees and made available through leaflets in all languages used within the Solar Group. In addition, these ethical standards are an integral part of all new employees' introduction programmes.

26
SOLAR ANNUAL REPORT 2015 MANAGEMENT'S REVIEW
Responsibility and management: Corporate governance
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CORPORATE GOVERNANCE

A VALUABLE TOOL

Overall, Solar views the May 2013 recommendations of the Danish Committee on Corporate Governance as a valuable tool for ensuring sound management, good transparency for shareholders and other stakeholders and for efficient risk management.

Solar, therefore, basically follows the recommendations relevant to the company. A complete description of Solar's stand on the individual points of the corporate governance recommendations is available at:

www.solar.eu/corporategovernance.

DEVIATIONS

Solar complies with 43 of 47 recommendations but deviates from:

Recommendation on nomination of candidates for the Board of Directors

Once a year, the Board of Directors review the skills and experience of the board available to the company and consider what is needed. The Fund of 20th December, which is the majority shareholder and submits proposals for the composition of the Board of Directors, attaches importance to board members representing relevant skills in relation to the company's needs.

Recommendation on fixing an age limit for board members

The ages of the members of the Board of Directors are listed in Solar's annual report. Solar wishes to promote age diversity on the Board of Directors, but has no fixed retirement age for individual members. As Solar believes that skills are more important than age, there is no fixed retirement age for board members.

Recommendation on establishment of a nomination committee

The Fund of 20th December, the majority shareholder, makes proposals for the composition of the Board of Directors. Due to this ownership structure with a majority shareholder, Solar has not established a permanent nomination committee tasked with nominating members of the Board of Directors. However, every year, the board evaluates the skills requirements of the Board of Directors. In connection with the appointment of members of the Executive Board, a temporary nomination committee is established.

Recommendation on establishment of a remuneration committee

Solar has not established a remuneration committee since our remuneration policy, including general guidelines for performance-related remuneration of the Executive Board, aims at being so simple that it can be appropriately assessed and approved by the full board. Negotiations concerning changes to the remuneration of the Executive Board are jointly conducted by the chairman and vice-chairman according to a mandate from the Board of Directors.

EVALUATION

The chairman carries out the evaluation of the Board of Directors' work by means of a questionnaire survey. The purpose is to assess whether the overall skills of the Board of Directors match the company's current needs, the quality of material distributed to the board and the holding of the meetings themselves as well as the relevance of issues discussed as regards legal requirements, risk factors and the company's development potential. The 2015 evaluation has not given rise to the introduction of additional measures.

STATUTORY CORPORATE GOVERNANCE STATEMENT

Solar has chosen to make the statutory corporate governance statement, cf. Danish Financial Statements Act section 107b, available on the company's website. Please use this link to find the statutory corporate governance statement 2015:

www.solar.eu/corporategovernance.

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SHAREHOLDER INFORMATION

SOLAR VALUES OPENNESS

INVESTOR RELATIONS POLICY

Solar aims at transparency by giving investors and analysts the best possible insight into relevant issues.

The publication of information that may affect the share price must be issued in good time and in compliance with the stock exchange's rules of ethics.

Everyone must have access to such information at the same time. We ensure this by publishing relevant information via Nasdaq Copenhagen and on www.solar.eu.

We hold meetings with investors and financial analysts. Investor meetings or similar events cannot be held during our IR quiet periods. These periods start on the 10th of every month following a closed quarter and end with the publication of the next quarterly or annual report. During such periods, no comments on financial results, expectations or market outlook will be issued by the company. The IR quiet periods are listed in the financial calendar.

COMMUNICATING WITH INVESTORS

Solar wants to be visible and accessible to both existing and potential institutional and private shareholders.

We need to know our target groups to have the best possible dialogue with them. This is why we recommend shareholders that they register by name and e-mail in the register of shareholders.

We communicate with shareholders at general meetings, through frequent announcements via Nasdaq Copenhagen and our website www.solar.eu as well as via web presentations.

Relevant investor relations material is published on www.solar.eu, where Solar's stakeholders can also sign up to receive company announcements by e-mail via our electronic newsletters.

INVESTOR RELATIONS ACTIVITIES

We hold audio webcasts in connection with the publication of annual and quarterly reports. In addition, Solar is also available for individual meetings with investors and analysts in Denmark and abroad. In 2015, Solar took part in 58 investor and analyst meetings.

In 2015, Solar attended roadshows in Copenhagen, Paris and London. We also took part in several other events, including SEB Nordic Seminar and Danske Bank Markets Copenhagen Winter Seminar.

AUDIO WEBCAST

The presentation of Annual Report 2015 will be transmitted online on 24 February 2016 at 11:00 CET and will be accessible via www.solar.eu.

GROWING INTEREST AMONG FOREIGN INVESTORS

Solar has professionalised our efforts and IR activities in relation to foreign investors and analysts. Consequently,

we have gained an increasing number of foreign shareholders through the years; from 14.6% at the end of 2011 to 21.6% at the end of 2015. At the same time, the Solar share has picked up foreign analyst coverage.

SOLAR'S CAPITAL AND SHARE STRUCTURE

The Board of Directors regularly assess the company's capital and share structures to ensure that these are appropriate for both the shareholders and the company.

Solar's Board of Directors have assessed the company's capital structure and, as a result, have decided to launch a buy-back of shares with an upper limit of DKK 70m. This buy-back of shares will run from 23 November 2015 to 30 June 2016. Naturally, the share buy-back programme will end sooner if the Board of Directors' authority to acquire treasury shares is not renewed at the company's annual general meeting on 1 April 2016.

Moreover, this share buy-back programme will run with due consideration of our continuous expansion option interests.

Solar's share capital is divided into nominally DKK 90 million A shares and nominally DKK 702 million B shares. The A shares are not listed. The B shares are listed on Nasdaq Copenhagen under the ID code DK0010274844 with the short designation SOLAR B and form part of the MidCap index and MidCap on Nasdaq Nordic.

Share capital includes 900,000 A shares and 7,020,607 B shares.

A shares have 10 votes per share amount of DKK 100, while B shares have 1 vote for each share amount of DKK 100.

To be entitled to vote, shares must be registered in Solar's register of shareholders no later than one week before the date of the annual general meeting.

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SHARE PRICE DEVELOPMENT

On 31 December 2015, the price of Solar's B share was DKK 432, up from the 2015 starting price of DKK 288. This is a 50% rise in Solar's share price over the year, exceeding the average MidCap index increase of approximately 46% in 2015.

Share price development (index)

DIVIDENDS AND RETURN PER SHARE

At the annual general meeting, the Board of Directors will propose dividends distribution of DKK 10.00 per share, up from DKK 7.00 in 2015.

Return per share of nominally DKK 100

DKK	Total 2011-15	Average 2011-15	Year 2015	Year 2014
Share price increase	10.00	2.00	144.18	-48.44
Dividends distributed	40.85	8.17	7.00	12.00
Return	50.85	10.17	151.18	-36.44

SHAREHOLDERS

As at 31 December 2015, registered share capital totalled 89.3%, distributed on 3,769 shareholders.

Solar's portfolio of treasury shares totalled 110,009 B shares or 1.4% of share capital as at 31 December 2015.

Distribution of share capital and votes as at 31 December 2015 in %

Holdings of 5% or more of share capital	Share capital	Votes
The Fund of 20 December Kolding, Denmark	15.6%	57.5%
Nordea Funds Oy, Danish Branch Copenhagen, Denmark	11.9%	5.9%
Chr. Augustinus Fabrikker A/S Copenhagen, Denmark	10.3%	5.1%
RWC Asset Management LLP London, England	8.6%	4.2%

ANNUAL GENERAL MEETING

Solar will hold its annual general meeting on Friday 1 April 2016 at 11.00 at our premises: Solar A/S, Industrivej Vest 43, DK-6600 Vejen, Denmark.

Shareholders can register for the annual general meeting on the investor portal, accessible via www.solar.eu.

The Board of Directors will submit the following proposals for approval by the annual general meeting:

Payment of DKK 10.00 in return per share outstanding of DKK 100.
Authority to make the decision to distribute extraordinary dividends of up to DKK 15.00.
Authority to acquire treasury shares valued at up to 10% of share capital.
Articles of association amendments, including changing B shares to registered shares, authority for the Board of Directors to raise share capital once or several times by new issues of B shares of up to 70,206,000 with and without pre-emption rights for current shareholders and consent that quarterly reports, annual reports and public presentations of the company are made in English.
Amendment to remuneration policy for Board of Directors and Executive Board.
Amendment to general guidelines for share option plans in observance of section 139 of the Danish Companies Act.
Approval of the Board of Directors' remuneration in 2016.

Please find a presentation of our Board of Directors on page 32.

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FINANCIAL CALENDAR 2016

1 April	Annual general meeting
10 April - 27 April	IR quiet period
27 April	Quarterly Report Q1 2016
10 July - 11 August	IR quiet period
11 August	Quarterly Report Q2 2016
10 October - 28 October	IR quiet period
28 October	Quarterly Report Q3 2016

COMPANY ANNOUNCEMENTS 2015

Date	No.	Announcement
28.12	24	Share buy-back in Solar
21.12	23	Share buy-back in Solar
14.12	22	Share buy-back in Solar
07.12	21	Share buy-back in Solar
30.11	20	Share buy-back in Solar
23.11	19	Solar launches share buy-back programme today
05.11	18	Financial calendar 2016 for Solar
05.11	17	Solar launches share buy-back programme
05.11	16	Quarterly Report Q3 2015
11.08	15	Quarterly Report Q2 2015
19.06	14	Change to financial calendar 2015 for Solar
07.05	13	Quarterly Report Q1 2015
30.04	12	Realised figures for 2014 per quarter divided into segments
29.03	11	Share trading in Solar
27.03	10	Share trading in Solar
27.03	09	Articles of association
27.03	08	Course of annual general meeting in Solar A/S
18.03	07	Major shareholder announcement
16.03	06	Solar A/S has finalised the divestment of assets in Solar Deutschland GmbH
11.03	05	Grant of options to the Executive Board and management team of Solar
03.03	04	Notice of annual general meeting
27.02	03	Share trading in Solar
25.02	02	Annual Report 2014
03.02	01	Solar enters into agreement concerning the divestment of assets in Solar Deutschland GmbH

ANALYSTS

The following institutions cover the Solar share:
- Carnegie Bank
- Danske Bank
- HSBC Bank
- Nordea Bank

INVESTOR CONTACT

Charlotte Risskov Kræfting
Director, Stakeholder Relations

Tel.: +45 79 300 257
E-mail: [email protected]

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EXECUTIVE BOARD AND SOLAR GROUP MANAGEMENT

EXECUTIVE BOARD

Anders Wilhjelm (born 1966)
CEO

Chairman of the boards of directors of all Solar Group subsidiaries.
Member of the boards of directors of DAT-Schaub A/S and the Fund of 28 May 1948.
Holds 1,270 Solar B shares, all purchased in 2015.
Holds 4,922 share options, all granted in 2015.
Remuneration: DKK 8m.

Michael H. Jeppesen (born 1966)
CFO

Member of the boards of directors of all Solar Group subsidiaries.
Holds 1,269 Solar B shares. Has not traded Solar shares in 2015.
Holds 9,514 share options, 2,461 of these granted in 2015.
Remuneration: DKK 4m.

SOLAR GROUP MANAGEMENT

Solar Group Management is made up of the Executive Board, our senior vice presidents and the MDs of the Solar Group subsidiaries.

Jens Andersen (born 1968)
SENIOR VICE PRESIDENT, MD DENMARK

Hugo Dorph (born 1965)
SENIOR VICE PRESIDENT, COMMERCIAL

Jan Willy Fjellvær (born 1961)
SENIOR VICE PRESIDENT, SOURCING, MD NORWAY

Lars Goth (born 1961)
SENIOR VICE PRESIDENT, SUPPLY CHAIN, MD AUSTRIA

Tore Håkonsson (born 1964)
SENIOR VICE PRESIDENT, HR AND COMMUNICATIONS

Anders Koppel (born 1969)
SENIOR VICE PRESIDENT, MD SWEDEN

Dariusz Targosz (born 1969)
SENIOR VICE PRESIDENT, MD POLAND

Martin Trampe (born 1955)
SENIOR VICE PRESIDENT, MD BENELUX

Bauke Zeinstra (born 1966)
SENIOR VICE PRESIDENT, MD MAG45
(joined on 1 February 2016)

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BOARD OF DIRECTORS

Jens Borum (born 1953, joined 1982)

CHAIRMAN

Associate professor, University of Copenhagen.
M.Sc. 1980, PhD 1985.
Member of the Board of Directors of the Fund of 20th December.
Represents the Fund of 20th December and has long-time experience as chairman.
Remuneration 2015: DKK 637,500.
Holds 6,900 Solar A shares and 118,520 Solar B shares. Has not traded Solar shares in 2015.

Agnete Raaschou-Nielsen (born 1957, joined 2012)

VICE CHAIRMAN

MSc in economics (1985) and PhD in economics (1988).
Chairman of the boards of directors of Brødrene Hartmann A/S and Arkil Holding A/S.
Vice chairman of the boards of directors of Dalhoff Larsen og Horneman A/S, the unit trusts Danske Invest, Danske Invest Select, Profil Invest, Pro-Capture and the capital trusts Danske Invest Institutional and AP Invest.
Member of the boards of directors of Novozymes A/S, Aktieselskabet Schouw & Co., Icopal Holding A/S plus two subsidiaries and Danske Invest Management A/S.
Represents managerial experience of production and service businesses with strong international relations and has deep knowledge of production, supply chain, sales and marketing.
Remuneration 2015: DKK 400,000.
Holds no Solar shares.

Lars Lange Andersen (born 1968, joined 2010)

EMPLOYEE-ELECTED MEMBER

Sales Manager.
Remuneration 2015: DKK 162,500.
Holds 93 Solar B shares. Has not traded Solar shares in 2015.

Niels Borum (born 1948, joined 1975)

M.Sc. in engineering 1973.
Chairman of the Board of Directors of the Fund of 20th December.
Represents the Fund of 20th December and has experience of IT and processes.
Remuneration 2015: DKK 250,000.
Holds 6,900 Solar A shares and 89,539 Solar B shares. Has not traded Solar shares in 2015.

Ulrik Damgaard (born 1973, joined 2014)

EMPLOYEE-ELECTED MEMBER

Market Manager.
Remuneration 2015: DKK 162,500.
Holds 60 Solar B shares. Has not traded Solar shares in 2015.

Bent H. Frisk (born 1961, joined 2006)

EMPLOYEE-ELECTED MEMBER

Central Warehouse Manager.
Remuneration 2015: DKK 162,500.
Holds 60 Solar B shares. Has not traded Solar shares in 2015.

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Ulf Gundemark (born 1951, joined 2014)

Holds an electrical engineering degree (1975) and has since gotten supplementary education at, among others, IFL and INSEAD.
Chairman of the boards of directors of Ripasso Energy AB and Nordic Waterproofing 2 ApS.
Member of the boards of directors of Papyrus AB, Constructor Group AS, Lantmännen Ekonomisk Förening, Scandi Standard Group AB and AQ Group AB.
Represents managerial experience from global and local businesses and holds significant knowledge of the trade and markets.
Remuneration 2015: DKK 250,000.
Holds 1,500 Solar shares purchased in 2015.

Jens Peter Toft (born 1954, joined 2009)

CED of Selskabet af 11. december 2008 ApS and one subsidiary hereof.
B.Com. Management Accounting 1983, the Executive Program, University of Michigan Business School.
Chairman of the boards of directors of Mipsalus Holding ApS and one subsidiary hereof.
Vice chairman of the board of directors of M. Goldschmidt Holding A/S.
Member of the boards of directors of Bitten og Mads Clausens Fond, Biludan Gruppen A/S and five subsidiaries hereof, the unit trusts Danske Invest, Danske Invest Select, Profil Invest, Pro capture and the capital units Danske Invest Institutional and AP Invest, Civilingeniør N.T. Rasmussens Fond, Enid Ingemanns Fond, Fondet for Dansk Norsk Samarbejde, six subsidiaries of M. Goldschmidt Holding A/S, Dansk Vækstkapital II and Selskabet af 11. december 2008 ApS.
Member of the Investment committee for GRO Capital.
Represents experience of capital market transactions, financial matters, investments, organisation, general management and stock exchange matters.
Remuneration 2015: DKK 400,000.
Holds 1,250 Solar B shares. Has not traded Solar shares in 2015.

Steen Weirsøe (born 1948, joined 2013)

MSc in Economics & Business Administration 1973.
Member of the board of directors of Larsen og Ibsen Holding A/S.
Represents wide managerial and international experience and considerable experience and knowledge of retail and wholesaling related to the construction industry.
Remuneration 2015: DKK 250,000.
Holds 1,000 Solar B shares. Has not traded Solar shares in 2015.

BOARD OF DIRECTORS' AFFILIATION WITH SOLAR

Ulf Gundemark, Steen Weirsøe, Agnete Raaschou-Nielsen and Jens Peter Toft are independent of the company pursuant to the definition in the recommendations on corporate governance in Denmark. Jens Borum and Niels Borum are affiliated with the Fund of 20th December, which is the majority shareholder in Solar A/S. Agnete Raaschou-Nielsen and Jens Peter Toft are members of the Audit Committee together with Chairman of the Board of Directors Jens Borum. Jens Peter Toft chairs the Audit Committee and has special accounting qualifications.

ELECTION OF EMPLOYEE REPRESENTATIVES

The most recent ordinary election of employee representatives took place electronically on 17-27 March 2014. The participation rate in the election was 57.3%. Under the law, employee representatives have the same rights, duties and responsibilities as the other members of the board. Under Danish law, employees have the right to elect a number of representatives and alternates, corresponding to half of the representatives elected by the annual general meeting at the time of calling the election of employee representatives.

ELECTION PERIOD

All board members elected at the annual general meeting are up for election each year, whereas employee representatives are elected by and among the company's employees for four-year terms.

SOLAR ANNUAL REPORT 2015 CONSOLIDATED

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS

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CONSOLIDATED FINANCIAL STATEMENTS

Summary for the Solar Group 36
Statement of comprehensive income 38
Balance sheet 39
Cash flow statement 40
Statement of changes in equity 41
Notes 42

Notes to the financial statements

Basis for preparation

Accounting policies 42
Significant accounting estimates and assessments 44

Notes to the income statement

Segment information 45
Staff costs 47
Loss on trade receivables 47
Depreciation, write-down and amortisation 47
Income tax 48
Net profit for the year 51

Invested capital

Intangible assets 52
Property, plant and equipment 56
Inventories 58
Trade receivables 59
Provision for pension obligations 60
Other provisions 63
Other payables 64
Assets and liabilities held for sale 65

Capital structure and financing costs

Share capital 67
Earnings per share in DKK per share outstanding for the year 68
Interest-bearing liabilities and maturity statement 69
Financial income 72
Financial expenses 72

Other notes

Share option plans 73
Contingent liabilities and other financial liabilities 75
Related parties 76
Auditors' fees 76
New financial reporting standards 77

SOLAR ANNUAL REPORT 2015 CONSOLIDATED Summary for the Solar Group

MANAGEMENT'S REVIEW

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CONTENTS

SUMMARY FOR THE SOLAR GROUP

2011-2015

Income statement (DKK million)	2015	2014	2013	2012	2011
Revenue	10,587	10,252	10,463	12,201	11,408
Earnings before interest, tax, depreciation and amortisation (EBITDA)	362	227	307	348	381
Earnings before interest, tax and amortisation (EBITA)	296	117	225	263	291
Earnings before interest and tax (EBIT)	249	-73	160	198	199
Financials, net	-48	-49	-54	-42	-53
Earnings before tax (EBT)	201	-122	106	156	146
Net profit for the year	167	-234	21	117	91
Cash flow (DKK million)	2015	2014	2013	2012	2011
---	---	---	---	---	---
Cash flow from operating activities, continuing operations	331	187	310	427	361
Cash flow from investing activities, continuing operations	-24	-58	-9	-69	-512
Cash flow from financing activities, continuing operations	-125	-151	-291	-106	-172
Net investments in intangible assets	-36	-18	-10	-17	-31
Net investments in property, plant and equipment	-25	-41	-81	-52	-17
Acquisition and divestment of subsidiaries, net	37	1	82	0	-462

Balance sheet (DKK million)

Non-current assets	1,250	1,324	1,814	1,907	1,943
Current assets	3,421	3,250	3,147	3,817	3,455
Balance sheet total	4,671	4,574	4,961	5,724	5,398
Equity	1,831	1,732	2,138	2,203	2,112
Non-current liabilities	592	655	771	1,070	1,141
Current liabilities	2,248	2,187	2,052	2,451	2,144
Interest-bearing liabilities, net	-184	302	316	559	897
Invested capital	1,662	2,172	2,637	2,950	3,236
Net working capital, year-end	989	1,111	1,318	1,607	1,807
Net working capital, average	1,252	1,267	1,538	1,706	1,745

Financial ratios (% unless otherwise stated)

Revenue growth	3.3	-2.0	-5.9	11.1	9.3
Organic growth	5.2	0.4	-5.4	-0.1	3.6
Organic growth adjusted for number of working days	5.2	0.1	-5.0	0.9	-
Gross profit	20.8	21.2	21.8	21.2	21.1
EBITDA margin	3.4	2.2	2.9	2.8	3.3
EBITA margin	2.8	1.1	2.2	2.2	2.6
EBIT margin	2.4	-0.7	1.5	1.6	1.7
Effective tax rate	33.2	-47.2	17.3	33.0	37.8
Net working capital (year-end NWC)/revenue (LTM)	9.3	10.8	10.7	12.3	15.8
Net working capital (average NWC)/revenue (LTM)	11.8	12.4	13.2	13.7	15.3
Gearing (net interest-bearing liabilities/EBITDA), no. of times	-0.5	1.3	1.0	1.6	2.3
Return on equity (ROE)	9.4	-12.1	1.0	5.6	4.3
Return on equity (ROE) excl. amortisation	12.0	-2.3	4.0	8.6	8.7
Return on invested capital (ROIC)	8.5	-4.3	4.5	4.5	3.8
Return on invested capital (ROIC) excl. amortisation	10.1	0.7	6.9	6.9	6.9
Adjusted enterprise value/earnings before interest, tax and amortisation (EV/EBITA)	10.6	21.7	12.8	9.6	9.0
Equity ratio	39.2	37.9	43.1	39.2	39.0

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CONTENTS

SUMMARY FOR THE SOLAR GROUP

2011-2015 – continued

Share ratios (DKK unless otherwise stated)	2015	2014	2013	2012	2011
Earnings per share outstanding (EPS)	21.26	-29.79	2.67	14.88	11.54
Earnings excl. amortisation per share outstanding (EPS)	27.25	-5.60	10.95	23.15	23.30
Intrinsic value per share outstanding	234.43	220.62	272.34	274.54	267.83
Cash flow from operating activities per share outstanding	42.05	23.77	39.46	54.34	45.93
Share price	432	288	336	257	224
Share price/intrinsic value	1.84	1.30	1.23	0.92	0.84
Dividends per share	10.00	7.00	12.00	6.65	5.20
Dividends in % of net profit for the year (payout ratio)	46.8	-	421.5	44.8	45.0
Price Earnings (P/E)	20.3	-9.7	125.7	17.2	19.4

Employees

Average number of employees (FTEs), continuing operations	2,871	2,898	2,943	3,505	3,200

Definitions

Organic growth	Revenue growth adjusted for enterprises acquired and sold off and any exchange rate changes. No adjustments have been made for number of working days.
Net working capital	Inventories and trade receivables less trade payables.
Gearing	Interest-bearing liabilities, net, relative to EBITDA.
ROIC	Return on invested capital calculated on the basis of operating profit or loss less tax calculated using the effective tax rate.

Overall, financial ratios are calculated in accordance with the Danish Finance Society's "Recommendations & Financial Ratios 2015".

In general, restatements have been made of income statements, cash flow and key ratios for the discontinued activities in Solar Deutschland GmbH 2013 and 2014 and for the divestment of Aurora Group Danmark A/S for 2012 and 2013, whereas these are not adjusted for previous years. In accordance with IFRS, the balance sheet has not been restated. The key ratio interest-bearing liabilities, net, has been adjusted for interest-bearing receivables relating to the divestment of Aurora Group Danmark A/S, up until the settlement in Q1 2015.

Effective from the presentation of Annual Report 2014, Solar has changed its presentation currency from EUR to DKK. Balance sheet items as at 1 January 2013 have been translated at a price of 746.030, while the 2013 income statement has been translated at a price of 745.794. Balance sheet items as at 1 January 2014 have been translated at a price of 746.030, while the 2014 income statement has been translated at a price of 745.879. Apart from this, the change has not affected earnings before tax, net profit for the year or earnings per share.

SOLAR ANNUAL REPORT 2015 CONSOLIDATED Statement of comprehensive income

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CONTENTS

STATEMENT OF COMPREHENSIVE INCOME

Note	DKK million	2015	2014
3	Revenue	10,587	10,252
	Cost of sales	-8,388	-8,083
	Gross profit	2,199	2,169
	Other operating income and costs	2	-3
25	External operating costs	-421	-446
4, 22	Staff costs	-1,396	-1,470
5	Loss on trade receivables	-22	-23
	Earnings before interest, tax, depreciation and amortisation (EBITDA)	362	227
6	Depreciation and write-down on property, plant and equipment	-66	-110
	Earnings before interest, tax and amortisation (EBITA)	296	117
6	Amortisation of intangible assets	-47	-190
	Earnings before interest and tax (EBIT)	249	-73
20	Financial income	22	29
21	Financial expenses	-70	-78
	Earnings before tax (EBT)	201	-122
7	Income tax	-67	-58
	Profit or loss of continuing operations	134	-180
16	Profit or loss of discontinued operations	33	-54
8	Net profit for the year	167	-234
18	Earnings in DKK per share outstanding (EPS) for the year	21.26	-29.79
18	Diluted earnings in DKK per share outstanding (EPS-D) for the year	21.21	-29.79
18	Earnings in DKK per share outstanding (EPS) of continuing operations for the year	17.06	-22.91
18	Diluted earnings in DKK per share outstanding (EPS-D) of continuing operations for the year	17.02	-22.91

Please see note 16 on discontinued operations for earnings per share outstanding (EPS) from discontinued operations.

Other comprehensive income

DKK million	2015	2014
Net profit for the year	167	-234
Other income and costs recognised:
Items that cannot be reclassified for the income statement
Actuarial gains / losses on defined benefit plans	-13	-8
Tax	0	-1
Items that can be reclassified for the income statement
Foreign currency translation adjustments of foreign subsidiaries	-7	-36
Value adjustments of hedging instruments before tax	35	-43
Tax on value adjustments of hedging instruments	-9	10
Other income and costs recognised after tax	6	-78
Total comprehensive income for the year	173	-312

SOLAR ANNUAL REPORT 2015 CONSOLIDATED Balance sheet

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FINANCIAL STATEMENTS

CONTENTS

BALANCE SHEET

as at 31 december

Note	DKK million	2015	2014
	ASSETS
9	Intangible assets	333	339
10	Property, plant and equipment	882	937
7	Deferred tax asset	28	43
	Other non-current assets	7	5
	Non-current assets	1,250	1,324
11	Inventories	1,302	1,240
12	Trade receivables	1,295	1,303
	Income tax receivable	4	10
	Other receivables	10	49
	Prepayments	23	25
	Cash at bank and in hand	699	248
16	Assets held for sale	88	375
	Current assets	3,421	3,250
	Total assets	4,671	4,574
Note	DKK million	2015	2014
---	---	---	---
	EQUITY AND LIABILITIES
17	Share capital	792	792
	Reserves	-143	-162
	Retained earnings	1,104	1,047
	Proposed dividends for the financial year	78	55
	Equity	1,831	1,732
19	Interest-bearing liabilities	430	501
13	Provision for pension obligations	15	19
7	Provision for deferred tax	128	122
14	Other provisions	19	13
	Non-current liabilities	592	655
19	Interest-bearing liabilities	60	81
	Trade payables	1,608	1,432
	Income tax payable	11	18
15	Other payables	516	503
	Prepayments	0	4
14	Other provisions	28	77
16	Equity and liabilities held for sale	25	72
	Current liabilities	2,248	2,187
	Liabilities	2,840	2,842
	Total equity and liabilities	4,671	4,574

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Cash flow statement
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CASH FLOW STATEMENT

Note	DKK million	2015	2014
	Net profit or loss of continuing operations for the year	134	-180
6	Depreciation, write-down and amortisation	113	300
	Changes to provisions and other adjustments	-64	67
20,21	Financials, net	48	49
	Income tax	67	58
20	Financial income, received	4	10
21	Financial expenses, settled	-42	-47
	Income tax, settled	-55	-31
	Cash flow before working capital changes	205	226
	Working capital changes
	Inventory changes	-61	-75
	Receivables changes	-28	-5
	Non-interest-bearing liabilities changes	215	41
	Cash flow from operating activities, continuing operations	331	187
16	Cash flow from operating activities, discontinued operations	-53	-29
	Cash flow from operating activities	278	158
	Investing activities
9	Purchase of intangible assets	-36	-18
	Purchase of property, plant and equipment	-28	-47
	Disposal of property, plant and equipment	3	6
	Divestment of subsidiary¹	37	1
	Cash flow from investing activities, continuing operations	-24	-58
16	Cash flow from investing activities, discontinued operations	345	-1
	Cash flow from investing activities	321	-59
Note	DKK million	2015	2014
---	---	---	---
	Financing activities
	Repayment of non-current interest-bearing debt	-51	-57
17	Treasury share purchases and sales	-19	0
	Dividends distributed	-55	-94
	Cash flow from financing activities, continuing operations	-125	-151
16	Cash flow from financing activities, discontinued operations	0	0
	Cash flow from financing activities	-125	-151
	Total cash flow	474	-52
	Cash at bank and in hand at the beginning of the year	167	226
	Foreign currency translation adjustments	-2	-7
	Cash at bank and in hand at the end of the year	639	167
	Cash at bank and in hand at the end of the year
	Cash at bank and in hand	699	248
	Current interest-bearing liabilities	-60	-81
	Cash at bank and in hand at the end of the year	639	167

1) Installments of the fixed and variable parts of the selling price of Aurora Group Danmark A/S.

SOLAR ANNUAL REPORT 2015 CONSOLIDATED

Statement of changes in equity

MANAGEMENT'S REVIEW

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CONTENTS

STATEMENT OF CHANGES IN EQUITY

DKK million	Share capital	Reserves for hedging transactions	Reserves for foreign currency translation adjustments	Retained earnings	Proposed dividends	Total
2015
Equity as at 1 January	792	-105	-57	1,047	55	1,732
Foreign currency translation adjustments of foreign subsidiaries			-7			-7
Value adjustments of hedging instruments before tax		35				35
Actuarial gains / losses on defined benefit plans				-13		-13
Tax on value adjustments		-9				-9
Net income recognised in equity via other comprehensive income in the statement of comprehensive income	0	26	-7	-13	0	6
Net profit for the year				89	78	167
Comprehensive income	0	26	-7	76	78	173
Distribution of dividends					-55	-55
Buy-back of treasury shares				-19		-19
Transactions with the owners	0	0	0	-19	-55	-74
Equity as at 31 December	792	-79	-64	1,104	78	1,831
2014
Equity as at 1 January	792	-72	-21	1,345	94	2,138
Foreign currency translation adjustments of foreign subsidiaries			-36			-36
Value adjustments of hedging instruments before tax		-43				-43
Actuarial gains / losses on defined benefit plans				-8		-8
Tax on value adjustments		10		-1		9
Net income recognised in equity via other comprehensive income in the statement of comprehensive income	0	-33	-36	-9	0	-78
Net profit for the year				-289	55	-234
Comprehensive income	0	-33	-36	-298	55	-312
Distribution of dividends					-94	-94
Transactions with the owners	0	0	0	0	-94	-94
Equity as at 31 December	792	-105	-57	1,047	55	1,732

SOLAR ANNUAL REPORT 2015 CONSOLIDATED Notes: Basis for preparation

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

1 Accounting policies

The consolidated financial statements of Solar A/S for 2015 are presented in accordance with the International Financial Reporting Standards (IFRSs) as approved by the EU and additional Danish disclosure requirements for annual reports of listed companies cf. Nasdaq Copenhagen's disclosure requirements for annual reports of listed companies and the IFRS executive order issued in accordance with the Danish Financial Statements Act.

The consolidated financial statements have been prepared using the historical cost formula with the exception of derivative financial instruments, which are measured at fair value, as well as non-current assets and groups of assets held for sale, which are measured at the lowest value of the book value before changes in classification or fair value less sales costs.

The accounting policies described below have been applied consistently in the financial year and to the comparative figures.

Implementation of new financial reporting standards

As of 1 January 2015, Solar implemented those new standards and interpretations approved by the EU that became effective in the financial year 2015 as well as any annual improvements on applicable IFRSs. The changes have no effect on Solar.

Note 26 includes a description of new standards and interpretations that have not yet become effective.

Presentation currency

The annual report is presented in Danish kroner rounded off to the nearest 1,000,000 Danish kroner. Danish kroner is the parent company's functional currency.

Translation of foreign currency items

A functional currency has been set for each reporting group entity. The functional currencies are the currencies used in the primary economic environments in which each individual reporting entity operates. Transactions in other currencies than the functional currency are considered transactions in foreign currencies.

Transactions in foreign currency are translated at first recognition to the functional currency at the exchange rate prevailing at the date of the transaction. Differences between the exchange rate prevailing

on the date of the transaction and the exchange rate on the payment date are recognised in the income statement as items under financial income and expenses.

All monetary items in foreign currencies that have not been settled on the balance sheet date are translated into the functional currencies using the exchange rates on the balance sheet date. Any difference between the exchange rate prevailing on the date of the transaction and the balance sheet date exchange rate are recognised in the income statement as items under financial income and expenses.

When recognising entities with different functional currencies than Danish kroner in the consolidated financial statements, the income statements are translated at the exchange rate prevailing on the date of the transaction and balance sheet items are translated at the balance sheet date exchange rates. The average rate of exchange for the individual months is used as exchange rate prevailing on the date of the transaction when this does not result in a considerably different presentation. Exchange rate differences, from translation of these entities' equity at the beginning of the year at the balance sheet date exchange rates and in connection with the translation of income statements from the exchange rate prevailing at the date of transaction to the balance sheet date exchange rates, are recognised directly in other comprehensive income as a separate reserve for foreign currency translation adjustments.

Consolidated financial statements

The consolidated financial statements include the financial statements of the parent company Solar A/S and subsidiaries in which Solar A/S has control of the financial or operational policies in order to get returns or otherwise benefit from their activities. Control is achieved by directly or indirectly owning or controlling more than 50% of the voting rights or by other means controlling the entity in question.

The consolidated financial statements have been prepared as a summary of the parent company and the individual subsidiaries' financial statements and in accordance with the group's accounting policies. Intercompany revenue, other intercompany operating items, intercompany balances, profit and loss from transactions between the consolidated entities as well as internal equity investments are eliminated.

Statement of comprehensive income

Solar A/S presents the statement of comprehensive income in two statements. An income statement and a statement of comprehensive income that show the year's results and income that forms part of other comprehensive income. Other comprehensive income includes exchange rate adjustments, actuarial gains and losses, adjustments of investments in associates and hedging transactions.

SOLAR ANNUAL REPORT 2015 CONSOLIDATED

Notes: Basis for preparation

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1 Accounting policies (continued)

Presentation of discontinued operations

Discontinued operations make up a considerable part of the enterprise if activities and cash flow can be clearly separated in an operational and accounting sense from the other parts of the entity and when the entity has either been divested or separated as held for sale.

Earnings after tax of discontinued operations as well as gains / losses from any sale are presented in a separate line in the income statement with adjustment of the comparative figures. Notes include information on revenue, costs, value adjustments, financials and tax for any discontinued operations. Assets and related liabilities of discontinued operations are recognised separately in the balance sheet without adjustments to comparative figures.

Cash flow statement

The cash flow statement shows cash flow distributed on operating, investing and financing activities for the year, changes in cash and cash equivalents, and cash at bank and in hand at the beginning and end of the year.

The effect of cash flow on the acquisition and divestment of entities is shown separately under cash flow from investing activities. Cash flow from acquired entities is recognised in the cash flow statement from the date of acquisition and cash flow from divested entities is recognised until the time of divestment. Cash flow from discontinued operations is presented separately under operating, investing and financing activities.

Cash flow from operating activities is determined using the indirect method as profit before tax adjusted for non-cash operating items, changes in working capital, interest received and paid, and income tax paid. Cash flow from investing activities includes payments in connection with the acquisition and sale of intangibles, property, plant and equipment and investments, and acquisition and divestment of entities. Cash flow from financing activities includes acquisition and sale of treasury shares, dividends distribution and incurrence or repayment of non-current interest-bearing liabilities.

Cash at bank and in hand includes cash holdings, deposits with banks and current interest-bearing liabilities.

Financial ratios

Earnings per share (EPS) and diluted earnings per share (EPS-D) are determined in accordance with IAS 33. In general, financial ratios are calculated in accordance with the "Recommendations and Financial Ratios 2015" of the Danish Finance Society.

Description of accounting policies in notes

Descriptions of accounting policies in the notes form part of the overall description of accounting policies. These descriptions are found in the following notes:

Note 3 Segment information
Note 7 Income tax
Note 8 Net profit or loss for the year
Note 9 Intangible assets
Note 10 Property, plant and equipment
Note 11 Inventories
Note 12 Trade receivables
Note 13 Provisions for pension obligations
Note 14 Other provisions
Note 16 Assets and liabilities held for sale
Note 17 Share capital
Note 19 Interest-bearing liabilities and maturity overview
Note 22 Share option plans
Note 23 Prepayments and other financial liabilities

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Notes: Basis for preparation
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2 Significant accounting estimates and assessments

When preparing the annual report in accordance with generally applicable principles, management make estimates and assumptions that affect the reported assets and liabilities. Management base their estimates on historic experience and expectations for future events. Therefore, actual results may differ from these estimates.

The following estimates and accompanying assessments are deemed material for the preparation of the financial statements:

Impairment test for goodwill and equity investments
Software
Inventory write-down
Write-down for meeting of loss on doubtful receivables
Provision for deferred tax

These estimates and assessments are described in the following notes:

Note 7 Income tax
Note 9 Intangible assets
Note 11 Inventories
Note 12 Trade receivables

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Notes to the income statement
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3 Segment information

The business segments are Installation, Industry and Others and are based on the customers' affiliation with the segments. Installation covers installation of electrical, and heating and plumbing products, while Industry covers industry, offshore and marine, and utility and infrastructure. Others covers other small areas. The three main segments have been identified without aggregation of operating segments. Segment income and costs include any items that are directly attributable to the individual segment and any items that can be reliably allocated to the individual segment. Non-allocated costs refer to income and costs related to joint group functions. Assets and liabilities are not included in segment reporting.

DKK million	Installation	Industry	Others	Total
2015
Revenue	7,255	2,651	681	10,587
Cost of sales	-5,793	-2,034	-561	-8,388
Gross profit	1,462	617	120	2,199
Direct costs	-294	-89	-12	-395
Earnings before indirect costs	1,168	528	108	1,804
Indirect costs	-560	-141	-57	-758
Segment profit or loss	608	387	51	1,046
Non-allocated costs¹				-684
Earnings before interest, tax, depreciation and amortisation (EBITDA)				362
Depreciation and amortisation				-113
Earnings before interest and tax (EBIT)				249
Financials, net				-48
Earnings before tax (EBT)				201

¹) Allocated costs cover costs directly or indirectly attributable to a specific sale, which facilitates profitability measurements for the respective segment. Non-allocated costs cover costs for administrative staff and various costs for joint expenses that cannot be attributed to any specific sale.

In Q3 2015, we made a more detailed classification of all customers onto our business segments. This led to changes between the various segments, and the effect of this is shown in the appendix to Quarterly Report Q3 2015. The appendix includes previously published information, changes to this and updated information per quarter for 2014 and for the first half-year of 2015.

ACCOUNTING POLICIES

As at 1 October 2014, Solar changed its segment reporting from geographical segmentation to business segmentation. The segmentation information has been prepared in accordance with the group's accounting policies.

The reporting on business segments follows the changed structure of Solar's internal management reporting to top operational management, the group Executive Board. The change is a consequence of the group's increased focus on utilising best practice across the geographical markets. The group Executive Board now uses business segmentation when allocating resources and following up on results.

No single customer makes up more than 10% of the total revenue.

Furthermore, Solar presents the geographical distribution of revenue and non-current assets divided on Denmark, Sweden, Norway, Benelux and Other markets. Other markets cover Austria, Poland and the Faroes. The geographical distribution is based on the business units operating in these geographical areas.

Revenue

Revenue includes goods for resale recognised in the income statement if the passing of the risk to the customer takes place before the end of the year and if revenue can be determined reliably. Revenue is measured exclusive VAT and duties charged on behalf of a third party. All types of discounts allowed are recognised in revenue.

Cost of sales

Cost of sales includes the year's purchases and change in inventory of goods for resale. This includes shrinkage and any write-down resulting from obsolescence.

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3 Segment information (continued)

DKK million	Installation	Industry	Others	Total
2014
Revenue	6,993	2,596	663	10,252
Cost of sales	-5,559	-1,963	-561	-8,083
Gross profit	1,434	633	102	2,169
Direct costs	-300	-86	-15	-401
Earnings before indirect costs	1,134	547	87	1,768
Indirect costs	-532	-144	-46	-722
Segment profit or loss	602	403	41	1,046
Non-allocated costs¹				-819
Earnings before interest, tax, depreciation and amortisation (EBITDA)				227
Depreciation and amortisation				-300
Earnings before interest and tax (EBIT)				-73
Financials, net				-49
Earnings before tax (EBT)				-122

Geographical information

Solar A/S operates primarily on the Danish, Swedish, Norwegian and Benelux markets. In the below table, Others covers the remaining markets, which can be seen in the group structure on page 19. The below allocation has been made based on the products' place of sale.

DKK million	Revenue	Organic growth	Non-current assets
2015
Denmark	2,771	4.3	1,746
Sweden	2,460	9.0	283
Norway	1,835	1.6	138
Benelux	2,765	3.4	321
Other markets and eliminations	756	12.6	-1,238
Total	10,587	5.2	1,250
2014
---	---	---	---
Denmark	2,657	-2.6	1,831
Sweden	2,321	1.1	278
Norway	1,932	1.6	156
The Netherlands	2,672	0.0	339
Other markets and eliminations	670	7.0	-1,280
Total	10,252	0.4	1,324

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4 Staff costs

DKK million	2015	2014
Salaries and wages etc.	1,148	1,222
Pensions, defined contribution	85	83
Pensions, defined benefit	-7	5
Costs related to social security	160	161
Share-based payment	10	-1
Total	1,396	1,470
Average number of employees (FTEs)	2,871	2,898
Number of employees at year-end (FTEs)	2,855	2,882
Remuneration of Board of Directors
Remuneration of Board of Directors	3	3
Remuneration of Executive Board
Remuneration and bonus	10	8
Share-based payment	2	0
Total	12	8

We have prepared a remuneration policy that describes guidelines for determining and approving remuneration of the Board of Directors and Executive Board. The annual general meeting adopts the Board of Directors' remuneration for one year ahead at a time. The Executive Board's remuneration is assessed every two years. The Board of Directors jointly approve the elements that make up the Executive Board's salary package as well as all major adjustments to this package following previous discussions and recommendations of the chairman and vice-chairman of the Board of Directors. Under section 139 of the Danish Companies Act, a complete remuneration policy for the Board of Directors and Executive Board is presented for adoption at the annual general meeting.

Terms of notice for members of the Executive Board is 12 months. When stepping down, the CEO is entitled to 6 months' remuneration. In 2014, a termination benefit of DKK 5m was provided to the former CEO; provisions for this were made in previous periods.

5 Loss on trade receivables

DKK million	2015	2014
Recognised losses	37	21
Received on trade receivables previously written off	-2	-1
	35	20
Change in write-down for bad and doubtful debts	-13	3
Total	22	23

Relevant accounting policies are described in note 12, trade receivables.

6 Depreciation, write-down and amortisation

DKK million	2015	2014
Buildings	29	36
Plant, operating equipment, tools and equipment	30	44
Leasehold improvements	4	4
Write-down on property, plant and equipment	0	28
Profit/loss from the sale of operating equipment etc.	3	-2
Total depreciation and write-down on property, plant and equipment	66	110
Customer-related assets	7	18
Software	40	37
Amortisation of intangible assets¹	0	135
Total amortisation and depreciation of intangible assets	47	190

1) In connection with the merger of Solar Nederland B.V. and Corelgro B.V., total amortisation of intangible assets of DKK 125m was made in 2014, of which DKK 25m related to customer-related assets.

Relevant accounting policies are described in note 9, intangible assets, and note 10, property, plant and equipment.

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7 Income tax

DKK million	2015	2014
Current tax	56	61
Deferred tax	12	-3
Tax on profit or loss for the year	68	58
Adjustment of deferred tax for previous years	1	0
Reduction of Danish and Norwegian income tax rates	-2	0
Total	67	58
Statement of effective tax rate:
Danish income tax rate	23.5%	24.5%
Tax base change for non-capitalised loss in subsidiaries	5.8%	-39.4%
Change to tax rates in Denmark and Norway	-1.2%	0.0%
Non-taxable/deductible items in parent company	2.4%	-7.1%
Non-taxable/deductible items and differing tax rates compared to Danish tax rate in foreign subsidiaries	2.1%	-26.3%
Tax for previous years	0.6%	1.1%
Effective tax rate	33.2%	-47.2%

8 ACCOUNTING POLICIES

Tax for the year is recognised with the share attributable to results for the year in the income statement and with the share attributable to other recognised income and costs in the statement of comprehensive income. Tax consists of current tax and changes to deferred tax.

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7 Income tax (continued)

DKK million	2015	2014
Provision for deferred tax
1/1	79	92
Foreign currency translation adjustments	1	-1
Recognised in other comprehensive income	9	-9
Ordinary tax recognised in income statement	12	-3
Other items, including reduction of Danish and Norwegian income tax rates	-1	0
Total 31/12	100	79
Specified as follows:
Deferred tax	128	122
Deferred tax assets	-28	-43
Total deferred tax, net	100	79
Further specified as follows:
Expected use within 1 year	2	-4
Expected use after 1 year	98	83
Total, net	100	79
Not recognised in balance sheet:
Deferred tax assets	63	51

Deferred tax assets not recognised in the balance sheet are the part of tax losses where it is not considered sufficiently certain that the tax losses can be realised within a short time frame. Non-recognised tax assets can in all material respects be attributed to tax losses in the Netherlands, where the non-recognised tax assets may be exercised until 2022.

8 ACCOUNTING POLICIES

Current tax liabilities and current tax receivables are recognised in the balance sheet as calculated tax on the year's taxable income, adjusted for tax on previous year's taxable income and for tax paid on account.

Deferred tax is measured in accordance with the balance sheet liability method of all temporary differentials between accounting and tax-related amounts and provisions. Deferred tax is recognised at the local tax rate that any temporary differentials are expected to be realised at based on the adopted or expected adopted tax legislation on the balance sheet date.

Deferred tax assets, including the tax value of tax loss allowed for carryforward, are measured at the value at which the asset is expected to be realised, either by elimination in tax of future earnings or by offsetting against deferred tax liabilities.

Deferred tax assets are assessed annually and only recognised to the extent that it is probable that they will be utilised.

Deferred tax is also recognised for the covering of the relaxation of losses in former foreign subsidiaries participating in joint taxation assessed as becoming current.

9 ACCOUNTING ESTIMATES AND ASSESSMENTS

Deferred tax assets

Deferred tax assets are not recognised if it is not deemed sufficiently safe that these can reduce future taxable income. In this connection, management assess expected future taxable income.

SOLAR ANNUAL REPORT 2015 CONSOLIDATED

Notes to the income statement

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

2014

CONTENTS

7 Income tax (continued)

Specification by balance sheet items

	1/1	Foreign currency translation adjustment	Change in tax rate	Other adjustments	2015	2014
Property, plant and equipment	43	0	0	3	46	43
Inventories	-2	0	0	-1	-3	-2
Provisions for loss on receivables	-6	0	0	4	-2	-6
Pension obligations	-4	0	0	-1	-5	-4
Other items¹	48	1	-2	17	64	48
Total, net	79	1	-2	22	100	79

1) Other items particularly cover intangible assets and loss balances in jointly taxed entities.

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8 Net profit for the year

DKK million	2015	2014
Proposed distribution of net profit for the year:
Proposed dividends, parent	78	55
Retained earnings	89	-289
Net profit for the year	167	-234
Dividends in DKK per share of DKK 100¹	10.00	7.00

1) Calculations are based on proposed dividends.

9 ACCOUNTING POLICIES

Dividends

Proposed dividends are recognised as a liability at the time of adoption of the general meeting.

SOLAR ANNUAL REPORT 2015 CONSOLIDATED

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9 Intangible assets

DKK million	Customer-related assets	Goodwill	Software	Total
2015
Cost 1/1	927	258	311	1,496
Foreign currency translation adjustment	-11	5	0	-6
Additions during the year	0	0	36	36
Disposals during the year	-89	0	0	-89
Cost 31/12	827	263	347	1,437
Amortisation and depreciation 1/1	906	110	141	1,157
Foreign currency translation adjustment	-11	0	0	-11
Amortisation during the year	7	0	40	47
Amortisation of abandoned assets	-89	0	0	-89
Amortisation and depreciation 31/12	813	110	181	1,104
Carrying amount 31/12	14	153	166	333
Remaining amortisation period in number of years	1-3	-	3-8	-

9 ACCOUNTING POLICIES

Customer-related intangible assets

Customer-related intangible assets acquired in connection with business combinations are measured at cost less accumulated amortisation and impairment loss.

Customer-related intangible assets are amortised using the straight-line principle over the expected useful life. Typically, the amortisation period is 5-7 years.

Goodwill

Goodwill is initially recognised in the balance sheet as the positive balance between the acquisition consideration of an enterprise on one side and the fair value of the assets, liabilities and contingent liabilities acquired on the other side. In cases of measurement uncertainty, the goodwill amount can be adjusted until 12 months after the date of the acquisition. Goodwill is not amortised but an impairment test is done annually. The first impairment test is done by the end of the year of acquisition. Subsequently, goodwill is measured at this value less accumulated impairment losses. On acquisition, goodwill is assigned to the cash-generating units that form the basis of the impairment test subsequently. The determination of cash-generating units follows the managerial structure and management control.

Software

Software is measured at cost less accumulated amortisation and writedown. Cost includes both direct internal and external costs. Software is amortised using the straight-line principle over 8 years. The basis of amortisation is reduced by any write-down.

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9 Intangible assets (continued)

DKK million	Customer-related assets	Goodwill	Software	Total
2014
Cost 1/1	1,020	269	293	1,582
Foreign currency translation adjustment	-13	-11	0	-24
Disposals relating to discontinued operations	-80	0	0	-80
Additions during the year	0	0	18	18
Disposals during the year	0	0	0	0
Cost 31/12	927	258	311	1,496
Amortisation 1/1	954	0	104	1,058
Foreign currency translation adjustment	-11	0	0	-11
Reversed amortisation related to discontinued operations	-80	0	0	-80
Amortisation and depreciation during the year	25	110	0	135
Amortisation during the year	18	0	37	55
Amortisation of abandoned assets	0	0	0	0
Amortisation and depreciation 31/12	906	110	141	1,157
Carrying amount 31/12	21	148	170	339
Remaining amortisation period in number of years	1-4	-	4-8	-

① ACCOUNTING POLICIES (CONTINUED)

Impairment of intangible assets

Goodwill is tested yearly for impairment and first before the end of the year of acquisition.

The carrying amount of goodwill is tested for impairment together with the other non-current assets of the cash-generating unit to which goodwill is allocated, and is written down to the recoverable amount via the income statement, provided that the carrying amount is larger. Most often, the recoverable amount is determined as the present value of the expected future net cash flow from the company or activity (cash-generating unit) that the goodwill is affiliated to. Write-down of goodwill is recognised on a separate line in the income statement.

The carrying amount of non-current assets is assessed annually to determine whether there is any indication of impairment.

When such an indication is present, the asset's recoverable amount is calculated, which is the highest of the asset's fair value less expected costs of disposal or value in use. Value in use is calculated as the present value of expected cash flow from the smallest cash flow-generating unit to which the asset belongs.

Impairment loss is recognised when the carrying amount of an asset exceeds the asset's recoverable amount. Impairment loss is recognised in the income statement.

Impairment loss relating to goodwill is not reversed. Amortisation and depreciation on intangible assets are reversed to the extent that changes have been made to the assumptions and estimates that led to the write-down.

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9 Intangible assets (continued)

Goodwill

(Comparative figures for 2014 in brackets)

On 31 December 2015, management completed an impairment test of the carrying amount of goodwill. The impairment test was performed in the fourth quarter and is based on the estimates and expectations as well as other assumptions approved by the Executive Board and Board of Directors with the necessary adjustments under IAS 36.

When performing an impairment test of cash-generating units, the recoverable amount (value in use), determined as the discounted value of expected future cash flow, is compared to the carrying amounts of the individual cash-generating units. Non-allocated costs are proportionately distributed between the individual segments and thus affect the individual impairment tests by the estimated total costs.

Overall, impairment tests made are based on the strategy approved by the Executive Board and Board of Directors. Budgets and expectations for the next 6 years (6 years) are based on Solar's current, on-going and contract investments in which risks of the material parameters have been assessed and recognised in future expected cash flow. Expected growth is based on a conservative outlook for market growth in the coming years.

Management's final assessment of the impairment tests made is based on an assessment of probable changes to the basic assumptions and that these will not result in the carrying amount of goodwill exceeding the recoverable amount.

ACCOUNTING ESTIMATES AND ASSESSMENTS

Impairment test for goodwill and equity investments

In connection with the annual impairment test of goodwill, or when there is an indication of impairment, an estimate is made of how the parts of the business (cash-generating units), that goodwill is linked to, will be able to generate sufficient positive cash flow in future to support the value of goodwill and other net assets in the relevant part of the business.

Due to the nature of the business, estimates must be made of expected cash flow for many years ahead which, naturally, results in a certain level of uncertainty. This uncertainty is reflected in the discount rate determined. The impairment test and the very sensitive related aspects are described in more detail in the comments section.

Software

Software is evaluated annually for indicators of a need for impairment. If a need to perform impairment is identified, an impairment test for the software is performed.

The impairment test is made on the basis of different factors, including the software's future application, the present value of the expected cost saving as well as interest and risks.

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9 Intangible assets (continued)

Alvesta V.V.S.-Material AB

DKK 142m of the carrying amount of goodwill result from the acquisition of the Swedish enterprise Alvesta V.V.S.-Material AB in 2007 by Solar Sverige AB. The impairment test is based on the installation segment in Sweden, which is estimated to be the lowest level of cash-generating units to which we can allocate.

The growth rate used in the impairment test for 2016 is 7% (4%), while the growth rate used in impairment tests for the years succeeding 2016 is 2-4% (4-6%). Growth for 2016 is a continuation of the growth rates seen in 2015 and trends until the terminal period should be regarded as a normalisation of growth expectations.

Terminal value after 6 years is determined while taking into consideration general expectations for growth, which by considerations of prudence are determined at 2% (2%).

The discount rates (WACC) used to calculate the recoverable amount is 8.5% (8.5%), equalling a pre-tax discount rate of approx. 11% (11%). Cash flow used includes any effect of related future risks, and therefore, such risks have not been added to the applied discount rates.

No improvements have been incorporated for working capital and gross profit as we adhere to the prudence concept.

Based on the above and other impairment tests completed, there is no need for impairment relating to the carrying amount of goodwill.

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10 Property, plant and equipment

DKK million	Land and buildings	Plant, operating equipment, tools and equipment	Leasehold improvements	Assets under construction	Total
2015
Cost 1/1	1,241	525	71	1	1,838
Foreign currency translation adjustments	-2	4	-1	0	1
Assets held for sale	-29	0	0	0	-29
Additions during the year	3	20	5	5	33
Disposals during the year	0	-31	-8	-5	-44
Cost 31/12	1,213	518	67	1	1,799
Write-down and depreciation 1/1	377	464	60	0	901
Foreign currency translation adjustments	0	3	-1	0	2
Reversed write-down and depreciation related to discontinued operations	-16	0	0	0	-16
Write-down and depreciation during the year	29	30	4	0	63
Write-down and depreciation of abandoned assets	0	-26	-7	0	-33
Write-down and depreciation 1/12	390	471	56	0	917
Carrying amount 31/12	823	47	11	1	882

② ACCOUNTING POLICIES

Property, plant and equipment

Land and buildings as well as other plant, operating equipment, and tools and equipment are measured at cost less accumulated depreciation and write-down.

Cost includes the purchase price and costs directly attributable to the acquisition until the time when the asset is ready for use. Cost of a combined asset is disaggregated into separate components which are depreciated separately if the useful lives of the individual components differ.

Subsequent expenditure, for example in connection with the replacement of components of property, plant or equipment, is recognised in the carrying amount of the relevant asset when it is probable that the incurrence will result in future economic benefits for the group. The replaced components cease to be recognised in the balance sheet and the carrying amount is transferred to the income statement. All other general repair and maintenance costs are recognised in the income statement when these are incurred.

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives which are:

Buildings 40 years
Technical installations 20 years
Plant, operating equipment, and tools and equipment 2-5 years.

There are a few differences from the mentioned depreciation periods in which useful life is estimated as shorter. Leasehold improvements are depreciated over the lease term, however, maximum 5 years.

Land is not depreciated.

The basis of depreciation is determined in consideration of the asset's residual value and reduced by any impairment. Residual value is determined at the time of acquisition and reassessed annually. If residual value exceeds the asset's carrying amount, depreciation will cease.

By changing the depreciation period or residual value, the effect of future depreciation is recognised as a change to accounting estimates.

SOLAR ANNUAL REPORT 2015 CONSOLIDATED

Notes: Invested capital

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

①

CONTENTS

10 Property, plant and equipment (continued)

DKK million	Land and buildings	Plant, operating equipment, tools and equipment	Leasehold improvements	Assets under construction	Total
2014
Cost 1/1	1,533	616	83	30	2,262
Foreign currency translation adjustments	-28	-15	-3	0	-46
Assets held for sale	-60	0	0	0	-60
Disposals, discontinued operations	-186	-54	-7	0	-247
Additions during the year	38	36	2	17	93
Disposals during the year	-56	-58	-4	-46	-164
Cost 31/12	1,241	525	71	1	1,838
Write-down and depreciation 1/1	475	539	67	0	1,081
Foreign currency translation adjustments	-5	-11	-1	0	-17
Reversed write-down and depreciation related to discontinued operations	-101	-53	-7	0	-161
Write-down and depreciation during the year	64	44	4	0	112
Write-down and depreciation of abandoned assets	-56	-55	-3	0	-114
Write-down and depreciation 1/12	377	464	60	0	901
Carrying amount 31/12	864	61	11	1	937

② ACCOUNTING POLICIES (CONTINUED)

Impairment of property, plant and equipment

The carrying amount of property, plant and equipment is assessed annually to determine whether there is any indication of impairment.

Impairment loss is recognised when the carrying amount of an asset exceeds the asset's recoverable amount. Impairment loss is recognised in the income statement.

Write-down on property, plant and equipment is reversed to the extent that changes have been made to the assumptions and estimates that led to the write-down.

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CONTENTS

11 Inventories

DKK million	2015	2014
End products	1,302	1,240
Recognised write-down	-10	-7

The main reasons for the recognised write-down are sales and scrapping of previously written-down products.

② ACCOUNTING POLICIES

Inventories are measured at cost according to the FIFO method or at net realisable value, if this is lower.

Cost of inventories includes purchase price with addition of delivery costs.

The net realisable value of inventories is determined as selling price less costs incurred to make the sale and is determined in consideration of marketability, obsolescence and development of expected selling price.

③ ACCOUNTING ESTIMATES AND ASSESSMENTS

Write-down of inventories

Write-down of inventories is made due to the obsolescence of products.

Management specifically assess inventories, including the products' turnover rate, current economic trends and product development when deciding whether the write-down is sufficient.

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12 Trade receivables

DKK million	2015	2014
Maturity statement, trade receivables
Not due	1,148	1,093
Past due for 1-30 day(s)	133	195
Past due for 31-90 days	20	37
Past due for 91+ days	37	35
	1,338	1,360
Write-down	-43	-57
Total	1,295	1,303
Write-down based on:
Age distribution	12	38
Individual assessment	31	19
Total	43	57
Write-down 1/1	57	61
Foreign currency translation adjustment	-1	-2
Adjustment related to discontinued operations	0	-5
Write-down for the year	14	18
Losses realised during the year	-20	-8
Reversed for the year	-7	-7
Write-down 31/12	43	57

We refer to the credit risks section under Risks in our management's review.

10 ACCOUNTING POLICIES

Trade receivables are measured at fair value at acquisition and at amortised cost subsequently. Based on an individual assessment of the loss risk, write-down to net realisable value is made, if this is lower.

12 ACCOUNTING ESTIMATES AND ASSESSMENTS

Write-down for meeting of loss on doubtful trade receivables

Write-down is made to meet loss on doubtful trade receivables. Management specifically analyses trade receivables, including the customers' credit rating and current economic trends, to ensure that write-down is sufficient.

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CONTENTS

13 Provision for pension obligations

Most of the group's employees have pension plans; mainly defined contribution pension plans and, to a smaller degree, defined benefit pension plans.

The Solar Group's defined benefit plans are, in all material aspects, constituted by the subsidiaries Solar Norge AS, Conelgro B.V., Claessen ELGB NV and GFI GmbH (Austria). Overall, these pension plans are similar and primarily comprise a number of different pension plans and, to a smaller extent, anniversary plans and retirement benefit plans. The majority of this obligation covers lifelong retirement pensions.

No major changes have been made to the method of accounting, and at the same time, no major risks are assessed as being associated with the group's defined benefit plans.

DKK million	2015	2014
Present value of pension obligations	303	312
Fair value of plan assets	-288	-293
Deficit	15	19
Pension obligations (net) recognised in the balance sheet	15	19

The following specifications show how this obligation is recognised in the balance sheet and income statement as well as development in present values of the obligation and pension assets. In addition, the specifications show the composition of pension assets and the most significant actuarial assumptions.

ACCOUNTING POLICIES

Obligations concerning the defined contribution plans are recognised in the income statement in the period that these are earned and any payments due are included under other payables.

Obligations related to defined benefit plans for present and former employees are determined systematically by an actuarial discount to net present value of the pension obligation. Value in use is calculated on the basis of presumptions about future developments in, for example, inflation, pay level and life expectancy. The discount rate used is the effective interest rate on corporate bonds with high credit quality and with terms that correspond to that of the pension obligation.

The actuarially calculated value in use less fair value of assets attached to the plan is recognised in the balance sheet under pension provisions. If the net amount is an asset, this is recognised under pension assets in the balance sheet to the extent that any surplus leads to a reduction in future contributions or repayment to the enterprise.

Results recognise current service costs based on actuarial estimates made at the beginning of the year. Returns on the net obligation are also recognised. Differences between the calculated development of the pension activities and obligations and realised values calculated at year-end are termed actuarial gains and losses and are recognised as other comprehensive income.

The effect of a change in value in use as a consequence of changes to the pension agreements made is recognised in the income statement at the modification date.

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13 Provision for pension obligations (continued)

DKK million	2015	2014
Amounts recognised in income statement
Expected pension costs	2	5
Calculated interests on obligations	8	10
Calculated interest revenue	-8	-10
Adjustment related to the merger of Solar Nederland B.V. and Conelgro B.V.	-9	0
Total	-7	5
Amounts recognised in the balance sheet
Obligations, defined benefit pension plans etc.	15	19
Assets	0	0
Total	15	19
Actual return on the plan's assets	-2	59
Development in present value of obligation
---	---	---
1/1	312	259
Foreign currency translation adjustments	-1	-3
Adjustment relating to change in pension obligation	-13	-2
Expected pension costs	2	5
Calculated interest on obligations	8	10
Benefits paid out	-8	-9
Actuarial gains and losses relating to change in demographic assumptions	-11	-1
Actuarial gains and losses relating to change in financial assumptions	14	53
Total 31/12	303	312
DKK million	2015	2014
---	---	---
Development in fair value of pension assets
1/1	293	237
Foreign currency translation adjustments	-1	-2
Adjustments relating to change in pension obligation	0	-1
Calculated interest income	8	10
Paid in by the Solar Group	5	6
Paid in by staff	1	2
Pensions paid	-8	-8
Actuarial gains and losses	-10	49
Total 31/12	288	293

The group's expected payments to defined benefit pension plans in 2015 total DKK 3m (2014: DKK 3m).

Distribution of pension assets
Equity instruments	50	51
Debt instruments	194	197
Others	44	45
Total 31/12	288	293

Average actuarial assumptions:
Discount rate	1.7-2.5%	2.0-2.3%
Pay increase rate	2.0-2.5%	2.0-2.8%
Pension increase rate	2.5%	2.5%

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FINANCIAL STATEMENTS

CONTENTS

13 Provision for pension obligations (continued)

The table below shows the sensitivity of the pension obligations to changes in key assumptions for the statement of the obligation on the balance sheet date. In addition, the Solar Group is also exposed to general development in the market value of the assets.

DKK million	2015	2014
Pension obligation	303	312
Sensitivity to discount rate:
Discount rate - 0.5 %	26	32
Discount rate + 0.5 %	-23	-22
Sensitivity to pay increase rate:
Pay increase rate - 0.5 %	-1	-3
Pay increase rate + 0.5 %	1	7
Sensitivity to pension increase rate:
Pension increase rate - 0.5 %	-27	-14
Pension increase rate + 0.5 %	26	11
Pension obligations are expected to be payable as follows:
0 - 1 year	8	8
1 - 5 year(s)	36	37
> 5 years	259	267
Total 31/12	303	312

The expected duration of the obligation at year-end 2015 is 19.5 years (2014: 20.4 years) and may be divided into active employees at 24.9 years (25.6 years) and retired employees at 9.5 years (2014: 9.7 years).

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14 Other provisions

DKK million	2015	2014
Non-current
Restructuring costs	2	1
Other provisions	17	12
Total 31/12	19	13
Specification, non-current
1/1	13	20
Used during the year	-1	-8
Provisions of the year	7	1
Total 31/12	19	13
Current
Integration plan	0	48
Other provisions	28	29
Total 31/12	28	77
Specification, current
1/1	77	22
Used during the year	-77	-22
Provisions of the year	28	77
Total 31/12	28	77

9 ACCOUNTING POLICIES

Provisions are measured in accordance with management's best estimate of the amount required to settle a liability.

Restructuring expenses are recognised as liabilities when a detailed official plan for the restructuring has been published to the parties affected by the plan on the balance sheet date at the latest.

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MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

15 Other payables

DKK million	2015	2014
Staff costs	218	207
Taxes and charges	92	82
Hedging instruments	112	136
Other payables and amounts payable	94	78
Total	516	503

Relevant accounting policies for hedging instruments are described in note 19 on interest-bearing liabilities and maturity statement on page 71.

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CONTENTS

16 Assets and liabilities held for sale

2015

Discontinued operation

On 16 March 2015, Solar A/S finalised the divestment of the assets of Solar Deutschland GmbH to Sonepar Group with an accounting profit of DKK 50m.

The discontinued operation impacted the income statement as follows:

DKK million	2015	2014
Revenue	185	932
Cost of sales	-157	-792
Gross profit	28	140
Costs incl. profit	8	-192
Earnings before interest and tax (EBIT)	36	-52
Financials	0	-2
Earnings before tax (EBT)	36	-54
Tax on net profit or loss for the period	-3	0
Net profit or loss for the period	33	-54
Earnings from discontinued operations in DKK per share outstanding (EPS)	4.20	-6.87
Diluted earnings from discontinued operations in DKK per share outstanding (EPS-D)	4.19	-6.87
Cash flow from operating activities	-53	-29
Cash flow from investing activities	345	-1
Cash flow from financing activities	0	0
Total cash flow	292	-30

ACCOUNTING POLICIES

Assets held for sale are saleable assets with expected sale within 1 year. Write-down to a reduced fair value less sales costs is made. Value adjustments after tax and profit/loss from sales are presented under other operational profit and loss without restatement of comparative figures.

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FINANCIAL STATEMENTS

CONTENTS

16 Assets and liabilities held for sale (continued)

DKK million	2015	2014
Divestment of the discontinued operations may be specified as follows:
Carrying amount of net assets	298	-
Gain on divestment	50	-
Total consideration	348	-

Assets and liabilities held for sale may be divided into the following main items:

DKK million	2015	2014
Property, plant and equipment, Solar Deutschland	16	86
Property, plant and equipment, Solar A/S	13	-
Property, plant and equipment, Solar Nederland	59	61
Non-current assets	88	147
Inventories, Solar Deutschland	-	109
Trade receivables, Solar Deutschland	-	117
Other current assets, Solar Deutschland	-	2
Current assets	-	228
Assets held for sale	88	375
Interest-bearing liabilities, Solar A/S	25	-
Other non-current liabilities, Solar Deutschland	-	4
Non-current liabilities	25	4
Trade payables, Solar Deutschland	-	54
Other current liabilities, Solar Deutschland	-	14
Current liabilities	-	68
Equity and liabilities held for sale	25	72

Deferred tax assets not recognised in the balance sheet of Solar Deutschland GmbH amounted to DKK 87m (2014: DKK 105m) at the end of the period.

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17 Share capital

DKK million	2015	2014
Share capital 1/1	792	792
Share capital 31/12	792	792
Share capital is fully paid in and divided into the following classes:
A shares, 40 shares at DKK 10,000	0	0
A shares, 2,240 shares at DKK 40,000	90	90
A shares total	90	90
B shares 7,020,607 at DKK 100	702	702
Total	792	792

Share capital remained unchanged from 2011 to 2015.

DKK million	No. of shares		Nominal value
	2015	2014	2015	2014
A shares outstanding 31/12¹	900,000	900,000	90	90
B shares outstanding
Outstanding 1/1	6,955,434	6,955,434	695	695
Purchase of treasury shares	-44,836	0	-4	0
B shares outstanding 31/12	6,910,598	6,955,434	691	695
Total shares outstanding 31/12	7,810,598	7,855,434	781	785

¹) A shares have been included in the calculation in units of DKK 100.

9 ACCOUNTING POLICIES

Treasury shares

Acquisition and disposal sums related to treasury shares are recognised directly as transactions with the owners.

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17 Share capital (continued)

Tresury shares (B shares)

	No. of shares		Nominal value (DKK million)		Cost (DKK million)		Share capital percentage
	2015	2014	2015	2014	2015	2014	2015	2014
Holding 1/1	65,173	65,173	7	7	26	26	0.8%	0.8%
Purchases	44,836	0	4	0	19	0	0.6%	0.0%
Holding 31/12	110,009	65,173	11	7	45	26	1.4%	0.8%

The holding of treasury shares is maintained for hedging of share option plans. Buy-back in 2015 has been done to adjust the company's capital structure.

All treasury shares are held by the parent company.

18 Earnings per share in DKK per share outstanding for the year

	2015	2014
Net profit for the year in DKK million	167	-234
Average number of shares	7,920,607	7,920,607
Average number of treasury shares	-67,316	-65,173
Average number of shares outstanding	7,853,291	7,855,434
Dilution effect of share options	18,525	10,525
Diluted number of shares outstanding	7,871,816	7,865,959
Earnings per share in DKK per share outstanding for the year	21.26	-29.79
Diluted earnings per share in DKK per share outstanding for the year	21.21	-29.79
Earnings per share from continuing operations in DKK per share outstanding for the year	17.06	-22.91
Diluted earnings per share from continuing activities in DKK per share outstanding for the year	17.02	-22.91

A shares have been included in the calculation in units of DKK 100.

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19 Interest-bearing liabilities and maturity statement

DKK million	Interest rate	2015	2014
Debt to mortgage credit institutions	Fixed	195	226
Debt to credit institutions	Fixed	285	326
Employee bonds	Fixed	0	5
Bank loans and overdrafts	Floating	10	25
Interest-bearing liabilities		490	582
Trade payables		1,608	1,432
Other payables		555	602
Financial liabilities		2,653	2,616
Cash at bank and in hand		699	248
Trade receivables		1,295	1,303
Other receivables		37	84
Financial assets		2,031	1,635
Total, net		622	981
Maturity < 1 year
Debt to mortgage credit institutions		6	6
Debt to credit institutions		44	45
Employee bonds		0	5
Bank loans and overdrafts		10	25
Current interest-bearing liabilities		60	81
Other financial liabilities		2,163	2,034
Financial liabilities		2,223	2,115
Financial assets		2,031	1,635
Total, net		192	480

9 ACCOUNTING POLICIES

Financial liabilities

Debt to credit institutions is recognised initially at the proceeds received net of transaction costs incurred.

In subsequent periods, the financial liabilities are measured at amortised cost using the effective interest method, meaning that the difference between the proceeds and the nominal value is recognised in the income statement under financials for the term of the loan.

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19 Interest-bearing liabilities and maturity statement (continued)

DKK million	2015	2014
Maturity 1-5 year(s)
Debt to mortgage credit institutions	32	24
Debt to credit institutions	241	237
Total	273	261
Maturity > 5 years
Debt to mortgage credit institutions	157	196
Debt to credit institutions	0	44
Total	157	240
Total non-current liabilities	430	501
Maturity, until year	2037	2037

The carrying amount of financial liabilities corresponds to fair value.

DKK million	2015	2014
Interest-bearing liabilities and maturity statement
Expected interest expense for the period
< 1 year	24	30
1-5 year(s)	49	84
> 5 years	71	98
Total	144	212
Distribution on currencies	Current liabilities
---	---	---
DKK million	2015	2014
EUR	34	48
DKK	0	8
NOK	0	0
PLN	5	2
SEK	21	23
Total	60	81
Interest rate in %	1.2-5.9	1.3-6.0

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CONTENTS

19 Interest-bearing liabilities and maturity statement (continued)

DKK million	2015	2014
Outstanding interest swaps made for hedging floating-rate loans
Principal amount	530	573
Fair value	-112	-136
Amounts recognised in other comprehensive income
Adjustment to fair value for the year	2	-12
Realised during the year, recognised as financial income/expenses	33	-31
Total	35	-43
Effect of a 1% interest rate increase
Effect on equity	28	40
Of this, earnings impact is	0	0
Undrawn credit facilities 31/12	744	735

Fair value of Solar's respective interest-bearing liabilities is seen as fair value measurement at level 2. Mortgage loans are valued based on underlying securities, while bank debt is calculated based on models for discounting to net present value. Non-observable market data is primarily made up of credit risks, which are seen as insignificant in Solar's case.

The fair value of Solar's derived financial instruments (interest rate instruments) is fixed as fair value measurement at level 2, since fair value can be determined directly based on the actual forward rates and instalments on the balance sheet date. Outstanding interest rate swaps for hedging of floating-rate loans expire over the period 2016-37 (2016-37).

The group's enterprises have raised loans in their respective functional currencies, while the parent company has also raised loans in euro. We refer to the risk section in our management's review for more information on liquidity risk, interest rate and currency risk management.

ACCOUNTING POLICIES (CONTINUED)

Derivatives

Derivatives are only used to hedge financial risks in the form of interest rate and currency risks.

Derivatives are initially recognised at cost and at fair value subsequently. Both realised and unrealised gains and losses are recognised in the income statement unless the derivatives are part of hedging of future transactions. Value adjustments of derivatives for hedging of future transactions are recognised directly in other comprehensive income. As hedged transactions are realised, gains or losses are recognised in the hedging instrument from other comprehensive income in the same item as the hedged items. Any non-effective part of the financial instrument in question is recognised in the income statement.

Derivatives are recognised under other receivables or other payables.

Fair value measurement

The group uses the fair value concept for recognition of certain financial instruments and in connection with some disclosure requirements. Fair value is defined as the price that can be secured when selling an asset or that must be paid to transfer a liability in a standard transaction between market participants (exit price).

Fair value is a market-based and not enterprise-specific valuation. The enterprise uses the assumptions that market participants would use when pricing an asset or liability based on existing market conditions, including assumptions relating to risks.

As far as possible, fair value measurement is based on market value in active markets (level 1) or alternatively on values derived from observable market information (level 2).

If such observable information is not available or cannot be used without significant modifications, recognised valuation methods and fair estimates are used as the basis of fair values (level 3).

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FINANCIAL STATEMENTS

CONTENTS

20 Financial income

DKK million	2015	2014
Interest revenue	4	10
Foreign exchange gains	18	19
Total	22	29
Financial income, received	4	10

21 Financial expenses

DKK million	2015	2014
Interest expenses	37	42
Foreign exchange losses	18	31
Other financial expenses	15	5
Total	70	78
Financial expenses, settled	42	47

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22 Share option plans

DKK million	Executive Board	Others	Total
No. of share options at year-end 2015
Outstanding at the beginning of 2015	8,745	89,349	98,094
Granted in 2015	7,383	30,989	38,372
Exercised	0	0	0
Expired	-1,692	-12,931	-14,623
Outstanding at year-end 2015	14,436	107,407	121,843
No. of share options at year-end 2014
---	---	---	---
Outstanding at the beginning of 2014	26,208	71,599	97,807
Granted in 2014	5,892	18,200	24,092
Transferred on change to the Executive Board	-21,583	21,583	0
Exercised¹	-1,772	-15,139	-16,911
Expired	0	-6,894	-6,894
Outstanding at year-end 2014	8,745	89,349	98,094
DKK million	2015	2014
---	---	---
Market value estimated using the Black-Scholes model, recognised under other liabilities	11	1

Conditions applying to the statement of market value using the Black-Scholes model:

Expected volatility	29%	30%
Expected dividends in proportion to market value	2%	3%
Risk-free interest rate	2%	4%

¹) In Q1 2014, 7,541 share options were exercised. The share price at the exercise date was DKK 380.64. The exercise period for the remaining 9,370 options was prolonged, and the options were exercised in Q2 2014. The share price at the exercise date was DKK 441.64.

9 ACCOUNTING POLICIES

Share options are measured at fair value at the grant date and are recognised in the income statement under staff costs over the period when the final right to the options is vested. The set-off to this is recognised under other payables, as the employees have the right to choose cash settlement. This liability is regularly adjusted to fair value and fair value adjustments are recognised in staff costs.

The fair value of the granted share options is estimated using the Black-Scholes model. Allowance is made for the conditions and terms related to the granted share options when performing the calculation.

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22 Share option plans (continued)

Specification of share option plans

No. of shares	Year of granting
	2015	2014	2013	2012	2011
Executive Board
Granted	7,383	5,892	8,147	7,159	5,076
Transferred on change to the Executive Board	0	-3,941	-5,431	-4,773	-3,384
Exercised	0	0	0	0	-1,692
Total	7,383	1,951	2,716	2,386	0
Others
Granted	30,989	18,200	30,217	33,112	14,350
Transferred on change to the Executive Board	0	3,941	5,431	4,773	3,384
Forfeited due to expiry	0	0	0	0	-12,931
Forfeited on resignation of management employees	0	0	-6,011	-13,245	-4,803
Exercised	0	0	0	0	0
Total	30,989	22,141	29,637	24,640	0
Exercise price²	328.26	373.64	269.18	307.27	436.26
Exercise period
10 banking days following the publication of the annual report in	2018/2019	2017/2018	2016/2017	2015/2016	2014/2015

2) Exercise price was adjusted by DKK -7.00 in 2015 as dividends were distributed in 2015 despite the fact that the year's results were negative.

The share option plan adheres to Solar's general guidelines for incentive programmes approved by the annual general meeting on 5 April 2013. Please find these guidelines on Solar's website at www.solar.eu/menu/investor/downloads/policies.

Each share option entitles the holder to purchase one Solar B share.

The plans include the option to make payment as a cash settlement.

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23 Contingent liabilities and other financial liabilities

DKK million	2015	2014
Operational leases and rent contracts
Non-cancellable minimum lease payments are to be made within the following periods from the balance sheet date:
< 1 year	108	111
> 1 year < 5 years	184	206
> 5 years	20	31
Total	312	348
Operational leases and rent recognised in the income statement:
Total	84	78
Company cars and office furniture and equipment are leased under operating leases The typical lease period is:
No. of years	1-6	1-7
Rent obligations with non-cancellation periods:
No. of years up to:	10	10
Collateral
Assets have been pledged as collateral for bank arrangements at a carrying amount of:
Land and buildings	391	426
Current assets	106	533
Total	497	959

8 ACCOUNTING POLICIES

Leasing

Leasing agreements, in which the most important aspects of the asset's risks and benefits remain with the lessor, are classified as operational leasing agreements. Leasing agreements, in which the most important aspects of the asset's risks and benefits are transferred to enterprises in the Solar Group, are classified as financial leases. As at the balance sheet date, no leasing agreement is classified as a financial lease. Leasing payments concerning operational leasing are recognised in the income statement on a straight-line basis throughout the leasing period.

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24 Related parties

Group and parent Solar A/S are subject to control by the Fund of 20th December (registered as a commercial foundation in Denmark), which owns 15.6% of the shares and holds 57.5% of the voting rights. The remaining shares are owned by a widely combined group of shareholders.

Other related parties include the company's Board of Directors and Executive Board. In 2015, member of the Board of Directors Jens Peter Toft invoiced Solar DKK 73,500 via toft advice aps for consultancy services.

Otherwise, there have been no transactions in the financial year with members of the Board of Directors and Executive Board than those which appear from note 5.

On the balance sheet date, the usual product balances derived from these transactions exist. These appear from the parent company's balance sheet.

The parent company has had the following significant transactions with related parties:

DKK million	2015	2014
Sale of services to subsidiaries	130	133
Sale of goods to subsidiaries	47	46

Solar also invoices the Fund of 20th December for the performance of administrative services at DKK 20,000. Balances with the Fund of 20th December total DKK 0 on the balance sheet date.

25 Auditors' fees

DKK million	2015	2014
PricewaterhouseCoopers
Statutory audit	3	2
Other assurance engagements	0	0
Tax consulting	1	1
Other services	1	0
Total	5	3
Other auditors
Other services	2	4
Total	2	4

SOLAR ANNUAL REPORT 2015 CONSOLIDATED
Notes: Other notes
MANAGEMENT'S REVIEW
FINANCIAL STATEMENTS
CONTENTS

26 New financial reporting standards

For further elaboration on new financial reporting standards to be implemented in subsequent accounting periods, please see note 1 on page 42 of this annual report.

Moreover, the following new or amended standards have been issued in 2015:

IFRS 9 on financial instruments
IFRS 10, 11 og 12 on the treatment of subsidiaries and on jointly controlled arrangements
IFRS 15 on revenue from contracts with customers
IFRS 16 on the treatment of leases
IAS 1 on the presentation of financial statements
IAS 16 and 38 on property, plant and equipment and intangible assets
IAS 27 and 28 on the treatment of subsidiaries and on jointly controlled arrangements
Improvements on applicable standards

These standards have not been adopted by the EU, with the exception of Improvements on applicable standards. Solar will continuously assess the impact but has not finished this assessment at present.

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FINANCIAL STATEMENTS PARENT

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CONTENTS

PARENT'S FINANCIAL STATEMENTS

Statement of comprehensive income 80
Balance sheet 81
Cash flow statement 82
Statement of changes in equity 83
Notes 84

Notes to the financial statements

Basis for preparation

Accounting policies 84
Significant accounting estimates and assessments 84

Notes to the income statement

Staff costs 85
Loss on trade receivables 85
Depreciation, write-down and amortisation 85
Income tax 86
Net profit or loss for the year 89

Invested capital

Intangible assets 90
Property, plant and equipment 92
Other non-current assets 94
Inventories 96
Trade receivables 97
Other provisions 98
Other liabilities 99

Capital structure and financing costs

Share capital 100
Interest-bearing liabilities 102
Financial income 105
Financial expenses 105

Other notes

Contingent liabilities and other financial liabilities 106
Related parties 107
Auditors' fees 108

SOLAR ANNUAL REPORT 2015 PARENT

Statement of comprehensive income

MANAGEMENT'S REVIEW

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CONTENTS

STATEMENT OF COMPREHENSIVE INCOME

Income statement

Note	DKK million	2015	2014
	Revenue	2,771	2,657
	Cost of sales	-2,067	-1,974
	Gross profit	704	683
	Other operating income and costs	36	35
21	External operating costs	-58	-60
3	Staff costs	-466	-451
4	Loss on trade receivables	-6	-2
	Earnings before interest, tax, depreciation and amortisation (EBITDA)	210	205
5	Depreciation and write-down on property, plant and equipment	-24	-37
	Earnings before interest, tax and amortisation (EBITA)	186	168
5	Amortisation of intangible assets	-40	-38
	Earnings before interest and tax (EBIT)	146	130
	Dividends from subsidiaries	16	2
17	Financial income	22	32
18	Financial expenses	-98	-492
	Earnings before tax (EBT)	86	-328
6	Income tax	-32	-40
7	Net profit for the year	54	-368

Other comprehensive income

DKK million	2015	2014
Net profit for the year	54	-368
Other income and costs recognised:
Items that can be reclassified for the income statement
Value adjustments of hedging instruments before tax	26	-47
Tax on value adjustments of hedging instruments	-7	11
Other income and costs recognised after tax	19	-36
Total comprehensive income for the year	73	-404

SOLAR ANNUAL REPORT 2015 PARENT Balance sheet

MANAGEMENT'S REVIEW

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CONTENTS

BALANCE SHEET

as at 31 december

Note	DKK million	2015	2014
	Assets
8	Intangible assets	166	171
9	Property, plant and equipment	281	308
10	Other non-current assets	1,299	1,352
	Non-current assets	1,746	1,831
11	Inventories	357	356
12	Trade receivables	317	313
	Receivables from subsidiaries	424	639
	Income tax receivable	3	3
	Other receivables	3	41
	Prepayments	9	7
	Cash at bank and in hand	572	78
	Assets held for sale	13	0
	Current assets	1,698	1,437
	Total assets	3,444	3,268
Note	DKK million	2015	2014
---	---	---	---
	Equity and liabilities
15	Share capital	792	792
	Reserves	-68	-87
	Retained earnings	1,121	1,164
	Proposed dividends for the financial year	78	55
	Equity	1,923	1,924
16	Interest-bearing liabilities	214	268
	Provision for pension obligations	1	1
6	Provision for deferred tax	70	65
	Non-current liabilities	285	334
16	Interest-bearing liabilities	29	45
	Trade payables	616	558
	Amounts owed to subsidiaries	303	140
	Income tax payable	0	4
14	Other payables	257	253
13	Other provisions	6	10
	Equity and liabilities held for sale	25	0
	Current liabilities	1,236	1,010
	Liabilities	1,521	1,344
	Total equity and liabilities	3,444	3,268

SOLAR ANNUAL REPORT 2015 PARENT

Cash flow statement

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CONTENTS

CASH FLOW STATEMENT

Note	DKK million	2015	2014
	Net profit or loss for the year	54	-368
5	Depreciation, write-down and amortisation	64	75
	Changes to provisions and other adjustments	-3	-2
17,18	Financials, net	76	460
	Income tax	32	40
17	Financial income, received	12	17
18	Financial expenses, settled	-23	-25
	Income tax, settled	-39	-6
	Cash flow before working capital changes	173	191
	Working capital changes
	Inventory changes	-1	-30
	Receivables changes	-6	15
	Non-interest-bearing liabilities changes	78	59
	Cash flow from operating activities	244	235
	Investing activities
8	Purchase of intangible assets	-35	-18
	Purchase of property, plant and equipment	-11	-23
	Disposal of property, plant and equipment	0	0
	Divestment of subsidiary¹	37	1
	Cash flow from investing activities	-9	-40
Note	DKK million	2015	2014
---	---	---	---
	Financing activities
	Repayment of non-current interest-bearing debt	-29	-37
	Changes to loans to subsidiaries	378	-40
	Treasury share purchases and sales	-19	0
	Dividends distributed	-55	-94
	Cash flow from financing activities	275	-171
	Total cash flow	510	24
	Cash at bank and in hand at the beginning of the year	33	9
	Cash at bank and in hand at the end of the year	543	33
	Cash at bank and in hand at the end of the year
	Cash at bank and in hand	572	78
	Current interest-bearing liabilities	-29	-45
	Cash at bank and in hand at the end of the year	543	33

1) Installments of the fixed and variable parts of the selling price of Aurora Group Danmark A/S.

SOLAR ANNUAL REPORT 2015 PARENT

Statement of changes in equity

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CONTENTS

STATEMENT OF CHANGES IN EQUITY

DKK million	Share capital	Reserves for hedging transactions	Reserves for foreign currency translation adjustments	Retained earnings	Proposed dividends	Total
2015
Equity as at 1 January	792	-86	-1	1,164	55	1,924
Value adjustments of hedging instruments before tax		26				26
Tax on value adjustments		-7				-7
Net income recognised in equity via other comprehensive income in the statement of comprehensive income	0	19	0	0	0	19
Net profit for the year				-24	78	54
Net profit for the year	0	19	0	-24	78	73
Comprehensive income					-55	-55
Distribution of dividends				-19		-19
Transactions with the owners	0	0	0	-19	-55	-74
Equity as at 31 December	792	-67	-1	1,121	78	1,923
2014
Equity as at 1 January	792	-50	-1	1,587	94	2,422
Value adjustments of hedging instruments before tax		-47				-47
Tax on value adjustments		11				11
Net income recognised in equity via other comprehensive income in the statement of comprehensive income	0	-36	0	0	0	-36
Net profit for the year				-423	55	-368
Comprehensive income	0	-36	0	-423	55	-404
Distribution of dividends					-94	-94
Transactions with the owners	0	0	0	0	-94	-94
Equity as at 31 December	792	-86	-1	1,164	55	1,924

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1 Accounting policies

A general description of accounting policies can be found in the consolidated financial statements on page 42, note 1, Accounting policies.

For the parent company particularly, dividends from investments in subsidiaries are recognised in the parent company's income statement under the financial year when the dividends are distributed.

Descriptions of accounting policies in notes

Descriptions of accounting policies in the notes form part of the overall description of accounting policies. Parent-specific descriptions are found in the following notes:

Note 6 Income tax
Note 7 Net profit or loss for the year
Note 8 Intangible assets
Note 9 Property, plant and equipment
Note 10 Other non-current assets
Note 11 Inventories
Note 12 Trade receivables
Note 13 Other provisions
Note 15 Share capital
Note 16 Interest-bearing liabilities
Note 19 Contingent liabilities and other financial liabilities

2 Significant accounting estimates and assessments

The following estimates and accompanying assessments are deemed material for the preparation of the financial statements:

Impairment test for goodwill and equity investments
Software
Inventory write-down
Write-down for meeting of loss on doubtful receivables

These estimates and assessments are described in the following notes:

Note 8 Intangible assets
Note 10 Other non-current assets
Note 11 Inventories
Note 12 Trade receivables

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Notes to the income statement

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CONTENTS

3 Staff costs

DKK million	2015	2014
Salaries and wages etc.	415	412
Pensions, defined contribution	29	30
Costs related to social security	12	10
Share-based payment	10	-1
Total	466	451
Average number of employees (FTEs)	747	756
Number of employees at year-end (FTEs)	760	734
Remuneration of Board of Directors
Remuneration of Board of Directors	3	3
Remuneration of Executive Board
Remuneration and bonus	10	8
Share-based payment	2	0
Total	12	8

We have prepared a remuneration policy that describes guidelines for determining and approving remuneration of the Board of Directors and Executive Board. The annual general meeting adopts the Board of Directors' remuneration for one year ahead at a time. The Executive Board's remuneration is assessed every two years. The Board of Directors jointly approve the elements that make up the Executive Board's salary package as well as all major adjustments to this package following previous discussion and recommendation of the chairman and vice-chairman of the Board of Directors. Under section 139 of the Danish Companies Act, a complete remuneration policy for the Board of Directors and Executive Board is presented for adoption at the annual general meeting. Term of notice for members of the Executive Board is 12 months.

When stepping down, the CEO is entitled to 6 months' remuneration. In 2014, a termination benefit of DKK 5m was provided to the former CEO; provisions for this were made in previous periods.

4 Loss on trade receivables

DKK million	2015	2014
Recognised losses	7	8
Received on trade receivables previously written off	-1	-1
	6	7
Change in write-down for bad and doubtful debts	0	-5
Total	6	2

5 Depreciation, write-down and amortisation

DKK million	2015	2014
Buildings	10	10
Plant, operating equipment, tools and equipment	13	22
Leasehold improvements	1	1
Write-down on property, plant and equipment	0	3
Profit/loss from the sale of operating equipment etc.	0	1
Total depreciation and write-down on property, plant and equipment	24	37
Customer-related assets	1	1
Software	39	37
Total amortisation and depreciation of intangible assets	40	38

SOLAR ANNUAL REPORT 2015 PARENT Notes to the income statement

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CONTENTS

6 Income tax

DKK million	2015	2014
Current tax	35	40
Deferred tax	-1	0
Tax on profit or loss for the year	34	40
Reduction of Danish income tax rate	-2	0
Total	32	40
Statement of effective tax rate:
Danish income tax rate	23.5%	24.5%
Non-taxable value of dividends from subsidiaries	-4.4%	0.1%
Write-down of equity investments	14.7%	-33.7%
Tax rate change	-2.1%	0.0%
Non-taxable/deductible items in parent	5.1%	-2.9%
Effective tax rate	36.8%	-12.0%

9 ACCOUNTING POLICIES

SOLAR ANNUAL REPORT 2015 PARENT Notes to the income statement

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

6 Income tax (continued)

DKK million	2015	2014
1/1	65	73
Recognised in other comprehensive income	7	-11
Ordinary tax recognised in income statement	-1	0
Other items, including change in the income tax rate	-1	3
Total 31/12	70	65
Specified as follows:
Deferred tax	70	65
Deferred tax assets	0	0
Total deferred tax, net	70	65
Further specified as follows:
Expected use within 1 year	0	-4
Expected use after 1 year	70	69
Total, net	70	65

9 ACCOUNTING POLICIES

Deferred tax assets are assessed annually and only recognised to the extent that it is probable that they will be utilised.

Deferred tax is also recognised for the covering of retaxation of losses in former foreign subsidiaries participating in joint taxation assessed as becoming current.

SOLAR ANNUAL REPORT 2015 PARENT

Notes to the income statement

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CONTENTS

6 Income tax (continued)

Specification by balance sheet items

	1/1	Other adjustments	2015	2014
Property, plant and equipment	14	3	17	14
Inventories	0	0	0	0
Provisions for loss on receivables	-1	0	-1	-1
Pension obligations	0	0	0	0
Other items¹	52	2	54	52
Total, net	65	5	70	65

1) Other items particularly cover intangible assets and loss balances in jointly taxed entities.

SOLAR ANNUAL REPORT 2015 PARENT Notes to the income statement

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CONTENTS

7 Net profit for the year

DKK million	2015	2014
Proposed distribution of net profit for the year:
Proposed dividends, parent	78	55
Retained earnings	-24	-423
Net profit for the year	54	-368
Dividends in DKK per share of DKK 100¹	10.00	7.00

¹) Calculations are based on proposed dividends.

9 ACCOUNTING POLICIES

Dividends

Proposed dividends are recognised as a liability at the time of adoption of the general meeting.

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Invested capital

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

2014

CONTENTS

8 Intangible assets

DKK million	Customer-related assets	Software	Total
2015
Cost 1/1	10	311	321
Additions during the year	0	35	35
Disposals during the year	0	0	0
Cost 31/12	10	346	356
Amortisation and depreciation 1/1	9	141	150
Amortisation during the year	1	39	40
Amortisation of abandoned assets	0	0	0
Amortisation and depreciation 31/12	10	180	190
Carrying amount 31/12	0	166	166
Remaining amortisation period in number of years	-	3-8	-

9 ACCOUNTING POLICIES

Customer-related intangible assets

Customer-related intangible assets acquired in connection with business combinations are measured at cost less accumulated amortisation and impairment loss.

Customer-related intangible assets are amortised using the straight-line principle over the expected useful life. Typically, the amortisation period is 5-7 years.

Software

Software is measured at cost less accumulated amortisation and write-down. Cost includes both direct internal and external costs. Software is amortised using the straight-line principle over 8 years. The basis of amortisation is reduced by any write-down.

Impairment of intangible assets

The carrying amount of intangible assets is assessed annually to determine whether there is any indication of impairment.

Impairment loss is recognised when the carrying amount of an asset exceeds the asset's recoverable amount. Impairment loss is recognised in the income statement.

Impairment loss on intangible assets is reversed if changes have been made to the assumptions and estimates that led to the impairment loss.

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Invested capital

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FINANCIAL STATEMENTS

2014

CONTENTS

8 Intangible assets (continued)

DKK million	Customer-related assets	Software	Total
2014
Cost 1/1	10	293	303
Additions during the year	0	18	18
Disposals during the year	0	0	0
Cost 31/12	10	311	321
Amortisation 1/1	8	104	112
Amortisation during the year	1	37	38
Amortisation of abandoned assets	0	0	0
Amortisation and depreciation 31/12	9	141	150
Carrying amount 31/12	1	170	171
Remaining amortisation period in number of years	1	4-8	-

9 ACCOUNTING ESTIMATES AND ASSESSMENTS

Software

Software is evaluated annually for indicators of a need for impairment. If a need to perform impairment is identified, an impairment test is performed for the software.

The impairment test is made on the basis of different factors, including the software's future application, the present value of the expected cost saving as well as interest and risks.

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Invested capital

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9 Property, plant and equipment

DKK million	Land and buildings	Plant, operating equipment, tools and equipment	Leasehold-improvements	Assets under construction	Total
2015
Cost 1/1	427	226	7	1	661
Assets held for sale	-29	0	0	0	-29
Additions during the year	3	9	0	0	12
Disposals during the year	0	-1	0	-1	-2
Cost 31/12	401	234	7	0	642
Write-down and depreciation 1/1	146	202	5	0	353
Assets held for sale	-16	0	0	0	-16
Write-down and depreciation during the year	10	13	1	0	24
Write-down and depreciation of abandoned assets	0	0	0	0	0
Write-down and depreciation 31/12	140	215	6	0	361
Carrying amount 31/12	261	19	1	0	281

10 ACCOUNTING POLICIES

Property, plant and equipment

Land and buildings as well as other plant, operating equipment, and tools and equipment are measured at cost less accumulated depreciation and write-down.

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives which are:

Buildings 40 years
Technical installations 20 years
Plant, operating equipment, and tools and equipment 2-5 years.

There are a few differences from the mentioned depreciation periods in which useful life is estimated as shorter. Leasehold improvements are depreciated over the lease term, however, maximum 5 years.

Land is not depreciated.

By changing the depreciation period or residual value, the effect of future depreciation is recognised as a change to accounting estimates.

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Notes: Invested capital

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9 Property, plant and equipment (continued)

DKK million	Land and buildings	Plant, operating equipment, tools and equipment	Leasehold- improvements	Assets under construction	Total
2014
Cost 1/1	395	209	8	30	642
Additions during the year	32	19	0	10	61
Disposals during the year	0	-2	-1	-39	-42
Cost 31/12	427	226	7	1	661
Write-down and depreciation 1/1	133	182	5	0	320
Write-down and depreciation during the year	13	22	1	0	33
Write-down and depreciation of abandoned assets	0	-2	-1	0	0
Write-down and depreciation 31/12	146	202	5	0	353
Carrying amount 31/12	281	24	2	1	308

9 ACCOUNTING POLICIES (CONTINUED)

Impairment of property, plant and equipment

The carrying amount of property, plant and equipment is assessed annually to determine whether there is any indication of impairment.

Impairment loss is recognised when the carrying amount of an asset exceeds the asset's recoverable amount. Impairment loss is recognised in the income statement.

Write-down on property, plant and equipment is reversed to the extent that changes have been made to the assumptions and estimates that led to the write-down.

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Invested capital

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FINANCIAL STATEMENTS

CONTENTS

10 Other non-current assets

DKK million	Equity investments	Other receivables	Total
2015
Cost 1/1	2,434	3	2,437
Additions during the year	0	1	1
Disposals during the year	0	0	0
Cost 31/12	2,434	4	2,438
Impairment 1/1	1,085	0	1,085
Impairment during the year	54	0	54
Impairment 31/12	1,139	0	1,139
Carrying amount 31/12	1,295	4	1,299

Based on the result of impairment tests made in SD of 16 March GmbH (the former Solar Deutschland GmbH), Claessen ELGB and GFI GmbH, impairment was made of the parent company's equity investments as at 31 December 2015 of DKK 17m for SD of 16 March, DKK 20m for Claessen ELGB and DKK 17m for GFI GmbH. In the impairment tests made, a discount factor of 8.5% (8.5%) after tax was used. In 2014, impairments of DKK 3m for Solar Deutschland GmbH, DKK 438m for Solar Nederland B.V. and DKK 10m for DKK 67m for Claessen ELGB were made.

ACCOUNTING POLICIES

Equity investments in subsidiaries

Equity investments in subsidiaries are recognised and measured in the parent company's balance sheet at historical cost. If impairment is indicated, an impairment test will be done as described in the consolidated financial statements. Should cost exceed the recoverable amount, cost will be written down to this lower value.

Impairment of equity investments

The carrying amount of equity investments is assessed annually to determine whether there is any indication of impairment.

Impairment loss is recognised when the carrying amount of an asset exceeds the asset's recoverable amount. Impairment loss is recognised in the income statement.

Impairment on equity investments are reversed to the extent that changes have been made to the assumptions and estimates that led to the impairment loss.

If dividends distribution exceeds earnings in a financial year or if the carrying amount exceeds net assets in the consolidated financial statements, an impairment test is performed.

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Notes: Invested capital

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10 Other non-current assets (continued)

DKK million	Equity investments	Other receivables	Total
2014
Cost 1/1	2,434	43	2,477
Additions during the year	0	0	0
Disposals during the year	0	-40	-40
Cost 31/12	2,434	3	2,437
Impairment 1/1	634	0	634
Impairment during the year	451	0	451
Impairment 31/12	1,085	0	1,085
Carrying amount 31/12	1,349	3	1,352

In all material aspects, disposals during the year for other receivables of DKK 40m is due to a vendor note deriving from the divestment of Aurora Group Danmark A/S becoming current and being included in other receivables. The fair value of this claim is considered a level 3 fair value measurement.

ACCOUNTING ESTIMATES AND ASSESSMENTS

Impairment test of equity investments

When there is an indication of a need for impairment of equity investments, an estimate is made of how the parts of the business (cash-generating units), that the equity investments are linked to, will be able to generate sufficient positive cash flow in future to support the value of equity investments and/or other net assets in the relevant part of the business.

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11 Inventories

DKK million	2015	2014
End products	357	356
Recognised write-down	2	0

The main reason for the recognised write-down is an increase in written-down articles.

9 ACCOUNTING POLICIES

Inventories are measured at cost according to the FIFO method or at net realisable value, if this is lower.

Cost of inventories includes purchase price with addition of delivery costs.

9 ACCOUNTING ESTIMATES AND ASSESSMENTS

Write-down of inventories

Write-down of inventories is made due to the obsolescence of products. Management specifically assess inventories, including the products' turnover rate, current economic trends and product development when deciding whether the write-down is sufficient.

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Notes: Invested capital

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CONTENTS

12 Trade receivables

DKK million	2015	2014
Maturity statement, trade receivables
Not due	290	281
Past due for 1-30 day(s)	22	30
Past due for 31-90 days	7	3
Past due for 91+ days	5	6
	324	320
Write-down	-7	-7
Total	317	313
Write-down based on:
Age distribution	1	5
Individual assessment	6	2
Total	7	7
Write-down 1/1	7	12
Write-down for the year	11	2
Losses realised during the year	-7	-2
Reversed for the year	-4	-5
Write-down 31/12	7	7

We refer to the risk section in our management's review.

9 ACCOUNTING POLICIES

9 ACCOUNTING ESTIMATES AND ASSESSMENTS

Write-down for meeting of loss on doubtful trade receivables

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Notes: Invested capital

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

13 other provisions

DKK million	2015	2014
Non-current
Other provisions	6	10
Total 31/12	6	10
Specification, non-current
1/1	10	0
Used during the year	-10	0
Provisions of the year	6	10
Total 31/12	6	10

ACCOUNTING POLICIES

Provisions are measured in accordance with management's best estimate of the amount required to settle a liability.

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Notes: Invested capital

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CONTENTS

14 Other payables

DKK million	2015	2014
Staff costs	104	97
Taxes and charges	21	13
Hedging instruments	99	116
Other payables and amounts payable	33	27
Total	257	253

Accounting policies for hedging instruments are described in note 16 on interest-bearing liabilities and maturity statement on page 103.

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15 Share capital

DKK million	2015	2014
Share capital 1/1	792	792
Share capital 31/12	792	792
Share capital is fully paid in and divided into the following classes:
A shares, 40 shares at DKK 10,000	0	0
A shares, 2,240 shares at DKK 40,000	90	90
A shares total	90	90
B shares 7,020,607 at DKK 100	702	702
Total	792	792

Share capital remained unchanged from 2011 to 2015.

DKK million	No. of shares		Nominal value
	2015	2014	2015	2014
A shares outstanding 31/12¹	900,000	900,000	90	90
B shares outstanding
Outstanding 1/1	6,955,434	6,955,434	695	695
Purchase of treasury shares	-44,836	0	-4	0
B shares outstanding 31/12	6,910,598	6,955,434	691	695
Total shares outstanding 31/12	7,810,598	7,855,434	781	785

¹) A shares have been included in the calculation in units of DKK 100.

9 ACCOUNTING POLICIES

Treasury shares

Acquisition and disposal sums related to treasury shares are recognised directly as transactions with the owners.

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Capital structure and financing costs

MANAGEMENT'S REVIEW

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CONTENTS

15 share capital (continued)

Treasury shares (B shares)

	No. of shares		Nominal value (DKK million)		Cost (DKK million)		Share capital percentage
	2015	2014	2015	2014	2015	2014	2015	2014
Holding 1/1	65,173	65,173	7	7	26	26	0.8%	0.8%
Purchases	44,836	0	4	0	19	0	0.6%	0.0%
Holding 31/12	110,009	65,173	11	7	45	26	1.4%	0.8%

The holding of treasury shares is maintained for hedging of share option plans. Buy-back in 2015 has been done to adjust the company's capital structure.

All treasury shares are held by the parent company.

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Capital structure and financing costs

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

16 Interest-bearing liabilities and maturity statement

DKK million	Interest rate	2015	2014
Debt to mortgage credit institutions	Fixed	195	226
Debt to credit institutions	Fixed	48	74
Employee bonds	Fixed	0	5
Bank loans and overdrafts	Variable	0	8
Interest-bearing liabilities		243	313
Current interest-bearing liabilities
Maturity < 1 year
Debt to mortgage credit institutions		6	6
Debt to credit institutions		23	26
Employee bonds		0	5
Bank loans and overdrafts		0	8
Current interest-bearing liabilities		29	45
Non-current interest-bearing liabilities
Debt to mortgage credit institutions		189	220
Debt to credit institutions		25	48
Total		214	268
Maturity 1-5 year(s)		57	69
Maturity > 5 years		157	199
Total		214	268
Maturity, until year		2037	2037

The carrying amount of financial liabilities corresponds to fair value.

Interest swaps have been used to hedge floating-rate loans, converting these loans to fixed-rate loans.

9 ACCOUNTING POLICIES

Financial liabilities

Debt to credit institutions is recognised initially at the proceeds received net of transaction costs incurred.

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Capital structure and financing costs

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

16 Interest-bearing liabilities and maturity statement (continued)

DKK million	2015	2014
Outstanding interest swaps made for hedging floating-rate loans
Principal amount	293	320
Fair value	99	116
Amounts recognised in other comprehensive income
Adjustment to fair value for the year	4	-33
Realised during the year, recognised as financial income/expenses	22	-14
Total	26	-47
Effect of a 1% interest rate increase
Effect on equity	26	35
Of this, earnings impact is	0	0
Undrawn credit facilities 31/12	607	415

Derivatives

Derivatives are only used to hedge financial risks in the form of interest rate and currency risks.

Derivatives are recognised under other receivables or other payables.

Fair value measurement

As far as possible, fair value measurement is based on market value in active markets (level 1) or alternatively on values derived from observable market information (level 2).

If such observable information is not available or cannot be used without significant modifications, recognised valuation methods and fair estimates are used as the basis of fair values (level 3).

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Notes: Capital structure and financing costs

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

104

CONTENTS

16 Interest-bearing liabilities and maturity statement (continued)

Distribution on currencies	Current liabilities		Non-current liabilities
DKK million	2015	2014	2015	2014
EUR	29	33	214	268
DKK	0	9	0	0
SEK	0	3	0	0
Total	29	45	214	268
Interest rate in %	5.2-5.8	1.3-5.8	5.2-5.8	5.2-5.8

Fair value of Solar's respective interest-bearing liabilities is seen as a fair value measurement at level 2. Mortgage loans are valued based on underlying securities, while bank debt is calculated based on models for discounting to net present value. Non-observable market data is primarily made up of credit risks, which are seen as insignificant in Solar's case.

The fair value of Solar's derived financial instruments (interest rate instruments) is fixed as a fair value measurement at level 2, since fair value can be determined directly based on the actual forward rates and instalments on the balance sheet date. Outstanding interest rate swaps for hedging of floating-rate loans expire over the period 2016-37 (2016-37).

The parent company has raised loans in Danish kroner and euro. We refer to the risk section in our management's review for more information on liquidity risk, interest rate and currency risk management.

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Capital structure and financing costs

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

17 Financial income

DKK million	2015	2014
Interest revenue	2	17
Foreign exchange gains	10	15
Other financial income	10	0
Total	22	32
Financial income, received	12	17

18 Financial costs

DKK million	2015	2014
Interest expenses	17	23
Foreign exchange losses	11	16
Write-down of equity investments¹	54	451
Other financial expenses	16	2
Total	98	492
Financial expenses, settled	23	25

1) Write-down pertains to SD of 16 March GmbH (the former Solar Deutschland GmbH), Claessen ELGB and GFI GmbH (2014: Solar Nederland B.V., Solar Deutschland GmbH and Claessen ELGB).

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Other notes

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

19 Contingent liabilities and other financial liabilities

DKK million	2015	2014
Operational leases and rent contracts
Non-cancellable minimum lease payments are to be made within the following periods from the balance sheet date:
< 1 year	25	25
> 1 year < 5 years	33	33
> 5 years	7	8
Total	65	66
Operational leases and rent recognised in the income statement:
Total	23	24
Company cars and office furniture and equipment are leased under operating leases
The typical lease period is:
No. of years	2-4	2-4
Rent obligations with non-cancellation periods:
No. of years up to:	10	10
Collateral
Assets have been pledged as collateral for bank arrangements at a carrying amount of:
Land and buildings	261	281
Current assets	12	0
Total	273	281

ACCOUNTING POLICIES

Leasing

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Other notes

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

19 Contingent liabilities and other financial liabilities (continued)

DKK million	2015	2014
Mortgaging and guarantees
As security for subsidiaries' bank arrangements, guarantees have been issued for:
Total	488	757
As security for subsidiaries' liabilities, guarantees have been issued for:
Total	417	514

20 Related parties

Otherwise, there have been no transactions in the financial year with members of the Board of Directors and Executive Board than those which appear from note 3.

On the balance sheet date, the usual product balances derived from these transactions exist. These appear from the parent company's balance sheet.

The parent company has had the following significant transactions with related parties:

DKK million	2015	2014
Sale of services to subsidiaries	130	133
Sale of goods to subsidiaries	47	46

Solar also invoices the Fund of 20th December for the performance of administrative services at DKK 20,000. Balances with the Fund of 20th December total DKK 0 on the balance sheet date.

SOLAR ANNUAL REPORT 2015 PARENT

Notes: Other notes

MANAGEMENT'S REVIEW

FINANCIAL STATEMENTS

CONTENTS

21 Auditors' fees

DKK million	2015	2014
PricewaterhouseCoopers
Statutory audit	1	1
Other services	1	0
Total	2	1
Other auditors
Other services	1	3
Total	1	3

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Statements and reports
^{}[]
MANAGEMENT'S REVIEW
^{}[]
FINANCIAL STATEMENTS
^{}[]
CONTENTS

STATEMENTS AND REPORTS

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Management's statement
VA
MANAGEMENT'S REVIEW
FINANCIAL STATEMENTS
CONTENTS

STATEMENT BY THE EXECUTIVE BOARD AND THE BOARD OF DIRECTORS

The group's Board of Directors and Executive Board have today discussed and approved Annual Report for the financial year 1 January – 31 December 2015.

The consolidated financial statements and financial statements have been presented in accordance with International Financial Reporting Standards as approved by the EU. Moreover, the consolidated financial statements and financial statements have been prepared in accordance with additional Danish disclosure requirements of listed companies. Management's review was also prepared in accordance with Danish disclosure requirements of listed companies.

In our opinion, the consolidated financial statements and financial statements give a fair presentation of the group and parent company's assets, liabilities and equity, and financial position as at 31 December 2015 as well as the results of the group and parent company's activities and cash flow for the financial year 1 January – 31 December 2015.

Further, in our opinion, the management review gives a true and fair statement of the development of the group and parent company's activities and financial situation, net profit for the year and of the group and parent company's financial positions and describes the most significant risks and uncertainties pertaining to the group and parent company.

The annual report is recommended for approval by the annual general meeting.

Vejen, 24 February 2016

Executive Board

Anders Wilhjelm
CEO

Michael H. Jeppesen
CFO

Board of Directors

Jens Borum
Chairman

Agnete Raaschou-Nielsen
Vice-chairman

Lars Lange Andersen

Niels Borum

Ulrik Damgaard

Bent H. Frisk

Ulf Gundemark

Jens Peter Toft

Steen Weirøe

111
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MANAGEMENT'S REVIEW
FINANCIAL STATEMENTS
CONTENTS

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Solar A/S

Report on Consolidated Financial Statements and Parent Company Financial Statements

We have audited the Consolidated Financial Statements and the Parent Company Financial Statements of Solar A/S for the financial year 1 January to 31 December 2015 which comprise income statement, balance sheet, statement of changes in equity, cash flow statement and notes, including summary of significant accounting policies, for both the Group and the Parent Company, as well as statement of comprehensive income for the Group. The Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU, and the Parent Company Financial Statements are prepared under the Danish Financial Statements Act. Moreover, the Consolidated Financial Statements and the Parent Company Financial Statements are prepared in accordance with Danish disclosure requirements for listed companies.

Management's Responsibility for the Consolidated Financial Statements and the Parent Company Financial Statements

Management is responsible for the preparation of Consolidated Financial Statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies and for preparing Parent Company Financial Statements that give a true and fair view in accordance with the Danish Financial Statements Act and Danish disclosure requirements for listed companies, and for such internal control as Management determines is necessary to enable the preparation of Consolidated Financial Statements and Parent Company Financial Statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on the Consolidated Financial Statements and the Parent Company Financial Statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the Consolidated Financial Statements and the Parent Company Financial Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Consolidated Financial Statements and the Parent Company Financial Statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the Consolidated Financial Statements and the Parent Company Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation of Consolidated Financial Statements and Parent Company Financial Statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the Consolidated Financial Statements and the Parent Company Financial Statements.

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

The audit has not resulted in any qualification.

Opinion

In our opinion, the Consolidated Financial Statements give a true and fair view of the Group's financial position at 31 December 2015 and of the results of the Group's operations and cash flows for the financial year 1 January to 31 December 2015 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.

Moreover, in our opinion, the Parent Company Financial Statements give a true and fair view of the Parent Company's financial position at 31 December 2015 and of the results of the Parent Company's operations and cash flows for the financial year 1 January – 31 December 2015 in accordance with the Danish Financial Statements Act and Danish disclosure requirements for listed companies.

In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the Group's and the Parent Company's financial position at 31 December 2015 and of the results of the Group's and the Parent Company's operations and cash flows for the financial year 1 January to 31 December 2015 in accordance with International Financial Reporting Standards as adopted by the EU as regards the Consolidated Financial Statements, in accordance with the Danish Financial Statements Act as regards the Parent Company Financial Statements and generally in accordance with Danish disclosure requirements for listed companies.

Statement on Management's Review

We have read Management's Review in accordance with the Danish Financial Statements Act. We have not performed any procedures additional to the audit of the Consolidated Financial Statements and the Parent Company Financial Statements. On this basis, in our opinion, the information provided in Management's Review is consistent with the Consolidated Financial Statements and the Parent Company Financial Statements.

The Triangle Region, 24 February 2016

AUDIT performed by

PricewaterhouseCoopers

Statsautoriseret Revisionspartnerselskab

CVR no. 33 77 12 31

Lars Almskou Ohmeyer

State Authorised Public Accountant

Jan Bunk Harbo Larsen

State Authorised Public Accountant

Solar A/S
Industrivej Vest 43
DK-6600 Vejen
Tel.: +45 79 30 00 00
CVR no. 15908416

www.solar.eu
http://www.linkedin.com/company/solar-as

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Solar — Annual Report 2015

3414_rns_2016-02-24_c933e6ec-d7ef-4088-82b3-d29d5db0abd2.pdf

Announcement no. 10 2016

Contacts:

Annual Report 2015

CEO Anders Wilhjelm says:

2015 revenue

2015 EBITA

Dividends distribution

2016 outlook

Q4 presentation - audio webcast and teleconference today

Facts about Solar

Disclaimer

SOLAR A/S ANNUAL REPORT 2015

CONTENTS

Management's review

Financial statements

Disclaimer

SOLAR IS MOVING IN THE RIGHT DIRECTION

SOLAR — A SOURCING AND SERVICES COMPANY

FINANCIAL RATIOS 2015

OUR BUSINESS MODEL

FINANCIAL HIGHLIGHTS

RESULTS AND OUTLOOK

SEGMENTS

TRENDS - INSTALLATION AND INDUSTRY

SEGMENT REPORTING

TRENDS IN THE INSTALLATION SECTOR IN 2015 AND Q4

TRENDS IN THE INDUSTRY SECTOR IN 2015 AND Q4

OUTLOOK 2016

OUTLOOK 2016 AND FINANCIAL TARGETS

OUTLOOK FOR SOLAR'S BUSINESS AREAS

INSTALLATION

INDUSTRY

FINANCIAL OUTLOOK

FINANCIAL TARGETS

FINANCIAL REVIEW

EBITA IMPROVED BY DKK 179M

REVENUE

EBITA

FINANCIALS

INCOME TAX

NET PROFIT FOR THE YEAR

BALANCE SHEET

CASH FLOW

REMUNERATION OF EXECUTIVE BOARD AND MANAGEMENT GROUP

EVENTS AFTER THE END OF THE PERIOD UNDER REVIEW

STRATEGY

WE WANT TO BOOST OUR CUSTOMERS' BUSINESSES

DIGITAL TRENDS

OUR DIGITAL TURNOVER ONLY GETS BETTER AND BETTER

BUSINESS FOCUS

EVERYTHING STARTS WITH THE CUSTOMERS

WE ANALYSE DATA TO GROW OUR BUSINESS

PRODUCTIVE CUSTOMERS EQUAL GOOD CUSTOMERS

ACQUISITIONS

DIVESTMENTS

SALE OF OUR FORMER GROUP HEADQUARTERS

EMPLOYEES

WE FOCUS ON DEVELOPMENT

NEW MANAGEMENT PROFILES

EMPLOYEE DEVELOPMENT AND RECRUITMENT

DIVERSITY

7%

Employee turnover

86%

Employee stick rate

4.4%

Absence due to illness

GROUP STRUCTURE

Solar A/S

RESPONSIBILITY AND MANAGEMENT

RISKS

SOLAR IDENTIFIES AND HANDLES RISKS

RISK MANAGEMENT

ANCHORING

RISKS

COMMERCIAL RISKS

SENSITIVITY TO ECONOMIC TRENDS

Solar Annual Report 2015