6. Changes in disclosure
The consolidated income statement shows an additional separate item “other financial result” within the scope of the financial result. This additional item contains the net result from financial assets designated as at fair value through profit or loss as well as those classified as held for trading. In the prior year, this result was included in the item interest and similar income.

On the balance sheet, the deferred items that were individually shown on the prior year’s balance sheet are now included in “IV. Other receivables and assets” and “V. Other current liabilities”.

7. Intangible assets
Purchased intangible assets are recognized at cost and – with the exception of goodwill – are subject to regular straightline amortization, their useful lives ranging between 4 and 15 years. Expenses on research incurred upon generation of intangible assets are immediately recognized as an expense. The same applies as regards development expenses because research and development are iteratively linked and reliable severability therefore does not exist. Sustained impairments are taken into account by extraordinary amortization.

Goodwill – including that from capital consolidation – is subjected to an annual impairment test in accordance with IFRS 3 and IAS 36 and 38. As in prior years, the impairment test per December 31, 2008 again showed that goodwill recognized is not impaired.

For the purpose of the impairment tests, the goodwill’s carrying amounts were assigned to the respective cash generating unit (CGU) “wafer-production”.

Prior to and, for lack of devaluation, also after the impairment test, the carrying amount of the goodwill assigned to the CGU “wafer production” amounted or amounts to k€ 29,587 (prior year: k€ 29,587).

Recoverable amounts were assessed as fair value less cost to sell. Determination was carried out via discounted cash flow procedures. Cash flow forecasts based on the most up-to-date planning approved by management were used for determining the recoverable amount. The forecasts, in turn, were based on the basic assumptions stated below. Basic assumptions are those that, if subjected to change, make for the highest level of sensitivity as regards the recoverable amount of the CGU.

With regard to the CGU “wafer production”, the forecasts are based on the following basic assumptions:

• Prices for raw materials (silicon) decreasing in the short and medium term; basis of this assumption are the long-term contracts concluded with silicon manufacturers.
• Increase of sales volume to at least 1,000 MW in 2011; basis of this assumption is the current expansion of capacities at the German and US locations as well as the market expectations and supply contracts already in existence.
• Annual decrease of the sales’ market prices in a high one-digit percentage range; basis of this assumption are relevant third party market surveys.

Cash flow forecasts for the CGU “wafer production” were derived from the company’s detailed budgeting for a five-year period. For the period beyond that, an extrapolation was performed on the basis of the last detailed forecast year. In doing so, a growth rate of 2.5% (prior year: 3%) was assumed in accordance with growth expectations for SOLARWORLD AG from long-term external surveys.

For determining the recoverable amount, the future cash flows of the CGU “wafer production” were discounted using a risk adequate discounting rate after taxes of some 9.4 % (prior year: 9.3%). External analysts of SOLARWORLD AG corroborate this interest rate.

8. Property, plant and equipment
Property, plant and equipment are measured at cost less regular physical depreciation. Cost comprises all individual expenses directly attributable to the manufacturing process as well as appropriate proportions of the necessary cost of materials and manufacturing overhead. In addition, cost includes depreciation caused by manufacturing and the manufacturing-related pro-rata costs for company retirement benefit plans as well as the voluntary social benefits of the company. Administration costs are considered to the extent to which they can be attributed to manufacturing. Cost also includes – in addition to the purchase price after reduction of discounts, rebates and cash discounts – all directly attributable costs incurred to bring the asset to a location and condition necessary for it to be capable of operating in the manner intended by management. Borrowing expenses are not capitalized.

With regard to own work capitalized in this connection, we refer to item 24.

Useful lives between 15 and 45 years are used as a basis for buildings while buildings and fixtures on leasehold land are depreciated in accordance with the terms of the respective lease agreements or a lesser useful life. Technical equipment and machinery is predominantly assessed with useful lives of up to 10 years. Factory and office equipment is depreciated over a period of 3 to 5 years if subjected to a common level of wear and tear.

Leased property, plant and equipment subject to economic ownership, i.e. cases in which the lessee basically carries all risks and rewards connected with the leased object, are, in accordance with IAS 17, recognized at market value to the extent to which the present value of the lease payments does not turn out to be lower. Depreciation expenses and useful lives equal those of comparable acquired assets.

In accordance with IAS 36, intangible assets and property, plant and equipment are subject to extraordinary depreciation per balance sheet date if impairment is indicated and if the then performed impairment test shows that the recoverable amount of the asset fell below the carrying amount. Irrespective of such indications, an impairment test is performed annually as regards assets assigned to a goodwill-bearing CGU. Insofar, we refer to item 7 above. No indications for impairment of the other essential assets arose in the course of the business year.

9. Investments measured at equity
Investments in other companies accounted for using the equity method are recognized on the balance sheet at cost in consideration of changes that occurred after the acquisition date regarding the Group’s participation in the investee’s equity, of the hidden reserves and burdens recognized at acquisition as well as of the unrealized proportionate intercompany results from transactions to the investee. The goodwill connected with the investment is included in the carrying amount of the investment and is subject to neither regular amortization nor separate impairment tests.

The consolidated income statement contains the Group’s share in the profit or loss of the investee, the effects of the development of the disclosed hidden reserves and burdens included. This concerns profit allocable to the investor and, thus, profit after tax and minority interests in the investee’s subsidiaries. The Group recognizes any changes recognized directly in the investee’s equity to the extent of its share and, if applicable, shows this in the scope of the change in equity statement. Unrealized intercompany results from transactions of the investee to the Group are eliminated in accordance with the latter’s share in the investee.

The financial statements of the associate companies are prepared as per the same balance sheet date as those of the parent. To the extent to which it is necessary, adjustments are made to conform the associates’ accounting policies to those of the investor.

After application of the equity method, the Group determines whether it is necessary to recognize any additional impairment loss with respect to the Group’s investment. As per each balance sheet date, the Group determines whether there is any evidence indicating that the share in an associate could be impaired. If this is the case, the difference between the recoverable amount of the share in the associate and the carrying amount of the share is recognized in profit or loss.

10. Inventories
Inventories include raw materials and supplies, work in process and finished goods, merchandise and prepayments for inventories. Purchased inventories are recognized at acquisition cost that, depending on the type of inventory, is determined either on the basis of average costs or in accordance with the first-in-first-out (FiFo) method. Inventories of the Group’s own making are recognized at production cost. In addition to the individual costs, cost includes adequate proportions of the necessary cost of materials and manufacturing overhead based on regular capacity utilization of the production facilities. Cost also includes depreciation caused by manufacturing which can be directly allocated to the manufacturing process and, to the extent to that they are manufacturing-related, pro-rata expenses for company retirement benefit plans and voluntary social benefits. Administration costs are taken into account to the extent to that they concern manufacturing. Borrowing costs are not taken into account.

Measurement per balance sheet date occurs at the respective lower amount of cost on the one hand side and net realizable value on the other. The latter is the estimated sales proceed of the final good realizable in the normal course of business less estimated costs until completion of the good as well as estimated necessary distribution costs.

Finished goods and merchandise are disclosed as one line item on the balance sheet due to the prevailing manufacturing circumstances in both company and industry.

Some of the prepayments recognized in inventories were paid in US dollar. Measurement was carried out at historic rate as per payment date because the prepayments are no monetary items in accordance with IAS 21.16. Though these prepayments are stipulated to be non-interest bearing, the circumstances, however, imply that the respective agreements contain a financing component, and therefore an implicit or matched maturity interest rate is compounded.

11. Trade receivables
Trade receivables are accounted for at nominal value. Should doubts exist with regard to the collectability of the debt, the receivables are recognized at lower realizable value. In part, allowances are made using a contra account. Receivables stated in foreign currencies are accounted for at an average rate of bid rate and asked price per balance sheet date. The decision whether an allowance is made via contra account or by directly reducing the carrying amount depends on the probability of the expected loss.

Receivables from construction contracts were accounted for in accordance with the percentage-of-completion-method as set forth by IAS 11.

We refer to our statements in item 22 (revenue and expense recognition).

12. Other receivables and assets
As a basic principle, other receivables and assets are accounted for at nominal value. Identifiable individual risks and general credit risks are taken into consideration by making corresponding value adjustments.

13. Other financial assets
Other financial assets mainly include securities. These are categorized either as financial assets “measured at fair value through profit or loss”, “held-to-maturity investments”, “financial assets available for sale” or “loans and receivables”. Upon initial recognition, they are measured at fair value plus transaction costs. This does not, however, apply to financial assets categorized as “measured at fair value through profit or loss” as these are initially recognized at fair value devoid of transaction costs.

As per balance sheet date, no securities categorized as “held-to-maturity investments” exist.

Securities are “measured at fair value through profit or loss” if they are either designated as such or “held for trading”.

Securities are categorized as “held for trading” if they were acquired with the intention to sell them in the short term.

They are designated as “at fair value through profit or loss” if they are part of a portfolio that is evaluated and managed on the basis of fair values. Acquisition and sale of securities take place with regard to revenue-optimized liquidity management and are, for the most part, centrally managed by SOLARWORLD AG.

Financial assets “at fair value through profit or loss” are recognized at fair value. Each profit or loss resulting from measurement is recognized with effect on income. The recognized net gain or loss also includes possible dividends and interest of the financial asset.

Securities categorized as “financial assets available for sale” are recognized at fair value. Any profit or loss resulting from the measurement is recognized in the scope of the IAS 39 reserve, thereby not affecting profit or loss.

As a general rule, fair values recognized correspond with the market prices of the financial assets. Should these figures be unavailable, they are calculated in application of measurement methods based on discounted cash flow analyses and observable current market parameters. If corresponding market parameters are unavailable, fair values are estimated in consideration of indicative evaluations and other information available.

Securities categorized as “loans and receivables” are measured in accordance with the effective interest method at amortized cost less possible impairments.

In consideration of IFRIC 14 and IAS 19, SOLARWORLD AG capitalized liability insurances in other financial assets. These insurances serve as insolvency insurance with regard to early retirement obligations. Recognition is based on the insurance company’s statements regarding the asset value and conducted in the amount in that the insurance value exceeds the amount of the early retirement obligations (plan asset surplus).

14. Liquid funds
Liquid funds include cash and cash equivalents in the form of cash accounts held and current investments made with banks that fall due within three months when acquired. They are categorized as “loans and receivables” and measured at amortized cost less possible impairments in accordance with the effective interest method.

15. Assets and liabilities of assets held for sale and discontinued operations
Individual noncurrent assets, asset groups or assets of discontinued operations are recognized as “assets held for sale” if their carrying amounts are largely realized via sales transactions as opposed to via continued usage and if, additionally, they meet the criteria set forth in IFRS 5. Regular depreciation or amortization on these assets ceases. Impairments are only recognized if the fair value less costs to sell is lower than the carrying amount. Any impairment previously recognized needs to be reversed if the fair value less costs to sell is increased later on. The addition is limited to the impairments previously recognized for the respective assets.

The item “liabilities of assets held for sale” includes liabilities that are part of a discontinued operation.

Expenses and income from discontinued operations as well as gains and losses from their measurement at fair value less costs to sell are disclosed as result of discontinued operations on the face of the income statement. Gains and losses from the sale of discontinued operations are also recognized in this line item.

16. Financial liabilities
At first-time recognition, financial liabilities are measured at fair value. The transaction costs directly attributable to the acquisition are also recognized with regard to all liabilities that are, subsequently, not measured at fair value through profit or loss.

Trade liabilities and other original financial liabilities are measured at amortized cost in accordance with the effective interest method.

Upon first-time recognition, financial guarantees issued by the Group are recognized at fair value less transaction costs directly connected with issuing the guarantee. Subsequently, the liability is measured at the best estimate of the expenses required for meeting the current obligation per balance sheet date or at the higher recognized amount less accumulated amortization.

17. Derivative financial instruments and hedging
Financial derivatives not included in an effective hedging relationship in terms of IAS 39 are categorized as “held for trading” and are, thus, measured at fair value through profit or loss.

SOLARWORLD Group utilizes derivatives for hedging interest rate risks and changes in foreign currency exchange rates resulting from operating activities, financial transactions and investments.

Upon first-time recognition and subsequent measurement, derivatives are measured at fair value. The recognized fair values of derivative financial instruments for which there is an active market correspond with the market price. Derivatives for which no active market exists are measured in application of accepted measurement models on the basis of discounted cash flow analyses and by reverting to current market parameters.

SOLARWORLD Group applies hedge accounting in accordance with IAS 39 for cash flow hedges.

The decisive factor for recognition of changes in fair value – recognition on the balance sheet through profit or loss or recognition in equity not affecting profit and loss – is whether or not the derivative is included in an effective hedging relationship in accordance with IAS 39. If hedge accounting is not applied, changes of the derivatives’ fair values are immediately recognized through profit or loss. If, however, an effective hedge relationship in terms of IAS 39 exists, the hedging relation as such is accounted for.

At inception of the hedging relation, the relation between hedged item and hedging instrument is documented including risk management objectives. In addition, both at inception and in the course of the hedge, documentation is carried out continuously as to whether the designated hedging instrument is highly effective with regard to compensation of cash flow changes in the hedged item.

The effective part of the change in fair value of a derivative or a non-derivative financial instrument designated as a hedging instrument is recognized in equity. Profit or loss falling upon the ineffective part is immediately recognized through profit or loss in either “other operating income” or “other operating expenses”.

Amounts recognized in equity are transferred to the income statement in that period in which the hedged item becomes effective through profit or loss. Recognition on the income statement occurs within the same item in which the hedged item is recognized. If, however, a hedged forecast transaction leads to the recognition of a non-financial asset or a non-financial liability, the profits and losses previously recognized in equity are derecognized and taken into consideration at initial determination of cost of the asset or liability.

Hedge accounting is discontinued if the hedging relationship is revoked, the hedging instrument expires or is sold, terminated or exercised or is no longer appropriate for hedging purposes. All profits or losses recognized in equity at this time remain in equity and are only accounted for through profit or loss once the forecast transaction is also recognized on the income statement. If the transaction is no longer expected to occur, the entire profit recognized in equity is immediately transferred to recognition on the income statement.

18. Accrued investment grants
Investment grants accounted for are accrued in application of IAS 20 and released to income over the course of the useful lives of the respective assets. Thus, the item is allocated to the periods of useful lives of the subsidized property, plant and equipment, and gradually increases future business years’ pre-tax income. This increase in income occurs alongside amortization and depreciation expenses of corresponding amounts, which are, therefore, neutralized upon balancing. In addition, tax effects will arise whereas income- increasing reversals of the accrued investment grants occur income tax exempt to the extent to which they result from tax-exempt investment grants.

Income from investment tax credits also falls into the application of IAS 20. Claims for tax credits are recognized if there is reasonable assurance that the material requirements for receipt are met and they are granted. The claims are measured at present value.

19. Retirement benefits
Group retirement benefits predominantly occur via defined contribution plans. The company pays contributions into a state or private pension fund on the basis of statutory or contractual obligations or on a voluntary basis and, once the contributions are paid, has no further benefit obligations. The annual contributions are recognized as personnel expenses.

A defined benefit plan exists in one case. Pension provisions are measured in accordance with the actuarial projected unit credit method as required by IAS 19 for defined benefit plans. Actuarial profits and losses are recognized as income or expense if the net cumulative unrecognized actuarial gains and losses at the end of the previous reporting period exceed 10 % of the present value of the defined benefit obligation at that date.

The interest proportion included in the pension expenses is recognized in the financial result.

20. Other provisions
Other provisions are recognized to the extent to which an obligation to third parties exists that will probably make for a future outflow of resources and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the extent of the obligation. Provisions for obligations that will probably not make for an outflow of resources in the year following the reporting year are recognized at present value of the expected outflow of resources.

If a provision cannot be set up because some criteria is not met but the possibility of an outflow of resources embodying economic benefits is all but remote, the respective obligations are recognized as contingent liabilities.

21. Other liabilities
Accrued liabilities included in the balance sheet item “other liabilities” are recognized for services and goods received that do not yet meet the requirements for payment. With regard to these liabilities, future outflow of resources is, on the merits, certain and is merely subject to minor uncertainties as regards the amount. Measurement is conducted at best estimate of the expenditure required.

A proportion of the customer advances recognized in other liabilities is denominated in US dollar. As the customer advances are no monetary items in terms of IAS 21.16, they were recognized at historic exchange rates valid at the date of collection. Though these customer advances are stipulated to be non-interest bearing, the circumstances, however, imply that the respective long-term agreements contain a financing component, and therefore a compounding was conducted at matched maturity or implicit interest rate.

22. Revenue and expense recognition
Revenue from the sale of goods or products is recognized at the time the significant risks and rewards are transferred if – as commonly true – the other requirements (no continued involvement, reliable estimation of the amount of revenue and probability of inflow) are also met.

Revenue from project business is recognized in accordance with the percentage of completion method set forth by IAS 11. Under this method, a pro-rata profit realization is recognized by reference to the state of completion if the assessment of the state of completion, total costs and total revenue of the respective contract can be reliably estimated in terms of IAS 11. The state of completion is assessed in accordance with the cost-to-cost method pursuant to IAS 11.30a. If the stated requirements are met, the overall contract revenue is recognized on a pro-rata basis in compliance with the state of completion. Contract expenses include the costs directly attributable to the contract and a proportion of overhead. Borrowing expenses are not recognized.

Grants related to expenses are recognized on an accrual basis through profit corresponding to the occurence of the respective expenses.

Operating expenses are recognized when goods and services are received or at the time of their occurrence respectively. Provisions for warranties are set up upon realization of the corresponding revenue. Interest income and expenses are recognized on an accrual basis.

23. Revenue
Revenue and its allocation to the business segments and regions can be taken from segment reporting (item 36) in these consolidated notes. Consolidated revenue consist of the following products and services:

Project proceeds basically result from the construction of major solar plants.

As per balance sheet date, project proceeds include finalized and invoiced projects as well as projects in process whose revenue is accrued in accordance with the percentage of completion method as stated in IAS 11. Per balance sheet date, this revenue amounts to k€ 2,944 (prior year: k€ 3,549).

24. Own work capitalized
For one, own work capitalized concerns the construction of photovoltaic plants operated by the Group companies Go!sun GmbH & co. kg and SOLAR FACTORY GmbH.

The item also concerns costs of own work directly attributable to bringing new production facilities to the condition necessary for them to be capable of operating.

25. Other operating income

Income from other grants related to expenses results from an agreement of SOLARWORLD industries deutschland GmbH (swid) and shell group according to which SWID was awarded grants for expenses from anticipated under-utilization, necessary restructuring measures and the purchase of silicon.

The research and development grants received are subject to a number of requirements. In accordance with today’s knowledge, we will be able to meet all of these requirements. Thus, repayment obligations are not expected to arise.

Foreign currency gains primarily consist of gains from exchange rate movements in between the time of origin and payment of foreign currency receivables and liabilities and foreign currency gains from measurement at closing rate. Respective foreign currency losses are recognized in other operating expenses.

26. Cost of materials

27. Personnel expenses

28. Amortization and depreciation
The composition of amortization and depreciation can be taken from the fixed assets movement schedule. Of the additions to accumulated amortization and depreciation recognized in the fixed assets movement schedule in an amount of k€ 55,166 (prior year: k€ 42,807), amortization and depreciation of discontinued operations make for k€ 0 (prior year: k€ 753).

29. Other operating expenses

30. Research and development costs
Research and development costs of SOLARWORLD Group made for a total amount of k€ 13,024 (prior year: k€ 10,802), the largest part of which results from personnel expenses.

31. Financial result

a) Income from investments measured at equity

b) Interest and similar income

Income from interest includes interest from interest-bearing securities, fixed term deposits and other bank balances categorized as “loans and receivables” or “financial assets available for sale”.

c) Interest and similar expenses

Interest expenses exclusively consist of interest payable for financial liabilities categorized as “measured at amortized cost”. They result from bank loans, from financial instruments issued by SOLARWORLD AG and from interest-bearing liabilities of SOLARWORLD Group towards its employees in the scope of an internal plan with regard to a profit-oriented employee compensation.

d) Other financial result

The net gains and losses of the category “designated at fair value through profit or loss” are attributable to changes in credit risks in amount of approximately m€ -30 (prior year: m€ 0).

Derivatives being part of a hedging relationship are not taken into account when it comes to the presentation of net gains and losses. Derivatives that are not accounted for as hedging instruments are included in the measurement category “financial assets and financial liabilities held for trading”.

32. Taxes on income
The following chart shows the composition of recognized tax expenses devoid of discontinued operations:

Taxes paid or owed on income in the individual countries and deferred taxes are recognized as taxes on income. Deferred taxes are determined with regard to temporary differences between the amounts of assets and liabilities as stated on the IFRS and tax balance sheet, consolidation entries and realizable tax loss carryforwards. Calculation is based on the tax rates to be expected in the individual countries per realization date. The tax rates are based on the statutory regulations effective or passed per balance sheet date.

Deferred taxes are only recognized for tax loss carryforwards if their utilisation is sufficiently probable in the medium term (within the next five years). No deferred taxes were recognized with regard to tax loss carryforwards at SOLARWORLD INDUSTRIES AMERICA lp originating from a time prior to its acquisition by SOLARWORLD AG, as it is assumed that these cannot be utilized by SOLARWORLD AG.

For the rest, all deferred tax assets on existing tax loss carryforwards are regarded utilizable because sufficient positive future results can be expected on the basis of continuously updated plans and the Group’s strategic alignment. As in the prior year, no impairments were made with regard to deferred tax assets.

The following chart shows unbalanced and balanced deferred tax assets and liabilities with regard to accounting differences in the different balance sheet items as well as with regard to tax loss carryforwards:

Deferred tax assets and liabilities are set off if they concern the same tax authority and the same tax subject.

In connection with hedge accounting as well as in connection with the accounting for financial assets available for sale, deferred tax assets of k€ 282 (prior year: k€ 673) and deferred tax liabilities of k€ 4,508 (prior year: k€ 2,268) resulting in neither profit nor loss were recognized in equity at balance sheet date.

The substantial differences between nominal and effective tax rates in the course of the business year and the prior year with regard to continued operations are illustrated below:

With effect from 2008 on, due to the Corporation Tax Reform Act 2008 SOLARWORLD AG calculates with an income tax rate of 30%.

33. Substantial expenses and income relating to other periods
As in the prior year, substantial expenses and income relating to other periods did not exist in the reporting year 2008.

34. Income after taxes from discontinued operations
In late 2007, SOLARWORLD AG concluded an agreement regarding the sale of 65 % of the shares in its subsidiary gällivare photovoltaic ab, which was executed in January 2008.

The components of the result from discontinued operations separately recognized on the income statement are shown below.

The disclosures of the prior year concern income and expenses after expense and income consolidation entries.

Cash flows attributable to discontinued operations are presented in item 59.

35. Earnings per share
Earnings per share are calculated as ratio of the consolidated net income and the weighted average of the number of shares in circulation during the business year. The key figure “diluted earnings per share” was not applicable as option rights or conversion privileges are not outstanding.

36. Segment reporting

a) Business segments
The business segments constitute the primary format for the Group’s segment reporting. In 2008 as in the prior year, SOLARWORLD Group operated in four vertically integrated business sectors on a worldwide scale:

• Manufacturing of silicon wafers (wafer production and sale),
• Manufacturing of solar cells (cell production),
• Manufacturing of solar modules (module production),
• Solar module trade (trade).

Inter-segment sales and revenue are carried out in compliance with the arm’s length principle. Administration services as well as the exertion of holding functions are, in part, charged by way of cost allocations.

Segment assets and segment liabilities shown below are initially disclosed including intragroup receivables and liabilities and then reconciled to the Group’s consolidated values.

Segment revenue and results illustrated below exclusively concern continued operations. Revenue and result from discontinued operations soley concern the segment “module”. We refer to item 34.

b) Geographical segments
Geographical segments constitute the secondary segment reporting format. The following chart illustrates the allocation of consolidated revenue in accordance with regional sales markets irrespective of the goods’ place of production. The carrying amounts of the segment assets as well as the investments in property, plant and equipment and intangible assets are recognized in accordance with the location of the assets.

37. Development of intangible assets and property, plant and equipment
Composition and development of intangible assets and property, plant and equipment can be taken from the following chart:

38. Intangible assets
Goodwill recognized in intangible assets results from the acquisition of DEUTSCHE SOLAR AG in 2000. The goodwill is attributed to the Cash Generating Unit (CGU) ”wafer-production“.

39. Property, plant and equipment
As per balance sheet date, leased property, plant and equipment to be capitalized did not exist.

40. Investments measured at equity

The investment in the listed SOLARPARC AG is held via SOLARWORLD AG and concerns a 29 % share in assets, result and voting rights. Aside from regenerative power generation, the company’s operations include management, project planning, conceptual design and marketing of solar parks and wind power plants. An impairment of the at equity value in an amount of k€ 4,051 became necessary due to decreased stock market valuation. SOLARWORLD AG’s profit share amounted to k€ 18 (prior year: k€ 545) in the reporting year. Attributable equity amounted to k€ 7,262 (prior year: k€ 7,522). The fair value of the investment in SOLARPARC AG derived from its stock market price amounted to k€ 8,285 (prior year: k€ 16,229) at balance sheet date.

The investment in JOINT SOLAR SILICON VERWALTUNGS GmbH (jssi GmbH) is held via SOLARWORLD AG and concerns a 49 % share in the assets and result. In 2008, jssi GmbH has taken over the business acitivities of Joint Solar Silicon GmbH & Co. KG (JSSI KG) by way of upstream merger. In prior year, the only function of jssi GmbH has been the one of the partner with unlimited liability. Therefore, prior year figures refer to JSSI KG. jssi GmbH’s purpose is the joint development of solar silicon production with Evonik Degussa GmbH, which holds the remaining shares. SOLARWORLD AG’s share in the loss amounted to k€ 1,175 (prior year: k€ 1,208). Attributable equity amounted to k€ 11,166 (prior year: k€ 5,783).

The investment in RGS DEVELOPMENT B.V. is held by DEUTSCHE SOLAR AG. The interest concerns a 35 % share in the assets and result. The company’s purpose is the joint development of a new process for producing silicon wafers for use in solar cells. There are two further Dutch shareholders, holding 35 % and 30 %. DEUTSCHE SOLAR AG’s share in the loss for the year amounted to k€ 991 (prior year: k€ 1,078). Attributable equity amounted to k€ 546 (prior year: k€ 1,986).

SOLARWORLD AG holds the investment in SCHEUTEN SOLARWORLD SOLICIUM GmbH, which concerns a 50 % share in the assets and result. The company’s purpose is the joint development of a process for processing metallurgical silicon to high purity solar silicon. SOLARWORLD AG’s share in the loss amounted to k€ 157 (prior year: k€ 216). Attributable equity amounted to k€ 335 (prior year: k€ -8).

The investment in gällivare photovoltaic ab is held by SOLARWORLD AG. After selling 65 % of the shares in January 2008, SOLARWORLD AG holds a mere 35 % per December 31, 2008 and therefore has a 35 % share in the investee’s assets and results. The company operates a module plant. SOLARWORLD AG’s share in the profit for the year amounted to k€ 1,376 (prior year: k€ 0). Attributable equity amounted to k€ 3,613 (prior year: k€ 0).

The investment in SOLARWORLD KOREA LTD. is held by SOLARWORLD AG and concerns a 50 % share in the assets and result. The company also operates a module plant. SOLARWORLD AG’s share in the loss amounted to k€ 721 (prior year: k€ 0). Attributable equity amounted to k€ 5,204 (prior year: k€ 0).

The investments in JOINT SOLAR SILICON VERWALTUNGS GmbH, RGS DEVELOPMENT B.V., SCHEUTEN SOLARWORLD SOLICIUM GmbH and SOLARWORLD KOREA LTD. are jointly controlled entities in terms of IAS 31 as all significant decisions regarding business and finance policy can only be made in unison.

We refer to item 61 as regards the disclosures on related parties.

The following chart includes summarized financial information regarding the investments measured at equity:

41. Deferred tax assets
Deferred tax assets are calculated in accordance with IAS 12 (Income Taxes). Impairments on deferred tax assets have not been required. The development of deferred tax assets is included in the comments on tax expenses.

42. Inventories

Finished goods of the Group in terms of the aforestated itemization only concern photovoltaic modules and wafers at DEUTSCHE SOLAR AG.

Of the prepayments, a partial amount of k€ 333.972 (prior year: k€ 233.271) will not be due to be set off with raw material supplies for more than 12 months after balance sheet date.

43. Trade receivables

The following chart illustrates the aging structure of the receivables:

We did not identify any indications requiring valuation allowances for those trade receivables not impaired. Approximately half of the receivables included in the cluster ”between 91 and 180 days“ were paid in the course of preparation of the financial statements. Those receivables included in the cluster ”between 181 and 360 days“ concern security deposits in connection with completed major projects.

Valuation allowances developed as follows:

44. Income tax receivables
Tax receivables concern refund claims for corporation and trade tax paid or corresponding foreign taxes due to excessive prepayments and necessary changes to the tax assessment of previous business years.

45. Other receivables and assets

Financial assets included in other receivables and assets are not significantly past due. The residual receivable from the sale of gällivare photovoltaic ab was settled within the period of preparation of the financial statements.

46. Other financial assets
Accrued interest receivables, fixed-term deposits and securities in the form of investment funds, assignable loans and certificates are recognized in this item. They fall upon the following asset categories:

Money market and similar investments include shares in an investment fund (Oppenheim ABS Fund) that are categorized as financial assets designated as at fair value through profit or loss. Payment of the return price and its calculation and publication was temporarily suspended per balance sheet date and until the time of preparation of the financial statements. Until the end of the preparation of the financial statments, an active market did also not exist for most of the securities included in the fund’s portfolio. In addition, no valid market data was available for measuring the fund shares in application of the discounted cash flow method. Thus, starting point for determining the fair value of the fund shares was an indicative value determined by the fund management company while this indicative value, in turn, was derived from indicative measurements of the portfolio’s individual securities. For validating this value, alternative computations were carried out on the basis of discounted cash flow procedures in application of market data from different sources. Likewise, development of the fund management company’s indicative value after the balance sheet date was assessed. In consideration of these analyses, fund shares were measured at k€ 23,238 (prior year: k€ 55,027) per balance sheet date. This amount equals a valuation ranging 13 % below the one that would result in application of the fund management company’s indicative value.

Moreover, SOLARWORLD AG’s securities portfolio contains an assignable loan of an international business bank with a nominal value of m€ 32.5. The security is categorized as financial asset designated as at fair value through profit or loss. In the meantime, the debtor filed for insolvency due to the international financial crisis. On the basis of an actual purchase proposal, the security was recognized at k€ 1,300 (prior year: k€ 30,250) per balance sheet date. For the rest and as regards the investment strategy, measurement and risks, we refer to our comments on financial instruments in items 5, 13 and 58.

Other financial assets include accrued interest receivable as well as liability insurances in an amount of k€ 1,051 the latter being recognized in compliance with IFRIC 14 and IAS 19.

47. Liquid funds
Liquid funds almost entirely concern bank balances. As per balance sheet date, these were invested in – mostly short-term – fixed term deposits and day-to-day money at different banks.

48. Assets and liabilities of assets held for sale

The prior year’s assets and liabilities of discontinued operations concern the assets and liabilities of gällivare photovoltaic ab. In this regard, we also refer to our comments in item 34. The disclosures concern assets and liabilities after elimination of intercompany accounts.

Property, plant and equipment held for sale concern several facilities that are no longer employed in the manufacturing or research process and are scheduled for sale in the short run. Impairments and losses of k€ 1,332 were recognized with regard to assets held for sale. These mainly result from research facilities of the Munich research location, which was shut down in the course of the reporting year. The remaining amount equals the expected net realizable value and results from market observations with regard to used machinery of this kind. Impairments and losses are recognized in other operating expenses.

49. Equity

Subscribed capital
Per balance sheet date, the capital stock amounts to m€ 111.72 (prior year: m€ 111.72) and exclusively comprises common stock, a total of 11,720,000 non-par bearer shares.

The shareholders’ meeting of May 24, 2007 decided an increase in capital stock from m€ 55.86 to m€ 111.72 from company resources. The capital increase was entered in the commercial register on June 22, 2007.

Authorized capital
The shareholders’ meeting of May 25, 2005 authorized the Executive Board to increase – upon approval of the Supervisory Board – the capital stock by a total of € 2,100,000.00 until December 31, 2009. After partial utilization of the authorization granted by the shareholders’ meeting of May 25, 2005 in the scope of a capital increase in 2006, the remaining approved capital amounts to € 1,510,000.00.

At the shareholders’ meeting of May 24, 2006, the Executive Board was authorized to increase – upon approval of the Supervisory Board – the capital stock by a total of € 5,472,500.00 until December 31, 2010.

At the shareholders’ meeting of May 24, 2007, the Executive Board was authorized to increase – upon approval of the Supervisory Board – the capital stock by a total of € 20,947,500.00 until December 31, 2011.

At the shareholders’ meeting of May 21, 2008, the Executive Board was authorized to increase – upon approval of the Supervisory Board – the capital stock by a total of € 27,930,000.00 until December 31, 2012.

Conditional Capital
SOLARWORLD AG does not have any conditional capital.

Own shares
By resolution of the shareholders’ meeting of May 21, 2008, the Executive Board was authorized to purchase own shares. In accordance with § 71 para. 1 No. 8 AktG, the authorization is subject to a fixed-term and expires per 12 midnight of November 21, 2009, and is limited to an extent of up to 10 % of the capital stock. The earlier authorization for acquisition of own shares, granted by resolution of the shareholders’ meeting of May 24, 2007, was revoked as of the new authorization taking effect.

Other reserves

Exchange reserve
The exchange reserve includes differences arising from currency translation in the course of translating financial statements of foreign subsidiaries.

IAS 39 reserve
An amount of k€ 9,148 of the reserve are gains and losses from hedging relations that were classified as highly effective in the scope of cash flow hedges. Also included is an amount of k€ 286 resulting from the change in fair value of assets available for sale. With regard to deferred taxes set off against the IAS 39 reserve, we refer to item 32.

Dividend suggestion
The Executive Board suggests the distribution of a dividend of € 0.15 per share for the reporting year 2008. The payment of this dividend depends on the approval of the shareholders’ meeting in May 2009 and will, if approved by the shareholders, amount to some m€ 16.8.

50. Noncurrent and current financial liabilities

Bank loans are hedged by customary chattel mortgages of property, plant and equipment and inventories as well as by land charge creation in an amount of m€ 24,3 (prior year: m€ 35,2) that are the respective group companies’ responsibility.

Other financial liabilities contain an amount of k€ 42 for a financial guarantee issued by SOLARWORLD AG.

51. Accrued investment grants
The item includes accrued investment subsidies and investment grants as well as accrued tax credits, even to the extent to which they are to be reversed in the course of the following year because they exclusively concern property, plant and equipment.

The investment subsidies and investment grants are subject to a number of requirements. Based on today’s knowledge, all of those requirements will be met. Thus, repayment obligations are not expected to arise.

52. Noncurrent and current provisions

The provision for warranties is set up for specific individual risks, for the general risk of being called upon in accordance to statutory warranty regulations and performance guarantees granted with regard to photovoltaic modules sold. The provision for the risk of being called upon for performance guarantees is set up in an amount of .25 % of all of SOLARWORLD Group’s module revenue. Due to the noncurrent nature of the provision (performance guarantees are granted for a period of 25 years), it is subject to compounding at matched maturity interest rate.

The provision for building restoration obligations concerns tenant fixtures that have to be removed by SOLARWORLD Group after expiration of the lease term. Due to the noncurrent nature of the provision, it is subject to compounding at matched maturity interest rate.

Other provisions include provisions for risks of litigation in an amount of k€ 2,555 (prior year: k€ 0), which concern possible claims from pending legal disputes.

Provisions for pending losses from onerous contracts include expected losses from rental and service agreements.

Pension provisions
Pension provisions include promises of retirement benefits to employees of the Group on the basis of direct compensation. The pension claims earned depend on the amount of pay at the time of retirement.

The following measurement parameters were uniformly used as a basis for calculating the DBO (defined benefit obligation):

The Heubeck standard tables RT 2005 G were used with regard to mortality and invalidity.

Reconciliation of the DBO with the balance sheet is illustrated below:

The following chart illustrates the DBO’s development:

Unrecognized actuarial gains (+) and losses (-) are the result of:

53. Other noncurrent and current liabilities

54. Deferred tax liabilities
Deferred tax liabilities entirely result from accounting policies for recognition and measurement of assets and liabilities that differ from tax principles. The item’s development is included in the comments on tax expenses.

55. Income tax liabilities
The item includes corporation and trade tax assessed by the tax authorities and calculated or estimated by the group companies as well as corresponding foreign taxes resulting from tax laws, including those amounts that will probably result from tax field audits performed.

With regard to potentially generated future taxable profits of SOLARWORLD INDUSTRIES AMERICA lp, SOLARWORLD Group is additionally burdened with German corporation tax plus solidarity surcharge irrespective of American taxation. This might make for future tax payments in a maximum amount of k€ 19,244 for SOLARWORLD Group. No current or deferred tax liabilities had to be recognized in this respect as these tax payments neither concern the current period or previous periods nor result from temporary differences.

56. Other financial obligations

Per February 29, 2008, SOLARWORLD AG issued an absolute guarantee in an amount of k€ 12,667 for SOLARPARC AG to Deutsche Bank AG, Düsseldorf. The guarantee was accounted for in compliance with the regulations concerning financial guarantees. The respective amount is disclosed in current financial liabilities (item 50).

57. Contingencies and events after the balance sheet date
A comprehensive presentation of corporate risks and events after the balance sheet date is included in the group management report which, in accordance with German laws and regulations, is to be prepared and published at the same time as these consolidated financial statements. Amongst others, the group management report goes into detail with regard to the expectations for future development of selling prices and the overall market.

58. Financial instruments

a) Capital management
A comprehensive presentation of the principles and objectives regarding the Group’s capital management is included in the group management report that, in accordance with German laws and regulations, is to be prepared and published at the same time as these consolidated financial statements. The details are given in the scope of the Group’s financial position.

b) Principles and objectives of financial risk management
With regard to its assets, liabilities and future transactions already set and planned, SOLARWORLD Group is exposed especially to risks from changes of exchange and interest rates. Objective of financial risk management is the limitation of these market risks by way of operating and finance-oriented activities.

For this purpose, harmonization processes are carried out across the Group on a regular basis during which the hedging strategy is aligned with the current situation and uniform group requirements are determined. Selected derivative and non-derivative financial instruments are utilized depending on the respective risk assessment, planning ability regarding future transactions and current market situation. As a basic principle, however, only those risks are addressed that have consequences on the Group’s cash flow.

Derivative financial instruments are exclusively used as hedging instruments but not for trading or speculation purposes. To minimize default risks, hedging agreements are only concluded with leading financial institutions that have a credit rating in the investment grade area.

With regard to the investment of liquid funds, SOLARWORLD Group aims at attaining a rate of return slightly exceeding the money market level. Thus, SOLARWORLD Group basically invests free liquid funds in financial investment products in the form of sight deposits (fixed-term deposits as well as day-to-day money) with financial institutes, investment funds, assignable loans and investment certificates. To limit the risks from changes in market prices, the investments are limited to financial investment products whose risk structure can be allotted to the money or debt securities market. Moreover, central management and broad diversification of the securities portfolio with regard to different market risks works against the establishment of risk concentrations. To minimize default risks, promissory notes and investment certificates are purchased only from leading financial institutions that have a credit rating in the investment grade area.

In the course of the international financial crisis, SOLARWORLD AG has noticeably adjusted its investment policies in favor of sight deposits at German business banks and government bonds.

The financial policy basics are continuously coordinated by the Executive Board and supervised by the Supervisory Board. Implementation of the financial policies and ongoing risk management is managed by the respective departments, which report to the Executive Board on a regular basis.

c) Currency risks
SOLARWORLD Group’s currency risks mainly result from financing measures and operating activities. Foreign currency risks are hedged to the extent to which they influence the group’s cash flows. On principle, risks that result from the translation of assets and liabilities of foreign subsidiaries into the group reporting currency are not hedged. However, hedging of these risks is not entirely ruled out in the future.

In the financing sector, foreign currency risks result from the issuance of senior notes (US Private Placement) in US dollar that, however, were fully hedged by application of an interest/currency swap.

In the operational sector, the individual group companies mostly handle their operations in utilization of the respective functional currency. However, an increasing number of transactions between group companies and at equity investments are conducted in US dollars. Thus, SOLARWORLD Group is increasingly exposed to currency risks. In addition, SOLARWORLD Group is exposed to foreign currency risks in connection with foreign currency transactions already set and planned. These mainly concern transactions in US dollars in connection with supply of raw materials and sale of products. Due to exchange rate-dependant escalator clauses (annual adjustment), they are generally limited.

The existing currency risks are, in part, hedged by way of derivative (exchange rate futures) and non-derivative financial instruments (currency reserves).

For presentation purposes of market risks, IFRS 7 requires sensitivity analyses that show the consequences of hypothetical changes of relevant risk variables on result and equity. In addition to currency risks, SOLARWORLD Group is also subjected to interest rate and market price risks. Periodic consequences are determined by linking the hypothetical changes of the risk variables and the financial instruments’ portfolio per balance sheet date. This is carried out under the assumption that the year-end portfolio is representative of that of the overall year.

Exchange risks in terms of IFRS 7 arise from financial instruments that are denominated in a currency other than the functional currency and are of the monetary type. Differences from the translation of financial statements into group currency caused by exchange rate changes remain unconsidered. In principle, all non-functional currencies in which SOLARWORLD Group holds financial instruments are considered relevant risk variables.

The significant non-derivative financial instruments aside from, in part, liquid funds, are either denominated in functional currency or are translated into functional currency by way of using derivatives. Hence, exchange rate changes basically influence the result only with regard to the liquid funds denominated in foreign currency. Interest income and expenses from financial instruments are also either directly recognized at functional currency or transferred to functional currency by way of using derivatives. Thus, effects on the result cannot emerge in this regard.

However, upon utilization of hedging instruments that are involved in effective cash flow hedge relationships for hedging currency risks, changes in exchange rates have consequences on the hedging reserve (IAS 39 reserve) recognized in equity. As these effects are not caused by currency rate change effects, a sensitivity analysis is not carried out.

Had the Euro been revalued (devalued) towards the US dollar by 10 % per December 31, 2008, the result would have been k€ 1,435 (prior year: k€ 344) lower (higher).

d) Interest rate risk
In the scope of determining the financial policy, the Executive Board decided to take up financial liabilities subject to variable rates only in exceptional cases. The original interest-bearing financial liabilities of SOLARWORLD Group are therefore basically either fixed-interest ones or transferred to fixed interest liabilities via use of derivates. All non-derivative financial liabilities are measured at amortized cost. Thus, the non-derivative interest-bearing financial liabilities are not subject to significant change of interest rate risks in terms of IFRS 7.

Due to the use of hedging instruments that are involved in an effective cash flow hedging relationship for hedging changes of interest rates, however, a change in interest rate level affects the hedging reserve (IAS 39 reserve) recognized in equity. As this is not caused by interest rate risk effects, a sensitivity analysis is not carried out.

Had the market interest rate level been 100 basis points higher (lower) per December 31, 2008, the result would have k€ 240 (prior year: k€ 352) lower (higher).

e) Other price risks
SOLARWORLD Group has a securities portfolio that is subject to various price change risks. The securities are mainly accounted for at fair value. Thus, changes in market prices directly affect profit and loss or the IAS 39 reserve.

Had the market price level of the securities included in the portfolio been lower (higher) by a total of 5 % per December 31, 2008, the result and equity would have been lower (higher) by k€ 3,994 (prior year: k€ 26,428) and k€ 3,482 (prior year: k€ 0), respectively.

f) Default risks
With one exception (compare item 46), the credit ratings of our promissory notes’ and certificates’debtors ranged at Aa (source: Moody’s) per balance sheet date. For the rest, SOLARWORLD Group invested most of its free liquidity in sight deposits at German financial institutions.

In detail, SOLARWORLD Group has the following financial investments:

1. Sight deposits in an amount of m€ 498
2. Assignable loans from financial institutions amounting to m€ 265 that are accounted for with a value of m€ 231.6.
3. Other securities
   Oppenheim ABS Fund m€ 23.3
   Government bonds m€ 69.7

With regard to all supplies to customers, collateral is required depending on type and amount of the respective service, credit ratings / references are collected or historical data from previous business relations – especially as regards payment behavior – is used for avoiding default in payment. To further limit default risks, receivables from module sales are mostly hedged via credit insurances. Hence, the default risk is regarded rather remote.

For the rest, the maximum default risk equals the carrying amounts.

g) Liquidity risks
For SOLARWORLD Group, liquidity risks arise from the obligation to redeem liabilities in full and in due time. It is therefore the task of the cash and liquidity management to assure the individual group companies’ liquidity at any time.

Cash management for operating activities is carried out in a decentralized manner within the individual business units. SOLARWORLD AG predominantly balances the respective requirements and surpluses regarding the individual units’ means of payment in a centralized way by granting and accepting intergroup loans. Central cash management determines the group-wide financial resources requirements on the basis of business planning. Due to available liquidity and existing credit lines, SOLARWORLD Group is not exposed to significant liquidity risks.

Promissory note loans and senior notes issued by SOLARWORLD AG contain regulations that will grant creditors the right to demand early redemption of the loans if certain financial ratios are not met (covenants). The respective relevant key data is constantly monitored and reported to the Executive Board by group controlling. In the course of the business year, these ratios were continuously exceeded and there are no indications at hand that suggest they might not be met in the future.

The following chart shows the future undiscounted cash flows of financial liabilities that affect the future liquidity status of SOLARWORLD Group.

Interest and redemption payments are taken into account. Interest and redemption payments are based on the contractually stipulated interest and redemption payments. The interest rates last specified prior to December 31, 2008 were used with regard to financial instruments subject to variable rates. The offset cash flows of the respective measurement unit are recognized to the extent to which derivative financial instruments are in an effective hedging relationship with financial liabilities.

h) Fair values, carrying amounts and residual terms of financial instruments by categories
The following chart shows the fair values and carrying amounts of the financial assets and financial liabilities included in the individual balance sheet items:

Trade receivables include receivables from construction contracts in an amount of k€ 4,359 (prior year: k€ 6,413).

Most of the trade receivables, other receivables and assets, liquid funds, trade payables as well as the most significant part of the other liabilities in the scope of IFRS 7 have short residual terms. Thus, their carrying amounts per balance sheet date nearly equal their fair values.

Other liabilities include financial liabilities to employees from an internal plan regarding the profit-oriented employee compensation. The liabilities are subject to variable interest rates. Therefore, the fair value at balance sheet date equals the carrying amount.

i) Net gains and losses by measurement category
Net gains and losses of the measurement categories ”financial assets designated as at fair value through profit or loss“ and ”financial assets held for trading“ can be taken from other financial result in item 31. In addition to results from fair value measurement, they also include interest, dividend and currency effects.

In addition to losses from exchange effects mentioned below, net gains and losses of the measurement category ”loans and receivables” mainly contain allowances in an amount of k€ 1,024 (prior year: k€ 604). The latter are included in other operating expenses.

With respect to the measurement categories ”loans and receivables“ and ”financial liabilities measured at amortized cost“, net gains and losses also include losses from currency effects which were not allocated to the individual categories for reasons because of cost and benefit consideration. The balance made for losses from currency effects in an amount of k€ 2,447 (prior year: k€ 2,238). Gains and losses from currency effects are recognized in other operating income and other operating expenses, respectively.

In addition to part of the mentioned losses from currency effects, gains from repayment of financial liabilities in an amount of k€ 1,429 need to be considered in net results of ”financial liabilities measured at amortized cost“. These gains are recognized in ”other financial income“.

Thus, net losses from the measurement categories ”loans and receivables“ and ”financial liabilities measured at amortized cost“ in total amount to k€ 2,042 (prior year: k€ 2,842).

With regard to ”financial assets available for sale“ k€ 286 (prior year: k€ 0) were recognized in the IAS 39 reserve thereby resulting in neither profit nor loss in addition to interest income of k€ 409 (prior year: k€ 0) recognized through profit and loss.

j) Hedging
SOLARWORLD Group concluded an interest rate swap (”static pay – variable receipt“) with a nominal volume of k€ 40,000 for hedging the cash flow risk of a variable interest loan, the term of the swap expiring at the end of 2013. The variable interest bank loan was designated hedged item. This hedging is aimed at transforming the variable interest bank loan in fixed interest financial liabilities. The fair value of the interest rate swap amounts to k€ -1,100 (prior year: k€ 411) at balance sheet date.

For hedging existing currency risks from senior notes denominated in US dollar, SOLARWORLD Group has five cross currency swaps (”static pay in € – static receipt of USD“), the nominal volume of which amounts to a total of kUSD 175,000. The senior notes denominated in US dollar were designated hedged items. The hedging is aimed at transforming the US dollar liabilities regarding the nominal amount as well as the open interest payments to financial liabilities in €. The fair values of the swaps amounted to a total of k€ 6,924 (prior year: k€ -7,427) at balance sheet date.

Proof of prospective effectiveness is provided by way of the critical terms match method. The retrospective effectiveness is regularly provided by means of the hypothetical derivative method. The results of the retrospective effectiveness tests ranged within a scope of 80 to 125 %. Thus, highly effective hedging can be assumed. An unrealized gain of k€ 9,148 (prior year: k€ 3,302) was therefore recognized in equity per balance sheet date.

59. Comments on the cash flow statement

Cash flow from discontinued operations
The cash flow statement shows cash flows including those of discontinued operations. The following cash flow proportions fall upon discontinued operations:

Cash flow from operating activities
Cash flow from operating activities was prepared in accordance with the indirect method. At first, the pretax result used as a starting point is adjusted by earnings and expenses that are not cash-effective. This makes for the cash flow from operating results. Changes regarding prepayments and customer advances, inventories, securities categorized as held for trading and remaining net assets are considered in cash flow from operating result and changes in net assets.

Customer advances and prepayments particularly concern noncurrent selling agreements regarding silicon wafers and noncurrent purchase agreements regarding elemental silicon concluded in a timely connection. The following chart illustrates the cash inflows and outflows resulting therefrom:

Interest paid and interest received are included in cash flow from financing activities and cash flow from operating activities, respectively.

Cash flow from investment activities
Cash flow from investment activities includes payments for asset investments as well as investment grants received for this purpose. In addition, the item contains payments in connection with financial investments and cash inflows from the disposal of 65 % of the shares in the subsidiary gällivare photovoltaic ab.

Cash flow from financing activities
Cash flow from financing activities takes into account the increased financial debts. Dividend distributions to the shareholders of SOLARWORLD AG are included as payments. Lastly, interest paid is shown as part of the cash flow from financing activities.

Cash and cash equivalents
Cash and cash equivalents comprise the balance of the liquid funds recognized on the balance sheet in an amount of k€ 431,689 (prior year: k€ 263,862) and of the liabilities due on a daily basis recognized in the item current financial liabilities in an amount of k€ 8,335 (prior year: k€ 0). Part of the prior year’s cash and cash equivalents (k€ 1,718) fell upon discontinued operations.

60. Contingent liabilities
Substantial contingent liabilities did not exist at balance sheet date.

61. Related party disclosures
In the reporting year 2008, the following material transactions involving related parties were carried out:

Administration and commercial property in Bonn was leased from members of the Asbeck family, the annual rent amounting to m€ .6 (prior year: m€ .6). SOLARWORLD AG recognized liabilities of k€ 30 (prior year: k€ 0) at balance sheet date.

In the course of the reporting year, deliveries and services in an amount of m€ 4.8 (prior year: m€ 21.5) were rendered to solarparc group, m€ 5.5 (prior year: m€ 17.8) of which were still unsettled per balance sheet date because one project was brought to account only per year-end and a security deposit for a project of the reporting year 2007 is still outstanding. In addition, SOLARWORLD Group received management and planning services in an amount of k€ 203 (prior year: k€ 195) from SOLARPARC AG.

For interim financing of a project, SOLARWORLD AG issued an absolute guarantee in an amount of k€ 12,667 for SOLARPARC AG to Deutsche Bank AG, Düsseldorf. In the course of the reporting year, SOLARWORLD AG received k€ 326 from SOLARPARC AG for interim financing.

gällivare photovoltaic ab rendered toll manufacturing services in an amount of k€ 15,257 (prior year: k€ 0) for SOLARWORLD Group. Therefrom, liabilities of k€ 5,124 (prior year: k€ 0) existed per balance sheet date. Furthermore, SOLARWORLD Group has received transport services from gällivare photovoltaic ab in amount of k€ 311 (prior year: k€ 0). Therefrom, no liabilities exist any more as of balance sheet date.

In 2008, SOLARWORLD AG issued a short-term loan to a jointly controlled entitiy. As of balance sheet date, the loan amounts to k€ 1,796 (prior year: k€ 0). In the course of the reporting year, SOLARWORLD AG received interest amounting to k€ 10 (prior year: k€ 0) from this jointly controlled entity in this regard. In addition, SOLARWORLD AG made a prepayment to a jointly controlled entity, which, at balance sheet date, is recognized on the balance sheet in an amount of k€ 11,400 (prior year: k€ 0).

SOLARWORLD Group sold cells,raw materials as well as services in an amount of k€ 4,761 (prior year: k€ 472) to jointly controlled entities. Accounts receivable from these transactions amount to k€ 1,138 (prior year: k€ 0) per balance sheet date.

From jointly controlled entities wafers, silicon as well as toll manufacturing services have been purchased in an amount of k€ 6,173 (prior year: k€ 1,149). As of balance sheet date, liabilities from these transactions amount to k€ 343 (prior year: k€ 0).

Deposit obligations with regard to a jointly controlled entity make for liabilities of m€ 1.4 (prior year: m€ 1.5).

The law firm of Schmitz Knoth Rechtsanwälte, Bonn – a party related to the Chairman of the Supervisory Board, Dr. Claus Recktenwald, in terms of IAS 24 – is concerned with SOLARWORLD Group’s legal issues. Upon approval of the Supervisory Board, a total fee amount of m€ .6 (prior year: m€ .4) was rewarded for these services in 2008.

Remuneration of the members of the Executive Board is presented in a separate item or in the remuneration report, which is part of the management report.

All transactions were handled in compliance with the arm’s length principle.

62. Employees
The average number of employees amounted to 1,662 (prior year: 1,410) and falls upon the company’s areas of operation or segments as follows:

Per December 31, 2008, the number of employees amounted to 1,825 (prior year: 1,486), including 83 trainees (prior year: 66).

63. Executive Board and Supervisory Board
For assuming their duties in both parent company and subsidiaries in 2008, the members of the Executive Board received a total remuneration of k€ 2,669 (prior year: k€ 2,504), which includes variable remuneration of k€ 1,815 (prior year: k€ 1,722).

For assuming their duties in both parent company and subsidiaries in 2008, the members of the Advisory Board received remuneration including reimbursements in a total amount of k€ 293 (prior year: 226), each plus statutory VAT. The total includes variable remuneration of net k€ 114 (prior year: k€ 109).

Individualized disclosures regarding the remuneration of the Executive Board are included in the company’s management report.

As in prior year, the Executive Board members are:

Dipl.-Ing. Frank H. Asbeck (Chairman)
Dipl.-Ing. Boris Klebensberger (Operations)
Dipl.-Kfm. tech. Philipp Koecke (Finance)
Dipl.-Wirtschaftsing. Frank Henn (Sales)

At balance sheet date, the Chairman of the Executive Board, Frank H. Asbeck, directly and indirectly held 25 % (prior year: 25 %) of the shares in SOLARWORLD AG.

As in prior year, the Supervisory Board members are:

Dr. Claus Recktenwald (Chairman), Rechtsanwalt and Partner with the partnership Schmitz Knoth, Bonn
Dr. Georg Gansen (Vice-Chairman), Rechtsanwalt / in-house lawyer at Deutsche Post AG, Bonn
Dr. Alexander von Bossel, LL.M (Edinb.); Rechtsanwalt and Partner with CMS Hasche Sigle, Partnerschaft von Rechtsanwälten und Steuerberatern, Cologne

Frank H. Asbeck, Chairman of the Executive Board, is Chairman of the Supervisory Board of DEUTSCHE SOLAR AG as well as of SUNICON AG

Dr. Claus Recktenwald, Chairman of the Supervisory Board, is Chairman of the Supervisory Board of SOLARPARC AG, Vice-Chairman of the Supervisory Board of DEUTSCHE SOLAR AG, Vice-Chairman of the Supervisory Board of SUNICON AG as well as member of the Supervisory Boards of VEMAG Verlags- und Medien Aktiengesellschaft, Cologne, and Wanderer-Werke AG, Augsburg.

Dr. Georg Gansen, Vice-Chairman of the Supervisory Board, is also the Vice-Chairman of the Supervisory Boards of SOLARPARC AG, DEUTSCHE SOLAR AG and SUNICON AG.

Dr. Alexander von Bossel, member of the Supervisory Board, is also a member of the Supervisory Board of SOLARPARC AG.

64. Auditor’s fees
In 2008, the fees of the auditor of the consolidated financial statements, BDO Deutsche Warentreuhand AG Wirtschaftsprüfungsgesellschaft, Hamburg / Bonn, including reimbursement of costs, amount to:

a) Year-end audits k€ 500 (prior year: k€ 535)
b) Other certification and valuation services k€ 11 (prior year: k€ 31)
c) Tax consultancy services k€ 13 (prior year: k€ 59)
d) Other services rendered for the parent company or subsidiaries k€ 4 (prior year: k€ 120)

65. Corporate Governance
On September 29, 2008 and October 20, 2008, Supervisory Board and Executive Board, respectively, issued the statement required by §161 AktG, stating that the recommendations of the “Regierungskommission Deutscher Corporate Governance Kodex” (“Government Commission German Corporate Governance Code”) as announced by the Federal Ministry of Justice were and are complied with. The statement is published on the website of SOLARWORLD AG.

Bonn, 16 March 2009