Valoe Oyj — Annual Report 2017

Apr 27, 2018

VALOE CORPORATION ANNUAL REPORT 2017

VALOE IN BRIEF

• Valoe is an innovative technology company based in Finland that specialises in efficient utilisation of solar energy.
• Valoe develops and sells Finnish solar energy technology to global markets.
• Valoe's most important products and services include automated manufacturing plants and production lines for solar modules that are based on Conductive Back Sheet developed by Valoe as well as other parts for production lines.
• Further, Valoe's portfolio includes special components out of which the most important for the moment is Conductive Back Sheet (CBS) developed by the company and in the future also solar cells utilizing the benefits of Conductive Back Sheet.
• Valoe also sells next generation back contact modules manufactured by the company and delivers solar power plants designed by the company.
• Valoe's strategy is based on strong partnership network. Valoe's future manufacturing partners use the company's cell and module technology, production lines and manufacturing recipe.
• Valoe operates globally. The company's clean energy customers are providing their products and services locally or worldwide.
• Valoe's head office is in Mikkeli, Finland.
• Valoe's shares are listed on the NASDAQ OMX Helsinki Ltd.

YEAR 2017 IN BRIEF

• In February 2016, Valoe received from Ethiopia a ca. EUR 15.8 million order for a solar module manufacturing plant and back contact technology. On 21 April, Valoe announced that, according to the prudence principal, the company resolved to remove the recognized revenue and the costs related to the Ethiopian project from the Financial Statements for 2016. The profit and loss effects of the Ethiopian project has been removed from the income statement for the financial year 1 January – 31 December 2017. In terms of operations, the Ethiopian project is continued.
• In February 2017 the company issued a EUR 1.5 million convertible bond I/2017 that was fully subscribed.
• In March 2017, Valoe settled the dispute relating to the security provided for the Chinese factory's lease liability. Pursuant to the settlement agreement Valoe has paid ca. EUR 0.15 million out of the security and the parties have terminated all legal proceedings relating to the matter. The decrease in the amount of the security will improve the result by ca. EUR 0.5 million.
• In April 2017, Valoe agreed on a EUR 3,000,000 equity-based financing arrangement with Bracknor Investment and resolved to start preparations for combination of the company's shares (reverse split). On 14 June 2017 Valoe's general meeting resolved to approve the reverse split. Further, in April 2017 the company resolved to issue 86,000,000 new shares to the company itself without consideration to implement part of the financing arrangement between the company and Bracknor Investment in accordance with the terms and conditions of such financing arrangement. On 16 October 2017, on the basis of the financing arrangement between the company and Bracknor Investment, the company resolved to issue a maximum of 2,570,825 new shares to the company itself without consideration and subscribed in total 525,000 new shares.
• On 7 August 2017 Valoe disclosed that it has signed a framework agreement with ForUs Capital Oy on delivering solar power plants worth a total of ca. EUR 4 million to Finland. ForUs Capital sells electricity generated by the solar power plants to its own partners. The first orders of ca. EUR 450,000 are delivered to nine sites owned by the City of Hanko. Some of the power plants have been delivered during the autumn 2017 and the rest will be delivered during the spring 2018. Further, on 19 December 2017 Valoe signed a new delivery contract under the framework agreement worth a total of ca. EUR 0.7 million. Pursuant to the new contract Valoe will deliver the solar power plants by the end of August 2018. After the end of the financial year Valoe and ForUs Capital Oy have signed delivery contracts totalling ca. EUR 0.45 million. The value of all binding delivery contracts signed so far with ForUs Capital Oy totals ca. EUR 1.6 million.
• In December 2017 the company resolved on a directed share issue in which the company offered up to 10,000,000 new shares in the company for subscription to all the creditors of the company who at the time of subscription hold indisputable

receivable amounting to at least EUR 25,000 from the company. The subscription price for the new shares could be paid in cash or by set-off against indisputable receivables the subscriber had from the company. In total 8,721,077 new shares were acceptably subscribed in the offering ended in January 2018. Thus, the company collected in the offering in total approximately EUR 859,000 new capital before fees and costs and the indebtedness of the company decreased in total approximately by EUR 9,257,000.

• In April 2018 Valoe introduced Chrome II, a new glass-glass solar module including Valoe's own MWT (Metal Wrap Through) cell, on the market.
• In April 2018 Valoe announced that it has purchased a solar cell production line from Italian Megacell S.r.l.; under liquidation. Further, Valoe has signed a cooperation agreement with Soli Tek Cells JSC, a solar cell manufacturer based in Lithuania. The cell production line Valoe purchased from Italy will be transferred to Soli Tek Cells JSC's premises. Valoe's objective is to use the cell production line for developing a next generation IBC (Interdigitated Back Contact) cell.
• Valoe Group's net sales stayed at the previous year's level and was ca. EUR 0.6 million (EUR 0.6 million in 2016). The operating profit was EUR -3.1 million (EUR 3.7 million) and profit before taxes was EUR -5.8 million (EUR 1.4 million). The comparison figures include a one-off item of EUR 7.1 million from the sale of the Chinese subsidiaries. The undiluted earnings per share were EUR -1.23 (EUR 0.32). Valoe Corporation's equity ratio at the end of 2017 was -52.8 percent (-92.0 percent) and Valoe Group's equity ratio was -47.3 percent (-91.8 percent).
• Valoe will not disclose any financial guidance for the year 2018.
• All of Valoe's stock exchange releases and other releases can be found on the company's website www.valoe.com.

MANAGING DIRECTOR'S REPORT

IIKKA SAVISALO

Dear Shareholders

The year 2017 was a disappointment for Valoe in terms of financial development. We had high expectations for the Ethiopian manufacturing partnership agreement. We were prepared for delivering the first full-size plant and thus trusted that the company's turnover starts to increase. However, the operating environment in countries like Ethiopia turned out to be more challenging and complicated than we expected. The major challenges relate to the financing of our manufacturing partner.

The prerequisites for the Ethiopian project have not changed. The operating environment for solar energy production continues to be favourable. Our partner has shown exceptional persistence and is still fully committed to the project. Both the local government and a local energy company have promised their support for us as well as for the project. We at Valoe still believe that the project will be completed after long-term work.

We have continued negotiations for new manufacturing partnerships and established new contacts in Africa as well as in Europe. We will disclose more information as soon as we are convinced that the projects can materialize.

Hopefully, there will be more good news from Valoe's research and development during 2018. I find the year 2017 successful in terms of product development. We are still aiming at developing a solar module with a lifespan of more than 100 years. With regard to cell technology we have been able to lay foundations for development which I would have considered impossible last year. The first proof of progress is Valoe's glass-glass polycrystalline module, Chrome II, with solar cells developed by the company.

We are very pleased that we were able to purchase a solar cell production line in April 2018. We believe that together with our cooperation partner, Lithuanian Soli Tek Cells, our R&D can soon develop an IBC (Intedigidated Back Contact) cell for Valoe's use. Further, we think that Valoe, having IBC cells integrated into Valoe's own module technology, will have a chance to manufacture solar modules in the highest efficiency categories in the market.

As we have previously stated, the energy produced by Valoe's solar modules shall be the greenest as well as the cheapest energy in the market. There start to be operators in the market who believe Valoe will achieve its ambitious goal. One example is cooperation with ForUs Capital Oy that has started very well. The cooperation has generated fair order book establishing foundations for growth during 2018.

A year ago, I shared my view that in the future we should be able to use solar electricity throughout the year, at any time of the day. During the financial year 2017, Valoe has worked for establishing a solar energy project 24-7-365. Our discussions regarding the project have made concrete progress and we are aiming to agree on a pilot project during 2018. There is demand for this kind of concept in off-grid areas in Africa and also financing available from various sources.

As in the previous years, the company's financing situation has somewhat restricted our innovative team's work. We hope that the Ethiopian project will solve our short-term financing challenges. However, this has not yet realized. Luckily, many of our key shareholders who believe that our hard work will bear fruit and generate profit on their investment have supported us. We thank for all the support and promise to do our best to achieve our shared goals as soon as possible. The company's Board of Directors and the management trust that the company will continue as going concern at least for the next 12 months.

Besides financial support from our shareholders our own personnel has shown exceptional commitment. I believe that all of us are working as convinced that Valoe will bring something totally new in the market, which we can be proud of. I trust that if we continue on the same path also during this year, our work will be rewarded.

Iikka Savisalo Managing Director

VALOE´S STRATEGY

OUR VISION

The future of energy is in Solar.

OUR MISSION

We will enable the use of solar energy in the form of electricity everywhere, at any time 24 -7 - 365. We will accomplish this together with our manufacturing, technology and distribution partners.

OUR STRATEGY

We believe that the use of photovoltaic energy will grow strongly. The use of abundant and free solar power will expand, especially in areas that do not currently have a reliable electric grid. Local production of electricity is efficient and cost effective. Once energy storage and conversion to other storable forms mature solar energy can cover all global electricity demands.

Valoe will do its share to tear down the obstacles preventing wide scale utilization of solar energy. We invest in the research and development together with our world renowned technology partners. We monitor the technological advances that will benefit further implementation of solar energy and adopt the most promising ones to our use. We thrive to grow quickly and profitably.

VALOE'S PRODUCTS AND SERVICES

Based on Valoe's strategy the company has the following four service and product concepts:

1. SALES AND SUPPLY OF PHOTOVOLTAIC MODULES AND SYSTEMS

Sales of modules and small photovoltaic systems are probably Valoe's most visible but in terms of revenue potential the smallest product group. All Valoe's PV modules are manufactured at the company's factory in Mikkeli for the time being. They are mainly delivered to the company's distributors and future manufacturing partners. Further, the company sells and provides solar power plants and systems to its customers in Finland and abroad. Valoe has enhanced the sale of its modules and solar systems in Finland by building sales channels for its products systematically.

Current capacity of the company's Mikkeli factory is designed to annually produce PV modules worth max EUR 6 – 8 million at the current market prices.

Valoe's modules have passed all the tests commonly used for solar modules and included in the test programme Valoe ordered from the German testing and research institute, Fraunhofer ISE. Having these test results, Valoe can more easily get specific local certifications, if required in Valoe's target market areas.

2. DEVELOPMENT AND SALES OF PRODUCTION LINES AND RELATED COMPONENTS

Manufacturers operating in the developing markets like China are typical investors for new module manufacturing production lines. These Valoe's potential customers are now manufacturers of traditional H-patterns modules. According to the information available to Valoe many of the manufacturers are going to start manufacturing next generation back contact modules. In most cases these customers have use their own module manufacturing recipe and need only single equipment or production lines. Valoe estimates that typical price of single equipment or a production line for back contact modules is EUR 4 – 8 million. A single production equipment costs EUR 0.3 – 1.0 million.

3. MANUFACTURING PARTNER NETWORK

The cornerstone of Valoe's strategy is to sign manufacturing partnership agreements or technology licensing agreements with solar module manufacturers who as newcomers on the market would commit themselves to Valoe's production technology and to using components designed for Valoe's back contact technology. Valoe provides a partner with a turnkey delivery project; secures availability of components for a partner either by manufacturing components by itself or by procuring required components from elsewhere; and as a technology partner commits itself to minority shareholding in a manufacturing company. Manufacturing partners pursued by Valoe operate mainly on developing markets and produce solar energy modules for local and nearby markets. Value of a typical turnkey plant delivery is more than ten million euros. Valoe signed its first manufacturing partnership agreement with Ethiopian LS Corp in 2016. However, the technology delivery based on the agreement has not yet been executed as per the date of this Annual Report.

On the basis of the early stages of the Ethiopian project, Valoe has gained valuable information on costs and profitability for future solar plant deliveries and projects. Valoe's manufacturing plant concept, equipment, technology and deliveries are standardized and with the experience gained in the first project the profitability of the following project deliveries can be expected to be good. Further, each delivered manufacturing plant or production line generates to Valoe continuous profitable business through component sales. Valoe's objective is that only Valoe's components are used at the manufacturing plants and production lines Valoe has delivered. The product certificates Valoe has applied for on behalf of a customer are valid only if the customer uses components approved by Valoe. Based on Valoe's experience, the availability of the components is limited elsewhere for the moment.

Valoe's growth strategy is based on signing new manufacturing partnership agreements. Valoe is aiming to sign at least 10 manufacturing partnership contracts in the next five years. After achieving this amount of partnerships, Valoe's partnership network is so wide that even the biggest solar module manufacturers will not remarkably benefit from the advantage of economies of scale e.g. in raw materials purchases compared to Valoe's network.

4. MODULE COMPONENTS SALES MAINLY TO MANUFACTURING PARTNERS

Special components, mainly for Valoe's manufacturing partners, are the most important part in Valoe's strategy and most remarkable in terms of net sales potential. Valoe's first component is Conductive Back Sheet (CBS) that has been developed by Valoe and is one of the most important components in a module. One normal size module production plant using back contact technology needs approximately 300,000 – 500,000 conductive back sheets in a year when operating at full capacity. Based on current estimation, considering price level in the near future, each production line will annually require back sheets worth approximately 5 – 11 million Euros. Typically, component deliveries to manufacturing partners can commence, at the earliest, about 12 months from the signing of the manufacturing partnership agreement.

In the future, Valoe plans to provide its manufacturing partners also with other special components. These components are back contact based cells that Valoe manufactures or has manufactured for the companies using Valoe's technology. Other components may include other manufacturers' smart components, components for storing energy and software for power management and electricity invoicing.

In the long run Valoe will include technologies related to energy storages and fuel cells as well as technologies increasing general usage of solar electricity in the company's offering. With regard to the expertise in these technologies Valoe will cooperate with its technology partners.

DIRECTORS' REPORT

FINANCIAL DEVELOPMENT

Because the performance obligations, in accordance with the International Accounting Standard IAS 11, were not satisfied, Valoe resolved, in April 2017, to remove the revenue and the costs related to the Ethiopian project from the company's income statement. Thus, Valoe's equity turned negative as per 31 December 2016. The Board of Directors took immediate actions and agreed on converting loans from the company's related parties to capital loans. Valoe's equity turned back to positive after some of the loans from the related parties were converted to capital loans.

During the financial year Valoe implemented also other corrective actions to strengthen the company's financial situation and to secure going concern. Among other things, Valoe agreed on extending the loans, which were due during 2017, until 30 April 2018. Further, on 19 April 2017 Valoe signed an EUR 3 million equity-based financing facility agreement with Bracknor Investment. By 31 December 2017 the company has withdrawn in total EUR 0.65 million from the Bracknor Investment's financing commitment. Since the end of the financial year the company has withdrawn EUR 0.5 million from the Bracknor Investment's financing commitment. By the date of this Annual Report a total of EUR 1.15 million has been withdrawn from the financing facility. In April 2017 the company resolved to issue 86,000,000 new shares to the company itself without consideration to implement part of the financing arrangement between the company and Bracknor Investment in accordance with the terms and conditions of such financing arrangement. In October, on the basis of the financing arrangement between the company and Bracknor Investment, the company resolved to issue a maximum of 2,570,825 new shares to the company itself without consideration and subscribed in October 2017 in total 525,000 new shares and in April 2018 in total 1,500,000 new shares in the company.

In February 2017 the company issued a EUR 1.5 million convertible bond I/2017 that was fully subscribed. During the subscription period of the Convertible Bond new investments of EUR 1.05 million was paid in cash and a total of EUR 0.45 million was paid by setting the subscription price off against the subscribers' receivables from the company.

In March 2017, Valoe settled the dispute relating to the security provided for the Chinese factory's lease liability. Pursuant to the settlement agreement Valoe has paid ca. EUR 0.15 million out of the security and the parties have terminated all legal proceedings relating to the matter. The decrease in the amount of the security will improve the result by ca. EUR 0.5 million.

In December 2017 the company resolved on a directed share issue in which the company offered up to 10,000,000 new shares in the company for subscription to all the creditors of the company who at the time of subscription hold indisputable receivable amounting to at least EUR 25,000 from the company. The subscription price for the new shares could be paid in cash or by set-off against indisputable receivables the subscriber had from the company. In total 8,721,077 new shares were acceptably subscribed in the offering ended in January 2018. Thus, the company collected in the offering in total approximately EUR 859,000 new capital before fees and costs and the indebtedness of the company decreased in total approximately by EUR 9,257,000.

Although the profit and loss effects of the Ethiopian project has been removed from Valoe's books, the Ethiopian project is continued in terms of operations and the company will resume recognizing revenue based on percentage of completion when the performance obligations have been satisfied. Valoe sees that one of the most important requirements is the opening of a EUR 9.5 million Irrevocable Letter of Credit in a bank approved by Valoe or a significant cash payment from the customer. The company needs to pledge a security for cash payment, as usual in export business.

Valoe's Asian customer has ongoing negotiations on arranging financing for a factory delivery in Asia worth EUR 26.5 million. Valoe will enter the order in its order book only after the customer has secured financing for the factory project. However, the financing negotiations are ongoing and the outcome is not yet known. Further, Valoe has ongoing sales negotiations for several other production plants.

The following financials include Valoe Group's continuing operations. The figures in brackets are comparison figures for the corresponding period in 2016, unless stated otherwise. The profit and loss effects of the Ethiopian project have been removed from the figures for the corresponding period in 2016. The comparison figures include a one-off item of EUR 7.1 million from the sale of the Chinese subsidiaries.

NET SALES AND RESULT

the net sales of Valoe Group's continuing operations in 2017 were EUR 0.6 million (EUR 0.6 million). The order book at the end of December stood at ca. EUR 16.9 million (EUR 15.9 million). EBITDA was EUR -1.7 million (EUR 4.8 million). Operating profit was EUR -3.1 million (EUR 3.7 million). Profit before taxes was EUR -5.8 million (EUR 1.4 million). Profit for the period was EUR -5.8 million (EUR 1.4 million). Undiluted earnings per share were EUR -1.23 (EUR 0.32). The Valoe Group's equity ratio at the end of December was -47.3 percent (-91.8 %). The equity ratio including capital loans was 0.4 percent (-20.8 %). The mother company's, Valoe Corporation's equity ratio was -52.8 percent and 2.2 percent including capital loans. The comparison figures from 2016 include a one-off item of EUR 7.1 million from the sale of the Chinese subsidiaries.

OPERATING ENVIRONMENT

BUSINESS SECTOR

Valoe operates in industries applying clean energy technology. The company's operating environment is global and it provides its customers with products, solutions and services worldwide.

MARKET CONDITIONS

The prices of solar modules collapsed and decreased by ca. 70 percent during 2010 – 2012. The prices of low- and middle-priced modules decreased by ca. 30 percent again in 2016 and 2017. Intense price competition followed by decrease in production costs of solar energy has led to rapid increase in solar electricity production around the world generating strong growth in the solar business.

The competitiveness of the solar electricity, compared to the fossil fuels and other renewable energy sources, will continue increasing faster and faster. Valoe is prepared for its competitors introducing their own back contact modules and other innovations in the near future. The companies that will succeed in price competition will continue decreasing the prices of their standard products based on sales volumes and increasing production capacity and will continue worldwide price war. Valoe believes that innovative companies capable of continuously developing next generation technologies will succeed in the future business environment. Valoe trusts it will be one of these companies.

According to Valoe's view, the prices of low-end modules will unlikely rise. Thus, Valoe is focusing on developing production technology for next generation modules. In the high-end price categories 's price reduction has not been remarkable. Valoe views that the most favourable markets for the company are the markets with incomplete or malfunctioning electricity grid, e.g. in Africa but also in Asia and South America. Valoe trusts that it has better possibilities to succeed if it is a part of the solar electricity value chain including solar electricity storages and smart grids.

According to the information available to Valoe there is only one major automation manufacturer, besides Valoe, in the market who provides its customers with turnkey production capacity for back contact modules. Valoe is aware that besides this automation manufacturer, there are companies developing production capacity for a similar application. However, according to Valoe's knowledge, it is the only back contact manufacturer with major existing mass production capacity for the moment.

Valoe provides production technology to all companies interested in back contact modules, e.g. large and often national solar energy projects; module subcontractors; and/or original equipment manufacturers. Valoe views that local production will increase significantly in the near future. However, Valoe is not aiming at becoming a local manufacturer but always seeks for a local partner and an investor. Valoe is responsible for production technology, product quality and development. Local investors and partners are responsible for project funding as well as marketing and product sales.

COMPETITION AND VALOE'S ROADMAP

Continuously decreasing prices have brought many of the H type module manufacturers into problems or even bankruptcy. Even the results of the world's biggest Chinese manufacturers have turned negative. Based on the market activities it seems that the current path is coming to an end in terms of price as well as technology. Valoe does not believe in increase in prices but estimates that there will be several new and better technologies in the near future. In the technological competition, Valoe finds itself to be well positioned thanks to its back contact development done for many years.

Valoe is planning to introduce completely new and in terms of performance more competitive products in the market enabling production of solar electricity at market price. The objective can be achieved by extending the lifetime of a module and increasing a module's efficiency.

The better efficiency of next generation IBC (Interdigitated Back Contact) cells can be utilized with Valoe's technology. The company's goal is, with the funding from Finnish Funding Agency for Technology and Innovation (Tekes), to actively take part in this development and expand the company's special component expertise in IBC cells. In April 2018 Valoe took a major step to develop its own IBC cell as the company purchased a production line designed for cell development from Italian Megacell S.r.l.; under liquidation.

The current price leaders in the market provide modules with a lifetime of ca. 20 years. Valoe believes that in the near future it can manufacture modules with economic lifetime of more than 100 years.

During the recent years, smart modules and smart applications as well as monitoring systems have been included in small solar power plants especially. However, the smart components have not been very popular over the world mainly due to high price of the smart electronics, customers' concern about durability of the electronics and likely increasing service need. Valoe follows closely the development of the electronics but in terms of the development of the company's next module generations Valoe focuses on using mainly smart analog features. The advantage of smart analog features compared to digital ones is lower price and higher reliability in the field use over dozens of years.

FINANCING

On 19 April 2017, Valoe entered into a convertible note facility agreement with Bracknor Investment ("Bracknor") concerning a funding arrangement of up to EUR 3,000,000 in convertible loan notes (the "Convertible Notes") that will be accompanied by share subscription warrants (the "Warrants"). By 31 December 2017 Valoe has withdrawn in total EUR 0.65 million from the Bracknor Investment's financing commitment. Since the end of the financial year the company has withdrawn EUR 0.5 million from the Bracknor Investment's financing commitment. By the date of this Annual Report a total of EUR 1.15 million has been withdrawn from the financing facility. The detailed information and the terms of the Agreement can be found in the company's stock exchange releases.

Despite the successful financing arrangements in early 2017 and the share issue at the end of 2017 in which the company collected in total approximately EUR 0.86 million new capital and the indebtedness of the company decreased in total approximately by EUR 9.3 million, pursuant to the estimate of the company, the company's financing situation and working capital situation continue to be tight in 2018.

During the reporting period, Valoe has increased its product development activities, which puts pressure on Valoe to find significant amount of new financing. Thus, the company will require significant amount of new financing in order to carry out its development projects as planned. In order to meet the financing needs, the company estimates to withdraw in total EUR 2.0 million from Bracknor Investment in 2018 out of which the company has withdrawn EUR 0.5 million during the first months of 2018. Further, the company contemplates to arrange a new share issue during 2018.

Additionally, the company has a product development loan from Tekes in the amount of EUR 4.1 million out of which the company had withdrawn a total of EUR 0.8 million by the end of the financial year. In April 2018 the company withdraw another EUR 0.6 million. As per the date of this Annual Report there is still a total of EUR 2.7 million to be withdrawn. In case the Company manages to collect the intended amount of new capital in the arrangements described above, the company is able to perform its investment plan and thus believes that it can withdraw approximately EUR 1.0 million of Tekes product development loan in late 2018.

Considering the company's minimum investment needs, available financing commitments as well as cashflow based on increased demand, the Board of Directors of Valoe views that the company has sufficient working capital at least for the next 12 months.

Cash flow from business operations before investments in January – December was EUR -3.2 million (EUR -1.5 million). Trade receivables at the end of the reporting period were EUR 0.02 million (EUR 0.03 million). Net financial items amounted to EUR 2.7 million (EUR 2.3 million). At the end of December, the equity ratio of Valoe Group was -47.3 percent (-91.8 %) and equity per share was EUR -0.96 (EUR - 2.23). The equity ratio including capital loans was 0.4 percent (-20.8 %). At the end of the reporting period, the Group's liquid assets totaled EUR 0.35 million.

Valoe's financial and other risks have been handled in the item "Risk management, Risks and Uncertainties" of this Annual Report.

RESEARCH AND DEVELOPMENT

Valoe has boosted its research and development significantly. In 2017, Valoe's focus was on the development project relating to cell development and optimization, funded by the Finnish Funding Agency for Technology and Innovation ("Tekes"). The project made good progress during the reporting period. Valoe develops other special components for solar modules, too, and monitors closely the projects of its technology partners aiming at developing technologies increasing utilization of solar energy.

The company's another ambitious R&D objective is to develop a module with a lifespan of more than 100 years. Today the company expects its modules to operate ca. 40 years that is significantly longer than the lifespan of the modules of most of Valoe's competitors. Valoes views that in field of green energy production extending products' economic life cycle should be one of the most important objectives of development. The lifetime of a power plant has a direct effect on the price of produced electricity. The current market prices cannot be achieved by reducing only module prices, at least in the near future. However, it is possible to meet the objective by extending lifetime of a power plant, increasing efficiency and simultaneously keeping capital investments at a reasonable level.

The energy produced by Valoe's solar modules shall be the greenest as well as the cheapest energy in the market.

Valoe's other research and development has mainly been concentrated on developing the production line concept. Equipment and machinery needed in automated module manufacturing process will increasingly be based on Valoe's own innovations and be designed by Valoe. Valoe is aiming at protecting its innovations in all important geographical areas.

The Group's research and development costs during 2017 amounted to EUR 1.5 million (EUR 1.6 million) or 277.5 (289.2) percent of net sales.

INVESTMENTS

Gross investments in the continuing operations during January – December period amounted to EUR 0.3 million (EUR 0.5 million). The investments on the reporting period as well as on the corresponding period were mainly in development costs.

PERSONNEL

At the end of December 2017 the Group employed 18 (18) people, who all worked in Finland. During the reporting period the Group's salaries and fees totaled EUR 1.1 million (EUR 1.2 million) and additionally, the salary costs from the stock option scheme 2015, under the IFRS 2, totaled EUR 0.1 (0.9) million.

SHARES AND SHAREHOLDERS

At the end of the reporting period Valoe's share capital amounted to EUR 80,000.00 and the number of shares was 5,269,436. As a result of the share issue in late 2017 and early 2018, the number of the shares increased to 13,990,513 as per 19 January 2018. The company has one series of shares, which confer equal rights in the company. On 31 December 2017 Valoe had in total 486,991 treasury shares.

The company had a total of 7,061 shareholders at the end of December 2017, and 15.09 percent of the shares were owned by foreigners. The ten largest shareholders held 66.39 percent of the company's shares on 31 December 2017.

The largest shareholders on 31 December 2017

		Shares	Percentage
1	SAVCOR GROUP OY	1 351 282	25,6
2	SAVCOR COMMUNICATIONS LTD PTY	666 667	12,7
3	VALOE OYJ	486 991	9,2
4	GASELLI CAPITAL OY	425 000	8,1
5	KESKINÄINEN ELÄKEVAKUUTUSYHTIÖ ETERA	318 370	6,0
6	SAVCOR INVEST B.V.	109 375	2,1
7	NORDEA PANKKI SUOMI OYJ	38 954	0,7
8	SVENSKA HANDELSBANKEN AB (PUBL)	35 551	0,7
9	SCI INVEST OY	34 354	0,7
10	SALMELA VEIJO ENSIO	32 000	0,6
	OTHERS	1 770 892	33,6
	TOTAL	5 269 436	100,00

As a result of the share issue at the beginning of 2018 the number of Valoe's shares and the list of the largest shareholders have changed remarkably. An updated list of the largest shareholders is on the company's web pages.

The members of the Board of Directors and the President and CEO, either directly or through companies under their control, held a total of 822,890 shares in the company on 31 December 2017, representing about 15.62 percent of the company's shares. Additionally, the members of the Board of Directors and the President and CEO held a total of 377,500 options connected to the stock option scheme 2015. At the end of the period Iikka Savisalo, Valoe's Managing Director, either directly or through companies under his control, held a total of 810,396 shares in the company and 132,500 options connected to the stock option scheme 2015.

The price of Valoe's share, calculated using the amount of the company's shares after the reduction of the quantity of the company's shares, varied between EUR 0.66 and 2.6 during the January – December period. The average price was EUR 1.85 and the closing price at the end of December EUR 0.70. A total of 2.1 million Valoe shares were traded at a value of EUR 3.9 million during the January – December period. The company's market capitalization at the end of September stood at EUR 3.7 million.

SHARE ISSUE AUTHORIZATIONS IN FORCE

The Annual General Meeting 2017 resolved to authorize the Board of Directors to decide on a share issue with and/or without payment, either in one or in several occasions, so that the number of new shares issued based on the authorization or number of shares issued based on option rights and other special rights entitling to the shares pursuant to the Chapter 10, Section 1 of the Finnish companies Act, would equal to the total maximum amount of 10,000,000 shares. The authorization is in force until 30 June 2018.

On 28 November 2017 the General Meeting authorized the Board of Directors to decide on a share issue, either in one or in several occasions, including right to resolve on option rights and other rights entitling to shares pursuant to the Chapter 10, Section 1 of the Finnish Companies Act so that the number of new shares issued based on the authorization or number of shares issued based on option rights and other special rights entitling to the shares pursuant to the Chapter 10, Section 1 of the Finnish companies Act, would equal to the total maximum amount of 50,000,000 shares. The Board of Directors is authorized to decide on the terms and conditions of an issue of shares or option rights and other special rights. The authorization does not exclude the Board's right to decide also on directed issue of shares or option rights and other special rights. The authorization shall not revoke any previous authorizations. The authorization is in force until 30 June 2018. As per the date of this Financial Statement Release the Board of Directors has resolved on an issue of a total of 10,000,000 shares based on the authorization.

THE MAJOR EVENTS DURING THE FINANCIAL YEAR 2017 ACCORDING TO THE STOCK EXCHANGE RELEASES

7 February 2017: VALOE ISSUES A CONVERTIBLE BOND AND RELATED WARRANTIES

In order to strengthen Valoe Corporation's capital structure the company issues a convertible bond of MEUR 1.5 at the most. The convertible bond can be converted to max. 150,000,000 new shares of the company. The subscription price is EUR 0.01 per share.

The convertible bond is issued in deviation from the shareholders' pre-emptive subscription rights to the parties separately approved by the Board of Directors. The convertible bond can also be subscribed against a loan receivable of min. EUR 50,000.00 from Valoe, undisputed during the subscription period, by converting the loan's capital and/or interest into convertible bond pursuant to the terms of the convertible bond.

The minimum amount of subscription of the convertible note shall be EUR 50,000.00 entitling the convertible note holder to subscribe for 5,000,000 new shares of the company.

The loan period shall commence on the payment date and expire on 1 February 2019 on which date the convertible bond shall expire to be repayable in its entirety in accordance with the terms of the loan. The subscription period of the shares under the convertible notes shall begin from the subscription of the convertible notes and expire on 1 February 2019.

A lender shall be entitled to participate in potential future share issues arranged by the company in which the subscription period shall terminate at the latest on 1 February 2019 by subscribing the shares at the subscription price that is 20 per cent lower compared to the subscription price offered in the respective share issues.

The subscription period of the convertible bond shall expire on 10 March 2017 at 6:00 p.m. The board of directors of the company has the right to approve the subscriptions at any time during the subscription period. In the event the convertible bond shall be oversubscribed, the board of directors of the company shall resolve on the allocation between the subscribers. The board of directors of the company has the right to discontinue the subscription period of the convertible bond at any time. The board of directors shall also have the right to decide on extending the subscription period.

When subscribing the convertible bond, the lender of the convertible bond is entitled to subscribe also warranties according to which the lender shall have later a right to subscribe new shares in the company with the amount equal to the capital of the convertible bond. Each convertible bond loan amount valued at EUR 0.01 shall entitle the lender to subscribe one (1) warrant. Each warrant entitles the lender to subscribe one (1) new share of the company. The maximum amount of share subscriptions that are based on the warrants shall be in total 150,000,000 new shares of the company. The subscription period for the shares subscribed based on the warrants shall begin on 1 July 2017 and expire on 1 February 2019.

The shareholders' pre-emptive subscription rights are deviated from in connection with the issue of convertible bond and warrants to secure financing required to strengthen the capital structure of the company cost effectively and considering the size of the financing. Thus, there is from the company's point of view a weighty financial reason to issue the special rights.

The company has one (1) class of shares.

9 March 2017: VALOE CORPORATION HAS SETTLED THE DISPUTE RELATING TO THE SECURITY PROVIDED FOR CHINESE FACTORY'S LEASE LIABILITY

On 10 May 2016 Valoe disclosed that it has contested the security provided for the Chinese factory's lease liability which could have amounted to EUR 0.65 million at the most if realized. A provision equivalent to the security has been booked in Valoe's Financial Statements for 2014 where it has been recognized as the mother company's liability. Valoe has now settled the dispute out of court. Valoe has paid ca. EUR 0.15 million out of the security and the parties have terminated all legal proceedings relating to the matter.

The decrease in the amount of the security will improve the result by ca. EUR 0.5 million.

13 March 2017: THE RESULT OF THE CONVERTIBLE BOND I /2017 OF VALOE CORPORATION

Valoe Corporation has received subscriptions of EUR 1.50 million for the Convertible Bond I/2017. During the subscription period of the Convertible Bond new investments of EUR 1.05 million was paid in cash. Out of the subscriptions, a total of EUR 0.45 million was paid by setting the subscription price off against the subscribers' receivables from the company.

The Board of Directors of Valoe has approved all subscriptions for the Convertible Bond.

One loan share of EUR 0.01 pursuant to the Promissory Note entitles the Promissory Note Holder to subscribe for one new share. Based on the subscriptions made pursuant to the loan shares Valoe shall issue a maximum amount of 150,000,000 new Valoe shares. The loan period and the conversion period expire on 1 February 2019.

When subscribing the convertible bond, the lender of the convertible bond was entitled to subscribe also warranties according to which the lender shall have later a right to subscribe new shares in the company with the amount equal to the capital of the convertible bond. Each convertible bond loan amount valued at EUR 0.01 shall entitle the lender to subscribe one (1) warrant. Each warrant entitles the lender to subscribe one (1) new share of the company. The maximum amount of share subscriptions that are based on the warrants shall be in total 150,000,000 new shares of the company. The subscription period for the shares subscribed based on the warrants shall begin on 1 July 2017 and expire on 1 February 2019.

24 March 2017: VALOE ESTIMATES ITS NET SALES AND PROFITABILITY FOR 2016 TO BE LOWER THAN PREVIOUSLY DISCLOSED. THE COMPANY'S FINANCING SITUATION CONTINUES TO BE VERY TIGHT.

In February 2016 Valoe received a ca. EUR 15.8 million order for a solar module manufacturing plant and back contact technology. About EUR 9.5 million of the sales price will be paid in cash to Valoe and the rest of the sales price in shares of the customer company resulting in Valoe having a 30 percent shareholding in its Ethiopian manufacturing partner. Valoe's customer will receive financing for the deal from The Development Bank of Ethiopia (DBE).

Valoe's financing situation continues to be very tight even though the convertible bond I/2017 of EUR 1.5 million issued in February 2017 was fully subscribed. Valoe's planned financing for the building period of the Ethiopian project was mainly based on an advance payment of EUR 2.8 million for which Valoe shall arrange a bank guarantee. Securing an advance payment guarantee has been delayed. Valoe has had frequent negotiations for a guarantee and they made significant progress in March. Valoe trusts it will close the negotiations by mid-April.

The delivery of the Ethiopian project has been postponed due to insufficient financing. Valoe and its manufacturing partner have revised the schedule for completing the Ethiopian project. According to the re-evaluation the machinery and equipment for the plant will be delivered in Ethiopia by the end of 2017. According to the previous estimation, the delivery was expected to take place during the first half of the year 2017.

Valoe has ongoing negotiations on arranging financing for a factory delivery in Asia worth EUR 26.5 million. If realized, the orders would include a delivery of a solar module factory to Valoe's manufacturing partner in Asia and solar modules with capacity of more than four megawatts, worth EUR ca. 2.5 million, to the same customer. However, the negotiations are ongoing and the orders are not yet secured.

Valoe estimates that the net sales of Valoe Group will be ca. EUR 3.8 million in 2016 (in 2015: EUR 0.7 million) and the EBITDA ca. EUR 6.9 million (in 2015: EUR -2.8 million). The financial year 2016 is estimated to be profitable with profit for the financial year 2016 of ca. EUR 3.5 million (in 2015: EUR -4.7 million). All figures concern the continuing operations. The audit has not yet been finished.

Previously Valoe has estimated that the net sales of Valoe Group will be ca. EUR 5.5 – 6.0 million in 2016 and the EBITDA ca. EUR 6.5 – 7.0 million. The financial year 2016 was estimated to be profitable with profit for the financial year 2016 of ca. EUR 3.2 – 3.7 million.

Until the above-mentioned advance payment guarantee for the Ethiopian project has been secured or the financing negotiations for the Asian project have been successfully concluded, Valoe's financing situation continues to be very tight and until then the sufficiency of the company's financing and working capital for the next twelve months involve very significant risks. If the abovementioned guarantee for the order from Ethiopia was not fully arranged or the negotiations for the Asian project did not have a positive outcome, the company's financing situation would further tighten and the continuity of the company's operation may be jeopardized.

19 April 2017: VALOE HAS AGREED ON AN EUR 3.000.000 EQUITY BASED FINANCIAL ARRANGEMENT WITH BRACKNOR INVESTMENT AND DECIDED TO START PREPARATIONS FOR COMBINATION OF COMPANY'S SHARES (REVERSE SPLIT)

Background of Financial Arrangement

Valoe Oyj ("Valoe" or the "Company") has today entered into a convertible note facility agreement with Bracknor Investment ("Bracknor") concerning a funding arrangement of up to EUR 3,000,000 in convertible loan notes (the "Convertible Notes") that will be accompanied by share subscription warrants (the "Warrants") (the agreement, the Convertible Notes and the Warrants hereinafter referred to collectively as the "Arrangement").

Under the Arrangement, Valoe issues Convertible Notes to Bracknor. The Convertible Notes may be drawn down in maximum of 12 sequential tranches of EUR 250,000 each (the "Tranche") during a period of 18 months as of the date hereof provided that the preconditions for each Tranche are met. Bracknor has the right to convert each Tranche into the Company's newly issued or treasury shares. In addition, Bracknor will receive Warrants stripped from the Convertible Notes at the drawdown of each Tranche, in place of interest rate. The Warrants entitle Bracknor to subscribe to additional shares of the Company with a subscription price described below in this release.

The Company has an obligation to draw down a minimum of two (2) Tranches of the Convertible Notes, i.e. a total minimum of EUR 500,000. The remainder of the Convertible Notes, a total of 10 Tranches i.e. EUR 2,500,000, may be drawn down by the Company at its discretion.

Purpose of Arrangement

The purpose of the Arrangement is to strengthen the Company's working capital situation during the term of the Arrangement assuming that the Arrangement will be implemented as planned.

Iikka Savisalo, CEO of Valoe, commented: "We in Valoe are pleased to start working with a global investor like Bracknor. Bracknor has identified Valoe as a growth company with its competitive edge in one of the quickest growing businesses in the world: electricity generation with solar power. This is another high level acceptance for the Valoe PV-module manufacturing technology."

Pierre Vannineuse, CEO & Founder of Bracknor, declared: "Bracknor is very enthusiastic to announce this long term cooperation agreement with Valoe. We are fully confident in the Company's strategy and the management's ability to generate growth drivers for the longterm while increasingly participating in the Finnish Renewable Portfolio Standard requirements. Finally, we consider the Company to be extremely undervalued while being at an inflexion point given current valuation of energy production assets across the globe."

Commercial Terms of Arrangement

Pursuant to the Arrangement Bracknor may be given in the maximum of 3,000 convertible loan notes against subscription price of EUR 1,000 per each convertible loan note. The Convertible Notes entitle their holder to subscribe to maximum of 300,000,000 shares of the Company in the aggregate.

A Tranche may be drawn down by the Company provided that all previously issued Convertible Notes within the Arrangement have been converted into the shares of the Company or that a cool-down period the length of which is calculated as per the terms and conditions of the Convertible Notes has lapsed. Bracknor has agreed to subscribe for the Convertible Notes issued by the Company with a conversion ratio calculated at the time the respective conversion is requested so that the conversion ratio is equal to 90 % of the lowest closing bid price observed over a period of fifteen (15) consecutive trading days prior to such conversion request.

The Convertible Notes bear a zero interest rate and have a maturity of 12 months from the issuance of each Tranche. Each Tranche must be converted into the Company's shares upon maturity at the latest.

In connection with the drawdown of each Tranche, Bracknor will receive Warrants free of charge. Bracknor has the right, but no obligation, to subscribe for the Company's shares based on the Warrants. In connection with the Arrangement, Bracknor may be given maximum of 300,000,000 Warrants in the aggregate which entitle their holder to subscribe to maximum of 300,000,000 shares of the Company in the aggregate. The number of Warrants that shall be attached to the Convertible Notes of a Tranche shall be determined as follows: the nominal value of the Convertible Notes of a Tranche divided by the Exercise Price of Warrants, the resulting number of Warrants being rounded down to the nearest whole number. For the purposes of the aforesaid, the "Exercise Price of Warrants" shall be 115% of the lowest closing volume weighted average price in the 5 trading days immediately preceding the request to issue a new Tranche, except for the Warrants issued in connection with the first Tranche in respect of which the Exercise Price of the Warrants shall be 115% of the lowest of (i) the lowest closing volume weighted average price in the 5 trading

days immediately preceding the date of signing the agreement on the Arrangement and (ii) the lowest closing volume weighted average price in the 5 trading days immediately preceding the request to issue the first Tranche.

The subscription period of the Company's shares pursuant to the Warrants is five (5) years from the issuance of each Warrant.

The exact number of the Company's shares to be issued based on the conversion of the Convertible Notes and the exercise of the Warrants depends, in the manner described above, on the conversion ratio applied to the Convertible Notes and Warrants and is thus not yet known. Depending on the exact number of the Company's shares to be issued based on the conversion of the Convertible Notes and the exercise of the Warrants, it may be necessary for the Board of Directors of the Company to apply for additional authorisations from the general meeting of shareholders in order to implement the entire Arrangement.

There is a weighty financial reason for the Company to issue the Convertible Notes and Warrants to Bracknor as the purpose of the Arrangement is to strengthen the tight working capital situation of the Company. The subscription price of the Convertible Notes and Warrants as well as the shares of the Company to be subscribed based on the Convertible Notes and Warrants is based on the agreement between the Company and Bracknor.

The drawdown of each Tranche requires that certain representations and warranties given by the Company and other customary conditions relating to financing arrangements of this nature are met.

Bracknor has the right to terminate the Arrangement if the Company's operations become subject to a material adverse effect, there has been a change of control in the Company or in the event of default which, if curable, is not cured within 30 business days.

Valoe will pay Bracknor on the Arrangement a commitment fee equal to EUR 120,000 in Convertible Notes.

For the purpose of implementing the Arrangement in accordance with its terms and conditions, the Company will arrange separately a share issue to the Company itself as well as apply for the listing of shares directed to itself in the share issue.

The terms and conditions of the Convertible Notes and of the Warrants (without schedules) are included in full in the Appendices 1 and 2 of this release.

Combination of the Company's Shares

In connection with entering into the Arrangement, the Company has decided to start the preparations for the combination of the Company's shares (reverse split) with at least 1:100 adjustment in 2017. The Board of Directors of the Company shall make a separate proposal to the Company's annual general meeting or the extraordinary general meeting on the combination of the shares.

21 April 2017: Valoe Revises Its Financial Statements 31.12.2016 due to a Delay in Fulfilling the Revenue Recognition Requirements under IFRS for the Ethiopian Project

Valoe revises the accounting policies in its financial statements 31.12.2016. Valoe removes the revenue from the Ethiopian project from the company's financial statements as the development of the project has been slower than estimated and there has been a delay in fulfilling the revenue recognition requirements under IFRS. Thus, the financial statements to be disclosed by 30 April 2017 will differ significantly from the financial information in the Financial Statement Release disclosed on 31 March 2017. As the accounting policies were revised the figures in the Financial Statement Release disclosed on 31 March 2017 do not comply with IFRS.

The company views performance obligations, under IFRS, of Valoe's Ethiopian project have not yet been satisfied. According to the prudence principles the company has decided to remove the revenue from the Ethiopian project from the company's financial statements.

Valoe's pro-forma financial statements as per 31 December 2016, not under IFRS, comply with the Financial Statement Release disclosed 31 March 2017. The key figures in the pro-forma financial statement are as follows: revenue EUR 3.8 million, EBITDA EUR 6.0 million, operating profit EUR 4.7 million and profit for the period EUR 2.7 million. In its pro-forma financial statement as per 31 December 2016 Valoe has recognized about 20 percent of the revenue from the Ethiopian project based on the completion percentage of the project. The aforesaid revenue recognition takes into account a case Valoe finds very unlikely, where the customer cancels the order or refuses to accept the delivery. In such case Valoe would be able, in some other customer project, to utilize at least the part of the project that has already been recognized and secure at least part of the project's income. In the company's official financial statements in compliance with the IFRS, to be disclosed by 30 April 2017, the revenue decreases by

EUR 3.3 million, the EBITDA by EUR 1.2 million, the operating profit by EUR 1.0 million and the profit for the period by EUR 1.0 million compared to the pro-forma financial statements disclosed on 31 March 2017.

The company will resume recognizing revenue according to the same principles as in the Financial Statement Release disclosed on 31 March 2017 as soon as the requirements under IFRS have been fulfilled. Valoe sees that one of the most important requirements is the opening of a EUR 9.5 million Irrevocable Letter of Credit in a bank approved by Valoe.

Valoe will disclose a separate release when the IFRS requirements for revenue recognition are satisfied. Until then Valoe will include also pro-forma figures in its financial reporting. The additional reporting is provided to give the market an understanding of the Ethiopian project's overall percentage of completion and its effect on the company's financials at the point when the revenue recognition requirements under IFRS are fulfilled.

CEO Iikka Savisalo's Status Report on the Ethiopian Project, 21 April 2017

During the summer 2015 Valoe signed with an Ethiopian manufacturing partner a ca. EUR 15.8 million manufacturing partnership agreement including e.g. a delivery of a manufacturing plant utilizing Valoe's own technology and related technology rights to Ethiopia. On 9 February 2016 the manufacturing partner signed a EUR 9.5 million financing agreement with the Development Bank of Ethiopia for the cash payment of the purchase price. In accordance with Valoe's partnership concept the rest of the sale price is paid in shares of the Ethiopian customer company resulting in Valoe having a 30 percent shareholding in its manufacturing partner when its operation starts. Further, in pursuant to the agreement, Valoe's partner has to inject capital to the Ethiopian company. The Development Bank of Ethiopia has agreed to provide Valoe's partner with financing required for the capitalization.

In accordance with the agreement, Valoe's partner shall open an Irrevocable Letter of Credit for a sum equivalent to the cash payment in a reputable bank approved by Valoe. Valoe shall arrange a bank guarantee for any funds released against the Letter of Credit before delivery. The funds against the Letter of Credit will be released to Valoe when the delivery of the production line is accepted in Mikkeli and the equipment is ready for shipping to Ethiopia. The agreement also includes checkpoints and reporting typical of this kind of agreements.

Despite the close cooperation between the parties an Irrevocable Letter of Credit required by Valoe has not yet been opened on 21 April 2017. Valoe views that this is due to massive bureaucracy in the local administration. The parties continue striving to overcome the administrative challenges.

Ethiopia is one the world's fastest growing economies and a country with one of the world's biggest potential to utilize solar energy. However, Ethiopia is not very experienced in running high technology projects. Although Valoe has more than 20 years' experience in conducting business operations in demanding environment the company and its local partner have faced many new and local challenges typical of this geographical area. Already before the actual project started, the new Ethiopian company managed to tackle issues related to various licenses and permits. Valoe's partner obtained all licenses and permits required to establish the business and open the factory and acquired land for it.

Valoe's management has spent several months in Ethiopia participating financing negotiations, planning the execution of the project and commencing sales of the new company. Based on Valoe's experience and lessons learned Valoe is even more convinced that production of solar energy suits very well to the Ethiopian climatel and that the local political leaders strongly support the increasing utilization of solar energy in general in Ethiopia and Valoe's project in particular. In addition, based on the close cooperation with Ethiopian stakeholders Valoe is convinced that there are several opportunities for the company also after the current project is completed.

25 April 2017: ISSUE OF NEW SHARES IN VALOE CORPORATION WITHOUT CONSIDERATION TO THE COMPANY ITSELF

The Board of Directors of Valoe Corporation (the "Company") has, on the basis of the authorization granted by the Annual General Meeting of Shareholders on 24 May 2016, resolved on the issuance of 86,000,000 new shares to the Company itself without consideration in accordance with Chapter 9, Section 20 of the Companies Act. The shares are of the same class as the Company's other shares and entitle to the same shareholder rights as the Company's old shares after their registration.

After the registration of the new shares in the trade register, the total number of the shares in the Company is 948,472,136 of which 86,000,000 shares are held by the Company.

The new shares are estimated to be registered in the trade register on 27 April 2017, after which the Company will without delay apply for the admission of the shares to public trading on the stock exchange list of Nasdaq Helsinki Ltd.

The purpose of the issue of shares to the Company itself is to implement part of the financing arrangement between the Company and Bracknor Investment approved on 19 April 2017 in accordance with the terms and conditions of such financing arrangement.

30 April 2017: DUE TO THE CHANGES IN VALOE'S FINANCIAL STATEMENT IN APRIL 2017 THE COMPANY'S EQYITY WAS NEGATIVE AS PER 31 DECEMBER 2016. THE MEASURES TAKEN BY THE BOARD OF DIRECTORS TURNED THE EQUITY POSITIVE. THE BOARD OF DIRECTORS CONTINUE THE MEASURES TO STRENGHTEN THE COMPANY'S EQUITY AND TO REMEDY ITS FINANCIAL POSITION.

Because the performance obligations, in accordance with the International Accounting Standard IAS 11, were not satisfied Valoe resolved, in April 2017, to remove the revenue and the costs related to the Ethiopian project from the company's income statement. Thus, Valoe's equity turned negative as per 31 December 2016. In terms of operations, the project will be continued and the company will resume recognising revenue based on percentage of completion when the performance obligations have been satisfied.

The Board of Directors took immediate actions and agreed on converting loans from the related parties to capital loans. Valoe's equity turned again positive after some of the loans from the related parties were converted to capital loans.

Valoe will convene a General Meeting to consider the measures to strengthen the company's equity and to remedy the financial position of the company.

Besides the above-mentioned actions affected the year-end equity situation the Board of Directors has already started implementing other corrective actions to strengthen the company's financial situation and to secure going concern.

On 19 April 2017 Valoe signed an EUR 3 million equity-based financing facility agreement with Bracknor Investment.

Further, Valoe's cash situation improves in 2017 as Valoe has agreed on extending the loans due during 2017 until 30 April 2018, excluding an EUR 0.7 million loan from Danske Bank due in 30 September 2017.

Further, the company's related parties have committed to convert their loan receivables from Valoe to capital loans, if required.

14 June 2017: RESOLUTIONS AT VALOE'S ANNUAL GENERAL MEETING AND ORGANIZING OF THE BOARD OF DIRECTORS

Valoe Corporation's Annual General Meeting was held on 14 June 2017 in Mikkeli, Finland. The AGM approved the 2016 financial statements and discharged the members of the Board and the President and CEO from liability for the financial year 2016. According to the Board' proposal, it was resolved that no dividend for the financial year 2016 will be distributed. It was also resolved that the loss for the financial period that ended on 31 December 2016 will be entered in retained earnings.

It was decided that the Board of Directors will have three members. Industrial counsellor Hannu Savisalo, Ville Parpola and Iikka Savisalo continue as old Board members in the Board of Directors.

At its organizing meeting following the Annual General Meeting, Valoe's Board of Directors elected Hannu Savisalo as the Chairman and Ville Parpola as the Vice Chairman of the Board. The Board of Directors decided, due to the scope of the company's business, that it is not necessary to establish any separate Board committees.

The Annual General Meeting resolved that an annual remuneration of EUR 40,000 will be paid to the Chairman and to the Vice Chairman of the Board, and EUR 30,000 to the members of the Board of Directors. Further, travel costs will be paid to the Board members pursuant to the company's travel policy.

Auditus Tilintarkastus Oy was elected as the company's auditor and Heidi Pirttijoki, APA, as the responsible auditor.

The General Meeting resolved on the reduction of the quantity of company's shares without reducing share capital by way of issuing new shares and by redemption of company's own shares, in such a way that each current 200 shares of the company shall correspond to one share of the company after the arrangements related to the reduction of the quantity of company's shares are completed. Prior to the reduction of the quantity of company's shares, the total number of shares in the company is 948,472,136. The purpose of the reduction of the quantity of company's shares is to increase the value of a single share and thus to improve the trade conditions of the shares and the reliability of the price formation of the shares. Thus, there is a particularly weighty financial reason for the company to reduce the quantity of company's shares. This arrangement shall not affect the equity of the company. The reduction of the quantity of company's shares is carried out so that the company shall, on 16 June 2017 (hereinafter the "Transaction Day"), issue new company shares to each shareholder of the company free of charge so that the number of all shares per book-entry accounts owned by the shareholders of the company are divisible by the number 200. The maximum quantity of company's own shares transferred by the company shall be 199 shares multiplied by the number of such book-entry accounts on the Transaction Day, on which the company's shares are held, and which are owned by the shareholders of the company. The number of company's shareholders as per 30 April 2017 was 7,369. Therefore, the maximum amount of new shares issued by the company in the share issue is 1,600,000 new shares of the company. The Board of Directors of the company is entitled to resolve on all other matters related to the issuance of shares free of charge. On the Transaction Day, at the same time with the aforementioned issue of company's new shares, the company shall redeem free of charge a number of shares from each shareholder of the company. The number of shares to be redeemed by the company will be determined according to the redemption ratio of 200/1. In other words, for every 200 shares of the company 199 company shares shall be redeemed. The Board of Directors of the company shall be entitled to resolve on all other matters related to the redemptions of shares. The company's shares, which are redeemed in connection with the reduction of the quantity of company's shares, shall be annulled immediately following the redemption by a resolution of the Board of Directors of the company. The reduction of the quantity of company's shares shall be carried out in the book- entry system after the end of trading day on Nasdaq Helsinki on 16 June 2017 i.e. on the Transaction Day. The annulment of the shares and the company's new total number of shares are entered in the trade register approximately on 19 June 2017. Trading with the company's new total number of shares on Nasdaq Helsinki will begin approximately on 19 June 2017. If necessary, the trading with the company's share on Nasdaq Helsinki shall be temporarily interrupted in order to perform necessary technical measures in the trading facility after the Transaction Day. The arrangement, if it is realized, will not require the shareholders to take any action. No part of the arrangement shall be carried out unless all the other parts of the arrangement are carried out as well.

Further, the General Meeting resolved to authorize the Board of Directors to decide on a share issue with and/or without payment, either in one or in several occasions, including right to resolve on option rights and other rights entitling to shares pursuant to the Chapter 10, Section 1 of the Finnish Companies Act so that the number of new shares issued based on the authorization or number of shares issued based on option rights and other special rights entitling to the shares pursuant to the Chapter 10, Section 1 of the Finnish companies Act, would equal to the total maximum amount of 10,000,000 shares (after reduction of quantity of shares). The authorization does not exclude the Board's right to decide also on directed issue of shares or option rights and other special rights pursuant to the Chapter 10, Section 1 of the Finnish Companies Act. It is proposed that the authorization may be used for important arrangements from the company's point of view e.g. to strengthen the capital structure, to finance investments, for acquisitions and business transactions or other business arrangements, or to expand ownership structure, or for incentive plans, or for other purposes resolved by the Board involving a weighty financial reason for issuing shares or option rights or special rights entitling to shares pursuant to the Chapter 10, Section 1 of the Finnish Companies Act. The share issue may be executed by deviating from the shareholders' pre-emptive subscription right provided the company has a weighty financial reason for that. The authorization is in force until 30 June 2018.

Further, the Board of Directors described the company's financial situation to the General Meeting. The General Meeting discussed the measures to remedy the company's financial position based on the resolutions made by the Board of Directors during the financial year 2017.

17 June 2017: QUANTITY OF VALOE CORPORATION'S SHARES AFTER REDUCING THE QUANTITY OF SHARES

The Annual General Meeting of Valoe Corporation (the "Company") resolved on 14 June 2017 to reduce the quantity of Valoe Corporation's shares by way of issuing new company shares and by the redemption of company's own shares (the "Arrangement").

As a part of the Arrangement, the Annual General Meeting resolved that the Company shall issue on 16 June 2017, the transaction day (the "Transaction Day"), in maximum 1,600,000 new Company shares free of charge so that the number of all shares per bookentry accounts owned by the shareholders of the Company are divisible by the number 200. 415,064 shares were needed in order to make the number of Company's shares owned by the shareholders divisible by the number 200. The complete amount of the shares issued free of charge in the share issue was 415,064 shares. After the share issue, the number of the Company shares was 948,887,200 on the Transaction Day. Further, pursuant to the resolution of the Annual General Meeting, the Company has on the Transaction Day in connection with the share issue referred to above, redeemed from all shareholders free of charge such number of Company's shares which was determined according to the redemption ratio of 200/1 i.e. altogether 944,142,764 Company shares.

Pursuant to the resolution of the Annual General Meeting, the Board of Directors has cancelled 944,142,764 Company shares which become Company's possession on the Transaction Day. After the cancellation resolution of the Board of Directors, the number of Company's shares is 4,744,436.

The cancellation of 944,142,764 Company shares and the new total number of the Company's shares shall be registered with the Trade Register by 19 June 2017. Trading with the amended number of the Company's shares shall commence on Nasdaq Helsinki on or around 19 June 2017.

7 August 2017: VALOE CORPORATION HAS AGREED ON DELIVERING SOLAR POWER PLANTS WORTH A TOTAL OF CA. EUR 4 MILLION TO FINLAND. THE FIRST ORDERS OF CA. EUR 450,000 WILL BE DELIVERED TO NINE SITES OWNED BY THE CITY OF HANKO DURING THE AUTUMN 2017.

Valoe Corporation has signed a framework agreement with ForUs Capital Oy on delivering solar power plants worth a total of ca. EUR 4 million to Finland. ForUs Capital sells electricity generated by the solar power plants to its own partners. The first orders of ca. EUR 450,000 will be delivered to nine sites owned by the City of Hanko during the autumn 2017.

Valoe and solar energy buyers will sign a separate service agreement on the maintenance of each solar power plant. Valoe is responsible for power production and gives the solar power plants performance guarantee.

The other deliveries are subject to governmental investment aid and securing final financing. If the conditions are fulfilled, the solar power plants will be delivered during the summer 2018 at the latest.

"The lifetime cost per kilo-watt hour of Valoe's next generation solar systems is significantly lower compared to traditional modules. It is great that after long cooperation ForUs Capital is convinced of competitiveness of Valoe's solar systems. We trust that our cooperation with ForUs will expand significantly in the future", says Iikka Savisalo, Valoe's CEO.

"We chose Valoe as our partner because they provided us with the latest Finnish technology, local Finnish production and the best guarantee terms. Despite the highest price within the industry, we estimated Valoe to be the most secured option in the market for our investors" says Eero Oksanen, Managing Director of ForUs Capital Oy. "We have followed Valoe's operation very closely. We are hopefully looking forward to seeing Valoe developing technically superior solar power plants", Eero Oksanen states.

16 October 2017: ISSUE OF NEW SHARES IN VALOE CORPORATION WITHOUT CONSIDERATION TO THE COMPANY ITSELF

The Board of Directors of Valoe Corporation (the "Company") has, on the basis of the financing arrangement between the Company and Bracknor Investment approved on 19 April 2017 resolved on the issuance of a maximum of 2,570,825 new shares to the Company itself without consideration. The subscription period for the new shares commenced on 16 October 2017 and shall end on 16 October 2018. New shares can be subscribed in tranches at any time during the subscription period as resolved by the Board of Directors of the Company, however, subject to total amount of treasury shares held by or pledged by the Company not exceeding 1/10 of all the shares in the Company at any time, as required under Chapter 15, Section 11 of the Companies Act.

The share issue without consideration to the Company itself is conducted in order to implement part of the financing arrangement referred to above. The new shares may be used solely to the implementation of the financing arrangement so that the Company may issue the new shares held by it to Bracknor Investment when Bracknor investment subscribes shares on the basis of the convertible loans and warranties granted to it under the said financing arrangement. To the extent it is not necessary to issue new shares subscribed by the Company to Bracknor Investment, the Company shall annul the shares.

The new shares are of the same class as the Company's other shares and entitle to the same shareholder rights as the Company's old shares after their registration.

The Company has on 16 October 2017 subscribed in total 525,000 new shares in the share issue ("Subscribed Shares").

After the registration of the Subscribed Shares in the trade register, the total number of the shares in the Company is 5,269,436 shares of which 525,824 shares are held by the Company.

The Subscribed Shares are estimated to be registered in the trade register approximately on 23 October 2017 and the Company shall apply for the admission of the Subscribed Shares to public trading on the stock exchange list of Nasdaq Helsinki Ltd approximately by the end of October 2017.

28 November 2017: RESOLUTIONS AT VALOE'S EXTRAORDINARY GENERAL MEETING

Valoe Corporation's Extraordinary General Meeting was held on 28 November 2017 in Mikkeli, Finland.

The General Meeting authorized the Board of Directors to decide on a share issue with and/or without payment, either in one or in several occasions, including right to resolve on option rights and other rights entitling to shares pursuant to the Chapter 10, Section 1 of the Finnish Companies Act so that the number of new shares issued based on the authorization or number of shares issued based on option rights and other special rights entitling to the shares pursuant to the Chapter 10, Section 1 of the Finnish companies Act, would equal to the total maximum amount of 50,000,000 shares. The authorization does not exclude the Board's right to decide also on directed issue of shares or option rights and other special rights pursuant to the Chapter 10, Section 1 of the Finnish Companies Act. The authorization shall not revoke any previous authorizations. The authorization is in force until 30 June 2018.

19 December 2017: VALOE CORPORATION RECEIVED A CA. EUR 0.7 MILLION ORDER FOR SOLAR POWER PLANTS. THE DELIVERY IS PART OF THE FRAMEWORK AGREEMENT WITH FORUS CAPITAL OY PUBLISHED ON 7 AUGUST 2017

On 7 August 2017 Valoe Corporation ("Valoe") disclosed that it has signed a framework agreement with ForUs Capital Oy on delivering solar power plants worth a total of ca. EUR 4 million to Finland. ForUs Capital sells electricity generated by the solar power plants to its own partners. The first, previously published orders of ca. EUR 450,000 are delivered to nine sites owned by the City of Hanko. The solar power plant deliveries have progressed well. Part of the solar power plants have already been delivered and the rest of the deliveries to the sites owned by the City of Hanko will be made during the first half of the year 2018.

Valoe has today signed a new delivery contract under the framework agreement worth a total of ca. EUR 0.7 million. Pursuant to the new contract Valoe will deliver the solar power plants by the end of August 2018.

The deliveries under the framework agreement other than the ones mentioned above are subject to governmental investment aid and securing final financing.

20 December 2017: VALOE CORPORATION'S OFFERING TO SIGNIFICANT CREDITORS OF THE COMPANY; THE COMPANY HAS RECEIVED CONDITIONAL SUBSCRIPTION UNDERTAKINGS IN THE TOTAL AMOUNT OF EUR 8.6 MILLION ON THE SHARE SUBSCRIPTIONS TO BE PAID BY SETTING OFF RECEIVABLES AND UNCONDITIONAL SUBSCRIPTION UNDERTAKINGS IN THE TOTAL AMOUNT OF EUR 0.8 MILLION ON THE SHARE SUBSCRIPTIONS TO BE PAID BY CASH

The Board of Directors of Valoe Corporation (the "Company") has resolved on the basis of the authorization granted to it by the Company's Extraordinary General Meeting held on 28 November 2017 on a directed share issue (the "Offering") in which the Company shall offer up to 10,000,000 new shares in the Company (the "New Shares") for subscription to all the creditors of the Company (including holders of the convertible loans I/2015 and I/2017) who at the time of subscription hold indisputable receivable amounting to at least EUR 25,000 from the Company (each "Subscriber"). The Board of Directors has approved the terms and conditions of the Offering which are attached to this release in their entirety.

The subscription price for the New Shares can be paid in cash or by set-off against, in the view of the Board of Directors of the Company, indisputable receivables the Subscriber has from the Company at the time of subscription. The subscription price per New Share shall be EUR 0.98 when the Subscription Price is paid in cash and EUR 1.18 when the subscription price is paid by way of set-off.

Subscription prices have been determined to be sufficiently attractive as estimated by the Board of Directors of the Company in order to allow the largest number of Subscribers to subscribe for shares, both in cash and against their receivables from the Company.

The subscription period of the New Shares shall commence on 21 December 2017 at 8 a.m. Finnish time and end on 15 January 2018 at 6 p.m. Finnish time. The Company shall publish the final result of the Offering after the Board of Directors of the Company has resolved on the approval of the subscriptions.

The purpose of the Offering is to strengthen the Company's balance sheet position and thus improve the financial performance of the Company and to raise new capital to the Company in order to partly finance its working capital needs as well as business operations specified in the business plan of the Company. The Offering is also expected to improve the liquidity of the Company's shares. The objective of the Offering is to collect at the most EUR 1.8 million of new money for the Company.

The New Shares shall be offered to the Subscribers in deviation from the pre-emptive subscription right of the shareholders of the Company. The reason for deviating from the shareholder's pre-emptive subscription right is the strengthening of the Company's

balance sheet position, improving the financial performance of the Company and partly financing of its working capital needs as well as business operations specified in the business plan in a cost-effective manner. Based on these grounds, the Board of Directors of the Company considers there to be a weighty financial reason to deviate from the shareholders' pre-emptive subscription right as referred to in Section 9, Article 4:1 of the Companies Act.

At the moment, the Company has conditional subscription undertakings related to the Offering in the total amount of EUR 8.6 million on the share subscriptions to be made by setting off receivables. Such subscription undertakings are conditional there not being a material adverse change in the Company between the signing of the undertaking and the subscription date. In addition, at the moment the Company has unconditional subscription undertakings related to the Offering in the total amount of EUR 0.8 million on the share subscriptions to be paid by cash.

The Company shall apply for the registration of the New Shares with the Trade Register as soon as practically possible after the Board of Directors has approved the subscription of the New Shares. The Company expects the New Shares subscribed acceptably in the Offering to be registered with the Trade Register approximately on 19 January 2018.

The New Shares are applied to be admitted to trading on the stock exchange list of Nasdaq Helsinki Oy approximately on 21 January 2018 together with the other shares of the Company.

THE MAJOR EVENTS AFTER THE FINANCIAL YEAR 2017

The main events since the end of the financial year 2017 have been handled in this Annual Report's items: Financial Result, Financing, and Shares and Shareholders. The main events since the end of the financial year 2017 have been listed in the item Notes to the Consolidated Financial of this Annual Report.

RISK MANAGEMENT, RISKS AND UNCERTAINTIES

Valoe's Board of Directors is responsible for the control of the company's accounts and finances. The Board is responsible for internal control, while the President and CEO handles the practical arrangement and monitors the efficiency of internal control. Business management and control are taken care of using a Group-wide reporting and forecasting system.

The purpose of risk management is to ensure that any significant business risks are identified and monitored appropriately. The company's business and financial risks are managed centrally by the Group's financial department, and reports on risks are presented to the Board of Directors as necessary.

Due to the small size of the company and its business operations, Valoe does not have an internal auditing organization or an audit committee.

Pursuant to the estimates available to the company, the company's financing situation and working capital situation continue to be tight in 2018. Considering the company's minimum investment needs, available financing commitments as well as cashflow based on increased demand, the Board of Directors of Valoe views that the company has sufficient working capital at least for the next 12 months.

On 31 December 2017 the company had financing commitment in the amount of EUR 2.35 million from Bracknor Investment for the purposes of enhancing its cash position. Valoe cannot withdraw new capital from the commitment at once but only during longer time period. In order to meet the company's financing needs Valoe estimates to withdraw in total EUR 2.0 million from the Bracknor Investment's financing facility during 2018 out of which the company has withdrawn EUR 0.5 million during the first months of 2018.

On 19 April 2018 the company issued a convertible bond 1/2018 of EUR 1.0 million. The company trusts the convertible bond will be fully subscribed.

In order to cover its strategic investments, the company contemplates to arrange a new share issue during 2018.

Valoe has a product development loan from Tekes in the amount of EUR 4.1 million out of which the company had withdrawn a total of EUR 0.8 million by the end of the financial year. In April 2018 the company withdraw another EUR 0.6 million. As per the date of this Annual Report there is still a total of EUR 2.7 million to be withdrawn. In case the Company manages to collect the

intended amount of new capital in the arrangements described above, the company is able to perform its investment plan and thus believes that it can withdraw approximately EUR 1.0 million of Tekes product development loan in late 2018.

Valoe's objective is to achieve a strong market position as a provider of, in various geographical areas, locally produced high-quality photovoltaic modules. Achievement of the objectives involves risks. Even though Valoe's strategy and objectives are based on market knowledge and technical surveys, the risks are significant and it is not certain if the company reaches all or part of the targets set for it. Valoe's future outlook will be highly dependent on the company's ability to reach the targeted market position in the global photovoltaic module market as well as on the company's financing.

Valoe's customer has ongoing negotiations on arranging financing for a factory delivery in Asia worth EUR 26.5 million. The realization of the project involves significant risks. The financing negotiations are ongoing and it is not yet certain if the project or even a part of it will be realized.

The module manufacturing plant order from Ethiopia involves business, financial, schedule and country risks that are typical of international equipment sales. The country risks include also slow decision process for financing arrangements. The payments relating to the project have not yet begun despite the binding financing agreements. The company follows very closely how the situation develops in Ethiopia and tries to support the customer in its negotiations by being present as often as possible.

The Agreement signed with ForUs Capital involves risks out of which the most remarkable risk relates to securing financing for the projects involved.

The developing markets can be unpredictable and operation in the markets involves many risks. When assessing the company, one shall be aware of the fact that the major part of the company's operations take place in high-risk environment and consider carefully the effects of the risks on the investor's own investment strategy.

The certain statements in this Annual Report and especially the non-binding estimations in Valoe's strategy are targeted to the future and based on the management's current estimations. They involve risks and uncertainty by their nature and may be affected by changes in general financial situation or business environment.

MARKET OUTLOOK

Valoe will not disclose financial guidance for the financial year 2018.

CORPORATE GOVERNANCE STATEMENT

Valoe applies the Finnish Corporate Governance Code approved by the Securities Market Association effective as of 1 October 2010. Valoe's Corporate Governance Statement drawn in accordance with Recommendation 51 will be released on the week commencing on 23 April 2018 as a separate report.

THE BOARD OF DIRECTORS' PROPOSAL CONCERNING THE DISTRIBUTION OF PROFIT

The Board of Directors proposes to the Annual General Meeting that no dividend from the financial year 2017 will be paid.

	2017	2016	2015
EUR 1 000	12 months	12 months	12 months
Continuing operations
Net sales	554	553	699
Operating profit	-3 078	3 661	-3 540
% of net sales	-556,0 %	661,5 %	-506,4 %
Result before taxes	-5 794	1 384	-4 731
% of net sales	-1 046,6 %	250,0 %	-676,8 %
Return on equity, %	n/a	n/a	n/a
Return on capital employed, %	n/a	n/a	n/a
Equity ratio, %	-47,3	-91,8	-235,7
Net gearing, %	neg.	neg.	neg.
Non-interest-bearing liabilities	4 074	5 716	7 493
Interest-bearing liabilities	9 878	14 354	10 354
Gross investments	272	481	395
% of net sales	49,1 %	86,9 %	56,5 %
Research and development costs	1 536	1 601	1 078
% of net sales	277,5 %	289,2 %	154,2 %
Order book, EUR million	16,9	15,9	0,05
includes Ethiopia	15,8	15,8	0
Personnel on average	17	21	22
Personnel at the end of the period	18	18	20
Share key indicators
Earnings per share (basic)	-1,23	0,30	-1,12
Earnings per share (diluted)	-1,23	0,22	-1,12
Earnings per share (basic) -continuing operations	-1,23	0,32	-1,10
Earnings per share (diluted) - continuing operations	-1,23	0,24	-1,10
Equity / share, EUR	-0,96	-2,23	-2,91
Dividend / share, EUR	0,00	0,00	0,00
Effective dividend yield, %	0,00	0,00	0,00
P/E ratio (basic)	-0,6	8,7	-3,4
P/E ratio (diluted)	-0,6	11,8	-3,4
Share price at the end of the period	0,70	2,60	3,80
Market capitalization of shares at the end of the period,	3,7	11,2	16,4
MEUR
Share trading adjusted for share issue	2 102 871	320 475 608	105 004 021
Portion of weighted average of shares, %	44,6 %	37,2 %	12,2 %
Weighted average number of shares adjusted for share	4 716 410	862 472 136	862 472 136
issue over the financial year
Number of shares adjusted for share issue at the end of the financial year	5 269 436	862 472 136	862 472 136
Average number of shares diluted by share option and adjusted for share issue over the financial year	7 432 107	1 739 558 970	875 047 478

Return on equity and net gearing has not been presented for the reportable years as the equity is negative.

The share key indicators and for the corresponding periods 2016 and 2015 are calculated using the amount of the company's shares after the reduction of the quantity of the company's shares ( the pre-split price multiplied with 200).

Return on investment (ROI), %:	Profit/loss + financial expenses x 100
	Shareholders' equity + interest-bearing financial liabilities
Equity ratio, %:	Total equity x 100
	Total assets - advances received
	Interest-bearing liabilities - cash and cash equivalents and
Net gearing, %:	marketable securities x 100
	Shareholders' equity + non-controlling interests
	Profit/loss for the period to the owner of the parent
Earnings/share (EPS):	company
	Average number of shares adjusted for share issue at the
	end of the financial year
Equity/share:	Equity attributable to shareholders of the parent company
	Undiluted number of shares on the balance sheet date
	Dividend distribution for the financial
Dividend/share:	period
	Undiluted number of shares on the balance sheet date
Dividend/profit, %:	Dividend per share x 100
	Earnings per share
Effective dividend yield, %:	Dividend / share x 100
	Price on the balance sheet date
P/E ratio:	Price on the balance sheet date
	Earnings per share

				1 Jan – 31 Dec
EUR 1 000	Liite	1 Jan – 31 Dec 2017		2016
Continuing operations
Net sales	1	554	100 %	553	100 %
Cost of sales		-1 204	-217 %	-994	-180 %
Gross profit		-650	-117 %	-441	-80 %
Other operating income	3	398		7 682
Product development expenses		-1 536		-1 601
Sales and marketing expenses		-498		-758
Administrative expenses		-786		-1 143
Other operating expenses	4	-5		-79
Operating profit / loss		-3 078	-556 %	3 661	662 %
Financial income	7	0		8
Financial expenses	8	-2 716		-2 285
Profit/loss before taxes from continuing operations		-5 794	-1047%	1 384	250 %
Income
taxes	9	0		18
Profit/loss for the period continuing
operations		-5 794	-1047%	1 402	253 %
Discontinued operations	10
Profit/loss after tax for the period from discontinued operations		0		-92
Profit/loss for the financial year		-5 794	-1047%	1 310	237%
Profit/loss attributable to:
Shareholders of the parent company		-5 794		1 310
Earnings/share (basic), EUR	11	-1,23		0,30
Earnings/share (diluted), EUR	11	-1,23		0,22
Continuing operations
Earnings/share (basic), EUR	11	-1,23		0,32
Earnings/share (diluted), EUR	11	-1,23		0,24
Profit/loss for the financial year		-5 794		1 310
Other comprehensive income
Translation difference		0		750
Other comprehensive income for the period,
which shall subsequently be transferred to
profit or loss		0		750
Total comprehensive income for the financial year		-5 794	1047%	2 059	372%
Total comprehensive income attributable to:		-5 794
shareholders of the parent company				2 059

The earnings per share for the corresponding period 2016 have been calculated using the amount of the company's shares after the reduction of the quantity of the company's shares (the pre-split price has been multiplied with 200).

EUR 1 000	Note	31 Dec 2017	31 Dec 2016
ASSETS
Non-current assets
Property, plant and equipment	12	8	13
Consolidated goodwill	13	441	441
Other intangible assets	13	6 982	8 039
Available-for-sale investments	14	9	9
Deferred tax assets	15	0	0
Total non-current assets		7 441	8 502
Current assets
Inventories	16	582	1 122
Trade and other non-interest-bearing receivables	17	1 256	860
Cash and cash equivalents	18	350	3
Total current assets		2 188	1 985
Assets classified as held for sale	10	0	0
Current assets		9 629	10 487
EQUITY AND LIABILITIES Equity attributable to shareholders of the parent company
Share capital	19	80	80
The invested unrestricted equity fund	19	10 542	0
Retained earnings	19	-15 166	-9 708
Total equity		-4 544	-9 628
Non-current liabilities
Non-current loans	22	7 874	12 423
Deferred tax liabilities	15	0	0
Total non-current liabilities		7 874	12 423
Current liabilities
Current interest-bearing liabilities	22	2 004	1 931
Trade and other payables	23	3 773	5 228
Current provisions	21	215	40
Total current liabilities		5 992	7 199
Liabilities directly associated with assets classified
as held for sale	10	306	493
Total liabilities		14 172	20 115
Equity and liabilities total		9 629	10 487

EUR 1 000		Jan-Dec 2017	Jan-Dec 2016
CASH FLOW FROM OPERATING ACTIVITIES
Income statement profit/loss before taxes for continuing operations		- 5 794	1 384
Income statement profit/loss before taxes for discontinuing operations		0	-92
Income statement profit/loss before taxes		-5 794	1 291
Non-monetary items adjusted on income statement
Depreciation and impairment	+	1 333	1 111
Gains/losses on disposals of non-current assets	+/-	0	-7 082
Unrealized exchange rate gains (-) and losses (+)	+/-	-11	4
Other non-cash transactions	+/-	-129	398
Change in provision	+/-	175	-13
Financial income and expenses	+/-	2 728	2 274
Total cash flow before change in working capital		-1 698	-2 018
Change in working capital
Increase (-) / decrease (+) in inventories		-162	-868
Increase (-) / decrease (+) in trade and other receivables		-412	17
Increase (+) / decrease (-) in trade and other payables		-611	1 484
Change in working capital		-1 184	634
Adjustment of financial items and taxes to cash-based accounting
Interest paid	-	273	92
Taxes paid	-	0	-18
Other financial items	-	5	25
Financial items and taxes		-278	-99
NET CASH FLOW FROM BUSINESS OPERATIONS		-3 160	-1 484
CASH FLOW FROM INVESTING ACTIVITIES
Investments in tangible and intangible assets	-	357	418
Proceeds on disposal of tangible and intangible assets	+	0	8
Loans granted	-	0	672
Disposals of subsidiaries and other business units	+	0	-23
NET CASH FLOW FROM INVESTMENTS		-357	-1 105
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from share issue	+	800	0
Financing arrangement with Bracknor Investment	+	650	0
Increase in non-current loans	+	1 803	807
Repayment of non-current loans	-	23	0
Increase in current loans	+	1 380	2 049
Repayment of current loans	-	741	286
		3 869	2 569
NET CASH FLOW FROM FINANCING ACTIVITIES
INCREASE (+) OR DECREASE (-) IN CASH FLOW		352	-19
Cash and cash equivalents at the beginning of the financial year		3	31
Translation adjustment to cash and cash equivalents		-5	-9
Cash and cash equivalents at the end of the financial year		350	3
		352	-19

Statement of Changes in Equity, 1 Jan – 31 Dec 2017

			Trans	Distributable non			Non
EUR 1 000	Share capital	Other reserves	lation difference	restricted equity fund	Retained earnings	Total	controlling interests	Total
31 Dec 2016 Profit/loss for the financial period	80	0	0	0	-9 708 -5 794	-9 628 -5 794	0	-9 628 -5 974
Translation difference, comprehensive income					1	1		1
Transactions with owners:
Own equity component of the convertible bond					300	300		300
Sale of own shares – Bracknor Investment				722		722		722
Share issue				9 820		9 820		9 820
Share issue expenses Stock options to be					-98	-98		-98
executed and paid in shares					133	133		133
31 Dec 2017	80	0	0	10 542	-15 166	-4 544	0	-4 544

Statement of Changes in Equity, 1 Jan – 31 Dec 2016

EUR 1 000	Share capital	Other reserves	Trans lation difference	Distributable non restricted equity fund	Retained earnings	Total	Non controlling interests	Total
31 Dec 2015 Profit/loss for the financial period	80	0	-750	0	-11 910 1 310	-12 579 1 310	9	-12 570 1 310
Translation difference, comprehensive income			750			750	-9	741
Transactions with owners: Stock options to be executed and paid in shares					892	892		892
31 Dec 2016	80	0	0	0	-9 708	-9 628	0	-9 628

GENERAL INFORMATION

Valoe Corporation specializes in the clean energy, especially in photovoltaic solutions. Valoe provides automated production technology for solar modules based on the company's own technology; production lines for modules, solar modules and special components for solar modules.

The Group's parent company is Valoe Corporation, a Finnish public limited company domiciled in Mikkeli. The company's registered address is Insinöörinkatu 5, FI-50150 Mikkeli.

A copy of the consolidated financial statements is available online at www.valoe.com or at the Group's headquarters at Insinöörinkatu 8, FI-50150 Mikkeli.

Valoe Corporation's Board of Directors approved the financial statements on 27 April 2018. According to the Limited Liability Companies Act, shareholders are entitled to approve or reject the financial statements at the Annual General Meeting held after their publication. The Annual General Meeting may also decide on amendments to the financial statements.

Accounting Principles

Basis of preparation

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), following the IAS and IFRS standards, as well as the SIC and IFRIC interpretations, effective on 31 December 2017. International accounting standards refer to standards and interpretations approved for application in the European Union as provided for in the Finnish Accounting Act and regulations based on the procedure laid down in Regulation (EC) No 1606/2002 of the European Parliament and of the Council. The notes to the consolidated financial statements are also in accordance with the Finnish accounting and business legislation supplementing the IFRS regulations

The consolidated financial statements have been prepared under the historical cost convention, with the exception of available-for-sale investments, which have been measured at fair value. The figures in the financial statements are given in thousands of euros.

Application of the going concern assumption

The financial statements have been prepared under the going concern assumption. In February 2017 the company issued a EUR 1.5 million convertible bond I/2017 that was fully subscribed. During the subscription period of the Convertible Bond new investments of EUR 1.05 million was paid in cash and a total of EUR 0.45 million was paid by setting the subscription price off against the subscribers' receivables from the company.

During the financial year Valoe implemented also other corrective actions to strengthen the company's financial situation and to secure going concern. On 19 April 2017 Valoe signed an EUR 3 million equity-based financing facility agreement with Bracknor Investment. By 31 December 2017 the company has withdrawn in total EUR 0.65 million from the Bracknor Investment's financing commitment.

In December 2017 the company resolved on a directed share issue. In total 8,721,077 new shares were acceptably subscribed in the offering ended in January 2018. Thus, the company collected in the offering in total approximately EUR 859,000 new capital before fees and costs and the indebtedness of the company decreased in total approximately by EUR 9,257,000.

Valoe Group has applied as from 1 January 2017 the following new and amended standards that have come into effect:

Amendments to IAS 7 Statement of Cash Flows- Disclosure Initiative* (effective for financial years beginning on or after 1 January 2017). The changes were made to enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. The amendments had no significant impact on Valoe's consolidated financial statements.

Amendments to IAS 12 Income Taxes - Recognition of Deferred Tax Assets for Unrealised Losses *(effective for financial years beginning on or after 1 January 2017). The amendments clarify that the existence of a deductible temporary difference depends solely on a comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and is not affected by possible future changes in the carrying amount or expected manner of recovery of the asset. The amendments had no significant impact on Valoe's consolidated financial statements.

Annual Improvements to IFRSs (2014-2016 cycle) (effective for financial years beginning on or after 1 January 2017 for IFRS 12 and on or after 1 January 2018 for IFRS 1 and IAS 28). The annual improvements process provides a mechanism for minor and non-urgent amendments to IFRSs to be grouped together and issued in one package annually. The cycle contains amendments to three standards. . The amendments had no significant impact on Valoe's consolidated financial statements.

Accounting policies requiring consideration by management and crucial factors of uncertainty associated with estimates

Estimates and assumptions regarding the future have to be made during the preparation of the financial statements, and the outcome may differ from the estimates and assumptions. Furthermore, the application of accounting policies requires consideration.

Management consideration connected with accounting policies and their adoption

The Group's management uses discretion in the selection and application of accounting principles. When preparing the financial statements the major issues for which the management has used discretion are evaluation of the going concern assumption and in appreciation of goodwill and product development costs. In 2016, the recognisition of the revenue from the Ethiopian project was based on the management consideration. According to the company's view the performance obligations of Valoe's Ethiopian project, under the IFRS, have not yet been satisfied. According to the prudence principles the company resolved to remove the revenue and the costs associated with the Ethiopian project from the Income Statement, due to which the financial information in the Annual Report differ significantly from the financial information in the Financial Statement Release disclosed on 31 March 2017.

Uncertainties relating to financing and continuity of the company's business operations have been described above in the accounting principles as well as the arguments for going concern assumption.

The company has not recorded a EUR 0.3 million calculated tax liability nor EUR 0.01 million tax receivable originating from the temporary timing differences between book value and taxation value because of improbable realization. The company has a remarkable amount of confirmed tax losses of which tax receivables have not been recorded.

Uncertainties connected with estimates

Estimates made when compiling the financial statements are based on the management's best views on the closing date of the reporting period. The estimates are based on previous experience and assumptions about the future that are deemed the most likely on the balance sheet date. Management estimates are used especially in goodwill impairment testing and the capitalization of product development costs (Note 13.). When testing for the impairment of assets, estimates are made on the recoverable amount of assets. The key uncertainty factors in goodwill impairment testing are related to sales and sales margins. The company has performed the impairment testing on goodwill and development expenditure in accordance with IFRS.

When testing for the impairment of assets, estimates are made on the recoverable amount of assets. Further information on the estimates used in goodwill impairment testing, as well as the bases for the estimates, is available under "Depreciation and Impairment" and "Intangible Assets / Goodwill" in the notes to the consolidated financial statements.

Accounting principles for the consolidated financial statements

The consolidated financial statements include the parent company Valoe Corporation and all of its subsidiaries. Subsidiaries are entities in which the Group exercises control. A position of control arises when the Group, by being an investor, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The information of subsidiaries is given in Related party transactions, Note 28. The Group has no subsidiaries with a significant proportion of noncontrolling interests.

Intra-group shareholding has been eliminated using the acquisition method. Acquired subsidiaries are consolidated in the financial statements from the date on which the Group has acquired control over the company, and disposed subsidiaries are deconsolidated from the date on which control ceases. All of the Group's internal operations, receivables, liabilities, unrealized gains and internal profit distribution are eliminated when preparing the consolidated financial statements. Unrealized losses are not eliminated if the losses result from impairment.

Foreign currency translation

The figures representing the performance and financial standing of the Group's units are measured in the functional currency of each unit's main operating environment. The consolidated financial statements are presented in euros, which is the parent company's functional and presentation currency.

Foreign currency transactions have been recognized in euros using the exchange rate prevailing on the transaction date. In practice, the rate used is often one that approximately equals the rate on the transaction date. Monetary items denominated in foreign currency have been translated into euros at the closing rate. Non-monetary items in foreign currency, measured at fair value, have been translated into euros at the rates prevailing on the measurement date. Other non-monetary items have been measured at the rate prevailing on the transaction date. Gains and losses from foreign currency transactions and from the translation of monetary items have been recognized in the income statement. Exchange rate gains and losses from business activities are included in the corresponding items above operating profit.

The revenues and expenses in the income statements of foreign group undertakings have been translated into euros using the weighted average rate for the financial year, while the balance sheets have been translated using the closing rates. Using different rates to translate the period's result in the income statement and balance sheet results in a translation difference that needs to be recognized in the statement of comprehensive income. Translation differences resulting from the elimination of the acquisition cost of foreign subsidiaries are recognized in the income statement when the net investment is divested wholly or partly.

Unrealized exchange gains and losses are recognized through profit or loss. If the exchange gains and losses are recognized in the same item in the balance sheet, they are measured at net realizable value and then recognized through profit or loss.

Translation differences generated before 1 January 2004, the date at which the Group adopted IFRS, have been recognized under retained earnings in conjunction with the transition to IFRSs, in accordance with the exemptions permitted under IFRS 1, and will not be later recognized in the income statement in conjunction with the disposal of subsidiaries. As of the transition date, translation differences arising in the preparation of consolidated financial statements have been presented as a separate item under equity. Valoe Group adopted this practice retroactively in 2008, and the necessary adjustments were made to the comparative figures given for the previous year.

Property, plant and equipment

Property, plant and equipment have been recognized at original cost less depreciation and impairment.

If an asset consists of several components, with useful lives of different lengths, each component is treated as a separate asset. In this case, the expenses related to the renewal of a component are capitalized and any remaining carrying amount is derecognized in conjunction with the renewal. Otherwise, expenses incurred at a later time are included in the carrying amount of an asset only if it is probable that any future economic benefit associated with the asset will flow to the Group and if the acquisition cost of the asset can be reliably determined. Other repair and maintenance expenses are recognized in the income statement after their realization.

Straight-line depreciations are made on assets over their estimated useful life. Land is not depreciated. The estimated useful lives are the following:

Buildings	25 years
Modernization of leased facilities	5 years
Machinery and equipment	3-7 years

The residual value and useful life of assets are assessed for every financial statement and, if needed, adjusted to reflect any changes in the expected economic benefit.

The depreciation of property, plant and equipment is terminated when the asset is classified as Held for Sale in accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations.

Gains and losses on disposals and transfers of property, plant and equipment are included in other operating income or expenses.

Public Subsidies

Public subsidies, such as government assistance for the acquisition of property, plant and equipment, are recognized as deductions from the carrying amount of property, plant and equipment or intangible assets when it is reasonably certain that the Group will receive the subsidies and that it complies with the conditions attached to them. Subsidies are recognized in the form of smaller depreciation over the useful life of the asset. Subsidies received as compensation for expenses already incurred are recognized in the income statement when the expenses related to the subsidized object are recognized as an expense. These types of subsidies are presented under other operating income. During previous financial years, the Group has received product development subsidies that involve both of the recognition methods explained above.

According to IAS 20 the benefit of a government loan at a below-market rate of interest is treated as a government grant. The loan is recognized and measured in accordance with IAS 39. The benefit of the below-market rate of interest is measured as the difference between the initial carrying value of the loan determined in accordance with IAS 39 and the proceeds received. The benefit is accounted for in accordance with this Standard.

Investment property

Investment property includes real estate that the Group holds to earn rental income or appreciation in property value. Investment property is measured at fair value. The fair value is determined regularly based on an estimate prepared by an impartial real estate assessor and corresponds to the market value of active markets. Changes in the fair value of investment property are included in other operating income or expenses in the income statement. The Group had no investment property in 2017.

Intangible assets

Goodwill

Goodwill arising in business combinations is recognized at the amount by which the consideration given, the share of the shareholders without control in the acquired business and the previously held share combined exceed the fair value of the acquired net assets. The goodwill of business combinations carried out prior to 2004 corresponds to the carrying amount that complies with previous accounting standards, which has been used as the default acquisition cost according to IFRS.

Goodwill and other intangible assets with indefinite useful life are not subject to depreciation but are tested annually for any impairment. For this purpose, goodwill has been allocated to cash-generating units. Goodwill is measured at original cost less impairment (Note 13)

Research and development costs

Research expenditure is recognized as an expense in the income statement. Development expenditure arising from the design of new or more advanced products is capitalized in the balance sheet under intangible assets as of the date the product is technically realizable and commercially viable and can be expected to generate future economic benefit. Capitalized development costs include the material, work and testing expenses that result directly from completing an asset for the intended purpose. Development expenditure that has been recognized as an expense in previous periods cannot be capitalized later.

Depreciation of an intangible asset begins once the asset is ready for use. Capitalized development expenditure is reviewed annually for any indication of impairment. An intangible asset that is not ready for use is tested annually for impairment. After initial recognition, capitalized development expenditure is measured at cost less accumulated depreciation and impairment. The useful life of capitalized development expenditure is 5 to 10 years, during which time capitalized costs are amortized on a straight-line basis.

Other intangible assets

An intangible asset is recognized in the balance sheet at original cost if the cost can be reliably determined and it is likely that the expected economic benefit from the asset will flow to the company.

Intangible assets with a limited useful life are capitalized in the balance sheet at acquisition cost and amortized on a straight-line basis through profit or loss over their useful life.

Other intangible assets have the following depreciation periods:

Patents	10 years
Software licenses	5 years

Inventories

Inventories are measured at the lower of acquisition cost or net realizable value. The acquisition cost of material inventories is determined using the weighted average cost method and that of work in progress using the FIFO (first in, first out) method. The cost of finished products and work in progress includes raw materials, direct labor costs and other direct costs, and a systematically allocated share in the variable manufacturing overhead costs. The net realizable value is the estimated selling price in normal business operations, less the estimated costs of completion and estimated costs resulting from sales.

Leases

Group as lessee

In accordance with IAS 17, leases are classified as finance leases or operating leases. Leases on tangible assets, which transfer substantially the risks and rewards of ownership to the Group, are classified as finance leases in accordance with IAS 17 Leases. Assets acquired on finance leases are recognized in the balance sheet at the beginning of the lease period at the fair value of the leased asset or, if lower, at the present value of minimum lease payments. An asset acquired on a finance lease is depreciated over the shorter of the asset's useful life or lease period. Lease payments are divided into a finance charge and a reduction of the outstanding liability over the lease period so that a constant periodic rate of interest is achieved on the outstanding liability. Lease obligations are included in interest-bearing liabilities. The Group has no assets leased by financial leasing during the financial year 2017 and 2016.

Leases where the lessor retains the risks and rewards of ownership are classified as operating leases. Other leases are recognized as rental expenses under other operating expenses. Payments made under operating leases are expensed in the income statement on a straight-line basis over the lease period. Received incentives are deducted from the paid leases in accordance with the duration of the benefit.

Impairment of tangible and intangible assets

Tangible and intangible assets

On every closing date the Group tests assets for possible impairment. If any indication of impairment is found, the recoverable amount of the asset in question is assessed. The recoverable amount is also estimated annually for goodwill and product development projects, irrespective of whether indications of impairment are found. The need for impairment is assessed at the level of cash-generating units, that is, at the lowest unit level that is mainly independent of other units and has separately identifiable cash flows.

The recoverable amount of an asset is the higher of its fair value less expenses from disposal or its value in use. Value in use equals the net future cash flows expected to be recovered from the asset or cash-generating unit, discounted to present value.

An impairment loss is recognized if the carrying amount of an asset is higher than its recoverable amount. An impairment loss is recognized immediately in the income statement. If the impairment loss concerns a cash-generating unit it is first allocated to reduce the goodwill of the cash-generating unit and then to proportionately reduce the unit's other assets. An impairment loss is reversed if there is a change in the conditions under which the recoverable amount of the asset was measured and if the recoverable amount of the asset has changed since the recognition of the impairment loss. However, the reversal shall not exceed the carrying amount that would have been determined had no impairment loss been recognized. Goodwill impairment is not reversed under any circumstances.

Employee benefits

Pension obligations

Pension plans are categorized into defined benefit and defined contribution schemes. In defined contribution schemes the Group pays fixed contributions to a separate entity. The Group has no legal or constructive obligation to pay further contributions if the entity does not hold sufficient assets to take care of all of the pension benefits. All other schemes that do not meet these conditions are defined benefit schemes. Contributions made into defined contribution payment schemes are recognized in the income statement in the financial period they are due. The Group has no pension arrangements considered to be defined benefit plans.

Share-based payments

During the financial year 1.1. – 31.12.2017 no options were given to the management. The company has an option scheme in force as per 31 December 2017.

The options given to Valoe Group's key employees are appreciated at their fair value as per the time of the transaction and recorded as an expense on a straight-line-basis over the issuance period. The expense of the granted options equivalent to the fair value is recorded in the personal expenses and the corresponding booking is made in the equity. The fair value is defined using the Black–Scholes-model where the market terms affecting the pricing of the options are considered. Further, the final amount and the period of validity are evaluated when the options are granted. The amount recorded as an expense will later be adjusted to equal the final amount of the options. When the option rights are used the payments, adjusted by possible transaction costs, will be recorded in the equity and the distributable non-restricted equity fund.

Other employee benefits

After a long period of employment, employees receive a reward or paid holiday. Long-term employee benefits are booked as deferred liability at the balance sheet at the present value at the reporting date. Actuarial gains and losses are recognized in profit or loss.

Provisions

A provision is recognized when the Group has a legal or constructive obligation as a result of a past event, it is probable that the payment obligation must be settled and the amount of the obligation can be reliably estimated. If there is a possibility to get compensation from a third party for part of the obligation, the compensation is recognized as a separate asset, but not until it is practically certain that the compensation will be received. Provisions are measured at the present value of expenditures required to settle the obligations. The discount rate used to calculate the present value is selected to reflect current market assessments of the time value of money and the risks specific to the obligation.

A warranty provision is recognized when the delivery of a product including a warranty clause has been approved. The amount of the warranty provision is based on experience about the realization of warranty expenses.

A restructuring provision is recognized when the Group has drawn up a detailed restructuring plan, initiated implementation of the plan or made the plan known. A restructuring plan includes at least the following information: the business targeted by restructuring; the main sites affected by the plan; the location, duties and estimated number of employees who will be compensated for termination of employment; the resulting expenses and the time of implementation of the plan. No provision is recognized for expenses related to the Group's ongoing operations.

A provision is recognized for an onerous contract if the expenses required to settle the obligations exceed the benefits from the contract.

A provision is recognized for obligations related to decommissioning and restoration if the Group has an obligation that is based on environmental legislation and the Group's environmental responsibility principles and that concerns the decommissioning of a production plant, repair of environmental damage or the transfer of equipment from one place to another.

Income taxes and deferred taxes

The taxes in the income statement include current tax and deferred tax. Tax expenses are recognized through profit or loss, with the exception of items recognized directly in equity, in which case the tax impact is recognized correspondingly as part of equity. Current tax is calculated from taxable income using the tax rate enacted in each country.

Deferred taxes are calculated on temporary differences between the carrying amount and taxable amount. Deferred tax liabilities are not recognized for an initially recognized asset or liability in a transaction other than a business combination if the recognition of the asset or liability does not affect accounting or the taxable income at the time of transaction. The largest temporary differences arise from measurement at fair value in connection with acquisitions.

Deferred tax is recognized in the case of investment in subsidiaries, except if the Group is able to determine the time the temporary difference was eliminated and the extent to which the difference will probably not be eliminated during the foreseeable future.

Deferred taxes are calculated using the tax rates enacted by the balance sheet date. A deferred tax asset is recognized to the extent that it is probable that taxable profit will be available in the future against which the temporary difference can be utilized. The company has not recognized deferred tax assets based on its deductible losses.

Revenue recognition principles

Sold goods and produced services

Revenue from the sales of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer. At this time, the Group no longer has control or regulatory power over the product. This usually coincides with the date on which the goods have been delivered to the customer according to the agreed delivery clause. Revenue from services is recognized at the time the service is carried

out. Net sales consist of the revenue from the sales of products, services, raw materials and equipment, adjusted by indirect taxes, discounts and exchange rate differences from sales in foreign currencies.

Long-term contract revenue has been recognized as revenue on the basis of the percentage of completion. The company has defined as longterm contract work projects which have started and ended in different financial periods and where the recognition of income as revenue has a substantial impact on net sales and result. The stage of completion of long-term contracts has been determined as the proportion of costs incurred in relation to the estimated total contract costs and is dependent on the eventual total revenue and costs and a reliable way to measure the progress of the project. A loss for a project is recognized as soon as it is known and can be estimated.

Interest and dividend

Interest income is recognized using the effective interest method and dividend yield at the time of vesting.

Non-current assets classified as held for sale and discontinued operations

Non-current assets (or disposal group) and assets and liabilities related to discontinued operations are classified as held for sale if the amount of their book value will be recovered through the sale of them instead of continuous use. Conditions for classification as held for sale are fulfilled when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition on customary terms and conditions, and when the management is committed to the sale and the sale is expected to occur within one year of the classification.

From the moment of the classification as held for sale (or disposal group) the assets are valued at book value or fair value less costs to sell, depending on whichever is lower. Depreciation of these assets is discontinued at the time of classification.

A discontinued operation is a component of the Group, which has been disposed or is classified as held for sale and which meets one of the following conditions;

• 1. It represents a separate major business unit or geographical area
• 1. It is part of a coordinated plan to dispose a separate major business unit or geographical area
• 1. It is a subsidiary acquired exclusively with a view to resale

The profit or loss of discontinued operations is presented separately in the consolidated statement of comprehensive income. Assets held for sale, disposal groups, items recognized in other comprehensive income related to assets held for sale and liabilities included in the disposal group are presented in the balance sheet separately from other items.

Valoe has reported the electronics automation business sold to FTTK as discontinued operations during the financial year 2016.

Financial assets and liabilities

Financial assets

The Group's financial assets are categorized into the following groups according to IAS 39 Financial Instruments, Recognition and Measurement: financial assets recognized at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The categorization is carried out based on the purpose for which the financial assets were acquired and is done in conjunction with the original acquisition The Group has no financial assets recognized at fair value through profit or loss during the financial years 2017 and 2016.

Loans and other receivables are non-derivative assets that have fixed or measurable payments, are not quoted on active markets and not held for trading by the Group. They are measured on the basis of amortized cost. They are presented under trade and other receivables in the balance sheet depending on their nature: in non-current assets if they mature in more than 12 months and in current assets otherwise. Financial assets available for sale are assets that are not included in derivatives and have been expressly allocated to this group or have not been classified into any other group. They are included in non-current assets except if they are to be held for less than 12 months from the closing date, in which case they are recorded under current assets. Available-for-sale financial assets consist of shares and interest-bearing investments. They are measured at fair value or, when the fair value cannot be reliably determined, at cost. Changes in the fair value of available-for-sale financial assets are recorded in equity in the fair value reserve taking into consideration the tax impact. Changes in fair value are transferred from equity to the income statement when the investment is sold or if it is subjected to impairment and an impairment loss must be recognized on the investment.

The Group had no derivative contracts during the financial years 2017 and 2016.

Cash and cash equivalents consist of cash, bank deposits that can be withdrawn if demanded and other current, highly liquid investments. Items in cash and cash equivalents have a maximum maturity of three months from the date of acquisition. Credit accounts related to Group accounts are included in current interest-bearing liabilities and reported as set off, as the Group has a contractual, legally recognized right to settle or otherwise eliminate all or a portion of an amount due to a creditor.

Transaction expenses are included in the original carrying amount of financial assets in the case of an item that is not measured at fair value through profit or loss. All of the purchases and sales of financial assets are recognized on the transaction date.

Financial assets are derecognized if the Group loses the contractual right to cash flows or if it transfers substantial risks and income outside the Group.

Financial liabilities

Financial liabilities are initially recognized at fair value. Transaction expenses are included in the original carrying amount of financial liabilities. All financial liabilities are later measured at amortized cost using the effective interest method. Financial liabilities are included in current and non-current liabilities and they can be either interest-bearing or non-interest-bearing. The fair value of the liability component of a convertible subordinated loan is determined using the prevailing market interest rate for a similar debt at the time of issue. The liability component is recognized at amortized cost. In calculating the convertible bond, the equity share has been recognized under equity.

The fair value measurement principles applied to all financial assets and liabilities are presented in Note 24

Impairment of financial assets

On each balance sheet date the Group assesses whether objective indication exists of impairment of an individual financial asset or a group of financial assets. A significant and long-lasting impairment of share investments, resulting in the fair value falling under the cost of acquisition, is an indication of impairment of available-for-sale shares.

The Group recognizes an impairment loss for trade receivables if objective indication exists that the receivable cannot be collected in full. Considerable financial difficulties of a debtor, likelihood of bankruptcy, default of payments or a payment delay of more than 90 days are indications of possible impairment of trade receivables. The amount of the impairment loss recognized in the income statement is determined as the difference between the carrying amount of the receivable and the present value of estimated future cash flows discounted using the effective interest rate. If the amount of the impairment loss decreases in a later period, and the decrease can be objectively related to an event subsequent to impairment recognition, the recognized loss is reversed through profit or loss.

Borrowing costs

The Group also capitalizes the borrowing costs for the acquisition, construction or production of a qualifying asset that are directly attributable as part of the cost of the asset when it is probable that they will generate future economic benefits, and the costs can be measured reliably. The Group no longer capitalizes the costs when the asset is substantially ready for its intended use or sale. Other borrowing costs are recognized as an expense in the period in which they occur.

VALOE OYJ ANNUAL REPORT 2017 38

Shareholder's equity

The Group classifies the instruments issued on the basis of their nature either as equity or as a liability (financial debt). Any contract that entitles to the assets of an entity after deducting all of its liabilities is an equity instrument. Expenses associated with the issuance or purchase of equity instruments are presented as an equity reduction item. If the company buys back its own equity instruments, the cost of these instruments is deducted from equity.

Valoe Corporation has a Convertible Bond of EUR 3,0 million (originally EUR 7.7 million), issud in May 2015. The Convertible Loan is a capital loan and is booked in the Company's balance sheet as non-current capital loan. One loan share of EUR 2.0 pursuant to the Promissory Note entitles the Promissory Note Holder to subscribe for one new share. Based on the subscriptions made pursuant to the loan shares Valoe shall issue a maximum amount of 1,502,000 new Valoe shares. The loan period and the conversion period expire on 1 August 2018.

As of the date of withdrawal an annual interest of eight (8) percent shall be paid to the capital of the Convertible Bond. The interest shall be added in the loan capital annually, if equity allows, once a year on 30 July. An interest shall not be paid to capitalized interest. The interest shall be paid in shares at the end of the loan period so that an interest amount of EUR 2.0 shall be converted to one new share of the Company. The last interest period shall end on 30 July 2018. During 2016, the interests on the Convertibe Bond accurred until 31 December 2015 totalling EUR 0.2 million, were added in the capital i.e. non-current financial liabilities. In Share Issue II in December 2017, accrued interests totaling EUR 0,8 million were added in the loan capital and after that EUR 5.6 million of the loan capital were converted to new shares of the Company.

Dividend distribution

The dividend proposed by the Board of Directors to the Annual General Meeting is not deducted from distributable equity until the Annual General Meeting makes its decision.

New IFRSs and interpretations

Valoe has not yet adopted the following new and amended standards and interpretations already issued by the IASB. The Group will adopt them as of the effective date or, if the date is other than the first day of the financial year, from the beginning of the subsequent financial year.

* = not yet endorsed for use by the European Union as of 31 December 2017.

IFRS 9 Financial Instruments* (effective for financial years beginning on or after 1 January 2018): IFRS 9 replaces the existing guidance in IAS 39. The new standard includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. The standard is not assessed to have a significant impact on Valoe's consolidated financial statements.

IFRS 15 Revenue from Contracts with Customers (effective for financial years beginning on or after 1 January 2018): The new standard replaces current IAS 18 and IAS 11 -standards and related interpretations. In IFRS 15 a five-step model is applied to determine when to recognise revenue, and at what amount. Revenue is recognised when (or as) a company transfers control of goods or services to a customer either over time or at a point in time. The standard introduces also extensive new disclosure requirements. There are no major changes to the existing revenue recognition policies and the new standard will have no impact on the reported net sales, expenses, or operating profit in 2017.

IFRS 16 Leases* (effective for financial years beginning on or after 1 January 2019): The new standard replaces the current IAS 17 –standard and related interpretations. IFRS 16 requires the lessees to recognise the lease agreements on the balance sheet as a right-of-use assets and lease liabilities. The accounting model is similar to current finance lease accounting according to IAS 17. There are two exceptions available, these relate to either short term contacts in which the lease term is 12 months or less, or to low value items. The lessor accounting remains mostly similar to current IAS 17 accounting. The Group continues to assess the impact of IFRS 16 during 2018.

Amendments to IFRS 2 Sharebased payments - Clarification and Measurement of Sharebased Payment Transactions * (effective for financial years beginning on or after 1 January 2018). The amendments clarify the accounting for certain types of arrangements. Three accounting areas are covered: measurement of cash-settled share-based payments; classification of share-based payments settled net of tax withholdings; and accounting for a modification of a share-based payment from cash-settled to equity-settled. The amendments are not assessed to have a significant impact on Valoe's consolidated financial statements.

IFRIC 22 Interpretation Foreign Currency Transactions and Advance Consideration* (effective for financial years beginning on or after 1 January 2018). When foreign currency consideration is paid or received in advance of the item it relates to – which may be an asset, an expense or income – IAS 21 The Effects of Changes in Foreign Exchange Rates is not clear on how to determine the transaction date for translating the related item. The interpretation clarifies that the transaction date is the date on which the company initially recognises the prepayment or deferred income arising from the advance consideration. For transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date. The interpretaion is not assessed to have a significant impact on Valoe's consolidated financial statements.

IFRIC 23 Interpretation Uncertainty over income tax treatments (effective for financial years beginning on or after 1 January 2019): The Interpretation addresses the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments. The interpretaion is not assessed to have an impact on Valoe's consolidated financial statements.

Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures (effective for annual periods beginning on or after January 1, 2019). The changes concern some long-term investments in associates and joint ventures. The amendments are not assessed to have an impact on Valoe's consolidated financial statements.

Amendments to IFRS 9 Prepayment Features with Negative Compensation (effective for annual periods beginning on or after January 1, 2019). The amendments will change the existing requirements in IFRS 9 and will relate to some prepayments classified as financial assets. The Group is assessing the impact of the amendments.

Presentation of Figures

Unless otherwise indicated, the figures in the following notes are given in thousands of euros.

1. Segment Information

Valoe sold the electronics automation business to FTTK Company during the secong half of the year 2014. In consequence of the sale of the shares Valoe reports the financial figures relating to the electronics automation business, i.e. LAS and LCM segments, as discontinued operations from Q3/2014 and segment information is divided into continuing and discontinued operations. Segment information is not available after operating profit in profit and loss statement. Financial income and expenses or balance sheet items are not booked to segments. Valoe's new segment information is based on the management's internal reporting and on the organisation structure. During the year 2015 the discontinued operations include the finishing up of few remaining projects of the electronics automation business sold to FTTK and finalising the sale of the shares. During the year 2016 most of the expenses in the discontinued operations associated with the attorneys expenses in the litigation process between Valoe and FTTK.

Information regarding discontinued operations is given in attachment 10. Discontinued operations.

The Group does not have common operations which could not have been allocated to the segments..

The Group has four customers whose revenues exceeded 10 percent of the Group's net sales, totalling 0.35 million euros.

Business segments in 2017	Clean Energy Solutions (=continuing)	Discontinued operations	Eliminations	Total
Net sales	554	0	0	554
EBITDA	-1 745	0	0	-1 745
Operation profit	-3 078	0	0	-3 078
Assets	9 629	0	0	9 629
Liabilities	13 866	306	0	14 172
Investments	272	0	0	272
Depreciation	1 333	0	0	1 333
Impairment	0	0	0	0

Business segments in 2016	Clean Energy Solutions (=continuing)	Discontinued operations	Eliminations	Total
Net sales	553	0	0	553
EBITDA	4 772	-92	0	4 680
Operation profit	3 661	-92	0	3 569
Assets	10 487	0	0	10 487
Liabilities	19 622	493	0	20 115
Investments	481	0	0	481
Depreciation	1 111	0	0	1 111
Impairment	0	0	0	0

Geographical information

Finland, the rest of Europe, the Americas, Asia and Africa are reported under geographical information. Geographical information in terms of net sales is determined based on the customer's location and in terms of assets on the location of the assets

Continuing operations

		Other European
	Finland	countries	America	Asia	Africa	Group
2017
External net sales	529	0	25	0	0	554
Non-current assets	7 441	0	0	0	0	7 441
2016
External net sales	529	10	11	4	0	553
Non-current assets	8 502	0	0	0	0	8 502
Distribution of net sales Continuing operations					2017	2016
Revenues from services					66	56
Revenues from the sale of goods					488	497
Total					554	553

2. Long-term contract revenues recognized on the basis of the percentage of completion

The Group had no long-term contract revenues recognized on the basis of the percentage of completion at the year end of 2017 or 2016.

3. Other operating income	2017	2016
Continuing operations
Proceeds from sale of property, plant and equipment	0	8
Subsidies received	0	25
Sale of used products	0	0
Partial reversal of rental security given on behalf of a subsidiary	0	494
Disposal of subsidiaries	0	7 139
Other income items	398	15
Total	398	7 682
4. Other operating expenses	2017	2016
Continuing operations
Disposal of subsidiaries	0	65
Other expense items	5	14
Total	5	79

	2016
27	0
4	0
31	0
13	54
1	7
14	62
	2017

The KPMG's auditors' fees during 2017 were related to the audit of 2016.

Unlike other specifications, the auditors' fees are reported here in full, not only for continuing operations.

Rental expenses - continuing operations	2017	2016
Rental expenses	212	217
5. Employee benefits	2017	2016
Salaries	1 194	1 388
Retirement expenses – defined contribution plans	253	164
Other indirect employee expenses	65	86
Stock option scheme 2015 (IFRS2)	133	892
Yhteensä	1 646	2 530

Employee benefits above include both continuing and discontinued operations in 2016, because the split between those two categories is not reliably available. The amount of discontinued operations is very minor.

Employee benefits total	2017	2016
Continued operations	1 646	2 529

Information on the emoluments of the management is given in Note 28. Related party transactions.

Employees by function were	2017	2016
During the financial period on average
Procurement and production	7	9
Product development	5	6
Sales and marketing	2	2
Administration	3	4
Total	17	21
At the end of the year
Procurement and production	8	7
Product development	5	6
Sales and marketing	2	2
Administration	3	3
Total	18	18

6. Depreciation and impairment	2017	2016
Depreciation by asset group continuing operations
Intangible assets
Development cost	1 284	1 064
Patents	16	14
Intangible rights	5	5
Other intangible assets	22	22
Total	1 327	1 105
Property, plant and equipment
Machinery and equipment	6	6
Total	6	8

No impaiments were booked during the financial year or the comparison year.

Income statement items are divided into continuing and discontinued operations to the operating profit. Financial income and expenses, or profit taxes are not shared, but they are shown in the figures of the entire Group.

7. Financial income	2017	2016
Exchange rate gains	14	0
Total	14	0

The items above the operating profit don't include ecxhange rate gains or losses (2016: EUR 400 in exchange rate losses).

8. Financial expenses	2017	2016
Interest expenses	2 502	1 867
Exchange rate losses	0	20
Other financial expenses	228	87
Total	2 730	1 974
9. Income taxes	2017	2016
Tax based on the taxable income for the financial year	0	0
Taxes carried forward	0	-18
Total	0	-18
Statement on the differences between the tax expense in the income statement and the tax rate of the Group's home country, reconciliation of calculated taxes:	2017	2016
Profit/loss before taxes	-5 794	1 291
Taxes at the parent entity's statutory income tax rate of 20 % (2016: 20 %)	-1 159	258
Different tax rates of subsidiaries	-2	8
Tax-free revenue / non-deductible expenses	100	77
Loss to be confirmed in taxation not recognized as deferred tax assets	1 061	-344
Taxes carried forward	0	18
Taxes in the income statement	0	18

10. Discontinued operations

17 September Valoe announced that it has transfered the company's electronics automation business into Cencorp Automation Oy, a fullyowned subsidiary of Valoe. Further, in accordance to the agreement signed earlier, FTTK Company Limited has purchased 70 percent of the shares in Cencorp Automation Oy. Further FTTK has used its option to purchase the remaining 30 percent of the shares in Cencorp Automation Oy and the parties have signed an agreement on exercising the option in December 2014. In consequence of the sale of the shares Valoe reports the financial figures relating to the electronics automation business as discontinued operations from Q3/2014.

During the year 2016 the discontinued operations include finalising the sale of the shares and most of the expenses in the discontinued operations associated with the attorneys expenses in the litigation process between Valoe and FTTK.

The results and major classes of assets and liabilities of electronics automation business, are as follows:

EUR 1 000	Jan – Dec 2017	Jan – Dec 2016
Revenue	0	0
Expenses	0	-92
Other operating expenses	0	0
Profit/loss from discontinued operation	0	-92
Assets
Assets classified as held for sale	0	0
Liabilities
Trande and other payables	301	487
Reserves	5	5
Liabilities directly associated with assets classified as held for sale	306	493
Net assets directly associated with disposal group	-306	-493

Net cash flow of electronic automation business:

EUR 1 000	Jan – Dec 2017	Jan – Dec 2016
Operating cash flow	-186	-122
Investing cash flow	0	0
Earnings/share (basic), from discontinued operations	0,00	-0,0000001
Earnings/share (diluted) from discontinued operations	0,00	-0,0000001

11. Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to shareholders of the parent by the weighted average of the number of outstanding shares during the period.

Loss attributable to shareholders of the parent (EUR 1,000)	Jan – Dec 2017	Jan – Dec 2016
for continuing operations	-5 794	1 402
Loss attributable to shareholders of the parent (EUR 1,000)
for discontinued operations	0	-92
Loss attributable to shareholders of the parent (EUR 1,000)	-5 794	1 310
Weighted average number of shares during the period (1,000)	4 716	862 472
Basic earnings per share (EUR/share)	-1,23	0,30
VALOE OYJ ANNUAL REPORT 2017		45

Diluted earnings per share (EUR/share)	-1,23	0,22
Basic earnings per share (EUR/share) continuing operations	-1,23	0,32
Diluted earnings per share (EUR/share) continuing operations	-1,23	0,24

The dilutive potential of ordinary shares has not been taken into account in 2017 as required by IAS 33, paragraph 41, because it would reduce the loss per share.

The earnings per share for the corresponding period 2016 have been calculated using the amount of the company's shares after the reduction of the quantity of the company's shares (the pre-split price has been multiplied with 200).

12. Property, plant and equipment

	Machinery and	Other tangible	Advance payments and construction in
2017	equipment	assets	progress	Total
Acquisition cost, 1 Jan 2017	142	0	0	142
Additions	1	0	0	1
Acquisition cost, 31 Dec 2017	143	0	0	143
Accumulated depreciation and
impairment, 1 Jan 2017	-129	0	0	-129
Depreciation for the period Accumulated depreciation and	-6	0	0	-6
impairment, 31 Dec 2017	-135	0	0	-135
Carrying amount, 1 Jan 2017	13	0	0	13
Carrying amount, 31 Dec 2017	8	0	0	8

			Advance
	Machinery	Other	payments and
	and	tangible	construction in
2016	equipment	assets	progress	Total
Acquisition cost, 1 Jan 2016	16 971	503	51	17 525
Exchange rate difference	-870	-24	-4	-897
Additions	6	0	0	6
Disposals and transfers	-15 965	-479	-47	-16 492
Acquisition cost, 31 Dec 2016	142	0	0	142
Accumulated depreciation and
impairment, 1 Jan 2016	-16 958	-503	0	-17 461
Exchange rate difference	870	24	0	894
Accumulated depreciation of disposals
and transfers - continued operations	15 965	479	0	16 445
Depreciation for the period	-6	0	0	-6
Accumulated depreciation and
impairment, 31 Dec 2016	-129	0	0	-129
Carrying amount, 1 Jan 2016	13	0	51	64
Carrying amount, 31 Dec 2016	13	0	0	13

Finance leas agreements

Property, plant and equipment did not include any property obtained on finance lease agreements in 2017 or 2016.

13. Intangible assets

				Other
	Consolidated	Development		intangible
2017	goodwill	costs	Patents	assets	Total
Acquisition cost, 1 Jan 2017	743	10 651	128	255	11 779
Additions	0	248	23	0	271
Disposals	0	0	0	0	0
Acquisition cost, 31 Dec 2017	743	10 899	151	255	12 049
Accumulated depreciation and
impairment, 1 Jan 2017	-302	-2 784	-35	-178	-3 298
Accumulated depreciation of disposals
and transfers - continued operations	0	0	0	0	0
Depreciation for the period	0	-1 284	-16	-27	-1 327
Accumulated depreciation and
impairment, 31 Dec 2017	-302	-4 068	-51	-205	-4 626
Carrying amount, 1 Jan 2017	441	7 868	93	78	8 480
Carrying amount, 31 Dec 2017	441	6 831	100	51	7 423

				Other
	Consolidated	Development		intangible
2016	goodwill	costs	Patents	assets	Total
Acquisition cost, 1 Jan 2016	743	4 803	114	1 304	6 964
Exchange rate difference	0	0	0	-50	-50
Additions	0	5 848	14	0	5 862
Disposals	0	0	0	-999	-999
Acquisition cost, 31 Dec 2016	743	10 651	128	255	11 778
Accumulated depreciation and
impairment, 1 Jan 2016	-302	-1 264	-22	-1 199	-2 787
Exchange rate difference	0	0	0	50	50
Accumulated depreciations of disposals
and transfers - continuing operations	0	-456	0	999	543
Depreciation for the period	0	-1 064	-14	-27	-1 105
Accumulated depreciation and
impairment, 31 Dec 2016	-302	-2 784	-35	-178	-3 298
Carrying amount, 1 Jan 2016	441	3 539	93	105	4 178
Carrying amount, 31 Dec 2016	441	7 868	93	78	8 480

INTANGIBLE ASSETS AND GOODWILL

Valoe's other intangible assets include capitalized development costs for EUR 6.8 million, of which EUR 2.2 million is related to R&D projects, where amortizations will be started during 2018 – 2019 after the development is compelete. The useful lifetime of the capitalized development expenditure is 5 to 10 years, during which capitalized costs are recognized on straight-line basis as an expense during the financial year.

Goodwill arising in business combinations is recognized at the amount by which the consideration given, the share of the shareholders without control in the acquired business and the previously held share combined exceed the fair value of the acquired net assets. The goodwill of business combinations carried out prior to 2004 corresponds to the carrying amount that complies with previous accounting standards, which has been used as the default acquisition cost according to IFRS.

Goodwill and unfinished capitalized R&D expenditure are not subject to depreciation but are tested annually for any impairment. For this purpose, goodwill has been allocated to cash-generating units. Goodwill is measured at cost less impairment losses.

At the end of the financial year the consolidated goodwill totaled EUR 0.44 million, no additions or disposals were booked in 2015. In the acquisition of Face (Telecom) business carried out on 30.11.2010 the entities controlled by the same party were merged. Valoe uses book values in the consolidation of the acquired and merged businesses. The difference between the acquired assets and the liabilities of the acquired entities, at the time of the acquisition, were booked in the retained earnings. No goodwill was booked in the transaction.

The impairment testing included the cash flow generated by the Group's continuing operations. The impairment was tested on goodwill and other intangible assets. The consolidated goodwill of EUR 0.4 million and other intangible assets of EUR 7.,0 million were entirely allocated to continuing operations in the impairment testing.

An impairment loss is recognized if the carrying amount of an asset is higher than its recoverable amount. An impairment loss is recognized immediately in the income statement. If the impairment loss concerns a cash-generating unit it is first allocated to reduce the goodwill of the cash-generating unit and then to proportionately reduce the unit's other assets. An impairment loss is reversed if there is a change in the conditions under which the recoverable amount of the asset was measured and if the recoverable amount of the asset has changed since the recognition of the impairment loss. However, the reversal shall not exceed the carrying amount that would have been determined had no impairment loss been recognized. Goodwill impairment is not reversed under any circumstances.

In impairment testing, the recoverable amount has been determined on the basis of the value in use, compared to the consolidated balance sheet of 31 December 2017. The estimated recoverable cash flows are based on projections approved by the management, which cover a period of three years. The discount interest rate is 11.2 % after taxes (14.8 % in 2016).

Company has previously used terminal value method(Gordon method). In fiscal year 2017 company has used net present value as method for valuation of current value of intangible assets. This change has been made since net present value method is more suitable considering company's current state of business.

Company is using Net present value method when estimating current value of intangible assets. Estimated cash flows are discounted to present values from next 10 years by using discount rate of 11.2% which reflects interest rates of monetary instruments used by the company.

In valuation calculation current year turnover is based in committed orderbook. Gross margin level is based on budgeted gross margin for year. Gross profit is expected to increase from 2017 level together with increase of turnover. Overhead cost structure is based on 2017 actual with budgeted changes reflected. Company has significant amount of unused tax credits. Therefore no tax payment is expected within period in consideration. Capital employed has been estimated to be 15% of the growth of the company which reflects actual amount of tied up capital as company grows. However, a business development involves naturally considerable risks. Should the company fail in its business plan implementation, it could generate a need for a write-off in goodwill and other intangible assets.

14. Available-for-sale financial assets

	Level 1	Level 2	Level 3
Financial assets available for sale, 31 Dec 2017			9
Financial assets available for sale consist of shares for which the purchase price is considered to correspond to the fair value.
No events affecting financial assets available for sale took place in 2017.

15. Deferred tax assets and liabilities

The parent company has confirmed deductible losses, totalling EUR 31.7 million, out of which 11.8 million is due within the next three years. The group has not recognized deferred tax assets based on its deductible losses as their utilization is uncertain.

16. Inventories	2017	2016
Materials and supplies	151	80
Work in progress	382	1 021
Finished products	49	21
Total	582	1 122

No write-downs were recognized for inventories in 2017 or 2016.

17. Trade and other non-interest-bearing receivables

	2017	2016
Trade receivables	18	31
Loan receivable form Ethiopia	672	672
Prepayments and accrued income	7	81
Other receivables	559	76
Total continuing operations	1 256	860
Age distribution of trade receivables and recognized impairment losses
Undue	0	13
Due 0–30 days	0	0
Due 30–60 days	0	0
Due 61–90 days	0	0
Due over 90 days	18	15

18. Cash and cash equivalents	2017	2016
Cash on hand and deposits - continuing operations	350	3
Total	350	31

Total 18 31

Cash and cash equivalents in the cash flow statement consist of cash on hand and bank deposits.

19. Notes to shareholders' equity

					Distributable
	Number of				non-restricted
	shares (1,000)	Share capital	Premium fund	Reserve fund	equity fund
31.12.2010	314 394	3 425	4 695	213	35 104
Share issue	27 767	0	0	0	3 332
31.12.2011	342 161	3 425	4 695	213	38 436
Share options of
convertible bond	0	0	0	0	347
31.12.2012	342 161	3 425	4 695	213	38 783
Share options of
convertible bond	0	0	0	0	432
Direct share issue	4 000	0	0	0	480
Decrease from share issue	0	0	0	0	-34
31.12.2013	346 161	3 425	4 695	213	39 661
Share issue	508 151	0	0	0	4 912
Direct share issue	8 160	0	0	0	204
Decrease from share issue	0	0	0	0	-194
Value of the options of
convertible bond
acknowledge	0	0	0	0	-30
31.12.2014	862 472	3 425	4 695	213	44 552
The share capital reduction
to cover losses	0	-3 345	-4 695	-213	-44 032
Transfer to retained earnings	0	0	0	0	-520
31.12.2015	862 472	80	0	0	0
31.12.2016	862 472	80	0	0	0
Issue of new Shares to
Company itself	86 000	0	0	0	0
Share Issue free of charge
redemption ratio 200/1	415	0	0	0	0
Reducing the quantity
of Shares	-944 143	0	0	0	0
Issue of new Shares
to Company itself	525	0	0	0	0
Financing Arrangement
with Bracknor Investment	0	0	0	0	722
Directed Share Issue	0	0	0	0	9 820
31.12.2017	5 269	80	0	0	10 542

All shares issued have been paid in full. The shares have no nominal value.

Premium fund

The items indicated in the old Companies Act (1978/734), Chapter 12, Section 3, are recognized in the share premium account. General meeting of Valoe Oyj decided on 28th of May 2015 to reduce the entire premium fund to cover accumulated losses.

Reserve fund

The provisions concerning the reserve fund were laid down in Chapter 12, Section 3 of the old Companies Act. The reserve fund is treated as restricted capital. General meeting of Valoe Oyj decided on 28th of May 2015 to reduce the entire reserve fund to cover accumulated losses.

Distributable non-restricted equity fund

The distributable non-restricted equity fund contains other quasi-equity investment instruments and the subscription price of shares when this is not separately recorded in share capital. General meeting of Valoe Oyj decided on 28th of May 2015 to reduce the entire distributable non-restricted equity fund to cover accumulated losses. Furthermore, the presenting of the equity component of the convertible bond was clarified. It will be presented in the retained earnings, not in distributable non-restricted equity fund. This way the distributable non-restricted equity fund reset also in the corporation level. During the year EUR 0.7 million related to the financing arrangement between Valoe and Bracknor Investment was credited to the distributable non-restricted equity fund. As a result of the directed share issue in December 2017 EUR 9.8 million was credited to the distributable non-restricted equity fund during the year 2017. The Company collected EUR 0.8 million new capital and the indebtedness of the Company decreased by EUR 9.0 million.

20. Share-based payments and convertible bonds

During the financial year, the Group had in place options related to bond I/2015 (original nominal value EUR 7.7 million, on 31.12.2017 after setting off the share issue payments EUR 3.0 million and book value on 31.12.2017 EUR 2.4 million) and to bond I/2017 (original nominal value EUR 1.5 million, on 31.12.2017 after setting off the share issue payments EUR 0.65 million and book value on 31.12.2017 EUR 0.5 million).

The Board of Directors of Valoe Corporation resolved the terms and conditions of an stock option scheme during 2015. The maximum total number of stock options issued is 650,000 and they entitle their owners to subscribe for a maximum total of 650,000 new shares in the Company. The Board of Directors shall annually decide upon the distribution of the stock options to the key employees of the Group. Of the stock options, 250,000 are marked with the symbol 2015A, 200,000 are marked with the symbol 2015B and 200,000 are marked with the symbol 2015C. All options have been given during the financial year 2016.

In Convertible Bond I/2015 one loan share of EUR 2.0 pursuant to the Promissory Note entitles the Promissory Note Holder to subscribe for one new share. Based on the subscriptions made pursuant to the loan shares Valoe shall issue a maximum amount of 1,502,000 new Valoe shares. The loan period and the conversion period expire on 1 August 2018.

In order to strengthen Valoe Corporation's capital structure the company decided to issue Convertible Bond of EUR 1,500,000 at the most in February 2017. The Convertible Bond was fully subcribed and the Board of Directors of Valoe approved all subsciptions on 13 March 2017. One loan share of EUR 2.0 pursuant to the Promissory Note entitles the Promissory Note Holder to subscribe for one new share. Based on the subscriptions made pursuant to the loan shares Valoe shall issue a maximum amount of 325,000 new Valoe shares. The loan period and the conversion period expire on 1 February 2019. When subscribing the convertible bond, the lender of the convertible bond was entitled to subscribe also warranties according to which the lender shall have later a right to subscribe new shares in the company with the amount equal to the capital of the convertible bond. Each convertible bond loan amount valued at EUR 2.0 shall entitle the lender to subscribe one (1) warrant. Each warrant entitles the lender to subscribe one (1) new share of the company. The maximum amount of share subscriptions that are based on the warrants shall be in total 325,000 new shares of the company. The subscription period for the shares subscribed based on the warrants shall begin on 1 July 2017 and expire on 1 February 2019.

Outstanding optios		2017		2016
	Option scheme	Weighted average exercise price EUR/share	Number of options (1,000)	Weighted average exercise price EUR/share	Number of options (1,000)
At the beginning of
the financial year	Options 2015A	2.40	250
	Options 2015B	3.80	200
	Options 2015C	2.18	200
New share options
granted	Options 2015A			2.40	250
	Options 2015B			3.80	200
	Options 2015C			2.18	200
At the end of the
financial year	Optiot 2015A-C		650		650
Exercisable share options at the end of the financial year			650

The numbers of options and the exercise prices for the corresponding period 2016 are calculated using the amount of the company's shares after the reduction of the quantity of the company's shares (the original amount divided by 200 and the presplit price multiplied with 200). No options were exercised during 2017 or 2016.

Exercise price fluctuation and weighted average vesting period for share options outstanding at year-end.

Vesting period (years)	Exercise price
1.9	2.18 – 3.80	2017
2.9	n/a	2016

21. Provisions

	2017	2016
Provisions at the beginning of the financial year	45	59
Additions to provisions	215	40
Provisions exercised	-40	0
Reversals of provisions	0	-53
Provisions at the end of the financial year	220	45
Long-term provisions	0	0
Current provisions	220	45
Total	220	45

In the end of the period, 31.12.2017, EUR 5,000 of the provisions are related to the discontinued operations (31.12.2016 EUR 5,000 were related to the discontinued provisions).

Revenue from the sales of goods is recognized when the significant risks and rewards of purchasing have been transferred to the buyer. A provision is made for estimated warranty expenses. On 31 Dec 2017, warranty provisions totalled EUR 220,000 (31 Dec 2016: EUR 45,000). Guarantee provision is based on previous years' experience on products that are faulty or required additional installations. During the financial year the company made a gurantee provision of EUR 215,000 that is higher than average due to lack of experience in the field of operations.

22. Financial liabilities	Balance sheet values	Balance sheet values
Non-current financial liabilities at amortized cost	2017	2016
R&D loan	3 160	2 861
Convertible bond 1/2012	364	364
Convertible bond 1/2015	2 366	6 335
Convertible bond 1/2017	474	0
Other subordinated loans	1 511	750
Other non-current liabilities	0	2 113
Total	7 874	12 423
Current financial liabilities at amortized cost
Loans from financial institutions	648	1 373
Other current liabilities	1 356	558
Total	2 004	1 931

The non-current financial liabilities include a EUR 3.0 million convertible subordinated loan (the original value of the loan was EUR 7.7 million). The liability component (book value 31.12.2017: 2.4 million) is recognized at amortized cost and the equity share (2.6 million) is recognized under equity. The equity share is measured at fair value on the issue date of the convertible bond. The key assumptions in the calculation were: Share price EUR 3.0; option's subscription price in conversion EUR 2.0; safe interest: 3 years Swap rate, per 30.6.2015 (0,32 %) and subscription period and due date for based on the main terms of the convertible bond. During 2016, the interests on the Convertibe Bond accurred until 31 December 2015 totalling EUR 0.2 million, were added in the capital i.e. non-current financial liabilities. In Share Issue II in December 2017, accrued interests totaling EUR 0,8 million were added in the loan capital and after that EUR 5.6 million of the loan capital were converted to new shares of the Company.

The non-current financial liabilities include a EUR 0.4 million convertible subordinated loan. The liability component (book value 31.12.2015: 0.4 million) is recognized at amortized cost and the equity share (0.3 million, which is booked based on the original amount of the convertible bond, EUR 1.5 million) is recognized under equity..

The non-current financial liabilities include a EUR 0.65 million convertible subordinated loan (the original value of the loan was EUR 1.5 million). The liability component (book value 31.12.2017: 0.5 million) is recognized at amortized cost and the equity share (0.3 million) is recognized under equity. The equity share is measured at fair value on the issue date of the convertible bond. The key assumptions in the calculation were: Share price EUR 2.40; option's subscription price in conversion EUR 2.00; safe interest: 3 years Swap rate, per 1.3.2017 (0,32 %) and subscription period and due date for based on the main terms of the convertible bond. EUR 0.85 million of the loan was set off against the share issue payments in Share Issue II in December 2017.

The Finnish Funding Agency for Technology and Innovation - Tekes gives Valoe (former Cencorp) a loan, of ca. EUR 3 million, to develop business and production model relating to the design and production of cost effective photovoltaic modules as well as to the development of components. The loan can amount maximum to 50 percent of the project's total costs which are estimated to be ca. EUR 6 million. The loan was withdrawn in the course of the years 2013 and 2017, as the duration of the project was extended. The loan period is ten years. The interest of the loan is 1 %. In accordance with IAS 39 the grant component has been deducted and the amortized 8% interest expense added to the loan amount in consolidated accounts.

.

The Finnish Funding Agency for Technology and Innovation - Tekes gives Valoe a loan, of ca. EUR 4.1 million, to further develop Valoe's solar modules and back contact based cells. The loan can amount maximum to 70 percent of the project's total costs which are estimated to be ca. EUR 5.8 million. The loan will be withdrawn in the course of the years 2016 and 2019 and the loan period is seven years. The nominal value of the withdrawn amount till December 31, 2017 is EUR 0.8 million. The interest of the loan is 1 %. In accordance with IAS 39 the grant component has been deducted and the amortized 8% interest expense added to the loan amount in consolidated accounts.

Maturity analysis of interest-bearing liabilities

					2022 and
31.12.2017	2018	2019	2020	2021	later
R&D loan	73	632	1 446	612	1 206
Convertible bonds	0	2 259	0	0	0
Other liabilities	1 963	110	110	0	0
Total interest-bearing
liabilities	2 004	3 001	1 556	612	1 206
					2021 and
31.12.2016	2017	2018	2019	2020	later
R&D loan	60	629	623	1437	903
Other liabilities	1 963	4 006	0	0	0
Total interest-bearing
liabilities	2 023	4 635	623	1 437	903

23. Trade payables and other short-term non-interest-bearing

liabilities	2017	2016
Trade payables	1 285	2 259
Accruals and deferred income	2 407	2 621
Other liabilities	81	348
Total for continued operations	3 773	5 228
Trade payables	0	5
Accruals and deferred income	0	40
Other liabilities	301	443
Total for discontinued operations	301	487

EUR 1.3 million out of trade payables of EUR 1.3 million above (including both continuing and discontinued operations) was overdue at the year end 2017. EUR 0,7 million out of other short-term non-interest bearing liabilities, accruals and deferred income as well as tax liabilities (total EUR 2.8 million above) was overdue at the year end 2017. Significant items in accrued liabilities consist of personnel expenses, accrrued intrest and other accrued expenses.

24. Fair values of financial assets and liabilities

The carrying amount of the financial assets equals with the fair value of the financial assets in 2017 and 2016.

The financial assets available-for-sale are investments that belong to categorie 3.

VALOE OYJ ANNUAL REPORT 2017 54

The fair value of trade and other receivables is expected to correspond to the carrying amount due to their short maturity.

The carrying amount of financial liabilities equals with the fair value of the financial liabilities in 2017 and 2016.

The fair value of non-current liabilities is expected to correspond to the carrying amount as the loans were recognized to their fair value when recorded. There has been no significant change in genereal interest level since withdrawals.

At the year end, other short-term interest bearing liabilities included EUR 0.3 million of overdue liabilities.

The hierarchy level for fair values is 2.

Average interest rates on interest-bearing liabilities	2017	2016
Loans from financial institutions	6,12 %	6,96 %

The fair value of short-term liabilities is expected to correspond to the carrying amount due to their short maturity.

25. Non-cash transactions	2017	2016
Depreciation	1 333	1 111
Exchange rate differences	-11	4
Gains on disposals of non-current assets	0	-7 082
Stock option scheme 2015	133	892
Partial reversal of rental security given on behalf of a subsidiary	0	-494
Other items	-262	0
Total	1 193	-5 570
26. Leases	2017	2016
Minimum lease payments payable on the basis of other non-terminable leases:
Within one year	62	61
27. Other contingent liabilities	2017	2016
Assets pledged for the company
Loans from financial institutions	600	721
Export credit limit	0	352
Other liabilities	281	0
Promissory notes secured by pledge	12 691	12 691

28. Related party transactions

Valoe complies with the Finnish Companies Act and International Financial Reporting Standards (IAS 24) obligations for monitoring of related party transactions. The Group's related parties include parent company Valoe Oyj and Group subsidiaries. Key members of the Board of Directors and Management Team, also CEO and the persons, who have a significant influence over the Group, are included with their families to the related parties. Also those communities which are controlled or influenced by, or is under common control or influence over the persons, who are included to the related parties, are included to the related parties. The Group's related parties also include those companies that have a significant control over the Group.

The relations and shares between the parent company and subsidiaries are as follows:

Company	Business area	Domicile	Group's holding
Parent company Valoe Oyj	Development, manufacture and sales of clean energy solutions	Mikkeli, Finland	100,0 %
PMJ Testline Oy	Sale of industrial machinery Development, manufacture	Lohja, Finland	100,0 %
Valo Clean Energy USA Inc	and sales of clean energy solutions	Canton MI, USA	100,0 %

The Group has sold and purchased goods and services from companies in which the majority holding and/or power of decision granting control of the company is held by members of the Group's related parties. Sales of goods and services carried out with related parties are based on market prices.

The Group entered into the following transactions with related parties:

Continuing operations
Sales of goods and services	2017	2016
Dunsit - financial management and services	0	8
Savcor Oy - financial management and production services	38	28
Savcor Face Ltd - solar modules / production services	25	-2
Others	0	1
Total	62	34
Purchases of goods and services
Dunsit Oy - rent	14	19
Savcor Oy - financial management and IT services	-2	71
Savcor Face Ltd – marketing services	3	34
SCI-Finance Oy - marketing and administration services	43	59
Savcor Technologies Oy - marketing and administration services	52	39
Savcor Tempo Oy – administration services	5	0
Oy Marville Ab – legal services	43	72
Total	157	293

Loss on disposal of non-current assets

Savcor Tempo Oy 0 300

Interest expenses and other financial expenses	2017	2016
Savcor Invest B.V.	105	103
Savcor Oy	0	1
SCI Invest Oy	0	68
SCI-Finance Oy	24	67
Savcor Technologies Oy	268	87
Savcor Communications Pty Ltd	93	65
Savcor Tempo Oy	30	23
Other	93	71
Total	613	485
Discontinued operations
Purchase of goods and services
SCI-Finance Oy – administration services	0	3
Oy Marville Ab – legal services	0	2
Total	0	5
Non-current convertible subordinated loan from related parties	1 282	2 781
Non-current other subordinated from related parties	1 511	750
Non-current convertible loan from related parties	114	0
Other non-current liabilities to related parties	0	1 820
Other current liabilities to related parties	659	79
Current interest liabilities to related parties	331	310
Trade payables and other non-interest-bearing liabilities to related parties	687	845
Trade receivables from related parties	18	31

Since August 2016 Savcor Group Oy has no longer been a company under control of Iikka Savisalo, Valoe's CEO and Hannu Savisalo, Valoe's Chairman of the Board, and is no longer reported as related party transactions. Savcor Invest B.V. and Dunsit Oy, the subsidiaries of Savcor Group Oy, are regarded as companies under control of Iikka Savisalo and/or Hannu Savisalo, as they are members of the Board in those companies.

Savcor Face Ltd, Savcor Technologies Oy, Savcor Communications Pty Ltd and Savcor Tempo Oy are companies under control of Iikka Savisalo, Valoe's CEO and Hannu Savisalo, Valoe's Chairman of the Board.

Since March 2017 Savcor Oy is no longer a company under control of Iikka Savisalo, Valoe's CEO and Hannu Savisalo, Valoe's Chairman of the Board.

SCI Invest Oy is a company under control of Iikka Savisalo, Valoe's CEO.

SCI-Finance Oy is a company under control of Hannu Savisalo, Valoe's Chairman of the Board.

Oy Marville Ab is a company under control of Ville Parpola, Valoe's Vice Chairman of the Board.

Employment benefits of the management	2017	2016
Wages and other short-term employment benefits	457	675
Stock option scheme 2015 (IFRS 2)	40	487
Total	498	1 159

The management does not have defined-benefit pension plans.

Wages and remuneration	2017	2016
Salaries of the CEO and his deputies (incl. in management wages)	168	169
Stock option scheme 2015 (IFRS 2)	17	158
Total	185	326
Board members and deputies
Parpola Ville - remuneration	40	40
Parpola Ville – stock option scheme 2015	20	71
Savisalo Hannu - remunerations	40	40
Savisalo Hannu - stock option scheme 2015	30	107
Savisalo Iikka – stock option 2015	10	36
Total	140	294

The CEO has a six-month term of notice. The CEO's pension is determined in accordance with the Employees Pensions Act.

During the financial year 1.1. – 31.12.2017 the company gave options to the management. The company has an option scheme in force as per 31 December 2017. More information on the option scheme in Section 20 "Share-based Payments and Convertible Bonds on the page 51.

29. Financial risk management

Financial risks

Valoe's normal business activities expose the company to financial risks: interest rate risks, credit risks, currency risks and funding risks. Risk management aims to minimize the adverse effects that changes in the financial market may have on the Group's financial performance and balance sheet. The Group's general risk management policy is approved by the Board of Directors, and its implementation is the joint responsibility of the Group's centralized finance department and the business groups. The finance department identifies, assesses and acquires the instruments needed to hedge the company against risks in close cooperation with the operational units. Hedging transactions are carried out in compliance with the risk management policy approved by Group management. The Group has not hedged itself against currency or interest rate risks.

Valoe's objective is to achieve a strong market position as a provider of, in various geographical areas, locally produced high-quality photovoltaic modules. Achievement of the objectives involves risks. Even though Valoe's strategy and objectives are based on market knowledge and technical surveys, the risks are significant and it is not certain if the company reaches all or part of the targets set for it. Valoe's future outlook will be highly dependent on the company's ability to reach the targeted market position in the global photovoltaic module market as well as on the company's financing.

Liquidity risks

The financial statements have been prepared under the going concern assumption. In February 2017 the company issued a EUR 1.5 million convertible bond I/2017 that was fully subscribed. During the subscription period of the Convertible Bond new investments of EUR 1.05 million was paid in cash and a total of EUR 0.45 million was paid by setting the subscription price off against the subscribers' receivables from the company.

Pursuant to the estimates available to the company, the company's financing situation and working capital situation continue to be tight in 2018. Considering the company's minimum investment needs, available financing commitments as well as cashflow based on increased demand, the Board of Directors of Valoe views that the company has sufficient working capital at least for the next 12 months.

On 31 December 2017 the company had financing commitment in the amount of EUR 2.35 million from Bracknor Investment for the purposes of enhancing its cash position. Valoe cannot withdraw new capital from the commitment at once but only during longer time period. In order to meet the company's financing needs Valoe estimates to withdraw in total EUR 2.0 million from the Bracknor Investment's financing facility during 2018 out of which the company has withdrawn EUR 0.5 million during the first months of 2018.

On 19 April 2018 the company issued a convertible bond 1/2018 of EUR 1.0 million. The company trusts the convertible bond will be fully subscribed.

In order to cover its strategic investments, the company contemplates to arrange a new share issue during 2018.

Valoe has a product development loan from Tekes in the amount of EUR 4.1 million out of which the company had withdrawn a total of EUR 0.8 million by the end of the financial year. In April 2018 the company withdraw another EUR 0.6 million. As per the date of this Annual Report there is still a total of EUR 2.7 million to be withdrawn. In case the Company manages to collect the intended amount of new capital in the arrangements described above, the company is able to perform its investment plan and thus believes that it can withdraw approximately EUR 1.0 million of Tekes product development loan in late 2018.

The Group continuously assesses and monitors the financing needed for business in cooperation with the management of different business functions to ensure that it has enough liquid assets at its disposal to finance operations and repay loans falling due. The Group's financing policy determines the optimum size of the liquidity reserve. The maturity and amortization of loans are planned so as to optimize liquidity. The availability and flexibility of financing are ensured through sufficient credit limits.

VALOE OYJ ANNUAL REPORT 2017 59 At year end 2017 Valoe Corporation has unbooked and unpaid interests in the amount of EUR 0.1 million relating to a bond issued in 2012 and EUR 0.5 million relating to a bond issued in 2015. The interest can only be repaid annually to the extent that the amount of Valoe Corporation's unrestricted equity and all subordinated loans exceeds the amount of loss confirmed for the most recently ended financial year or included in the balance sheet of more recent financial statements. 8% interest is calculated on the bonds issued in 2012 and 2015. Regarding the bond issued in 2015 the interst shall be added in the loan capital annually once a year on 30 July (if the eqyity allows) and paid in shares at the end of the loan period so that an interest amount of EUR 2.0 shall be converted to one new share of the company. An interest shall not be paid to capitalized interest. The company has no non-restricted equity at the end of the financial year. In addition to above mentioned unbooked interests totaling EUR 0.6 million, Valoe Corporation has unbooked interests of EUR 0.1 million for other equity based loans at the year end 2017. The Group has booked the interest expense according to IFRS.

The sufficiency of the shareholders' equity of Valoe Group's parent company may involve risks if the company's financial situation does not develop as estimated by the company's management.

Currency risks

The Group's international operations expose it to transaction risks caused by foreign exchange positions and to risks arising from the translation of foreign-currency investments into the parent company's functional currency. Currency risks arise from purchases and sales carried out in currencies other than the Group's functional currency, from trade receivables and payables denominated in foreign currencies, as well as from net investments in foreign subsidiaries.

Valoe has no foreign investments in its subsidiaries after the sale of Savcor Pacific's shares, and therefor the risks arising from the translation of its investments denominated in foreign currencies in its foreign subsidiaries into Valoe Group's parent company's functional currency, the euro, is minor. The company has not hedged its foreign exchange position or net debts in foreign subsidiaries.

Interest rate risk

The Group's revenue and operational cash flows are mostly independent of interest rate fluctuations. During 2015, the Group was exposed to fair value interest rate risk (fixed-rate liabilities) and cash flow interest rate risk (floating-rate liabilities), mainly due to interest on liabilities. In compliance with the principles for risk management, at least 10% of the credit portfolio must be fixed-rate and the loan portfolio shall have an average duration of 3–6 years. Fixed-rate loans account for 94,6 % of the company's interest-bearing liabilities.

Credit risk

The company's business involves the normal cross-border trade-related credit risks to which the company aims to manage with advance payments and by monitoring the customers payment behavior and the credit information. The balance sheet values of the financial assets correspond best the maximum amount of the group's credit risk, excluding the fair value of the guarantees, in such a case where the parties in question cannot fullfil the obligations related to the financial instruments.

Capital management

Capital management aims at ensuring the continuity of the company's operations and the increase of shareholder value. Capital structure management is based on decisions concerning share issues, the use of equity-settled instruments and distribution of dividends. Capital structure indicators include equity ratio and net gearing.

Exposure to financial risks Impact of fluctuation in short-term interest rate +/-2%	2017 +/-4	2016 +/-17
The Group had credit limits at 31 Dec 2017 consisting of the following: Check account limit	0,6 milj. eur	0,7 milj. eur
Export credit limit	-	0,4 milj. eur

In the comparison year 2016, both credit limits were overdue.

Exposure to currency risks

In 2017, the Group's minor currency risks consisted of ETB and USD denominated financial assets and liabilities. The following sensitivity analysis is based on existing financial assets and liabilities denominated in foreign currencies on 31 December 2017.

Financial assets denominated in foreign currency	2017	2016
USD	29	2
ETB	672	672
Financial liabilities denominated in foreign currency
USD	59	149
Net	643	526
Impact on result
EUR/USD +/-10%	+/-2	+/-10
EUR/ETB +/-10%	+/-54	+/- 54

Materials management risks

The most significant risks related to material prices and availability are those related to the copper and silicon and the general price risk related to components. The objective is to pass the price increases on to the sales prices and to improve price competitiveness through product development.

30. The Major Events After the End of The Reporting Period

16 January 2018: VALOE CORPORATION: RESULT OF THE OFFERING

The Board of Directors of Valoe Corporation (the "Company") resolved on 20 December 2018 on a directed share issue (the "Offering") in which the Company offered up to 10,000,000 new shares in the Company (the "New Shares") for subscription to all the creditors of the Company (including holders of the convertible loans I/2015 and I/2017) who at the time of subscription held indisputable receivable amounting to at least EUR 25,000 from the Company (each "Subscriber").

The Board of Directors of the Company has today resolved to approve the subscriptions made in the Offering. In total 8,721,077 New Shares were acceptably subscribed in the Offering.

According to the terms and conditions of the Offering, the subscription price for the New Shares was payable in cash or by set-off against, in the view of the Board of Directors of the Company, indisputable receivables the Subscriber had from the Company at the time of subscription. The subscription price for in total 876,326 of the New Shares subscribed was paid in cash and the subscription price for in total 7,844,751 of the New Shares subscribed was paid by way of set-off.

Thus, the Company collected in the Offering in total approximately EUR 859,000 new capital before fees and costs and the indebtedness of the Company decreased in total approximately by EUR 9,257,000. The subscription price for the New Shares shall be fully credited to the reserve for invested equity of the Company.

The Company expects the New Shares subscribed acceptably in the Offering to be registered with the Trade Register approximately on 19 January 2018. The New Shares shall be issued and recorded to the book-entry system maintained by Euroclear Finland Ltd first as interim shares representing the New Shares (the "Interim Shares"). The ISIN code of the Interim Shares is FI4000301056. The Interim Shares will not be applied to be admitted to trading on Nasdaq Helsinki Ltd. The Interim Shares will be combined with the Company's present class of shares (the ISIN code FI0009006951, trading symbol VALOE) when the New Shares have been registered to the Trade Register. Such combination is expected to occur approximately on 19 January 2018. The New Shares are applied to be admitted to trading on the stock exchange list of Nasdaq Helsinki Ltd approximately on 22 January 2018 together with the other shares of the Company.

After the registration of the New Shares subscribed in the Share Issue in the Trade Register, the total number of the shares in the Company is 13,990,513 shares of which 445,325 shares are held by the Company.

The Company shall publish separately around 18 January 2018 a prospectus pursuant to the Finnish Securities Markets Act for the application of in total 8,721,077 New Shares subscribed in the Share Issue and in total 117,586 shares not yet listed and subscribed by the Company in the share issue without consideration to the Company itself on 16 October 2017, to trading on Nasdaq Helsinki Ltd.

18 January 2018: VALOE CORPORATION: PROSPECTUS REGARDING ADMISSION TO TRADING OF IN TOTAL 8,838,663 NEW SHARES IN THE COMPANY APPROVED

The Financial Supervisory Authority has today approved the prospectus (the "Prospectus") of Valoe Corporation (the "Company") pursuant to the Finnish Securities Markets Act (746/2012, as amended) regarding admission to trading of in total 8,838,663 new shares in the Company. As set out in the stock exchange release published by the Company on 16 January 2018, the Prospectus covers admission to trading of in total 8,721,077 New Shares subscribed in the share Issue and in total 117,586 shares not yet listed and subscribed by the Company in the share issue without consideration to the Company itself on 16 October 2017.

In this release, the Company discloses certain information related to the financial situation and financing needs of the Company, as described in the Prospectus.

As described in the Prospectus, pursuant to the estimate of the Company, the amount of Company's working capital does not correspond to the need of the working capital of the Company (including the minimum investments described below) for the period of next 12 months. To the understanding of the Company, the current working capital of the Company will last until the end of March 2018.

The cumulative cash flow of the Company is estimated to be approximately EUR 1.0 million negative. The trade payables due on the date of the Prospectus amount to EUR 1.3 million. Other debts than equity instruments to other parties than to the related parties of the Company amount to approximately EUR 0.6 million and other short-term debts amount to approximately EUR 0.7 million. The minimum investments to the product development pursuant to the investment plan of the Company amount to approximately EUR 3.6 million of which EUR 1.0 million is intended to be financed from existing financing commitments.

The Company has financing commitment in the amount of EUR 2.35 million from Bracknor Investment for the purposes of enhancing its cash position. The Company cannot withdraw new capital from the commitment at once but only during longer time period. The Company estimates to withdraw in total EUR 1.0 million from the commitment during the period of next 12 months.

To the understanding of the Company, the minimum financing needed to cover the working capital deficit and investments pursuant to the investment plan for the period of 12 months as of the date of the Prospectus amount to EUR 6.2 million.

As reported on 16 January 2018, the Company has, in the directed share issue to its significant creditors, collected in total EUR 0.86 million as new money and in total approximately EUR 9.3 million of debts of the Company were set-off, the total amount of the share issue thus being approximately EUR 10.1 million.

In order to cover its strategic investments and working capital deficit the Company contemplates to arrange a new share issue during the second quarter of 2018 in which the Company intends to collect in total EUR 6.2 million of new capital.

Additionally, the Company has a product development loan from Tekes in the amount of EUR 4.1 million of which EUR 3.3 million is not yet withdrawn. In case the Company manages to collect the intended amount of new capital in the arrangements described above, the Company is able to perform its investment plan and thus believes that it can withdraw approximately EUR 2.5 million of Tekes product development loan in late 2018.

The Company estimates its available cash funds to exceed EUR 3 million by the end of 2018, presuming that the above described arrangements are carried out as planned i.e. the Company is able to withdraw in total EUR 1.0 million of new financing from the arrangement agreed on with Bracknor Investment, all the shares offered for subscription in the share issues to be arranged during the second quarter of 2018 will be subscribed and the Company is able to withdraw approximately EUR 2.5 million of Tekes product development loan in late 2018.

Should the funds to be collected in the share issue contemplated to be arranged during the second quarter of 2018 be less than EUR 6.2 million, the Company needs additional financing for performing its strategic investments. The Company contemplates to acquire necessary additional financing, to the extent necessary, by means of equity or other debt financing.

The investors are requested to read entire contents of the Prospectus and particularly sections concerning description of the risks.

The Finnish version of the Prospectus is available at the registered office of the Company at Insinöörinkatu 5, 50150 Mikkeli, during the customary office hours and in the electronic form on the website of the Company at http://fi.valoe.com/sijoittajat/.

12 April 2018: VALOE CORPORATION RECEIVED A CA. EUR 0.45 MILLION ORDER FOR SOLAR POWER PLANTS. THE DELIVERY IS PART OF THE FRAMEWORK AGREEMENT WITH FORUS CAPITAL OY PUBLISHED ON 7 AUGUST 2017

On 7 August 2017 Valoe Corporation ("Valoe") disclosed that it has signed a framework agreement with ForUs Capital Oy on delivering solar power plants worth a total of ca. EUR 4 million to Finland. ForUs Capital sells electricity generated by the solar power plants to its own partners. Under the framework agreement Valoe has previously received orders for solar power plants totaling ca. EUR 1.15 million. The company has published releases on the orders in August and December 2017. Part of the solar power plants have already been delivered and the rest of the deliveries will be made by the end of August 2018.

Valoe has signed a new delivery contract under the framework agreement worth a total of ca. EUR 0.45 million. Pursuant to the new contract Valoe will deliver the solar power plants to the sites owned by the City of Hanko and a property investment company called VVT Kiinteistösijoitus Oy by the end of November 2018. In the property owned by VVT Kiinteistösijoitus Oy one of the electricity consumers is XXL Sports Oy.

Other deliveries under the framework agreement are subject to governmental investment aid and securing final financing.

19 April 2018: VALOE ISSUES A CONVERTIBLE BOND

In order to strengthen Valoe Corporation's capital structure the company issues a convertible bond of MEUR 1.0 at the most. The convertible bond can be converted to max. 1,818,180 new shares of the company. The subscription price is EUR 0.55 per share.

The convertible bond is issued in deviation from the shareholders' pre-emptive subscription rights to the parties separately approved by the Board of Directors.

The minimum amount of subscription of the convertible bond shall be EUR 100,000.00 entitling the convertible bond holder to subscribe for 181,818 new shares of the company.

The loan period shall commence on the payment date and expire on 31 May 2021 on which date the convertible bond shall expire to be repayable in its entirety in accordance with the terms of the loan. The subscription period of the shares under the convertible bond shall begin from the subscription of the convertible bond and expire on 31 May 2021.

The subscription period of the convertible bond shall expire on 11 May 2018 at 6:00 p.m. The board of directors of the company has the right to approve the subscriptions at any time during the subscription period. In the event the convertible bond shall be oversubscribed, the board of directors of the company shall resolve on the allocation between the subscribers. The board of directors of the company has the right to discontinue the subscription period of the convertible bond at any time. The board of directors shall also have the right to decide on extending the subscription period.

The shareholders' pre-emptive subscription rights are deviated from in connection with the issue of convertible bond to secure financing required to strengthen the capital structure of the company cost effectively and considering the size of the financing. Thus, there is from the company's point of view a weighty financial reason to issue the special rights.

The company has one (1) class of shares.

20 April 2018: Valoe Corporation Launched a New Solar Module on the Market; Increases Its Production Capacity and Recruits New Personnel at Its Factory in Mikkeli

Valoe Corporation introduced a new solar module, Chrome II, on the market. Valoe's objective to develop a module with a lifespan of more than 100 years has been one of the cornerstones of desinging the new module. Chrome II is a glass-glass module with Valoe's own MWT (Metal Wrap Through) cell.

During the last few months Valoe's development has been focused on developing the company's own polycrystalline cell and glassglass module structure. The new MWT cell has higher efficiency compared to the cells Valoe previously used. In the current market environment the availability of back contact cells has been limited and there has been a lot of variation in the quality and prices of the cells. Having own cells Valoe can keep better control of their quality, availablity and pricing. The new cell technology is implemented in the Chrome II modules. Further, the new cell technology improves the economic efficiency of module production. Valoe's objective is to provide its customers with even more efficient and more economic solar systems.

Valoe views that the solar energy market is growing fast in Finland too. The advance sales of the new Chrome II module has been good. In order to meet the growing demand Valoe is going to recruit 14 persons to Mikkeli.

20 April 2018: SUBSCRIPTION OF NEW SHARES IN VALOE CORPORATION

The Board of Directors of Valoe Corporation (the "Company") has resolved on 20 April 2018 to subscribe in total 1,500,000 new shares ("Subscribed Shares") in the share issue without consideration resolved by the Company on 16 October 2017.

The share subscription is conducted in order to implement a part of the financing arrangement between the Company and Bracknor Investment approved on 19 April 2017. The new shares may be used solely for the implementation of the financing arrangement so that the Company may issue the new shares held by it to Bracknor Investment when Bracknor investment subscribes shares on the basis of the convertible loans and warrants granted to it under the said financing arrangement. To the extent it is not necessary to issue new shares subscribed by the Company to Bracknor Investment, the Company shall annul the shares.

The new shares are of the same class as the Company's other shares and entitle to the same shareholder rights as the Company's old shares after their registration.

After the registration of the Subscribed Shares in the trade register, the total number of the shares in the Company is 15,490,513 shares of which 1,544,413 shares are held by the Company.

The Subscribed Shares are estimated to be registered in the trade register approximately on 25 April 2018 and the Company shall apply for the admission of the Subscribed Shares to public trading on the stock exchange list of Nasdaq Helsinki Ltd approximately on 26 April 2018.

24 April 2018: Valoe Corporation Purchases a Solar Cell Production Line. Valoe Signed a Cooperation Agreement with a Lithuanian Company, Soli Tek Cells

Valoe purchases a solar cell production line from Italian Megacell S.r.l.; under liquidation.

Valoe's objective is to use the cell production line for developing a solar cell that would leverage the benefits and qualities of Valoe's own back contact module in the best possible way. The production line is designed for developing high-efficient N type silicon cells. Valoe is aiming at utilizing the production line for developing a next generation IBC (Interdigitated Back Contact) cell. An IBC cell's efficiency and other features related to electricity generation are remarkably better compared to polycrystalline and monocrystalline cells commonly available on the market at the moment. The acquisition of the cell production line complements and accelerates Valoe's solar cell development project funded by Business Finland (prev. Tekes).

Valoe has signed a cooperation agreement with Soli Tek Cells JSC ("SoliTek"). SoliTek is a solar cell manufacturer based in Lithuania. It belongs to the BOD Group which has both a solar cell plant and a module plant in Vilnius, Lithuania.

The cell production line Valoe purchased from Italy will be transferred to SoliTek's premises, next to SoliTek's cell production line. The development work can be started much sooner as the required infrastructure is ready. Part of Megacell's research and development equipment will be transferred to Valoe's factory in Mikkeli where the company runs its solar module production.

EUR	Note	1 Jan – 31 Dec 2017		1 Jan – 31 Dec 2016
Net sales	1-3	553 631,29	100 %	553 484,06	100 %
Cost of sales		-3 608 757,01	-652 %	-2 406 717,48	-435 %
Gross profit/loss		-3 055 125,72	-552 %	-1 853 233,42	-335 %
Sales and marketing costs		-483 136,79		-666 677,96
Administrative expenses		-693 222,99		-677 490,05
Other operating income	4	397 795,68		542 360,92
Other operating expenses	10	-3 162,57		-541 301,86
Operating loss		-3 836 852,39	-693 %	-3 196 342,37	-577 %
Financial expenses	12	9 253,67		7 861,75
Financial expenses	12	-1 583 499,86		-595 095,46
Profit/loss before extraordinary items		-5 411 098,58	-977 %	-3 783 576,08	-684 %
Profit/loss before appropriations and taxes		-5 411 098,58		-3 783 576,08
Appropriations	13	0,00		0,00
Income taxes	14	0,00		0,00
Profit/loss for the financial year		-5 411 098,58	-977 %	-3 783 576,08	-684 %

EUR	Note	31 Dec 2017	31 Dec 2016
ASSETS
Non-current assets
Intangible assets	13	7 422 939,29	9 082 867,07
Tangible assets	14	8 335,25	13 263,67
Investments	15	13 004,60	13 004,60
		7 444 279,15	9 109 135,34
Vaihtuvat vastaavat
Inventories	16	581 715,23	1 122 015,55
Short-term receivables	17	1 255 654,22	859 622,12
Cash and cash equivalents		350 115,83	1 019,99
		2 187 485,25	1 982 657,66
TOTAL ASSETS		9 631 764,43	11 091 793,00
LIABILITIES
Shareholders' equity
Share capital	18	80 000,00	80 000,00
Distributable non-restricted equity fund	18	10 542 120,84	0,00
Profit/loss carried forward	18	-10 281 377,58	-6 497 801,50
Profit/loss for the financial year	18	-5 411 098,58	-3 783 576,08
		-5 070 355,32	-10 201 377,58
Accumulated appropriations
Depreciation difference		0,00	0,00
Obligatory provisions
Other obligatory provisions	19	220 397,22	45 312,22
Liabilities
Non-current liabilities	20	9 318 915,99	14 602 821,97
Current liabilities	21	5 162 806,54	6 645 036,39
		14 481 722,53	21 247 858,36
TOTAL LIASBILITIES		9 631 764,43	11 091 793,00

EUR 1 000		1-12/2017	1-12/2016
Cash flow from operating activities
Income statement profit/loss before extraordinary items		-5 411	-3 784
Non-monetary items adjusted on income statement
Depreciation and impairment	+	2 121	1 316
Gains/losses on disposals of non-current assets	+/-	0	412
Unrealized exchange rate gains (-) and losses (+)	+/-	-9	4
Other non-cash transactions	+/-	-262	-494
Financial income and expenses	+	1 583	583
Total cash flow before change in working capital		-1 978	-1 962
Change in working capital
Increase (-) / decrease (+) in inventories		-162	-868
Change in reserves		175	-13
Increase (-) / decrease (+) in short-term trade and other receivables		-412	29
Increase (+) / decrease (-) in short term trade and other payables		-507	1 443
Change in working capital		-905	590
Cash flow from business operations before financial items and taxes		-2 883	-1 372
Adjustment of financial items and taxes to cash-based accounting
Interest paid and payments for other financial expenses	-	280	116
Interest received	+	0	0
Taxes paid	-	0	0
Financial items and taxes		-280	-116
NET CASH FLOW FROM BUSINESS OPERATIONS		-3 163	-1 488
Cash flow from investments
Investments in tangible and intangible assets	-	541	430
Proceeds on disposal of tangible and intangible assets	+	0	8
Granted loans	-	0	672
NET CASH FLOW FROM INVESTMENTS		-541	-1 095
Cash flow from financing Payments from share issue		800	0
	+
Financing arrangement with Bracknor Investment	+	602	0
Increase in non-current loans	+	1 987	820
Repayment of non-current loans	-	23	0
Increase in current loans	+	1 428	2 049
Repayment of current loans	-	741	286
NET CASH FLOW FROM FINANCING ACTIVITIES		4 053	2 582
INCREASE (+) OR DECREASE (-) IN CASH FLOW		349	-1
Cash and cash equivalents at the beginning of the financial year		1	2
Cash and cash equivalents at the end of the financial year		350	1
		349	-1

Accounting, measurement and accrual principles

Valoe Oyj's financial statements have been prepared in accordance with the Finnish Accounting Act in force and with other regulations and provisions concerning the preparation of financial statements. The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as have the parent company's financial statements, where possible.

Use of estimates in the financial statements

When preparing financial statements according to good accounting practice, the company management has to make estimates and assumptions that affect the amounts of the reported assets and liabilities on the balance sheet date and the amounts of income and expenses reported for the financial year. The estimates and assumptions have been made following the precautionary principle. The final figures may differ from these estimates.

Measurement of non-current assets

Tangible and intangible assets have been recorded on the balance sheet at original cost of acquisition less planned depreciation. Planned depreciation has been calculated from the original cost of acquisition with amortization on a straightline basis according to the estimated useful life. Depreciations of new property, plant and equipment have been calculated as of the month of commissioning. The depreciations have been booked by function.

The planned depreciation periods are:

Intangible rights	5-10 vuotta
Development costs	5-10 vuotta
Goodwill	5 vuotta
Other expenses with long-term effects	5 vuotta
Machinery and equipment	3-7 vuotta

Gains and losses from the disposal of fixed assets are presented in the income statement.

Maintenance and repairs

Maintenance and repair costs are recognized as expenses for the financial year. Significant basic improvement costs are included in the carrying amount of the tangible fixed assets and depreciated over the remaining useful life of the asset.

Research and product development costs

Research and product development have primarily been recognized as annual costs in the year in which they have been incurred. Development costs that accrue revenues for three or more years have been capitalized and are depreciated over 5 to 10 years.

The development cost of Conductive Back Sheet production for solar modules which was transferred from Beijing to the Mikkeli factory is depreciated over 10 years which is in line with the expected useful life. The company has critically reviewed the balance sheet item concerned and decided to impose a one-off extraordinary depreciation of EUR 0.8 million in Valoe Oyj:s accounts.

Development costs in the balance sheet include EUR 2.2 million capitalized costs where amortizations will be started during 2018 – 2019 after the development is compelete. The depreciation of development costs currently capitalized in the balance sheet is expected to end during the financial year 2024.

Other intangible assets

Acquisition costs for patents, trademarks and licences are capitalized and depreciated on a straight-line basis over the useful life, as a general rule over 10 years. Acquisition costs for software licences are included in intangible rights and depreciated over 5 years.

Measurement of inventories

Inventories are presented in compliance with the principle of weighted average price at the lower of acquisition cost or replacement price or likely sales price.

Items denominated in foreign currencies

Receivables and liabilities denominated in foreign currencies have been translated into euros using the average rate quoted by the Bank of Finland on the balance sheet date.

Revenue recognition principles

When calculating net sales, indirect taxes, discounts and exchange rate differences related to sales are deducted from the sales revenue. Income from the sale of goods and services are recognized as revenue when they have been carried out.

Long-term contract revenue has been recognized as revenue on the basis of the stage of completion. The company has defined as long-term contract work projects which have started and ended in different financial periods and where the recognition of income as revenue has a substantial impact on net sales and result. The stage of completion of long-term contracts has been determined as the proportion of costs incurred in relation to the estimated total contract costs and is dependent on the eventual total revenue and costs and a reliable way to measure the progress of the project. A loss for a project is recognized as soon as it is known and can be estimated.

The Ethiopian factory project has been divided into sub-projects. Their percentage of completion is estimated on monthly basis. A project manager is responsible for the estimation. Typically, status reports from subcontractors are used for the estimation. Further, a project manager reviews status reports from each section and compares the results with predetermined checklists/checkpoints. The company has not recognized the revenue from the project as the performance oblications are not yet satisfied.

Provisions

A provision is recognized in the balance sheet when the company has a legal or constructive obligation that is likely to require the outflow of economic benefits or cause a financial loss and the amount of the obligation can be estimated in a reliable manner. The amount of the provision to be recognized corresponds to the best estimate of the company's management concerning the expenses required to settle the obligation on the balance sheet date. Provisions may relate to restructuring of operations, onerous contracts, legal cases or tax risks.

A warranty provision is recognized when the delivery of a product including a warranty clause has been approved. The amount of the warranty provision is based on experience concerning the realization of warranty expenses.

A provision is recognized for an onerous contract if the expenses required to settle the obligations exceed the benefits from the contract.

Unless otherwise indicated, the figures in the following notes are given in thousands of euros

NOTES TO THE INCOME STATEMENT

1. Distribution of net sales by market area	2017	2016
Europe	529	539
Americas	25	11
Asia and Australia	0	4
Total	554	553
2. Distribution of net sales by business segment	2017	2016
Laser - ja automaatiosolutions	0	0
Clean Energy	554	553
Total	554	553

3. Long-term contract revenues recognized on the basis of the percentage of completion

Valoe had no projects, where the revenues are recognized on the basis of the percentage of completion, at the year end of 2017 or 2016.

4. Other operating income	2017	2016
Subsidies received	0	25
Partial reversal of rental security given on behalf of a subsidiary	0	494
Capital gains on disposal of fixed assets	0	8
Other income	398	15
Total	398	542
5. Materials and services
	2017	2016
Materials and supplies
Purchases during the financial year	694	1 436
Change in inventories	-98	-1 052
	596	383
Third-party services	42	33
Total	638	416
6. Number of personnel
	2017	2016
During the financial period on average
Procurement and production	7	9
Product development	5	5
Sales and Marketing	2	2
Administration	3	4
Total	17	20

At the end of the year	2017	2016
Procurement and production	8	7
Product development	5	5
Sales and Marketing	2	2
Administration	3	3
Total	18	17
7. Personnel expenses	2017	2016
Wages and remuneration	1 260	1 156
Retirement expenses	253	164
Other indirect employee expenses	55	76
Total	1 568	1 396
8. Management's salaries and remuneration	2017	2016
CEO and his deputy	168	169
Board members	80	80
Total	248	249
9. Depreciation and impairment	2017	2016
Depreciation on cost of sales	4	4
Depreciation on development costs	2 116	1 311
Depreciation on sales and marketing	1	1
Depreciation on administration	0	1
Total	2 121	1 316
10. Operating expenses
	2017	2016
Expenses paid on behalf of subsidiaries	0	7
Attorneys expenses in the litigation process with FTTK	0	108
Sale of shares of LSCorp Clean Energy PLC - loss	0	120
Sale of shares of Savcor Pacific Ltd -loss	0	300
Other operating expenses	3	7
Total	3	542
11. Auditors' fees
Auditus Tilintarkastus Oy	2017	2016
Auditors' fees	27	0
Certificates and Statements Total	4 31	0 0
KPMG Oy
Auditors' fees	13	54
Other services	1	7
Total	14	62

The KPMG's fees during 2017 were related to the audit of 2016.

12. Financial income and expenses	2017	2016
Other interest and financial income
Interest income	0	1
Exchange rate gains	9	0
Total financial income	9	2
Interest expenses and other financial expenses
Interest expenses	1 257	489
Other financial expenses	326	87
Exchange rate losses	0	19
Total financial expenses	1 583	595
Total financial income and expenses	-1 574	-594

At the end of the financial year 2017 EUR 0,7 million of equity based loan interests were not booked as an expense (EUR 0.3 million for 2016 and 0.4 million for 2017).

NOTES TO THE BALANCE SHEET

13. Intangible assets

	Development			Other long-term
EUR 1 000	costs	Intangible rights	Goodwill	expenses	Total
Acquisition cost, 1 Jan 2017	11 695	276	0	108	12 079
Additions	432	23	0	0	455
Disposals	0	0	0	0	0
Transfers between items	0	0	0	0	0
Acquisition cost, 31 Dec 2017	12 127	299	0	108	12 534
Accumulated depreciation
and impairment, 1 Jan 2017	-2 784	-147	0	-66	-2 996
Accumulated depreciations of
disposals and transfers	0	0	0	0	0
Depreciation for the period	-2 072	-21	0	-22	-2 115
Impairment	0	0	0	0	0
Accumul. depr., 31 Dec. 2017	-4 855	-168	0	-88	-5 111
Carrying amount, 1 Jan 2017	8 912	129	0	42	9 083
Carrying amount, 31 Dec 2017	7 272	131	0	21	7 423

Should the company fail in its business plan implementation, it could generate a need for a write-off in intangible assets.

Depreciation of the development costs includes a one-off extra depreciation of EUR 0.8 million for the Beijing CBS product.

14. Tangible assets

			Machinery and	Other tangible
EUR 1 000	Land	Buildings	equipment	assets	Total
Acquisition cost, 1 Jan 2017	0	0	142	0	142
Additions	0	0	1	0	1
Disposals	0	0	0	0	0
Transfers between items	0	0	0	0	0
Acquisition cost, 31 Dec 2017	0	0	143	0	143
Accumulated depreciation
and impairment, 1 Jan 2017	0	0	-129	0	-129
Depreciation for the period	0	0	-6	0	-6
Accumul. depr., 31 Dec. 2017	0	0	-135	0	-135
Carrying amount, 1 Jan 2017	0	0	13	0	13
Carrying amount, 31 Dec 2017	0	0	8	0	8

15. Investments

Shares and equity interest in Group companies		Parent company's	Group's
	Domicile	holding	holding
PMJ testline Oy	Lohja,Finland	100,0 %
Valo Clean Energy USA Inc.	Canton MI, USA	100,0 %

The consolidated financial statements include the parent company Valoe Corporation and all of its subsidiaries.

Investments in Group companies	2017	2016
PMJ Testline Oy, investment in Distributable non-restricted equity
fund	1	1
Other shares and participations
Kiinteistö Oy Musko II one-week share	3	3
Helsinki Halli Oy B shares, 2 shares	6	6
Total	9	9

The fair value of Kiinteistö Oy Musko II shares is expected to correspond to the carrying amount. Helsinki Halli Oy B shares were written-off at fair value in 2012.

16. Inventories

	2017	2016
Materials and supplies	151	80
Work in progress	382	1 021
Finished products/goods	49	21
Total	582	1 122

17. Short-term receivables

	2017	2016
Trade receivables	18	31
Loan receivable Ethiopia	672	672
Adances paid	472	42
Other receivables	87	33
Accrued income	7	81
Total	1 256	860
Relevant items of accrued income
Instalment plan receivables	0	18
Accrual of indirect employee costs	4	61
Other accrued income	2	2
Total	7	81

In addition, the company has a security deposit of EUR 107.000, which has not been recorded in cash or receivables. The security deposit is subject to certain deliveries and will be released upon deliveries.

18. Shareholders' equity
	2017	2016
Share capital on 1 Jan	80	80
Share capital on 31 Dec	80	80
Total restricted equity	80	80
Distributable non-restricted equity fund on 1 Jan	0	0
Sale of own shares – Bracknor Investment	722	0
Share issue	9 820	0
Distributable non-restricted equity fund on 31 Dec	10 542	0
Retained earnings on 1 Jan	-10 281	-6 498
Profit/loss for the financial year	-5 411	-3 784
Retained earnings on 31 Dec	-15 692	-10 281
Total non-restricted equity	-5 150	-10 281
Total equity	-5 070	-10 201
Subordinated loans	5 279	8 995
Total equity and subordinated loans	209	-1 206
Calculation of distributable non-restricted equity on 31 Dec 2017
Retained earnings on 31 Dec.	-15 692	-10 281
Distributable non-restricted equity fund	10 542	0
Unbooked interests on subordinated loans	-662	-670
Total	-5 812	-10 951
19. Obligatory provisions
	2017	2016
Warranty provisions	220	45
Total	220	45
20. Non-current liabilities	2017	2016
Liabilities maturing in one to five years
Subordinated loans	5 279	8 995
Loans from financial institutions	3 196	3 196
Loans from Group undertakings	0	2
Other non-current loans	250	2 113
Total	8 725	14 306
Liabilities maturing in more than five years
Loans from financial institutions	594	297
Total	594	297
Total non-current liabilities	9 319	14 603

			21. Current liabilities
--	--	--	-------------------------

	2017	2016
Liabilities to Group undertakings
Loans from Group undertakings	2	0
Trade payables	20	88
Total	21	88
Liabilities to others
Loans from financial institutions	648	1 373
Other loans	1 356	308
Trade payables	1 284	2 263
Other liabilities	382	1 041
Accrued expenses	1 471	1 572
Total	5 141	6 557
Total current liabilities	5 163	6 645
Material items of accrued expenses
Subsidies received from the EU for product development projects	67	67
Accrued interest	451	590
Accrued personnel expenses	587	425
Guarantee on lease liability given on behalf of subsidiary	0	156
Accrued remuneration to Board members	127	47
Other accrued expenses	164	176
Other accrued liabilities	75	112
Total	1 471	1 572
22. Notes concerning collateral and contingent liabilities
	2017	2016
Liabilities secured by mortgages
Loans from financial institutions	600	721
Export credit limit used	0	352
Other liabilities	281	0
Business mortgages	12 691	12 691
Rental liabilities
Maturing the following year	62	61
Maturing later	0	0

23. Related party transactions

No borrowings were made to persons within related party and no guarantees or other securities were given for their debts.

24. Notes concerning an accountable entity belonging to the Group

Valoe Oyj is the parent company of Valoe Group.

The consolidated financial statements can be obtained from the following address:

Insinöörinkatu 5, 50150 Mikkeli or www.valoe.com

Mikkeli 27 April 2018

Hannu Savisalo Chairman

Ville Parpola Vice Chairman

likka Savisalo Member of the board CEO

Auditor's Note

A report has been issued today on the audit that has been conducted.

Tampere, 27 April 2018

Auditus Tilintarkastus Oy Authorized Public Accountants

Heidi Pirttijoki Authorized Public Accountant This document is an English translation of the Finnish auditor's report. Only the Finnish version of the report is legally binding.

Auditor's Report

To the Annual General eting of Valoe Oyj

Report on the Audit of he Financial Statements Opinion

We have audited the financial statements of Valoe Oyj (business identity code 0749606-1) for the year ended 31 December, 2017. The financial statements comprise the consolidated balance sheet, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company's balance sheet, income statement, statement of cash flows and notes.

In our opinion

• the consolidated financial statements give a true and fair view of the group's financial performance, financial position and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU
• the financial statements give a true and fair view of the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutoryrequirements.

Basis for Opinion

We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.

We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with theserequirements.

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

We have not performed any other services than auditing to the parent company or to any Group companies.

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

Materiality

The scope of our audit was influenced by our application of materiality. The materiality is determined based on our professional judgement and is used to determine the nature, timing and extent of our audit procedures and to evaluate the effect of identified misstatements on the financial statements as a whole. The level of materiality we set is based on our assessment of the magnitude of misstatements that, individually or in aggregate, could reasonably be expected to have influence on the economic decisions of the users of the financial statements. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for qualitative reasons for the users of the financial statements.

Key Audit Matters

.

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.

THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN THE AUDIT

Net Sales – revenue recognition criteria

The company has solar module manufacturing plant and back contact technology projects.	Our audit procedures comprised an evaluation of revenue recognition criteria. We have noted that the company will not start recognizing revenue from the delivery projects before special financing for the projects has been secured pursuant to the delivery contracts. The company has not recognized revenue based on completion percentage from projects under IAS 11 Construction Contracts.

Going Concern

During the financial year 2017 and at the year- end the company's financial situation was very tight and its liquidity was low.

the Group's overdue debts totaled EUR 2.3 million at balance sheet date. The consolidated cash flow from operating activities was negative in the financial years 2016 and2017.

Based on the assessment presented in the Directors' Report, management of the company and the Board of Directors believe that the going concern basis is appropriate in preparing the financial statements. The assessment is based on the following: the company has been able to improve its financing situation by drawing new borrowings in 2017, by converting convertible bonds to shares in a share issue and rearranging its current debts. Furthermore, the company has resolved it will not launch delivery projects in full until project funding pursuant to a delivery agreement is available to the company. Additionally, investments will not be made unless required financing and going concern is secured

Our audit procedures comprised evaluation of the company's cash flow forecast, order book and sufficiency of the financing. In addition, we discussed with company representatives about the future development and outlook of the company's operations.

The company's ability to continue as a going concern is dependent on the development of its operations and cash flows, as well as on the company's efforts to settle the borrowings and other liabilities fallen due with its creditors.

Capitalised development costs, EUR 6.8 million (refer to Accounting Principles for consolidated financial statements and notes 6 and 13) (refer to Accounting, measurement and accrual principles for the parent company financial statements and note 15)

At the balance sheet date 31 December 2017 the capitalised development costs were carried at EUR 6.8 million, which accounted for 71 per cent of the consolidated total assets. The capitalized development costs of the parent company totaled EUR 7.3 million, representing 70 per cent of the parent company's total assets.

Accounting for development costs requires management use judgement and make assumptions that affect carrying values and amortisation methods. The consolidated financial statements include development costs amounting to EUR 0.9 million for which the amortisation has not begun.

Development costs have been tested for impairment. Valoe determines recoverable amounts based on value in use. Those calculations use discounted future cash flow forecasts in which management make judgments over certain key inputs, for example net sales growth rate, discount rate and rate of borrowed capital.

Given the high level of management judgement related to the forecasts used, estimation uncertainty and the significant carrying amounts involved, capitalized development costs is considered a key audit matter.

We assessed the composition of development costs and the capitalization criteria applied, original project plans and discussed the changes in plans with the company representatives.

Our audit procedures also included agreeing the non- current asset register to the general ledger, assessing the appropriateness of the amortisation methods and testing amortisation accounting.

In addition, we discussed with company representatives how development costs are monitored and accounted for, assessed amortization and how stages in a project when amortization is begun is defined.

We analysed management estimates and assumptions, upon which future cash flow forecasts are based. We involved our own valuation specialists when assessing the appropriateness of the assumptions used, such as discount rates. We performed audit procedures to examine the technical accuracy of the calculations.

Furthermore, we considered the appropriateness of the disclosures provided in respect of developments costs and impairment testing.

Responsibilities of the Board of Directors and the Managing Director for the Financial Statements

The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financialstatementsthat give a true and fair viewin accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company's and the group's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of userstaken on the basis of the financial statements.

As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. Wealso:

— Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

If, based on the work we have performed on the report of the Board of Directors and in the Annual Report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in thisregard.

Other Reporting Requirements

We have been the company's auditor elected by the general meeting as from 14 June 2017.

Other Information

The Board of Directors and the Managing Director are responsible for the other information. The other information comprises information included in the report of the Board of Directors and in the Annual Report, but does not include the financial statements and our auditor's report thereon. We have received the report of the Board of Directors before the date of this Auditor's Report and we expect to receive the Annual Report after this date. Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

If, based on the work we have performed on the other information received prior the date of the Auditor's Report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in thisregard.

Tampere, 27 April 2018

AUDITUS TILINTARKASTUS OY

Heidi Pirttijoki Authorised Public Accountant, KHT

ADMINISTRATION

Valoe Corporation and its subsidiaries are governed in accordance with the law, the company's Articles of Association, and the Finnish Corporate Governance Code effective as of 2015. The company also complies with the applicable standards issued by the Financial Supervisory Authority, and the rules and regulations of NASDAQ OMX Helsinki Ltd.

Valoe's Corporate Governance Statement has been prepared in accordance with Recommendation 54 of the Finnish Corporate Governance Code approved by the Securities Market Association and Chapter 2, Section 6, Subsection 3 of the Securities Markets Act. An unofficial English translation of the Finnish Corporate Governance Code is available on the website of the Securities Market Association at www. cgfinland.fi. Valoe's Corporate Governance Statement is presented as a report separate from the Report of the Board of Directors. The Board of Directors handled the Corporate Governance Statement in its meeting in April 2018.

Valoe abides by the Finnish Corporate Governance Code with the following exceptions:

• Recommendation 9 The composition of Valoe's Board of Directors does not comply with the recommendation of having both genders represented at the Board of Directors. The 2017 annual general meeting did not elect any woman to the Board of Directors.
• Recommendation 14 The composition of Valoe's Board of Directors does not comply with the recommendation concern- ing the independence of directors specified in the Finnish Corporate Governance Code, according to which the majority of the directors shall be independent of the company and, in addition, at least two of the directors representing this majority shall be independent of significant shareholders of the company. In 2017, one of Valoe's three directors was independent of the company and significant shareholders. The non-compliance is justified by the fact that major part of Valoe's shares are owned by the Savisalo family or Companies owned by the Savisalo family. Therefore, the General Meeting of Valoe has deemed it appro- priate to ensure strong owner representation in its Board composition.
• Recommendation 24 The company's Board of Directors has not set up a separate audit committee because the scope of the company's business does not require matters related to financial reporting and supervision to be prepared by a group smaller than the entire Board of Directors. The Board of Directors handles the tasks of the audit committee.

GROUP STRUCTURE

Valoe's head office is located in Mikkeli. Responsibility for Valoe Group's corporate governance and operations is divided between the Board of Directors, which is appointed by the General Meeting, and the President and CEO.

GENERAL MEETING

The Annual General Meeting shall be held each year on a day decided by the Board of Directors, by the end of June. An Extraordinary General Meeting shall be held when deemed necessary by the Board of Directors or when legally required. The General Meeting shall be held at the Company's domicile, Mikkeli, or when the Board of Directors so decides, in Helsinki.

The invitation to the General Meeting shall be published, through a stock exchange release and on the Company's website, at the earliest three calendar months prior to the record date of the General Meeting and at the latest three weeks prior to the General Meeting, however, always at least nine days prior to the record date of the General Meeting. The Board of Directors may also decide to publish the invitation to the meeting in a national newspaper.

At the Annual General Meeting, the following shall be presented:

• Financial Statements
• Auditor's Report

At the Annual General Meeting, the following shall be decided upon:

• the approval and adoption of the Financial Statements
• the measures to be taken on the basis of the profit shown in the approved balance sheet,
• the discharge from liability of the members of the Board of Directors and the President and CEO
• the number of members on the Board of Directors

• the remuneration payable to the members of the Board of Directors and the principles for indemnifying travel expenses

At the Annual General Meeting, the following shall be elected:

• the members of the Board of Directors and, when necessary, deputy members
• the auditor and, when necessary, deputy auditor

BOARD OF DIRECTORS

The Board of Directors is responsible for the company's governance and the appropriate organisation of the company's operations. The Board comprises at least three and up to six members. The Board members are elected by the General Meeting for one year at a time. The Board elects a chairman from among its members. The Board of the parent company of Valoe Group determines the composition of the Boards of its subsidiaries.

MAIN TASKS OF THE BOARD OF DIRECTORS

Under the Limited Liability Companies Act, the Board of Directors is responsible for the administration of the company and the appropriate organization of its operations. The Board of Directors is responsible for the appropriate arrangement of the control of the company accounts and finances. The Board is responsible for controlling and supervising the company's management; appointing and dismissing the President and CEO; approving the company's strategic goals, budget, total investments and their allocation, and bonus schemes; deciding on long-term contracts and the principles of risk management; ensuring the operation of the management system; approving the company's vision, values and organization model; approving and publishing interim reports, stock exchange releases, annual report and financial statements; determining the company's dividend policy; and summoning the General Meeting. It is the Board's duty to promote the best interest of the company and all its shareholders.

The Board of Directors convened 52 times in 2017. The attendance rate of the Board members was 100 percent. The attendance rate of each Board member is mentioned below in the item Composition of the Board of Directors.

BOARD COMMITTEES

In 2008, the Company's Board of Directors decided to discontinue the nomination and remuneration committee, as the addressing of these issues does not require preparation of matters by a group smaller than the entire Board of Directors. The same procedure was followed in 2017.

The company's Board of Directors has not set up a separate audit committee because the scope of the company's business does not require matters related to financial reporting and supervision to be prepared by a group smaller than the entire Board of Directors. The Board of Directors handles the tasks of the audit committee.

COMPOSITION OF THE BOARD OF DIRECTORS

The Annual General Meeting held in 2017 elected four members to the Board of Directors.

Hannu Savisalo

• Chairman of the Board since 2009
• b. 1946, M.Sc. (Eng.), Industrial Counsellor (a Finnish honorary title)

• Chairman of the Board of Savcor Technologies Oy, Member of the Board of Directors of Savcor Communications Pty Ltd and Savcor Invest B.V.

• 4,067,688 shares in Valoe Corporation through Savcor Communications Pty Ltd, Savcor Invest B.V. and Savcor Technologies Oy. 147,500 options connected to the option scheme 2015.

• The attendance rate at the Board meetingsin 2017 was 100 percent.

Iikka Savisalo

• member of the Board since 2009
• b. 1972, BBA(Accounting)
• CEO of Valoe Corporation
• 4,067,688 shares in Valoe Corporation through Savcor Communications Pty Ltd, Savcor Invest B.V. and Savcor Technologies Oy. 132,500 options connected to the option scheme 2015.
• The attendance rate at the Board meetingsin 2017 was 100 percent.

Ville Parpola

• Vice Chairman and Independent member of the Board since 2015
• b. 1972, LL.M.
• Chairman of Board of Directors of Tonfisk Design Oy, Oy Marville Ab and Lumonator Oy
• Ville Parpola is an entrepreneur and works as a lawyer at his own company. He has a long experience in Valoe Corporation. He worked as Vice President, Legal Affairs, also in Valoe's predecessors in PMJ Automec Oy and Cencorp Corporation in 1999 – 2010.
• Parpola owns directly 12,494 shares and through Oy Marville Ab 23,518 shares in Valoe Corporation. He has 97,500 options connected to the option scheme 2015.
• The attendance rate at the Board meetingsin 2017 was 100 percent.

EVALUATION OF THE INDEPENDENCE OF BOARD MEMBERS

The Board of Directors evaluates its members' independence of the company and major shareholders. Based on the evaluation of independence carried out in 2017, the composition of Valoe's Board of Directors does not comply with the recommendation concerning the independence of directorsspecified in the Finnish CorporateGovernance Code.

• The Board member independent of the company and major shareholders was Ville Parpola.
• Iikka Savisalo and Hannu Savisalo exercise control in the Savcor companiesand act in their governing bodies.

The non-compliance is justified by the fact that major part of Valoe's shares are owned by the Savisalo Family members or companies owned by the Savisalo family. Thus, the General Meeting of Valoe has deemed it appropriate to ensure strong owner representation in its Board composition.

PRESIDENT AND CEO

Under the Limited Liability Companies Act, the President and CEO shall attend to the company's day-to-day management in compliance with the instructions and orders given by the Board of Directors. The President and CEO shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner. The President and CEO shall supply the Board of Directors and its members with the information necessary for the performance of the duties of the Board of Directors. The President and CEO may undertake measures that are unusual or extensive in view of the scope and nature of the activities of the company only if so authorized by the Board of Directors or if it is not possible to wait for a decision of the Board of Directors without causing essential harm to the business operations of the company. In the latter case, the Board of Directors shall be notified of the measures as soon as possible. The President and CEO is responsible for the day-to- day operations, budget compliance, the performance of Valoe Group, and the performance of those reporting directly to the President and CEO.

MANAGEMENT TEAM

The Group's Management Team assists the President and CEO in the operative management of the company, prepares matters to be dealt with by the Board of Directors and the President and CEO and plans and oversees the operations of the business units. The Group's Management Team convenes when needed, however, at least twice a month. The Management Team is chaired by the President and CEO.

COMPOSITION OF THE MANAGEMENT TEAM

Iikka Savisalo

• CEO of Valoe Corporation since 2012
• member of the Board since 2009
• b. 1972, BBA(Accounting)
• 4,067,688 shares in Valoe Corporation through Savcor Communications Pty Ltd, Savcor Invest B.V. and Savcor Technologies Oy. 132,500 options connected to the option scheme 2015.

Sami Lindfors

• Senior Vice President, member of the Management Team since 2010
• b. 1975, MBA
• Sami Lindfors joined the Savcor Group in 1996. In 2001, he transferred to Guangzhou, China, as President of Chinese operations and, since 2004, has served as President of Savcor Face China.
• In 2013 he was nominated as CEO of Valoe Clean Energy.
• 57.500 options connected to the stock option scheme 2015.

Seija Kurki

• Chief Financial Officer, member of the Management Teamsince2012
• s. 1963, BBA(Accounting)
• Seija Kurki has held different financial management positions at Savcor Companiessince 1984.
• 1,500 sharesin Valoe Corporation
• 57.500 options connected to the stock option scheme 2015.

REMUNERATION

The General Meeting decides on the remuneration of the Board members and auditors. The Board of Directors decides on and approves the President and CEO's terms of employment with a written contract. The Board of Directors decides on the principles of remuneration for senior management. The Board of Directors annually approves, if appropriate, an incentive system for the Company's employees.

The Board of Directors has decided not to set up separate committees since the scope of the Company's business and the size of the Board of Directors do not require matters to be prepared by a group smaller than the Board of Directors. Therefore, the task of preparing the remuneration of the Board of Directors has not been assigned to the nomination committee and the task of preparing the remuneration of other executives has not been assigned to the remuneration committee.

RENUMERATION OF THE BOARD OF DIRECTORS

The Annual General Meeting held in spring 2017 decided that an annual remuneration of EUR 40,000 be paid to both the Chairman and the Vice Chairman of the Board of Directors and an annual remuneration of EUR 30,000 be paid to the Board members. In addition, travel expenses are indemnified in accordance with Valoe Corporation's travel policy. The Board members do not have fringe benefits or other benefits outside their remuneration.

REMUNERATION OF THE PRESIDENT AND CEO AND OTHER MANAGEMENT TEAM MEMBERS

The Company's President and CEO is Iikka Savisalo. The period of notice on the President and CEO agreement is six months, both for the Company and for Iikka Savisalo. Should Iikka Savisalo terminate the President and CEO agreement for a reason not attributable to the Company, the Company shall not be liable to pay Iikka Savisalo any other compensation than the notice period pay. If the Company cancels the President and CEO agreement, the Company shall not be liable to pay Iikka Savisalo the abovementioned severance pay or any other compensation.

The Board of Directors decides on the principles of remuneration of the members of the Management Team. The remuneration system consists of a monthly salary, options and an annual bonus.

The salaries, fees and fringe benefits to President and CEO Iikka Savisalo in 2017 totalled EUR 168,000.00. In 2017, the salaries, fees and fringe benefits to the Management Team members totalled EUR 289,393.95. No remuneration was paid to the members of the Management Team under the bonus scheme in 2017.

BONUS SCHEMES FOR EMPLOYEES

Valoe has in place a salary-based bonus scheme for management and other employees based in Finland. The Board of Directors decides on the application of the bonus scheme annually. Depending on the job, the maximum amount payable under the bonus scheme 2018 can vary between 8 and 12 percent of the person's regular annual salary. The amount payable to the President and CEO and other executives under the bonus scheme can be up to 15 percent of their regular annual salary.

The payment of the amount under the bonus scheme is linked to the realization of the company's business targets and those set for the person's field of responsibility. In addition, indicators related to processes, personal goals and projects are used.

In 2015 the Board of Directors of Valoe resolved the terms and conditions of a stock option scheme. The maximum total number of stock options issued is 650,000 and they entitle their owners to subscribe for a maximum total of 650,000 new shares in the company. The stock options will be issued for free. The Board of Directors shall annually decide upon the distribution of the stock options to the key employees of the Group. Of the stock options, 250,000 are marked with the symbol 2015A, 200,000 are marked with the symbol 2015B and 200,000 are marked with the symbol 2015C.

INSIDERS AND INSIDER ADMINISTRATION

Valoe has in place insider rules complying with the guidelines for insiders approved by NASDAQ OMX Helsinki Ltd. According to the insider rules, insiders, persons under their guardianship and corporations under their control are not permitted to trade in the Company's shares and options during a period of 30 days prior to the publication of its financial results (closed window period).

The Company's statutory insiders include the members of the Board of Directors, the President and CEO, the auditors and the accounting firm's auditor with principal responsibility. In addition, the Company's permanent insiders include, as specified insiders, the members of the Management team and specified persons from the Group's financial and other administration. Persons involved in corporate transactions or other projects that affect the value of the Company's shares are included in the Company's project-specific insiders and are subject to a temporary prohibition of trading.

DESCRIPTION OF THE MAIN FEATURES OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS PERTAINING TO THE FINANCIAL REPORTING PROCESS

CONTROL ENVIRONMENT

Valoe's business idea

Valoe Corporation specializes in the clean energy, especially in photovoltaic solutions. Valoe provides automated production technology for solar modules based on the company's own technology; production lines for modules; solar modules and special components for solar modules.

Environmental Policy

The company complies with the environmental legislation in force. The company aims to take environmental issues into consideration in management systems and decision-making.

Planning and monitoring processes

The Group's operations are planned and reviewed annually using a strategic planning process and a budgeting process. The implementation of plans and the development of the business environment are monitoring in connection with monthly reports, quarterly reports and financial statements. At Valoe Group, risk analysis and risk management are part of the annual strategic planning process and day-to-day operations. The purpose of internal control and risk management is to ensure the effective and profitable operations of the company, reliable information and compliance with the relevant regulations and operating principles.

Internal Control Activities

Authority and responsibility are assigned to persons responsible for budget compliance and to line organization supervisors, in accordance with their roles and duties. Compliance with laws and regulations is ensured using internal guidelines. The objectives of internal control include operational targets, financial reporting and compliance with laws and regulations.

Board of Directors

• Defining the operating principles of internal control
• Monitoring the performance of internal control
• Approving the company's risk management principles
• Reviewing auditors' reports
• Determining the company's bonus scheme

President and CEO

• Monitoring the existence and performance of internal control in practice
• Ensuring that operations are in compliance with the company's values
• Adjusting operating principles and policies
• Ensuring the appropriate and efficient use of resources
• Determining control mechanisms (approval processes, balancing and reporting)
• Determining risk management principles andmethods

Chief Financial Officer

• Management accounting: monitoring and analysis of performance
• Financial accounting andreporting
• Maintenance and development of planning processes
• Ensuring liquidity

Auditor

• Statutory audit
• Expanded audit at the Board's separate request
• Reporting to the Board

Internal control and risk management

Valoe's Board of Directors is responsible for the control of the Company's accounts and finances. The Board is responsible for internal control, while the President and CEO handles the practical arrangement and monitors the efficiency of internal control. Business management and control are taken care of using a Group-wide reporting and forecasting system. Due to the small size of the company and the limited scope of its business operations, Valoe does not have an internal auditing organization or an audit committee. The Board aims to evaluate and continuously develop the company's risk management, internal control and management processes, also by using the interim audits and internal control reports prepared by external auditors in connection with interim reports.

The purpose of risk management is to ensure that any significant business risks are identified and monitored appropriately. The Company's business and financial risks are managed centrally by the Group's financial department, and reports on risks are presented to the Board of Directors as necessary.

Reporting System

Valoe prepares its consolidated financial statements and interim reports in compliance with the International Financial Reporting Standards (IFRS) adopted in the EU. The report of the Board of Directors and the parent company's financial statements have been prepared in accordance with the Accounting Act and the guidelines and published opinions of the Accounting Board.

In accordance with the reporting system, the CEO reports to the Board of Directors monthly on the operations, performance and deviations from the budget and adjusted forecasts (monthly report) of the Group and its business units; quarterly on the operating result based on the interim report/financial statements; and immediately on any significant changes in the business environment. The President and CEO reports to the Board of Directors regularly on the implementation of the company's strategy and long-term plans.

The CFO is responsible for Group reporting. Accounting for the Finnish Group companies and consolidated financial statements is carried out in the financial department of Valoe. Accounting and reporting for foreign subsidiaries are carried out using local, qualified accounting firms or other external experts.

The accuracy of reporting is ensured by using financial reporting guidelines, maintaining the professional skills of employees, ensuring the reliability of information systems, using normal internal control mechanisms and an expanded audit. Any deviations from the budget or plans detected in reports are investigated.

The CFO and external auditors are responsible for verifying the accuracy of the financial reporting.

Communications

The Board of Directors and the President and CEO are together responsible for the Group's communications. The President and CEO is responsible for communications within the company.

Monitoring

The performance of internal control is evaluated regularly in connection with management and control measures, and separately upon the completion of audit reports. Monitoring measures carried out continuously include comparing the actual and targeted figures in financial reports, various balancing measures, and the monitoring of the regularity of operational reports. The Board's annual plan includes planning and monitoring meetings. Information systems are, for the most part, established, and their reliability is regularly assessed by an external expert

Auditing

The auditor is elected for one term at a time by the Annual General Meeting. The term ends at the end of the following Annual General Meeting. Authorized Public Accountants KMPG Oy Ab, with Petri Kettunen, Authorized Public Accountant, acted as the company's auditor until the annual general meeting held in 2017. At the annual general meeting held 14 June 2017 Auditus Tilintarkastus Oy, with Heidi Pirttijoki, Authorized Public Accountant, was elected as the auditor of the company. In 2017 the fees to the auditors totalled EUR 44,657.85.

VALOE CORPORATION

Corporate Identity Number 0749606-1 Incorporated in Mikkeli, Finland www.valoe.com

CONTACT

Insinöörinkatu 5 FI-50150 Mikkeli

Puhelin: +358 20 7747 788

DIRECTORS

Hannu Savisalo (Chairman) Ville Parpola (Vice Chairman and Independent Board Member) Iikka Savisalo (Board Member)

CEO

Iikka Savisalo

SECURITIES EXCHANGE LISTING

NASDAQ OMX Helsinki Oy Listing Identity VALOE

AUDITOR

Auditus Tilintarkastus Oy Tehtaankatu 13 FI-11170 RIIHIMÄKI Tel: +358 010 328 4800