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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 20-F
      (Mark One)o

Registration statement pursuant to Section 12(b) or
    12(g) of the Securities Exchange Act of 1934orþ

Annual report pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934For the fiscal year ended
    December 31, 2007.oro

Transition report pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934For the transition period
    from          tooro

Shell company report pursuant to Section 13 or 15(d) of
    the Securities Exchange Act of 1934Date of event requiring this
    shell company report   Commission file number:
    001-33107
 CANADIAN SOLAR INC.
 (Exact name of Registrant as
    specified in its charter)
  N/A(Translation of
    Registrants name into English)
  Canada(Jurisdiction of incorporation
    or organization)
  199 Lushan
    Road
    Suzhou New District
    Suzhou, Jiangsu 215129
    Peoples Republic of China
 (Address of principal executive
    offices)
      Bing Zhu,
    Chief Financial Officer
    675 Cochrane Drive
    East Tower, 6th Floor
    Markham, Ontario L3R 0B8
    Tel: (1-905)
    530-2334
    Fax: (1-905)
    530-2001
 (Name, Telephone,
    E-mail
    and/or
    Facsimile number and Address of Company Contact
    Person)
      Securities
    registered or to be registered pursuant to Section 12(b) of
    the Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon shares with no par value

The NASDAQ Stock Market LLC
    (The NASDAQ Global Market)       Securities
    registered or to be registered pursuant to Section 12(g) of
    the Act:
    None
    (Title of Class)
      Securities
    for which there is a reporting obligation pursuant to
    Section 15(d) of the Act:
    None
    (Title of Class)
        27,320,389 common shares issued and outstanding, excluding
    566,190 restricted shares, which were subject to restrictions on
    voting, divided rights and transferability, as of
    December 31, 2007
  o þ
  o þ
  þ o
  Rule 12b-2
  Large
    accelerated filer
    o
    Accelerated filer
    þ
    Non-accelerated filer
    o    þ o o
  Indicate by check mark which financial statement item the
    registrant has elected to follow. Item 17
    o
    Item 18  þ  If Other has been checked in response to the
    previous question, indicate by check mark which financial
    statement item the registrant has elected to follow.
    Item 17
    o
    Item 18  o  Rule 12b-2 o þ
  o o




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##### 





TABLE OF
    CONTENTS
   
 INTRODUCTION


3PART I


5Item 1.


Identity of Directors, Senior Management and
    Advisers


5Item 2.


Offer Statistics and Expected Timetable


5Item 3.


Key Information


5Item 4.


Information on the Company


29Item 4A.


Unresolved Staff Comments


44Item 5.


Operating and Financial Review and Prospects


45Item 6.


Directors, Senior Management and Employees


68Item 7.


Major Shareholders and Related Party
    Transactions


81Item 8.


Financial Information


84Item 9.


The Offer and Listing


85Item 10.


Additional Information


86Item 11.


Quantitative and Qualitative Disclosures About
    Market Risk


93Item 12.


Description of Securities Other than Equity
    Securities


93PART II


93Item 13.


Defaults, Dividend Arrearages and
    Delinquencies


93Item 14.


Material Modifications to the Rights of Security
    Holders and Use of Proceeds


94Item 15.


Controls and Procedures


94Item 16A.


Audit Committee Financial Expert


96Item 16B.


Code of Ethics


96Item 16C.


Principal Accountant Fees and Services


97Item 16D.


Exemptions from The Listing Standards for Audit
    Committees


97Item 16E.


Purchases of Equity Securities by The Issuer and
    Affiliated Purchasers


97PART III


97Item 17.


Financial Statements


97Item 18.


Financial Statements


97Item 19.


Exhibits


98EX-8.1 LIST OF SUBSIDIARIESEX-12.1 CEO CERTIFICATION TO SECTION 302EX-12.2 CFO CERTIFICATION TO SECTION 302EX-13.1 CEO CERTIFICATION TO SECTION 906EX-13.2 CFO CERTIFICATION TO SECTION 906   2




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INTRODUCTION  Form 20-F
  
    CSI, we, us, our
    company and our are to Canadian Solar Inc.,
    its predecessor entities and its consolidated subsidiaries;
    $, US$ and U.S. dollars
    are to the legal currency of the United States;
    RMB and Renminbi are to the legal
    currency of China;
    C$ and Canadian $ are to the legal
    currency of Canada;
     and Euro are to the legal
    currency of the European Union; and
    China and the PRC are to the
    Peoples Republic of China, excluding, for the purposes of
    this annual report on
    Form 20-F
    only, Taiwan and the special administrative regions of Hong Kong
    and Macau.  Form 20-F
  Form 20-F
  FORWARD-LOOKING
    INFORMATION
  Form 20-F
  
    our expectations regarding the worldwide demand for electricity
    and the market for solar power;
    our beliefs regarding lack of infrastructure reliability and
    long-term fossil fuel supply constraints;
    our beliefs regarding the inability of traditional fossil
    fuel-based generation technologies to meet the demand for
    electricity;
    our beliefs regarding the importance of environmentally friendly
    power generation;
    our expectations regarding governmental support for the
    deployment of solar power;
    our beliefs regarding the future shortage or availability of the
    supply of high-purity silicon;
    our beliefs regarding the acceleration of adoption of solar
    power technologies and the continued growth in the solar power
    industry;
    our beliefs regarding the competitiveness of our solar module
    products;
    our expectations with respect to increased revenue growth and
    improved profitability; 3




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
    our expectations regarding the benefits to be derived from our
    supply chain management and vertical integration manufacturing
    strategy;
    our beliefs and expectations regarding the use of upgraded
    metallurgical grade silicon materials (UMgSi) and solar power
    products made of this material;
    our ability to continue developing our in-house solar components
    production capabilities and our expectations regarding the
    timing and production capacity of our internal manufacturing
    programs;
    our beliefs regarding our securing adequate silicon and solar
    cell requirements to support our solar module production;
    our beliefs regarding the effects of environmental regulation;
    our beliefs regarding the changing competitive arena in the
    solar power industry;
    our future business development, results of operations and
    financial condition; and
    competition from other manufacturers of solar power products and
    conventional energy suppliers.   4




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PART I Item 1.  Identity
    of Directors, Senior Management and
    Advisers   Item 2.  Offer
    Statistics and Expected Timetable   Item 3.  Key
    Information  A.  Selected
    Financial Data
  Selected
    Consolidated Financial and Operating Data
  Form 20-F. Form 20-F.
    Year Ended December 31,2003


2004


2005


2006


2007(In thousands of US$, except share and per share data, and
    operating data and percentages)Statement of operations data:Net revenues

$
4,113


$
9,685


$
18,324


$
68,212


$
302,798Net income/(loss)

$
761


$
1,457


$
3,804


$
(9,430
)

$
(210
)Earnings/(loss) per share, basic and diluted

$
0.05


$
0.09


$
0.25


$
(0.50
)

$
(0.01
)Shares used in computation Basic and diluted


15,427,995



15,427,995



15,427,995



18,986,498



27,283,305Other financial data:Gross margin


42.3
%


33.2
%


38.8
%


18.1
%


7.8
%Operating margin


15.6
%


19.0
%


28.5
%


1.6
%


(0.6
)%Net margin


18.5
%


15.0
%


20.8
%


(13.8
)%


(0.1
)%Selected operating data:Products sold (in MW) Standard solar modules

$



$
1.8


$
3.4


$
14.7


$
83.4 Specialty solar modules and products

$
0.7


$
0.4


$
0.7


$
0.2


$
Total

$
0.7


$
2.2


$
4.1


$
14.9


$
83.4Average selling price (in $     per
    watt) Standard solar modules

$



$
3.62


$
3.92


$
3.97


$
3.75   5




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As of December 31,2003


2004


2005


2006


2007(In thousands of US$, except share data)Balance Sheet Data:Total assets


3,053



6,145



27,430



129,634



284,503Long-term debt


















17,866Convertible notes










3,387







75,000Number of shares outstanding


15,427,995



15,427,995



15,427,995



27,270,000



27,320,389
(1)     (1)
    
    Excluding 566,190 restricted shares, which were subject to
    restrictions on voting and dividend rights and transferability,
    as of December 31, 2007.  Exchange
    Rate Information
  Form 20-F Form 20-F
    Noon Buying RatePeriodPeriod

End


Average(1)


Low


High2002


8.2800



8.2770



8.2800



8.26692003


8.2767



8.2772



8.2800



8.27652004


8.2765



8.2768



8.2774



8.27642005


8.0702



8.1940



8.2765



8.07022006


7.8041



7.9723



8.0702



7.80412007


7.2946



7.5806



7.8127



7.2946November


7.3850



7.4212



7.4582



7.3800December


7.2946



7.3682



7.4120



7.29462008January


7.1818



7.2405



7.2946



7.1818February


7.1115



7.1644



7.1973



7.1100March


7.0120



7.0722



7.1110



7.0151April


6.9870



6.9997



7.0185



6.9840May


6.9400



6.9725



7.0000



6.9377June (through June 2)


6.9325



6.9325



6.9325



6.9325     (1)
    
    Annual averages are calculated from month-end rates. Monthly
    averages are calculated using the average of the daily rates
    during the relevant period. 6




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B.
    Capitalization
    and Indebtedness    C.
    Reasons
    for the Offer and Use of Proceeds    D.
    Risk
    Factors  Risks
    Related to Our Company and Our Industry
  The
    current industry-wide shortage of high-purity silicon may
    constrain our revenue growth and decrease our margins and
    profitability.
      If we are
    unable to secure an adequate and cost effective supply of solar
    wafers, solar cells or reclaimable silicon, our revenue, margins
    and profits could be adversely affected.
   7




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Advance
    payments to our polysilicon and silicon wafer suppliers and
    credit term sales offered to some of our customers expose us to
    the credit risks of such suppliers and customers and may
    increase our costs and expenses, which could in turn have a
    material adverse effect on our liquidity.
  and/or
 8




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and/or
  Our
    ability to adjust our materials costs may be limited as a result
    of entering into prepaid, fixed-priced arrangements with our
    suppliers, and it therefore may be difficult for us to respond
    appropriately in a timely manner to market conditions, which
    could materially and adversely affect our cost of revenues and
    profitability.
    Because
    the markets in which we compete are highly competitive and many
    of our competitors have greater resources than us, we may not be
    able to compete successfully and we may lose or be unable to
    gain market share.
     9




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Evaluating
    our business and prospects may be difficult because of our
    limited operating history.
    Our
    quarterly operating results may fluctuate from period to period
    in the future.
    
    the average selling prices of our solar modules and products;
    the availability and pricing of raw materials, particularly
    high-purity silicon and reclaimable silicon;
    the availability, pricing and timeliness of delivery of solar
    cells and wafers from our suppliers and toll manufacturers;
    the rate and cost at which we are able to expand our internal
    manufacturing capacity to meet customer demand and the
    timeliness and success of these expansion efforts;
    the impact of seasonal variations in demand linked to
    construction cycles and weather conditions, with purchases of
    solar products tending to decrease during the winter months in
    our key markets, such as Germany, due to adverse weather
    conditions that can complicate the installation of solar power
    systems;
    timing, availability and changes in government incentive
    programs and regulations, particularly in our key and target
    markets;
    unpredictable volume and timing of customer orders, some of
    which are not fixed by contract but vary on a purchase order
    basis; 10




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
    the loss of one or more key customers or the significant
    reduction or postponement of orders from these customers;
    availability of financing for on-grid and off-grid solar power
    applications;
    unplanned additional expenses such as manufacturing failures,
    defects or downtime;
    acquisition and investment related costs;
    geopolitical turmoil within any of the countries in which we
    operate or sell products;
    foreign currency fluctuations, particularly in the Euro,
    U.S. dollar and RMB;
    our ability to establish and expand customer relationships;
    changes in our manufacturing costs;
    changes in the relative sales mix of our products;
    our ability to successfully develop, introduce and sell new or
    enhanced solar modules and products in a timely manner, and the
    amount and timing of related research and development costs;
    the timing of new product or technology announcements or
    introductions by our competitors and other developments in the
    competitive environment; and
    increases or decreases in electric rates due to changes in
    fossil fuel prices or other factors.    The
    reduction or elimination of government subsidies and economic
    incentives for solar power could cause demand for our products,
    our revenues, profits and margins to decline.
     11




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Existing
    regulations and policies and changes to these regulations and
    policies may present technical, regulatory and economic barriers
    to the purchase and use of solar power products, which may
    significantly reduce demand for our products.
      If solar
    power technology is not suitable for widespread adoption, or
    sufficient demand for solar power products does not develop or
    takes longer to develop than we anticipate, our revenues may not
    continue to increase or may even decline, and we may be unable
    to sustain our profitability.
    
    cost-effectiveness, performance and reliability of solar power
    products compared to conventional and other renewable energy
    sources and products;
    availability of government subsidies and incentives to support
    the development of the solar power industry;
    success of other alternative energy generation technologies,
    such as wind power, hydroelectric power, geothermal and biomass;
    fluctuations in economic and market conditions that affect the
    viability of conventional and other renewable energy sources,
    such as increases or decreases in the prices of oil and other
    fossil fuels;
    capital expenditures by end users of solar power products, which
    tend to decrease when the economy slows down; 12




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
    deregulation of the electric power industry and broader energy
    industry; and
    changes in seasonal demands for our products.    The lack
    or unavailability of financing for on-grid and off-grid solar
    power applications could cause our sales to decline.
    We may be
    unable to procure adequate sources of needed capital due to
    market conditions beyond our control, which may adversely impact
    our ability to grow our business.
    
    our future financial condition, results of operations and cash
    flows;
    general market conditions for financing activities by
    manufacturers of PV and related products; and
    economic, political and other conditions in the PRC and
    elsewhere.    Our
    dependence on a limited number of solar wafer, solar cell and
    silicon raw material suppliers could prevent us from timely
    delivering our products to our customers in the required
    quantities, which could result in order cancellations and
    decreased revenues.
   13




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Our
    dependence on a limited number of customers and our lack of
    long-term customer contracts may cause significant fluctuations
    or declines in our revenues.
    
    reduction, delay or cancellation of orders from one or more of
    our significant customers;
    loss of one or more of our significant customers and our failure
    to identify additional or replacement customers; and
    failure of any of our significant customers to make timely
    payment for our products.    Cancellation
    of customer product orders may make us unable to recoup
    prepayments made to suppliers.
    We may
    not be able to manage our expansion of operations
    effectively.
   14




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Technological
    changes in the solar power industry could render our products
    uncompetitive or obsolete, which could reduce our market share
    and cause our revenues and profit to decline.
      We have
    recently begun to focus our efforts on development of and
    expansion into the use of UMgSi as a component of our solar
    products. We cannot assure you that these efforts will yield any
    successful results, if at all.
    We have
    limited experience in the high value-added building integrated
    photovoltaic (BIPV) market and we may be unable to manage the
    growth of our BIPV business or successfully operate in the BIPV
    market.
   15




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We face
    risks associated with the marketing, distribution and sale of
    our PV products internationally, and if we are unable to
    effectively manage these risks, they could impair our ability to
    expand our business abroad.
    
    difficulties staffing and managing overseas operations;
    fluctuations in foreign currency exchange rates;
    increased costs associated with maintaining the ability to
    understand local markets and trends, as well as developing and
    maintaining an effective marketing and distributing presence in
    various countries;
    providing customer service and support in these markets;
    our ability to manage our sales channels effectively as we
    expand beyond distributors to include direct sales to systems
    integrators, end users and installers;
    difficulties and costs relating to compliance with the different
    commercial, legal and regulatory requirements of the overseas
    markets in which we offer our products;
    failure to develop appropriate risk management and internal
    control structures tailored to overseas operations;
    inability to obtain, maintain or enforce intellectual property
    rights;
    unanticipated changes in prevailing economic conditions and
    regulatory requirements; and
    trade barriers such as export requirements, tariffs, taxes and
    other restrictions and expenses, which could increase the prices
    of our products and make us less competitive in some countries.    Our
    future success substantially depends on our ability to
    significantly expand our internal solar components manufacturing
    capacity, which exposes us to a number of risks and
    uncertainties.
    
    the need to raise significant additional funds to purchase raw
    materials and to build additional manufacturing facilities,
    which we may be unable to obtain on commercially viable terms or
    at all;
    delays and cost overruns as a result of a number of factors,
    many of which are beyond our control, including delays in
    equipment delivery by vendors;
    delays or denial of required approvals by relevant government
    authorities;
    diversion of significant management attention and other
    resources; and
    failure to execute our expansion plan effectively.   16




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Our
    business depends substantially on the continuing efforts of our
    executive officers, and our business may be severely disrupted
    if we lose their services.
    Problems
    with product quality or product performance, including defects,
    in our products could damage our reputation, or result in a
    decrease in customers and revenue, unexpected expenses and loss
    of market share.
       17




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Since we
    cannot test our products for the duration of our standard
    warranty periods, we may be subject to unexpected warranty
    expense.
  10-year 25-year 25-year
  Our
    future growth depends in part on our ability to make strategic
    acquisitions and investments and to establish and maintain
    strategic relationships, and our failure to do so could have a
    material adverse effect on our market penetration and revenue
    growth.
     18




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We may
    not succeed in developing and maintaining a cost-effective solar
    cell manufacturing capability.
      We may
    experience difficulty in developing our internal production
    capabilities for ingots and wafers and, if developed, in
    achieving acceptable yields and product performance as a result
    of manufacturing problems.
        We may
    fail to successfully bring to market our new specialty solar
    modules and products, which may prevent us from achieving
    increased sales, margins and market share.
   19




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Our
    failure to protect our intellectual property rights in
    connection with new specialty solar modules and products may
    undermine our competitive position.
    We may be
    exposed to infringement, misappropriation or other claims by
    third parties, which, if determined adversely to us, could cause
    us to pay significant damage awards.
    No. 500-05 071241-028)
 20




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We rely
    on dividends paid by our subsidiaries for our cash
    needs.
    If we are
    unable to attract, train and retain technical personnel, our
    business may be materially and adversely affected.
    Fluctuations
    in exchange rates could adversely affect our business.
      Product
    liability claims against us could result in adverse publicity
    and potentially significant monetary damages.
   21




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Our
    founder, Dr. Shawn Qu, has substantial influence over our
    company and his interests may not be aligned with the interests
    of our other shareholders.
    Compliance
    with environmental regulations can be expensive, and
    noncompliance with these regulations may result in adverse
    publicity and potentially significant monetary damages, fines
    and suspensions of our business operations.
        We may
    not be successful in establishing our brand names among all
    consumers in important markets and the products we sell under
    our brand name may compete with the products we manufacture on
    an OEM basis for our customers.
   22




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If we
    grant employee share options, restricted shares or other
    share-based compensation in the future, our net income could be
    adversely affected.
    There
    have been historical deficiencies with our internal controls and
    there remain areas of our internal and disclosure controls that
    require improvement. If we fail to maintain an effective system
    of internal controls, we may be unable to accurately report our
    financial results or prevent fraud, and investor confidence and
    the market price of our common shares may be adversely
    impacted.
  Form 20-F.
   23




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Risks
    Related to Doing Business in China
  Uncertainties
    with respect to the Chinese legal system could have a material
    adverse effect on us.
    Fluctuation
    in the value of the Renminbi may have a material adverse effect
    on your investment.
    Restrictions
    on currency exchange may limit our ability to receive and use
    our revenues effectively.
   24




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We may
    face a potential risk for failing to comply with certain PRC
    legal requirements.
         25




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Our
    business benefits from certain incentives under PRC tax law and
    regulations. The recent promulgation of the PRC Enterprise
    Income Tax Law and, subsequently, the expiration of, or changes
    to those incentives, as well as the creation or resumption of
    certain types of taxation will result in our having to pay
    additional PRC taxes, which could have a material adverse impact
    on our operations.
           26




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We face
    risks related to health epidemics and other outbreaks.
    Risks
    Related to Our Common Shares
  The
    market price for our common shares may be volatile.
    
    announcements of technological or competitive developments;
    regulatory developments in our target markets affecting us, our
    customers or our competitors;
    actual or anticipated fluctuations in our quarterly operating
    results;
    changes in financial estimates by securities research analysts;
    changes in the economic performance or market valuations of
    other solar power companies;
    addition or departure of our executive officers and key research
    personnel;
    announcements regarding patent litigation or the issuance of
    patents to us or our competitors;
    fluctuations in the exchange rates between the U.S. dollar,
    the Euro and RMB;
    release or expiry of
    lock-up or
    other transfer restrictions on our outstanding common
    shares; and
    sales or perceived sales of additional common shares. 27




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Substantial
    future sales or perceived sales of our common shares in the
    public market could cause the price of our common shares to
    decline.
    Your
    right to participate in any future rights offerings may be
    limited, which may cause dilution to your holdings.
    Our
    articles of continuance contain anti-takeover provisions that
    could adversely affect the rights of holders of our common
    shares.
    
    Our board of directors has the authority, without approval by
    the shareholders, to issue an unlimited number of preferred
    shares in one or more series. Our board of directors may
    establish the number of shares to be included in each such
    series and may fix the designations, preferences, powers and
    other rights of the shares of a series of preferred shares.
    Our board of directors is entitled to fix and may change the
    number of directors within the minimum and maximum number of
    directors provided for in our articles. Our board of directors
    may appoint one or more additional directors to hold office for
    a term expiring no later than the close of the next annual
    meeting of shareholders, subject to the limitation that the
    total number of directors so appointed may not exceed one-third
    of the number of directors elected at the previous annual
    meeting of shareholders.  You may
    have difficulty enforcing judgments obtained against
    us.
   28




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We may be
    classified as a passive foreign investment company, which could
    result in adverse U.S. federal income tax consequences to U.S.
    holders of our common shares.
  non-U.S. corporation
  We incur
    increased costs as a result of being a public company.
   Item 4.  Information
    on the Company  A.
    History
    and Development of the Company      
    CSI Solartronics (Changshu) Co., Ltd., or CSI Solartronics,
    incorporated in November 2001, which has operations located in
    Changshu, China where we manufacture primarily specialty solar
    modules and products;
    CSI Solar Manufacture Inc., or CSI Solar Manufacturing,
    incorporated in January 2005, which has operations in Suzhou,
    China where we manufacture primarily standard solar modules;
    CSI Solar Technologies Inc., or CSI Solar Technologies,
    incorporated in August 2003, which has operations located in
    Suzhou, China where we conduct solar module product development; 29




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
    CSI Central Solar Power Co., Ltd., or CSI Luoyang, incorporated
    in February 2006, which has operations located in Luoyang, China
    where we manufacture solar modules and intend to manufacture
    solar ingots and solar wafers;
    CSI Cells Co., Ltd. (formerly known as CSI Solarchip
    International Co., Ltd.), or CSI Cells, incorporated in June
    2006, which has operations located in Suzhou, China where which
    we manufacture solar cells;
    Changshu CSI Advanced Solar Inc., or CSI Advanced, incorporated
    in August 2006, which has operations located in Changshu, China
    where we intend to manufacture solar modules; and
    CSI Solar Inc., which was incorporated in Delaware in June 2007,
    through which we carry out marketing and sales efforts in the
    United States.    530-2334 530-2001.
    B.
    Business
    Overview  Overview
       30




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
    Expansion of our internal solar cell manufacturing capacity from
    100 to 250MW. We expect to complete this project by the third
    quarter of 2008.
    Construction of a solar ingot and wafer plant in Luoyang, China.
    We expect to complete the initial phase of this project by the
    third quarter of 2008, which will give us an annual solar wafer
    capacity of 40 to 60MW.  e-Modules 30-40MW e-Modules
      Our
    Products
   31




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##### Table of Contents



Standard
    Solar Modules
    Specialty
    Solar Modules and Products
    
    customized solar modules; and
    complete specialty products.        Solar
    Cells
   32




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##### Table of Contents



Solar
    Power Development Projects
          Supply
    Chain Management
   33




---



##### Table of Contents



Silicon
    Raw Materials
        Silicon
    Reclamation Program
   34




---



##### Table of Contents



Toll
    Manufacturing Arrangements
    Solar Wafers.
  Solar Cells.
  Solar
    Module Manufacturing
      
    (1)
    
    Laser cutting is only necessary for smaller-sized modules.       35




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##### Table of Contents



Quality
    Control and Certifications
      Markets
    and Customers
      
    Germany.  The renewable energy laws in Germany
    require electricity transmission grid operators to connect
    various renewable energy sources to their electricity
    transmission grids and to purchase all electricity generated by
    such sources at guaranteed feed-in tariffs. Additional
    regulatory support measures include investment cost subsidies,
    low-interest loans and tax relief to end users of renewable
    energy. 36




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Germanys renewable energy policy has had a strong solar
    power focus, which contributed to Germany surpassing Japan as
    the leading solar power market in terms of annual megawatt
    additions in 2004. According to Solarbuzz, the size of the total
    German market reached 1,328MW in 2007. Our products are used for
    large-size ground mounted solar power field, commercial rooftop
    and residential rooftop installations. The feed-in tariffs for
    rooftop applications less than 30kWh and between 30kWh and
    100kWh was 0.4921 and 0.4682 per kWh, respectively,
    in 2007. Our major customers located in Germany in 2007 are City
    Solar AG, Schüco International KG and pro solar Solarstrom.  
    Spain.  According to Solarbuzz, the Spanish
    market grew 482% and reached 637MW in 2007. In Spain, the actual
    feed-in tariff for solar power energy is fully guaranteed for
    25 years and guaranteed at 80% subsequently. The
    feed-in tariff for applications less than 100kWh was
    0.4404 per kWh for the first 25 years of system
    operation, and 0.3523 per kWh after 25 years of
    system operation in 2007. Spain was our second largest market as
    measured by net revenue generated after Germany in 2007 and is
    expected to remain in this position in 2008.
    Italy.  At the end of 2007, the Italian solar
    market was 90MW. According to Solarbuzz, current feed-in tariff
    rates for systems between 1 and 20kWh are 0.445 per kWh
    for solar electricity generated and consumed onsite and are
    0.460 per kWh for systems between 20 and 50kWh. Further,
    according to Solarbuzz, the Italian market saw an enormous boost
    in large installations in 2007, a trend which is expected to
    continue in 2008.
    China.  China passed the Renewable Energy Law
    in February 28, 2005, which went into effect on
    January 1, 2006. The Renewable Energy Law authorizes
    relevant authorities to set favorable prices for the purchase of
    on-grid solar power-generated electricity, and provides other
    financial incentives for the development of renewable energy
    projects. In January 2006, Chinas National Development and
    Reform Commission further promulgated two implementation rules
    of the Renewable Energy Law, and other implementation rules are
    expected in the future.      
    United States.  There are now six states in the
    U.S. that offer significant incentives, with California
    offering the most preferential incentives. In January 2006, the
    California Public Utilities Commission enacted the California
    Solar Initiative, a $2.9 billion program that will
    subsidize solar power systems by $2.80 per watt. Due to
    excessive demand, this subsidy has been reduced to the current
    $2.50 per watt. Combined with federal tax credits for solar
    power usage, the subsidy may account for as much as 50% of the
    cost of a solar power system. The program will last from 2007 to
    2017 and is expected to dramatically increase the use of solar
    power for on-grid applications in California. We incorporated
    CSI Solar, Inc. to enhance our sales and marketing efforts in
    the U.S.
    Canada.  In March 2006, Canadas largest
    province, Ontario, announced a solar power subsidy, by which a
    fixed price of C$0.42 per kWh is offered for solar power
    transferred to the electrical grid starting in the fall of 2006.
    The program will last 20 years and is expected to
    substantially increase the market for solar power in Ontario. 37




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
    Japan.  According to Solarbuzz, 1.9GW of PV
    systems had been installed, mainly on residential homes, by the
    end of 2007. The Japanese government has a long-term energy goal
    to install 4.82GW of PV by FY2010, and is a signatory to the
    Kyoto Protocol, requiring it to reduce greenhouse gas emissions
    by 6% from the 1990 baseline level by 2012. Japan currently
    funds a number of key programs supporting domestic PV
    installations and has recently announced a plan to begin
    installing PV on federal buildings through 2012.
    South Korea.  The South Korean market reached
    50MW in 2007. The South Korean government has established a
    number of initiatives to enhance self-sufficiency in energy
    supplies and invest in renewable energy systems. Under the
    Public Institution Renewable Obligation Law created in 2004, the
    government has mandated that newly built public facilities
    exceeding 3,000 square meters invest at least 5% of its
    construction expenses in renewable energy systems. Current
    feed-in tariff rates for systems over 30kW are KRW 677.8 per kWh
    and KRW 711.25 per kWh for systems under 30kWh.  Sales
    and Marketing
  Standard
    Solar Modules
    
    Sales contracts.  In late 2007 and early 2008,
    we entered into annual sales and distribution agreements with
    most of our customers and deliver standard solar modules
    according to a pre-agreed monthly schedule. We typically require
    full payment of the contract price by letters of credit or telex
    money transfers prior to shipping. In certain circumstances, we
    provide short term credit sales ranging from 21 to 45 days.
    On rare occasions, we provide medium term credit sales from 60
    to 120 days to creditworthy customers. We may increase
    these sales when expanding into the U.S. market.
    OEM/tolling manufacturing arrangements.  From
    time to time, to address solar wafer and cell shortage issues,
    we enter into OEM/tolling arrangements with our customers.    Specialty
    Solar Modules and Products
   38




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Solar
    Power Development Projects
    Customer
    Support and Service
  10-year 25-year
  Competition
    
    supply chain management;
    strength of supplier relationships;
    manufacturing efficiency;
    power efficiency and performance;
    price;
    customer relationships and distribution channels;
    brand name and reputation; and
    aesthetic appearance of solar module products.   39




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##### Table of Contents



Insurance
    Environmental
    Matters
          Government
    regulation
    Renewable
    Energy Law and Other Government Directives
     40




---



##### Table of Contents



Environmental
    Regulations
    Restriction
    on Foreign Businesses
     41




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##### Table of Contents



Tax
                   42




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##### Table of Contents



Foreign
    Currency Exchange
    
    Foreign Currency Administration Rules (1996), as amended, or the
    Exchange Rules; and
    Administration Rules of the Settlement, Sale and Payment of
    Foreign Exchange (1996), or the Administration Rules;    and/or
  Dividend
    Distribution
    
    Wholly Foreign Owned Enterprise Law (1986), as amended; and
    Wholly Foreign Owned Enterprise Law Implementation Rules (1990),
    as amended.   43




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##### Table of Contents



C.
    Organizational
    Structure    
    D.
    Property,
    Plant and Equipment    
    We have manufacturing facilities in Suzhou that occupy
    approximately 22,908 square meters, under two leases that
    will expire in September 2010. We have the right to renew the
    leases on six-months prior written notice if the terms we
    offer are not less favorable than terms offered by other
    prospective tenants. We also rent offices with an aggregate of
    approximately 40 square meters in Suzhou for our research
    and development and certain administrative personnel under a
    lease expiring in September 2008. In Changshu, we rent our
    facilities of approximately 4,500 square meters under a
    lease that expired in January 2008 and 1,955 square meters
    of manufacturing space under a lease that will expire in
    December 2008.
    CSI Luoyang holds the land use rights certificate for a piece of
    land in Luoyang of approximately 35,345 square meters, on
    which we have constructed a manufacturing facility of
    approximately 4,627.5 square meters for module
    manufacturing and an office building of approximately
    1,915 square meters. CSI Luoyang is currently applying for
    land use rights for a piece of land of approximately
    79,685.125 square meters, on which we plan to construct
    wafer manufacturing facilities.
    CSI Cells holds the land use rights certificate for a piece of
    land in Suzhou of approximately 65,661 square meters. We
    recently built a solar cell facility and completed our first
    solar cell production line in the first quarter of 2007. The
    manufacturing facility has approximately 10,000 square
    meters and we have built an office building of approximately
    3,900 square meters on the same land.
    CSI Advanced holds the land use rights certificate for a piece
    of land in Changshu of 40,000 square meters, on which we
    have built a module manufacturing facility of approximately
    23,480 square meters. Production in this facility began in
    April of 2008.    Item 4A.
    Unresolved
    Staff Comments   44




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Item 5.
    Operating
    and Financial Review and Prospects  You should read the following discussion and analysis of our
    financial condition and results of operations in conjunction
    with our consolidated financial statements and the related notes
    included elsewhere in this annual report on
    Form 20-F.
    This discussion may contain forward-looking statements based
    upon current expectations that involve risks and uncertainties.
    Our actual results may differ materially from those anticipated
    in these forward-looking statements as a result of various
    factors, including those set forth under Item 3. Key
    Information  D. Risk Factors or in other parts
    of this annual report on
    Form 20-F.
  A.
    Operating
    Results    
    availability and price of solar cells and silicon raw materials;
    industry demand;
    government subsidies; and
    product mix and pricing.  Availability and Price of Solar Cells, Wafers and Silicon Raw
    Materials.
     45




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##### Table of Contents



Industry and Seasonal Demand.
    Government Subsidies.
  Product Mix and Pricing.
   46




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##### Table of Contents



Overview
    of Financial Results
    Net
    Revenues
  and/or
    Year Ended December 31,2005


2006


2007Total Net





Total Net





Total NetRegion

Revenues


%


Revenues


%


Revenues


%(In thousands of US$, except percentages)Europe


15,264



83.3



51,981



76.2



286,588



94.7Asia


504



2.8



14,200
(1)


20.8



13,605



4.5America


2,556



13.9



2,031



3.0



2,605



0.8Total net revenues

$
18,324



100.0


$
68,212



100.0


$
302,798



100.0     (1)
    
    $8.3 million of the $14.2 million net revenues were
    generated from a one-time silicon materials sale that took place
    in the fourth quarter of 2006.  Cost of
    Revenues
    
    solar wafers; 47




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##### Table of Contents




    materials used in solar cell production, such as metallic pastes;
    solar cells;
    other materials for the production of solar modules such as
    glass, aluminum frame and polymer backing;
    production labor, including salaries and benefits for
    manufacturing personnel;
    warranty costs;
    overhead, including utilities, production equipment maintenance,
    share-based compensation expenses for options granted to
    employees in our manufacturing department and other support
    expenses associated with the manufacture of our PV
    products; and
    depreciation and amortization of manufacturing equipment and
    facilities, which have increased due to capacity expansion and
    which are expected to increase as we continue expand our
    manufacturing capabilities and construct additional facilities.      10-year 25-year
  Gross
    Profit/ Gross Margin
       48




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Operating
    Expenses
    Selling
    Expenses
    General
    and Administrative Expenses
    Research
    and Development Expenses
     49




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##### Table of Contents



Share-based
    Compensation Expenses
        Years Ended December 31,2005


2006


2007(In thousands of US$, except for percentages)Share-based compensation expenses included in:Cost of revenues






169



2.8



274



3.0Selling expenses






1,945



31.7



2,287



25.1General and administrative expenses






3,942



64.1



6,277



69.0Research and development expenses






89



1.4



264



2.9Total share-based compensation expenses






6,145



100.0
%


9,102



100.0
%     Interest
    Expenses
   50




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##### Table of Contents



Loss on
    Change in Fair Value of Derivatives
    Loss on
    Financial Instruments Related to Convertible Notes
    Income
    Tax Expense
         51




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##### Table of Contents



Critical
    Accounting Policies
     52




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##### Table of Contents



Revenue
    Recognition
    Warranty
    Cost
  10-year 25-year 25-year
  Impairment
    of Long-lived Assets
   53




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##### Table of Contents



Allowance
    for Doubtful Accounts
    Inventories
        work-in-process
    Fair
    value of derivative and freestanding financial
    instruments
     54




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##### Table of Contents



Income
    Taxes
      Share-based
    compensation
    Recent
    Accounting Pronouncements:
     55




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##### Table of Contents



56




---



##### Table of Contents



Results
    of Operations
    Years Ended December 31,2005


2006


2007(In thousands of US$, except percentages)Net revenues: Solar modules

$
18,324



100.0
%

$
68,212



100
%


302,798



100
%Cost of revenues Solar modules


11,211



61.2



55,872



81.9



279,022



92.1Gross profit


7,113



38.8



12,340



18.1



23,776



7.9Operating expenses Selling expenses


158



0.9



2,909



4.3



7,531



2.5 General and administrative expenses


1,708



9.3



7,923



11.6



17,204



5.70 Research and development expenses


16



0.1



398



0.6



998



0.31Total operating expenses


1,882



10.3



11,230



16.5



25,733



8.5Income/(loss) from operations


5,231



28.5



1,110



1.6



(1,957
)


(0.7
)Interest expenses


(239
)


(1.3
)


(2,194
)


(3.2
)


(2,367
)


(0.8
)Interest income


21



0.1



363



0.5
%


562



0.2Tax refund for reinvestment


















925



0.3Loss on change in fair value of derivatives related to
    convertible notes


(316
)


(1.7
)


(6,997
)


(10.3
)






Loss on financial instruments relating to convertible bonds


(263
)


(1.4
)


(1,190
)


(1.7
)






Other gain/(loss)  net


(25
)


(0.1
)


(90
)


(0.1
)


2,443



0.8Income/(loss) before taxes


4,409



24.1



(8,998
)


(13.2
)


(394
)


(0.2
)Income tax benefit/(expense)


(605
)


(3.3
)


(432
)


(0.6
)


184



0.1Net income/(loss)

$
3,804



20.8
%

$
(9,430
)


(13.8
)

$
(210
)


(0.1
)     (1)
    
    Less than 0.1.  Year
    Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
  Net Revenues.
   57




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##### Table of Contents



Cost of Revenues.
  Gross Profit.
  Operating Expenses.
  Selling Expenses. free-on-board
  General and Administrative
    Expenses.
  Research and Development Expenses.
  Share-Based Compensation Expenses.
  Interest Expenses.
 58




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Loss on Change in Fair Value of Derivatives Related to
    Convertible Notes.
  Loss on Financial Instruments Related to Convertible
    Notes.
  Other Net Gain/Loss.
  Income Tax Benefit/Expense.
  Net Loss.
  Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Net Revenues.
    Cost of Revenues.
  Gross Profit.
  Operating Expenses.
 59




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##### Table of Contents



Selling Expenses.
  General and Administrative
    Expenses.
  Research and Development Expenses.
  Interest Expenses.
  Loss on Change in Fair Value of Derivatives Related to
    Convertible Notes.
  Loss on Financial Instruments Related to Convertible
    Notes.
  Income Tax Expense.
  Net Income.
  B.
    Liquidity
    and Capital Resources  Cash
    Flows and Working Capital
     60




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61




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##### Table of Contents



Year Ended December 31,2005


2006


2007(In thousands of US$)Net cash used in operating activities

$
(4,670
)

$
(46,276
)

$
(80,224
)Net cash used in investing activities


(646
)


(7,770
)


(42,483
)Net cash provided by financing activities


9,330



88,307



124,828Net increase (decrease) in cash and cash equivalents


4,221



34,631



(3,244
)Cash and cash equivalents at the beginning of the year


2,059



6,280



40,911Cash and cash equivalents at the end of the year

$
6,280


$
40,911


$
37,667   Operating
    Activities
    Investing
    Activities
    Financing
    Activities
      Capital
    Expenditures
   62




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##### Table of Contents



Restricted
    Net Assets
    C.
    Research
    and Development, Patents and Licenses, Etc.        Alternative silicon materials technologies.
  Solar module manufacturing technologies.
  Product development of specialty solar modules and
    products.
 63




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##### Table of Contents



Solar cell manufacturing.
  Silicon reclamation technologies.
  D.
    Trend
    Information  Form 20-F,
  E.
    Off-balance
    Sheet Arrangements    F.
    Tabular
    Disclosure of Contractual Obligations  Contractual
    Obligations and Commercial Commitments
    Payment Due by PeriodLess than








More thanTotal


1 Year


1-3 Years


3-5 Years


5 Years(In thousands of US$)Short-term debt obligations

$
40,374


$
40,374


$



$



$
Interest related to short-term debt(1)


750



750











Operating lease obligations


2,149



786



1,193



85



85Purchase obligations(2)


1,686,021



338,483



632,638



269,631



445,269Convertible notes(3)


120,000



4,500



9,000



9,000



97,500Other long-term borrowing(4)


17,866







17,866







Total

$
1,867,160


$
384,893


$
660,697


$
278,716


$
542,854     (1)
    
    Interest is derived using 6.2% interest per annum.(2)
    
    Includes commitments to purchase production equipment in the
    amount of $91.4 million and commitments to purchase solar
    cells and silicon raw materials in the amount of
    $1,594.6 million. 64




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##### Table of Contents



(3)
    
    Assumes redemption of $75.0 million aggregate principal
    amount of 6.0% convertible senior notes due December 15,
    2017. Assumes none of the convertible senior notes have been
    converted into ordinary shares. The holders of our convertible
    senior notes may require us to repurchase the convertible senior
    as early as December 2012. This figure also includes interest
    payable until December 5, 2017.(4)
    
    Includes syndicated commercial loans with ICBC and Chinas
    Bank of Communication. A total of $50 million in secured
    loans cover a three-year expansion plan. Funds are available at
    various stages and with different terms and rates.      G.
    Safe
    Harbor  Form 20-F
  Form 20-F
    
    our expectations regarding the worldwide demand for electricity
    and the market for solar power;
    our beliefs regarding lack of infrastructure reliability and
    long-term fossil fuel supply constraints;
    our beliefs regarding the inability of traditional fossil
    fuel-based generation technologies to meet the demand for
    electricity;
    our beliefs regarding the importance of environmentally friendly
    power generation;
    our expectations regarding governmental support for the
    deployment of solar power; 65




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##### Table of Contents




    our beliefs regarding the future shortage or availability of the
    supply of high-purity silicon;
    our beliefs regarding the acceleration of adoption of solar
    power technologies and the continued growth in the solar power
    industry;
    our beliefs regarding the competitiveness of our solar module
    products;
    our expectations with respect to increased revenue growth and
    improved profitability;
    our expectations regarding the benefits to be derived from our
    supply chain management and vertical integration manufacturing
    strategy;
    our beliefs and expectations regarding the use of UMgSi and
    solar power products made of this material;
    our ability to continue developing our in-house solar components
    production capabilities and our expectations regarding the
    timing and production capacity of our internal manufacturing
    programs;
    our beliefs regarding our securing adequate silicon and solar
    cell requirements to support our solar module production;
    our beliefs regarding the effects of environmental regulation;
    our beliefs regarding the changing competitive arena in the
    solar power industry;
    our future business development, results of operations and
    financial condition; and
    competition from other manufacturers of solar power products and
    conventional energy suppliers.  Form 20-F
  Form 20-F Form 20-F.
 66




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##### Table of Contents



Item 6.
    Directors, Senior Management and Employees  A.
    Directors
    and Senior Management  Form 20-F.
  Name

Age

Position/TitleShawn (Xiaohua) Qu


44


Chairman of the Board, President and Chief Executive OfficerBing Zhu(1)


43


Director and Chief Financial OfficerRobert McDermott


66


Lead Independent DirectorLars-Eric Johansson


61


Independent DirectorMichael G. Potter


41


Independent DirectorYan Zhuang


44


Independent DirectorGregory Spanoudakis


50


Vice President, EuropeGenmao Chen


46


Director, Research and DevelopmentTai Seng Png


45


Vice President, Business IntegrationCharlotte Xi Klein


52


Corporate Controller and Compliance OfficerBencheng Li


67


Vice President, Business Development (China)Robert Patterson


61


Vice President, Business Development (North America)Arthur Chien(1)


47


Vice President, Finance and SecretaryChengbai Zhou


61


Principal Technical FellowShanglin Shi


54


Deputy General Manager, China OperationXiaohu Wang


52


Vice President, China Supply Chain ManagementLingjun Zhang


42


General Manager, CSI Cells     (1)
    
    Bing Zhu, our chief financial officer, will resign from this
    position effective as of June 7, 2008. Arthur Chien, our
    vice president, finance, has been appointed as chief financial
    officer, also effective as of June 7, 2008.  Directors
  Dr. Shawn (Xiaohua) Qu tm
  Mr. Bing Zhu
 68




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Mr. Robert McDermott
  Mr. Lars-Eric Johansson
  Mr. Michael G. Potter
  Mr. Yan Zhuang
 69




---



##### Table of Contents



Executive
    Officers
  Mr. Gregory Spanoudakis
  Mr. Genmao Chen
  Mr. Tai Seng Png
  Ms. Charlotte Xi Klein
  Mr. Bencheng Li Sino-American
  Mr. Robert Patterson
 70




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##### Table of Contents



start-up
  Mr. Arthur Chien
  Mr. Chengbai Zhou
  Mr. Shanglin Shi
  Mr. Xiaohu Wang
  Dr. Lingjun Zhang
 71




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##### Table of Contents



Duties
    of Directors
    
    convening shareholders annual general meetings and
    reporting its work to shareholders at such meetings;
    declaring dividends and authorizing other distributions to
    shareholders;
    appointing officers and determining the term of office of
    officers;
    exercising the borrowing powers of our company and mortgaging
    the property of our company; and
    approving the issuance of shares.  B.
    Compensation
    of Directors and Executive Officers  Cash
    Remuneration
    Share-based
    Remuneration
  2006 Share
    Incentive Plan
    Options
   72




---



##### Table of Contents



CommonSharesUnderlying


ExerciseOptions


Price


Date of


Date ofName

Granted


(US$/Share)


Grant


ExpirationDirectors:Bing Zhu


116,500



2.12



May 30, 2006



May 29, 2016Robert McDermott


46,600
(2)


15.00



August 8, 2006



August 7, 201623,300
(2)


9.88
(3)


July 1, 2007



June 30, 2017Lars-Eric Johansson


46,600
(2)


15.00



August 8, 2006



August 7, 201623,300
(2)


9.88
(3)


July 1, 2007



June 30, 2017Michael G. Potter


23,300
(2)


7.36



September 24, 2007



September 23, 2017Yan Zhuang


23,300
(2)


7.36



September 24, 2007



September 23, 2017Directors as a group


302,900Executive Officers:Bing Zhu


116,500
(4)


2.12



May 30, 2006



May 29, 2016Gregory Spanoudakis


116,500



2.12



May 30, 2006



May 29, 2016Xiaohu Wang


89,705



2.12



May 30, 2006



May 29, 2016Arthur Chien


46,600
(1)


4.29



August 8, 2006



August 7, 201623,300
(2)


9.88



July 1, 2007



June 30, 201746,600



7.36



September 24, 2007



September 23, 2017Lingjun Zhang


75,725



2.12



May 30, 2006



May 29, 2016Robert Patterson


48,056



2.12



May 30, 2006



May 29, 2016Bencheng Li


48,056



2.12



May 30, 2006



May 29, 2016Chengbai Zhou


64,075



2.12



May 30, 2006



May 29, 2016Shanglin Shi


46,600



2.12



May 30, 2006



May 29, 2016Genmao Chen


62,075



4.29



July 17, 2006



July 16, 2016Charlotte Xi Klein


11,652
(7)


7.36



September 24, 2007



September 23, 201746,600



12.10
(9)


March 1, 2007



February 28, 2017Executive Officers as a group


842,044Other Individuals:One individual


69,900



2.12



May 30, 2006



May 29, 2016Twenty-six individuals as a group


84,695



4.29



May 30, 2006



May 29, 2016Two individuals as a group


51,260



4.29



June 30, 2006



June 29, 2016Hanbing Zhang(5)


46,600



4.29



July 28, 2006



July 27, 2016One individual


58,250



12.00
(6)


August 8, 2006



August 7, 2016Two individuals as a group


11,650



15.00
(3)


April 13, 2007



April 12, 2017Three individuals as a group


9,319



12.00
(6)


August 31, 2006



August 30, 2016Two individuals as a group


28,542



12.10
(9)


March 1, 2007



February 28, 2007Four individuals as a group


28,980



8.21



August 17, 2007



August 16, 2017Six individuals as a group


25,056
(7)


7.36



September 24, 2007



September 23, 2017Twelve individuals as a group


170,145



7.36



September 24, 2007



September 23, 2017Six individuals as a group


36,136



19.55
(8)


February 28, 2008



February 27, 2018One individual


10,000



19.40
(8)


March 3, 2008



March 2, 2018Two individuals as a group


18,000



20.67
(8)


March 31, 2008



March 30, 2018Other individuals as a group


648,533  73




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##### Table of Contents



(1)
    
    Vest in two equal installments, the first upon the date of grant
    and the second upon the first year anniversary of the grant date
    so long as the director remains in service.(2)
    
    All vested upon the date of grant.(3)
    
    The initial public offering price of the common shares.(4)
    
    Included above as held by Mr. Zhu as a director.(5)
    
    The wife of Dr. Qu, our founder, chairman, president and
    chief executive officer.(6)
    
    80% of the initial public offering price of the common shares.(7)
    
    Option granted are vested one year after the grant date.(8)
    
    The average of the closing prices for the five trading days
    preceding the grant date.(9)
    
    The average of the price of the common shares on the NASDAQ for
    each of the five trading days, preceding the date of grant.    Restricted
    Shares
    RestrictedSharesName

Granted


Date of Grant


Date of ExpirationExecutive Officers:Gregory Spanoudakis


233,000



May 30, 2006



May 29, 2016Chengbai Zhou


23,300



May 30, 2006



May 29, 2016Bencheng Li


11,650



May 30, 2006



May 29, 2016Xiaohu Wang


18,640



May 30, 2006



May 29, 2016Robert Patterson


11,650



May 30, 2006



May 29, 2016Executive Officers as a group


298,240Other Individuals:Eight individuals as a group


18,640(1
)


May 30, 2006



May 29, 2016One individual


116,500(1
)(2)


June 30, 2006



June 29, 2016Hanbing Zhang


116,500(3
)(4)


July 28, 2006



July 27, 2016Other Individuals as a group


251,640     (1)
    
    Each holding less than 1% of our total outstanding voting
    securities.(2)
    
    Vest over a two-year period from the date of grant.(3)
    
    The wife of Dr. Qu, our founder, chairman, president and
    chief executive officer.(4)
    
    Vest over a four-year period from the date of grant.    Types of Awards.
  
    options to purchase our common shares; and 74




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##### Table of Contents




    restricted shares, which are non-transferable common shares
    without voting or dividend rights, subject to forfeiture upon
    termination of a grantees employment or service.  Plan Administration.
  Award Agreement.
  Eligibility.
  Acceleration of Awards upon Corporate
    Transactions.
  Exercise Price and Term of Awards.
    Vesting Schedule.
  Indemnification
    of Directors and Officers
    C.
    Board
    Practices  Terms
    of Directors and Executive Officers
   75




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##### Table of Contents



Committees
    of the Board of Directors
    Audit
    Committee
    
    selecting our independent auditors and pre-approving all
    auditing and non-auditing services permitted to be performed by
    our independent auditors;
    reviewing with our independent auditors any audit problems or
    difficulties and managements response;
    reviewing and approving all proposed related-party transactions,
    as defined in Item 404 of
    Regulation S-K
    under the Securities Act;
    discussing the annual audited financial statements with
    management and our independent auditors;
    reviewing major issues as to the adequacy of our internal
    controls and any special audit steps adopted in light of
    material control deficiencies;
    annually reviewing and reassessing the adequacy of our audit
    committee charter;
    such other matters that are specifically delegated to our audit
    committee by our board of directors from time to time;
    meeting separately and periodically with management and our
    internal and independent auditors; and
    reporting regularly to the full board of directors.  Compensation
    Committee
    
    approving and overseeing the compensation package for our
    executive officers;
    reviewing and making recommendations to the board with respect
    to the compensation of our directors;
    reviewing and approving corporate goals and objectives relevant
    to the compensation of our chief executive officer, evaluating
    the performance of our chief executive officer in light of those
    goals and objectives, and setting the compensation level of our
    chief executive officer based on this evaluation; and 76




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##### Table of Contents




    reviewing periodically and making recommendations to the board
    regarding any long-term incentive compensation or equity plans,
    programs or similar arrangements, annual bonuses, employee
    pension and welfare benefit plans.  Nominating
    and Corporate Governance Committee
    
    identifying and recommending to the board nominees for election
    or re-election to the board, or for appointment to fill any
    vacancy;
    reviewing annually with the board the current composition of the
    board in light of the characteristics of independence, age,
    skills, experience and availability of service to us;
    identifying and recommending to the board the directors to serve
    as members of the boards committees;
    advising the board periodically with respect to significant
    developments in the law and practice of corporate governance as
    well as our compliance with applicable laws and regulations, and
    making recommendations to the board on all matters of corporate
    governance and on any corrective action to be taken; and
    monitoring compliance with our code of business conduct and
    ethics, including reviewing the adequacy and effectiveness of
    our procedures to ensure proper compliance.  Interested
    Transactions
    Remuneration
    and Borrowing
    Qualification
    Employment
    Agreements
   77




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##### Table of Contents



and/or
    Directors
    Agreements
   78




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##### Table of Contents



D.
    Employees    As of December 31, 2007Number of Employees


Percentage of TotalManufacturing


2,684



90.04General and administrative


272



9.12Research and development


15



0.5Sales and marketing


10



0.34Total


2,981



100
%     E.
    Share
    Ownership    
    each of our directors and executive officers; and
    each person known to us to own beneficially more than 5.0% of
    our common shares.     79




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##### Table of Contents



Shares Beneficially Owned(1)Directors and Executive Officers(2):

Number


%Shawn (Xiaohua) Qu


13,672,263



50.0
%Bing Zhu(6)


58,250



0.2
%Robert McDermott(4)


73,900



0.3
%Lars-Eric Johannson(5)


74,900



0.3
%Michael G. Potter


23,300



0.1
%Yan Zhuang


23,300



0.1
%Robert Patterson(10)


27,669



0.1
%Arthur Chien(3)


69,900



0.3
%Gregory Spanoudakis(7)


291,250



1.0
%Bencheng Li(8)


27,669



0.1
%Chengbai Zhou(9)


55,338



0.2
%Genmao Chen


14,019



0.1
%Charlotte Xi Klein


11,650



0.0
%Tai Seng Png






0.0
%Shanglin Shi


23,300



0.1
%Xiaohu Wang(11)


63,493



0.2
%Lingjun Zhang


37,863



0.1
%All directors and executive officers as a group


14,548,064



53.2
%Principal Shareholders:Columbia Wanger Asset Management, L.P.(12)


2,645,000



9.5
%     (1)
    
    Beneficial ownership is determined in accordance with
    Rule 13d-3
    of the General Rules and Regulations under the Securities
    Exchange Act of 1934, as amended, and includes voting or
    investment power with respect to the securities.(2)
    
    The business address of our directors and executive officers is
    199 Lushan Road, Suzhou New District, Suzhou, Jiangsu 215129,
    Peoples Republic of China.(3)
    
    Represents 69,900 common shares issuable upon exercise of
    options held by Mr. Chien.(4)
    
    Represents 69,900 common shares issuable upon exercise of
    options held by Mr. McDermott and 4,000 common shares that
    Mr. McDermott purchased in the Directed Shares Program in
    connection with our initial public offering in November 2006.(5)
    
    Represents 69,900 common shares issuable upon exercise of
    options held by Mr. Johannson and 5,000 common shares that
    Mr. Johannson purchased in the Directed Shares Program in
    connection with our initial public offering in November 2006.(6)
    
    Represents 58,250 common shares issuable upon exercise of
    options held by Mr. Zhu.(7)
    
    Represents 233,000 vested restricted shares and 58,250 common
    shares issuable upon exercise of options held by
    Mr. Spanoudakis.(8)
    
    Represents 11,650 vested restricted shares and 16,019 common
    shares issuable upon exercise of options held by Mr. Li.(9)
    
    Represents 23,300 vested restricted shares and 32,038 common
    shares issuable upon exercise of options held by Mr. Zhou.(10)
    
    Represents 11,650 vested restricted shares and 16,019 common
    shares issuable upon exercise of options held by
    Mr. Patterson. 80




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##### Table of Contents



(11)
    
    Represents 18,640 vested restricted shares and 44,583 common
    shares issuable upon exercise of options held by Mr. Wang.(12)
    
    Represents 2,645,000 common shares held by Columbia Wanger Asset
    Management, L.P. The principal business address of Columbia
    Wanger is 227 West Monroe Street, Suite 3000, Chicago,
    IL 60606.  Form 20-F.
  Item 7.
    Major Shareholders and Related Party Transactions  A.
    Major
    Shareholders    B.
    Related
    Party Transactions  Unless otherwise indicated, the share numbers in this section
    do not take into account any post-transaction share splits.
  Issuance,
    Sale and Conversion of Convertible Notes
      Conversion
    of Convertible Notes and Put Option Agreement
   81




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##### Table of Contents



Retained
    Earnings
    Investment
    Agreement
      Registration
    Rights Agreements with HSBC, JAFCO and ATS
    Demand Registration Rights. Form F-3 S-3
  Form F-3
    Registration Rights. Form F-3 S-3, Form F-3 S-3
  Piggyback Registration Rights. Form F-4, S-4 S-8, Form F-3
 82




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##### Table of Contents



Expenses of Registration. Form F-3
    Termination of Registration Rights
    Agreements. Form 20-F.
  Consultancy
    Agreements
      Shareholder
    Loans
    Guarantees
    and Share Pledges
     83




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##### Table of Contents



Employment
    Agreements
    Equity
    Incentive Plan
    C.
    Interests
    of Experts and Counsel    Item 8.
    Financial
    Information  A.
    Consolidated
    Statements and Other Financial Information    Legal
    and Administrative Proceedings
  No. 500-05 071241-028)
 84




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##### Table of Contents



Dividend
    Policy
      B.
    Significant
    Changes  Form 20-F
    Item 9.
    The
    Offer and Listing  A.
    Offering
    and Listing Details   85




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##### Table of Contents



Sales PriceHigh


LowQuarterly High and LowFourth Quarter 2006


16.73



9.43First Quarter 2007


14.36



8.72Second Quarter 2007


13.88



8.78Third Quarter 2007


11.70



6.50Fourth Quarter 2007


31.44



8.67First Quarter 2008


31.10



14.74Monthly Highs and LowsNovember 2007


18.88



9.99December 2007


31.44



15.62January 2008


31.10



14.74February 2008


24.15



17.32March 2008


23.96



16.31April 2008


28.45



21.25May 2008


48.91



25.93June 2008 (through June 2)


42.59



39.20   B.
    Plan
    of Distribution    C.
    Markets    D.
    Selling
    Shareholders    E.
    Dilution    F.
    Expenses
    of the Issue    Item 10.
    Additional
    Information  A.
    Share
    Capital    B.
    Memorandum
    and Articles of Association  No. 333-138144),
 86




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##### Table of Contents



C.
    Material
    Contracts  Form 20-F.
  D.
    Exchange
    Controls    E.
    Taxation  Material
    Canadian Federal Tax Considerations
  General
      Form 20-F. Form 20-F.
    TAX MATTERS ARE VERY COMPLICATED AND THE CANADIAN FEDERAL TAX
    CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF COMMON
    SHARES WILL DEPEND ON THE SHAREHOLDERS PARTICULAR
    SITUATION. THIS SUMMARY IS NOT INTENDED TO BE
 87




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##### Table of Contents



A COMPLETE ANALYSIS OF OR DESCRIPTION OF ALL POTENTIAL
    CANADIAN FEDERAL TAX CONSEQUENCES, AND SHOULD NOT BE CONSTRUED
    TO BE, LEGAL, BUSINESS OR TAX ADVICE DIRECTED AT ANY PARTICULAR
    HOLDER OR PROSPECTIVE PURCHASER OF COMMON SHARES. ACCORDINGLY,
    HOLDERS OR PROSPECTIVE PURCHASERS OF COMMON SHARES SHOULD
    CONSULT THEIR OWN TAX ADVISORS FOR ADVICE WITH RESPECT TO THE
    CANADIAN FEDERAL TAX CONSEQUENCES OF AN INVESTMENT IN COMMON
    SHARES BASED ON THEIR PARTICULAR CIRCUMSTANCES.
  Dividends
    Disposition
    of Our Common Shares
  60-month
    United
    States Federal Income Taxation
      
    banks;
    certain financial institutions;
    regulated investment companies;
    real estate investment trusts; 88




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##### Table of Contents




    insurance companies;
    broker dealers;
    U.S. expatriates;
    traders that elect to mark to market;
    tax-exempt entities;
    persons liable for alternative minimum tax;
    persons holding a common share as part of a straddle, hedging,
    constructive sale, conversion or integrated transaction;
    persons that actually or constructively own 10.0% or more of our
    voting stock;
    persons who acquired common shares pursuant to the exercise of
    any employee share option or otherwise as compensation; or
    persons holding common shares through partnerships or other
    pass-through entities for U.S. federal income tax purposes.  U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS
    ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO
    THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL
    AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
    AND DISPOSITION OF COMMON SHARES.
    
    an individual who is a citizen or resident of the United States;
    a corporation (or other entity taxable as a corporation)
    organized under the laws of the United States, any State or the
    District of Columbia;
    an estate whose income is subject to U.S. federal income
    taxation regardless of its source; or
    a trust that (1) is subject to the supervision of a court
    within the United States and the control of one or more
    U.S. persons or (2) has a valid election in effect
    under applicable U.S. Treasury regulations to be treated as
    a U.S. person.    Dividends
    and Other Distributions on the Common Shares
     89




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##### Table of Contents



Dispositions
    of Common Shares
      Passive
    Foreign Investment Company
    
    at least 75% of its gross income is passive income, or
    at least 50% of the value of its assets (based on an average of
    the quarterly values of the assets during a taxable year) is
    attributable to assets that produce or are held for the
    production of passive income (the asset test).     90




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##### Table of Contents




    the excess distribution or gain will be allocated ratably over
    the U.S. Holders holding period for the common shares,
    the amount allocated to the current taxable year, and any
    taxable year prior to the first taxable year in which we became
    a PFIC, will be treated as ordinary income, and
    the amount allocated to each other year will be subject to the
    highest tax rate in effect for that year and the interest charge
    generally applicable to underpayments of tax will be imposed on
    the resulting tax attributable to each such year.       91




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##### Table of Contents



Information
    Reporting and Backup Withholding
  Form W-9.
    F.
    Dividends
    and Paying Agents    G.
    Statement
    by Experts    H.
    Documents
    on Display  Form F-1, 333-138144).
  Form 20-F 1-800-SEC-0330.
     92




---



##### Table of Contents



I.
    Subsidiary
    Information    Item 11.
    Quantitative
    and Qualitative Disclosures About Market Risk  Foreign
    Exchange Risk
        Interest
    Rate Risk
    Item 12.
    Description
    of Securities Other than Equity Securities   PART II  Item 13.
    Defaults,
    Dividend Arrearages and Delinquencies   93




---



##### Table of Contents



Item 14.
    Material
    Modifications to the Rights of Security Holders and Use of
    Proceeds    
    the registration statement on
    Form F-1
    (File number:
    333-138144),
    or the IPO Registration Statement for our initial public
    offering of 7,700,000 common shares, which IPO Registration
    Statement was declared effective by the SEC on November 8,
    2006; and
    the registration statement on
    Form F-3
    (File number:
    333-149497),
    or the Shelf Registration Statement for our registration of
    convertible senior notes, initially sold in a private
    transaction on December 10, 2007, which Shelf Registration
    Statement was declared effective by the SEC on March 27,
    2008.                Item 15.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  Rule 13a-15(e)
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f)
 94




---



##### Table of Contents



Attestation
    Report of the Independent Registered Public Accounting
    Firm
    Internal Control  Integrated Framework Managements Annual Report on Internal Control over
    Financial Reporting
     95




---



##### Table of Contents



Internal Control  Integrated Framework
         Changes
    in Internal Controls
     Item 16A.  Audit
    Committee Financial Expert  Form 20-F.
  Item 16B.  Code
    of Ethics  Form 20-F, www.csisolar.com
 96




---



##### Table of Contents



Item 16C.  Principal
    Accountant Fees and Services    For the Year Ended December 31,2005


2006


2007Audit fees(1)






334,857



1,350,000Audit-related fees










378,224Tax fees










All other fees










     (1)
    
    Audit fees means the aggregate fees billed for
    professional services rendered by our principal auditors for the
    audit of our annual financial statements.  de minimus
  Item 16D.  Exemptions
    from the Listing Standards for Audit Committees    Item 16E.  Purchases
    of Equity Securities by the Issuer and Affiliated Purchasers    PART III  Item 17.
    Financial
    Statements    Item 18.
    Financial
    Statements  Form 20-F,
  
    Report of Independent Registered Public Accounting Firm
    Consolidated Balance Sheets as of December 31, 2006 and 2007
    Consolidated Statements of Operations for the years ended
    December 31, 2005, 2006 and 2007
    Consolidated Statements of Shareholders Equity and
    Comprehensive Income for the years ended December 31, 2005,
    2006 and 2007
    Consolidated Statements of Cash Flows for the years ended
    December 31, 2005, 2006 and 2007
    Notes to the Consolidated Financial Statements
    Additional Information  Financial Statement
    Schedule I 97




---



##### Table of Contents



Item 19.
    Exhibits  ExhibitNumber

Description of Document1
.1

Articles of Continuance and By-Law No. 1 of Canadian Solar
    Inc., as amended and currently in effect (incorporated by
    reference to Exhibit 1.1 from our annual report on
    Form 20-F
    filed with the Commission on May 29, 2007)2
.1

Subscription Agreement, dated November 16, 2005, in respect
    of the issue of notes convertible into common shares in the
    capital of Canadian Solar Inc., as amended by Supplemental
    Agreements, dated February 28, 2006, March 29, 2006,
    June 9, 2006 and July 1, 2006 (incorporated by
    reference to Exhibit 4.1 from our F-1 registration
    statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.2

Investment Agreement, dated November 30, 2005, among
    Canadian Solar Inc. and the parties named therein (incorporated
    by reference to Exhibit 4.2 from our F-1 registration
    statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.3

Registration Rights Agreement, dated November 30, 2005,
    among Canadian Solar Inc. and other parties named therein
    (incorporated by reference to Exhibit 4.3 from our F-1
    registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.4

Registration Rights Agreement, dated October 3, 2006,
    between Canadian Solar Inc. and ATS (incorporated by reference
    to Exhibit 4.4 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.5

Joinder Agreement, dated October 3, 2006, among Canadian
    Solar Inc., Dr. Shawn Qu, ATS, HSBC HAV 2
    (III) Limited and JAFCO Asia Technology Fund II
    (Barbados) Limited (incorporated by reference to
    Exhibit 4.5 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.6

Amended and Restated Certificates for the Convertible Notes and
    the Conditions, for the US$5,400,000 and US$2,700,000
    Convertible Notes due November 30, 2008 issued by Canadian
    Solar Inc. to HSBC HAV2 (III) Limited and JAFCO Asia
    Technology Fund II, respectively (incorporated by reference
    to Exhibit 4.6 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.7

Amended and Restated Certificates for the Convertible Notes and
    the Conditions, for the US$2,350,000 and US$1,300,000
    Convertible Notes due March 30, 2009 issued by Canadian
    Solar Inc. to HSBC HAV2 (III) Limited and JAFCO Asia
    Technology Fund II, respectively (incorporated by reference
    to Exhibit 4.7 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.8

Conversion Notices, each dated July 1, 2006, Regarding
    Conversion of Convertible Notes into Common Shares in the
    Capital of Canadian Solar Inc. (incorporated by reference to
    Exhibit 4.8 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.9

Put Option Agreement among Dr. Shawn Qu, HSBC HAV
    (III) Limited and JAFCO Asia Technology Fund II, dated
    July 1, 2006, as amended by the Supplemental Put Option
    Agreement, among Dr. Shawn Qu, HSBC HAV (III) Limited,
    JAFCO Asia Technology Fund II and JAFCO Asia Technology
    Fund II (Barbados) Limited, dated July 28, 2006
    (incorporated by reference to Exhibit 4.9 from our F-1
    registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.10

Letter Agreement among HSBC HAV2 (III) Limited, JAFCO Asia
    Technology Fund II, Dr. Shawn Qu and the Registrant
    Regarding Retained Earnings of Canadian Solar Inc., dated
    July 28, 2006 (incorporated by reference to
    Exhibit 4.10 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)2
.11

Canadian Solar Inc.s Specimen Certificate for Common
    Shares (incorporated by reference to Exhibit 4.11 from our
    F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)4
.1

2006 Share Incentive Plan, including forms of Restricted
    Shares Award Agreement and Share Option Agreement (incorporated
    by reference to Exhibit 10.1 from our F-1 registration
    statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006) 98




---



##### Table of Contents



ExhibitNumber

Description of Document4
.2

Employment Agreement between Canadian Solar Inc. and the
    Dr. Shawn Qu (incorporated by reference to
    Exhibit 10.2 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)4
.3

Form of Employment Agreement between Canadian Solar Inc. and any
    other executive officer of the Registrant (incorporated by
    reference to Exhibit 10.3 from our F-1 registration
    statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)4
.4

Strategic Partnership Agreement and Performance Reward Plan
    (2005), dated November 1, 2005, between Kunical
    International Group, Ltd. and Canadian Solar Inc., as amended by
    the letter agreement dated August 25, 2006 (incorporated by
    reference to Exhibit 10.3 from our F-1 registration
    statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)4
.5

English translation of Polycrystalline Silicon Supply Agreement,
    dated September 12, 2005, between Canadian Solar Inc. and
    Luoyang Zhong Gui High Tech Co., Ltd. (incorporated by reference
    to Exhibit 10.5 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)4
.6

English translation of Solar Cell Silicon Wafer Agreement, dated
    July 6, 2006, between Canadian Solar Inc. and Jiangxi
    Saiwei LDK Solar Energy High-Tech Limited, as amended by the
    supplemental agreement, dated August 11, 2006 (incorporated
    by reference to Exhibit 10.6 from our F-1 registration
    statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)4
.7

Written description of prior Consulting Agreement between
    Canadian Solar Inc. and Dr. Shawn Qu (incorporated by
    reference to Exhibit 10.7 from our F-1 registration
    statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)4
.8

Written description of prior Consulting Agreement between
    Canadian Solar Inc. and Robert Patterson (incorporated by
    reference to Exhibit 10.8 from our F-1 registration
    statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)4
.9

Security Agreement, dated September 30, 2005, between
    Canadian Solar Inc. and ATS (incorporated by reference to
    Exhibit 10.9 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)4
.10

Promissory Note, dated September 30, 2005, issued by
    Canadian Solar Inc. (incorporated by reference to
    Exhibit 10.10 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)8
.1*

List of Subsidiaries11
.1

Code of Business Conduct (incorporated by reference to
    Exhibit 99.1 from our F-1 registration statement (File
    No. 333-138144),
    as amended, initially filed with the Commission on
    October 23, 2006)12
.1*

CEO Certification Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200212
.2*

CFO Certification Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200213
.1*

CEO Certification Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 200213
.2*

CFO Certification Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002     *
    
    Filed with this annual report on
    Form 20-F 99




---



##### 



CANADIAN
    SOLAR INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
 Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2006 and 2007


F-3Consolidated Statements of Operations for the
    Years Ended December 31, 2005, 2006 and 2007


F-4Consolidated Statements of Stockholders
    Equity and Comprehensive Income/(Loss) for the Years Ended
    December 31, 2005, 2006 and 2007


F-5Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2005, 2006 and 2007


F-6Notes to the Consolidated Financial Statements


F-8Schedule I


F-31   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
          Internal Control  Integrated Framework
  Deloitte Touche
    Tohmatsu CPA Ltd.
  
 F-2




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,

December 31,2006

2007$

$ASSETSCurrent assets:Cash and cash equivalents


40,910,759



37,667,120Restricted cash


824,719



1,625,555Accounts receivable, net of allowance for doubtful accounts of
    nil and $376,178 on December 31, 2006 and 2007, respectively


17,344,445



58,637,304Inventories


39,700,051



70,920,927Value added tax recoverable


2,280,985



12,246,989Advances to suppliers


13,484,411



28,744,670Prepaid and other current assets


2,398,103



10,057,777Total current assets


116,943,473



219,900,342Property, plant and equipment, net


7,909,606



51,486,258Deferred tax assets


3,638,606



3,965,886Prepaid-rental


1,103,123



1,616,011Other non-current assets


38,949



7,534,032TOTAL ASSETS


129,633,757



284,502,529LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term borrowings


3,311,238



40,373,932Accounts payable


6,873,502



8,250,826Amounts due to related parties


148,636



208,718Other payable


993,313



6,153,217Advance from customer


3,225,157



1,962,024Other current liabilities


1,303,383



2,264,499Total current liabilities


15,855,229



59,213,216Accrued warranty costs


874,673



3,878,755Convertible notes






75,000,000Long-term borrowings






17,866,203Liability for uncertain tax positions






2,278,482TOTAL LIABILITIES


16,729,902



158,236,656Commitments and contingencies (Note 13)Stockholders equity:Common shares  no par value: unlimited authorized shares,
    27,270,000 and 27,320,389 shares issued and outstanding at
    December 31, 2006 and 2007, respectively


97,302,391



97,454,214Additional paid-in capital


17,333,897



26,435,689Accumulated deficit


(2,782,697
)


(3,604,572
)Accumulated other comprehensive income


1,050,264



5,980,542Total stockholders equity


112,903,855



126,265,873TOTAL LIABILITIES AND STOCKHOLDERS EQUITY


129,633,757



284,502,529    F-3




---



##### Table of Contents



CANADIAN
    SOLAR INC.
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 312005


2006


2007$$$Net revenues:Product


18,323,800



68,212,256



302,797,671Cost of revenues:Product


11,210,878



55,871,959



279,022,155Gross profit


7,112,922



12,340,297



23,775,516Operating expense:Selling expenses


157,763



2,908,675



7,530,970General and administrative expenses


1,707,674



7,923,923



17,203,761Research and development expenses


16,381



397,859



997,832Total operating expenses


1,881,818



11,230,457



25,732,563Income/(loss) from operations


5,231,104



1,109,840



(1,957,047
)Other income (expense):Interest expense


(239,225
)


(2,193,551
)


(2,367,131
)Interest income


21,721



362,528



562,006Loss on change in fair value of derivatives


(316,000
)


(6,997,000
)


Loss on financial instruments related to convertible notes


(263,089
)


(1,189,500
)


Tax refund for reinvestment










924,611Other  net


(25,156
)


(90,187
)


2,442,907Income/(Loss) before taxes


4,409,355



(8,997,870
)


(394,654
)Income tax benefit/(expense)


(605,402
)


(431,994
)


184,978Net Income/(Loss)


3,803,953



(9,429,864
)


(209,676
)Earning/(Loss) per share-basic and diluted

$
0.25


$
(0.50
)

$
(0.01
)Shares used in computation-basic and diluted


15,427,995



18,986,498



27,283,305    F-4




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE
 INCOME
    (LOSS)
  Retained

AccumulatedAdditional

Earnings

Other

Total

TotalCommon

Paid in

Accumulated

Comprehensive

Stockholder

ComprehensiveShares

Capital

Deficit)

Income (Loss)

Equity

Income/(Loss)Number

$

$

$

$

$

$Balance at December 31, 2004


15,427,995



210,843







2,843,214



(92,671
)


2,961,386Net income














3,803,953







3,803,953



3,803,953Foreign currency translation adjustment


















201,741



201,741



201,741Balance at December 31, 2005


15,427,995



210,843







6,647,167



109,070



6,967,080



4,005,694Share-based compensation










6,144,879











6,144,879Conversion of convertible notes


5,542,005



10,162,215















10,162,215De-recognition of conversion option derivative liability option
    derivative liability










10,928,031











10,928,031Issuance of ordinary shares Pursuant to initial public offering


6,300,000



83,323,942















83,323,942Deferred tax of issuance cost of initial public offering






3,605,391















3,605,391Forgiveness of payable to shareholders










260,987











260,987Net loss














(9,429,864
)






(9,429,864
)


(9,429,864
)Foreign currency translation adjustment


















941,194



941,194



941,194Balance at December 31, 2006


27,270,000



97,302,391



17,333,897



(2,782,697
)


1,050,264



112,903,855



(8,488,670
)Adjustment for adoption of FIN 48














(612,199
)






(612,199
)Share-based compensation










9,101,792











9,101,792Exercise of stock options


50,389



151,823















151,823Net loss














(209,676
)






(209,676
)


(209,676
)Foreign currency translation adjustment


















4,930,278



4,930,278



4,930,278Balance at December 31, 2007


27,320,389



97,454,214



26,435,689



(3,604,572
)


5,980,542



126,265,873



4,720,602    F-5




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2005

2006

2007$

$

$Operating activities:Net Income/(loss)


3,803,953



(9,429,864
)


(209,676
)Adjustments to reconcile net income/(loss) to net cash provided
    by (used in) operating activities:Depreciation and amortization


81,879



201,715



1,682,977Amortization of prepaid lease payment






6,823



15,218Loss on disposal of property, plant and equipment






11,072



23,806Allowance for doubtful debts






62,318



456,570Write down of inventory






274,947



482,544Loss on fair value change of derivatives


316,000



6,997,000



Loss on financial instruments related to convertible notes


263,089



1,189,500



Amortization of discount on debt


134,666



706,320



Share-based compensation






6,144,879



9,101,792Changes in operating assets and liabilities:Inventories


(9,771,728
)


(27,812,410
)


(27,099,561
)Accounts receivable


(1,431,483
)


(14,836,433
)


(37,675,531
)Value added tax recoverable


(793,206
)


(1,396,221
)


(9,479,472
)Advances to suppliers


(4,369,335
)


(8,479,625
)


(16,796,871
)Prepaid and other current assets


(67,899
)


(1,861,085
)


(4,847,423
)Accounts payable


3,482,266



2,361,064



719,126Other payable


18,122



640,104



2,672,192Advance from customers


2,549,686



324,890



(1,822,752
)Amounts due to related parties


241,741



(282,528
)


60,082Accrued warranty costs


174,451



530,826



2,979,414Other current liabilities


157,513



158,177



874,954Prepaid-rental






(1,087,055
)


(444,855
)Income tax payables


506,604



(1,027,100
)


1,697,913Interest payables


101,210



32,216



314,654Deferred taxes


(67,877
)


294,296



(2,929,089
)Net cash used in operating activities


(4,670,348
)


(46,276,174
)


(80,223,988
)Investing activities:Increase in restricted cash


(85,204
)


(686,214
)


(695,893
)Purchases of property, plant and equipment


(560,793
)


(7,113,912
)


(42,006,616
)Proceeds from disposal of property, plant and equipment






30,157



220,009Net cash used in investing activities


(645,997
)


(7,769,969
)


(42,482,500
)Financing activities:Proceeds from short-term borrowings


1,300,000



25,333,379



92,090,998Repayment of short-term borrowings






(23,429,420
)


(56,157,679
)Proceeds from long-term borrowings










16,712,795 F-6




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS  (Continued)
  Year Ended December 31,2005

2006

2007$

$

$Proceeds from issuance of convertible notes


8,100,000



3,650,000



75,000,000Issuance cost paid on convertible debt


(69,685
)


(571,315
)


(2,970,138
)Proceeds from issuance of common shares, net of issuance costs






83,323,942



Proceeds from exercise of stock options










151,823Net cash provided by financing activities


9,330,315



88,306,586



124,827,799Effect of exchange rate changes


207,146



370,521



(5,364,950
)Net increase/(decrease) in cash and cash equivalents


4,221,116



34,630,964



(3,243,639
)Cash and cash equivalents at the beginning of the year


2,058,679



6,279,795



40,910,759Cash and cash equivalents at the end of the year


6,279,795



40,910,759



37,667,120Supplemental disclosure of cash flow information:Interest paid


(3,349
)


(1,471,498
)


(823,040
)Income taxes paid


(166,674
)


(1,340,014
)


(177,790
)Supplemental schedule of non-cash activities:Issuance cost included in other payable


571,315







(381,496
)Property, plant and equipment cost included in other payable






41,657



(1,712,773
)Conversion of debt to equity






10,162,215



Provision for FIN 48 uncertain tax positions upon adoption










612,199    F-7




---



##### Table of Contents



CANADIAN
    SOLAR INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
    (In U.S. dollars)
  1.  ORGANIZATION
    AND PRINCIPAL ACTIVITIES
      Date of

Place of

Percentage ofSubsidiary

Incorporation

Incorporation

OwnershipCSI Solartronics (Changshu) Co., Ltd.

November 23, 2001

PRC


100
%CSI Solar Technologies Inc.

August 8, 2003

PRC


100
%CSI Solar Manufacture Inc.

January 7, 2005

PRC


100
%CSI Central Solar Power Co., Ltd.

February 24, 2006

PRC


100
%CSI Cells Co., Ltd.

August 23, 2006

PRC


100
%Changshu CSI Advanced Solar Inc.

August 1, 2006

PRC


100
%CSI Solar Inc.

June 8, 2007

USA


100
%   2.  SUMMARY
    OF PRINCIPAL ACCOUNTING POLICIES
  (a)
    Basis
    of presentation    (b)
    Basis
    of Consolidation    (c)
    Use of
    estimates    (d)
    Cash
    and cash equivalents   F-8




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (e)
    Advances
    to suppliers    December 31,

December 31,2006

2007Supplier A

$
5,628,504


$
9,541,574Supplier B






8,324,889Supplier C






4,102,711Supplier D


1,992,986



   (f)
    Inventories      work-in-process
 F-9




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  (g)
    Property,
    plant and equipment  Capitalization of Interest Costs
    Buildings

20 yearsLeasehold improvements

Over the shorter of the lease term or their estimated useful
    livesMachinery

5-10 yearsFurniture, fixtures and equipment

5 yearsMotor vehicles

5 years     (h)
    Intangible
    assets  5-year
  (i)
    Impairment
    of long-lived assets    (j)
    Income
    taxes     F-10




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      (k)
    Revenue
    recognition        (l)
    Cost
    of revenues    (m)
    Research
    and development    (n)
    Advertising
    expenses    (o)
    Warranty
    cost  10-year 25-year
 F-11




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (p)
    Interest
    income    (q)
    Lease    (r)
    Foreign
    currency translation      (s)
    Foreign
    currency risk    (t)
    Concentration
    of credit risk     F-12




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  (u)
    Fair
    value of derivatives and financial instruments    (v)
    Earnings
    per Share    (w)
    Share-based
    compensation    (x)
    Recently
    issued accounting pronouncements  Fair Value
    Measurements
  The Fair Value
    Option for Financial Assets and Financial
    Liabilities
  Business Combination
 F-13




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Noncontrolling Interests in Consolidated Financial
    Statements,
  Disclosures About Derivative Instruments and Hedging
    Activities,
  3.  INVENTORIES
    At December 31,

At December 31,2006

2007$

$Raw materials


32,748,305



39,184,973Work-in-process


5,261,990



21,082,544Finished goods


1,689,756



10,653,41039,700,051



70,920,927   4.  ACCOUNTS
    RECEIVABLE
    At December 31,

At December 31,2006

2007$

$Beginning of the year


117,685



Allowances made during the year


44,873



460,132Accounts receivable written-off against allowances


(162,558
)


(83,954
)Closing balance






376,178  F-14




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  5.  PROPERTY,
    PLANT AND EQUIPMENT, NET
    At December 31,

At December 31,2006

2007$

$Buildings






2,313,884Leasehold improvements


205,342



475,654Machinery


1,179,131



24,572,316Furniture, fixtures and equipment


227,314



1,723,984Motor vehicles


219,106



311,8311,830,893



29,397,669Less: Accumulated depreciation


(384,889
)


(2,060,207
)1,446,004



27,337,462Construction in process


6,463,602



24,148,796Property, plant and equipment, net


7,909,606



51,486,258     6.
    BANK
    BORROWING  At December 31,

At December 31,2006

2007$

$Bank borrowings


3,311,238



58,240,135Analysis as:Short-term


3,311,238



40,373,932Long-term






17,866,203Total


3,311,238



58,240,135     a)
    Short-term    b)
    Long-term   F-15




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2008

$
2009


10,000,0002010


7,866,2032011


2012 and after


Total

$
17,866,203   c)
    Interest
    expense  Year Ended December 312005

2006

2007$

$

$Interest capitalized










46,617Interest expense


239,225



2,193,551



2,367,131Total interest incurred


239,225



2,193,551



2,413,748   7.
    ACCRUED
    WARRANTY COSTS    At December 31,

At December 31,2006

2007$

$Beginning balance


341,032



874,673Warranty provision


603,659



3,015,715Warranty costs incurred


(70,018
)


(11,633
)Ending balance


874,673



3,878,755   8.
    CONVERTIBLE
    NOTES  2005
    Convertible Note Subscription Agreement
      Maturity date.
  Interest.
     F-16




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Withholding taxes.
  Dividends.
  Conversion.
    Redemption.
  Liquidation preference.
  Pledge of shares.
     F-17




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          12-month
    12-month
    Interest
   F-18




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Taxes
  Conversion
  Share split
              2007
    Convertible Note Subscription Agreement
      Maturity date.
  Interest.
  Conversion.
 F-19




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Redemption.
      Year Ended December 312005

2006

2007$

$

$Proceeds from issuance of convertible notes


8,100,000







75,000,000Discount on debt


(4,713,329
)






Convertible notes


3,386,671







75,000,000Financial instruments related to convertible notes


1,107,084







Fair value of conversion option


3,654,000







Fair value of early redemption option


25,000







Fair value of derivatives related to convertible notes


3,679,000







     9.
    RESTRICTED
    NET ASSETS   F-20




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      10.
    INCOME
    TAXES    Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2005

2006

2007$

$

$Loss before income taxCanada


(801,720
)


(15,218,572
)


(2,628,043
)Other


5,211,075



6,220,702



2,233,3894,409,355



(8,997,870
)


(394,654
)Current TaxCanada


142,666



(115,061
)


569,396Other


530,613



363,719



471,220673,279



248,658



1,040,616Deferred TaxCanada


(10,507
)


263,309



263,279Other


(57,370
)


(79,973
)


(962,315
)(67,877
)


183,336



(1,225,594
)     Open-up
   F-21




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
           F-22




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
              Unrecognized Tax Benefits  Balance at January 1,
    2007 (date of FIN 48 adoption)

$
612,199Gross increases  additions for tax positions and the
    additional interest and penalties taken in 2007


1,666,283Unrecognized Tax Benefits  Balance at
    December 31, 2007

$
2,278,482  F-23




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    At December 31,

At December 31,2006

2007$

$Deferred tax assets:Issuance cost


3,149,992



2,439,086Accrued warranty costs


242,091



1,260,517Net loss carried forward


241,349



1,123,320Foreign tax credit (FTC)






1,048,175Others


194,257



911,429Total deferred tax assets


3,827,689



6,782,527Analysis as:Current


189,083



2,816,641Non-current


3,638,606



3,965,8863,827,689



6,782,527Deferred tax liabilities:Unrealized profit


4,261



Total deferred tax liabilities


4,261



Analysis as:Current


4,261



4,261



     Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2005

2006

2007$

$

$Combined federal and provincial income tax rate


36
%


36
%


36
%Expenses not deductible for tax purpose


8
%


7
%


(425
)%Tax exemption and tax relief granted to the Company


(22
)%


(45
)%


341
%Effect of different tax rate of subsidiary operation in other
    jurisdiction


(11
)%


(2
)%


132
%FIN 48 liability










(144
)%Others


3
%


(1
)%


107
%14
%


(5
)%


47
%     Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2005

2006

2007$

$

$The aggregate dollar effect


953,804



1,429,352



1,345,726Per share effect  basic and diluted


0.06



0.08



0.05  F-24




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  11.
    EARNINGS
    PER SHARE    Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2005


2006


2007Income (Loss) available to common stockholder  basic
    and diluted

$
3,803,953


$
(9,429,864
)

$
(209,676
)Weighted average number of common shares  basic and
    diluted


15,427,995



18,986,498



27,283,305Basic and diluted income (loss) per share

$
0.25


$
(0.50
)

$
(0.01
)     12.
    RELATED
    PARTY BALANCES AND TRANSACTIONS  Related
    party balances:
      Related
    party transactions:
    13.
    COMMITMENTS  a)
    Operating
    lease commitments      December 31

$2008


786,3322009


706,8642010


485,7792011


27,9282012 and late


141,965Total


2,148,868  F-25




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  b)
    Property,
    plant and equipment purchase commitments    c)
    Supply
    purchase commitments                Twelve Months Ending December 31:2008

$
247,051,6432009


320,632,3832010


312,005,3252011


134,902,7222012


134,728,743Thereafter


445,268,644Total

$
1,594,589,460   14.
    SEGMENT
    INFORMATION    F-26




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Year Ended December 31, 2005Solar Power Products

Other

Total$

$

$Revenues from external customers


17,895,383



428,417



18,323,800Cost of revenue


10,885,165



325,713



11,210,878Interest income


21,721







21,721Interest expenses


239,225







239,225Segment profit


3,738,222



65,731



3,803,953Segment assets


27,099,319



330,698



27,430,017   Year Ended December 31, 2006Solar Power Products

Other

Total$

$

$Revenues from external customers


68,144,422



67,834



68,212,256Cost of revenue


55,804,125



67,834



55,871,959Interest income


362,528







362,528Interest expenses


2,193,551







2,193,551Segment (loss) profit


(9,429,864
)






(9,429,864
)Segment assets


129,633,757







129,633,757   Year Ended December 31, 2007Solar Power Products

Other

Total$

$

$Revenues from external customers


302,797,671







302,797,671Cost of revenue


279,022,155







279,022,155Interest income


562,006







562,006Interest expenses


2,367,131







2,367,131Segment profit/(loss)


(209,676
)






(209,676
)Segment assets


284,502,529







284,502,529     Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2005

2006

2007$

$

$Europe: Germany


13,800,581



38,787,860



206,740,573 Others


1,462,718



13,192,923



79,847,344Europe Total


15,263,299



51,980,783



286,587,917Asia: China


504,410



14,091,562



6,608,046 Others


286



109,061



6,996,651Asia Total


504,696



14,200,623



13,604,697America


2,555,805



2,030,850



2,605,057Total net revenues


18,323,800



68,212,256



302,797,671    F-27




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  15.
    MAJOR
    CUSTOMERS    Year Ended December 312005

2006

2007$

$

$Company A










63,926,118Company B






*



60,361,058Company C






*



60,119,666Company D






*



43,540,156Company E






9,737,337



*Company F


6,739,649



6,893,121



*Company G


*



9,189,588



Company H


2,556,107







     *
    
    Less than 10%    16.
    EMPLOYEE
    BENEFIT PLANS      17.
    SHARE
    OPTIONS     F-28




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Options
    to Employees
          2006

2007Risk free rate


5.27%5.72
%


5.31%6.15
%Average expected exercise term


6.13 years



n/aVolatility ratio


66%69
%


79%81
%Dividend yield






Annual exit rate


n/a



6
%Suboptimal exercise factor


n/a



3.27     WeightedWeighted

AverageAverage

RemainingNumber

Exercise

Contract

Aggregateof Options

Price

Terms

Intrinsic Value$



$Options outstanding at January 1, 2007


1,273,695



4.15Granted


511,623



8.60Exercised


(50,389
)


3.01Cancelled or Forfeited


(104,534
)


4.57Options outstanding at December 31, 2007


1,630,395



5.55



9 years



13,210,316Options vested or expected to vest at December 31, 2007


1,566,185



3.89



8 years



13,153,234Options exercisable at December 31, 2007


500,172



6.94



9 years



3,575,970  F-29




---



##### Table of Contents



CANADIAN
    SOLAR INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Options
    and Restricted shares to Non-employees
    Restricted
    shares to Employees
        Weighted AverageNumber of

Grant-Date

TotalShares

Fair Value

Fair Value$Unvested at January 1, 2007


566,190



16.01Granted






Exercised






Vested


(255,135
)


16.22



(4,138,995
)Cancelled or Forfeited






Unvested at December 31, 2007


311,055



15.83   18.
    SUBSEQUENT
    EVENTS         F-30




---



##### Table of Contents



Additional
    Information  Financial Statements
    Schedule 1



Canadian
    Solar Inc.    Financial
    Information of Parent Company
  Balance
    Sheets
  December 31,2006

2007$

$ASSETSCurrent assets:Cash and cash equivalents


16,345,243



22,411,660Accounts receivable, net of allowance for doubtful accounts of
    Nil and $204,382 on December 31, 2006 and 2007, respectively


2,336,966



59,990,021Inventories


2,219,710



895,472Advances to suppliers


5,300,059



3,359,795Amount due from related parties


26,944,177



43,250,443Deferred tax assets


98,822



2,226,879Prepaid and other current assets


367,293



848,270Total current assets


53,612,270



132,982,540Investment in subsidiaries


65,304,847



94,130,246Deferred tax assets


3,609,424



3,609,116Other non-current assets






7,398,486TOTAL ASSETS


122,526,541



238,120,388LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable


499,784



2,536,003Amounts due to related parties


6,218,885



22,671,919Other current liabilities


2,300,237



5,946,606Total current liabilities


9,018,906



31,154,528Accrued warranty costs


603,780



3,421,505Convertible notes






75,000,000Liability for uncertain tax positions






2,278,482TOTAL LIABILITIES


9,622,686



111,854,515Stockholders equity:Common shares  no par value: unlimited authorized Shares,
    27,270,000 shares issued and outstanding, as of
    December 31, 2006; 27,283,305 shares issued and
    outstanding, as of December 31, 2007


97,302,391



97,454,214Additional paid-in capital


17,333,897



26,435,689Retained earnings (accumulated deficit)


(2,782,697
)


(3,604,572
)Accumulated other comprehensive income


1,050,264



5,980,542Total stockholders equity


112,903,855



126,265,873TOTAL LIABILITIES AND STOCKHOLDERS EQUITY


122,526,541



238,120,388  F-31




---



##### Table of Contents



Financial
    Information of Parent Company
  Statements
    of (Loss) Income
  Year Ended December 31,2005


2006


2007$


$


$Net revenues:Product


29,124,181



77,427,512



323,884,241Cost of revenues:Product


28,233,339



74,844,151



313,554,507Gross profit


890,842



2,583,361



10,329,734Operating expenses:Selling expenses


3,600



2,510,642



3,382,165Research and development






76,084



405,784General and administrative expenses


888,283



5,903,722



12,504,867Total operating expenses


891,883



8,490,448



16,292,816Loss from operations


(1,041
)


(5,907,087
)


(5,963,082
)Other income (expenses):Interest expenses


(239,225
)


(1,598,415
)


(409,179
)Interest income


17,634



304,636



316,175Loss on change in fair value of derivatives


(316,000
)


(6,997,000
)


Loss on financial instruments related to convertible notes


(263,089
)


(1,189,500
)


Other-net






(43,969
)


2,441,284Loss before taxes


(801,721
)


(15,431,335
)


(3,614,802
)Income tax expenses


(132,159
)


(125,606
)


(145,141
)Equity in earnings of subsidiaries


4,737,833



6,127,077



3,550,267Net income (loss)


3,803,953



(9,429,864
)


(209,676
)Earnings (Loss) per share-basic and diluted

$
0.25


$
(0.50
)

$
(0.01
)Shares used in computation-basic and diluted


15,427,995



18,986,498



27,283,305  F-32




---



##### Table of Contents



Financial
    Information of Parent Company
  Statements
    of Cash Flows
  Year Ended December 31,2005

2006

2007$

$

$Operating activities:Net income (loss)


3,803,953



(9,429,864
)


(209,676
)Adjustments to reconcile net income (loss) to net cash used in
    operating activities operating activities:Depreciation and amortization










55,861Allowance for doubtful debts






17,445



188,894Loss on fair value change of derivatives


316,000



6,997,000



Loss on financial instruments related to convertible notes


263,089



1,189,500



Amortization of discount on debt


134,666



722,053



Equity in earnings of subsidiaries


(4,737,835
)


(6,127,077
)


(3,550,266
)Share based compensation






6,144,879



9,101,792Changes in operating assets and liabilities:Inventories


(1,677,940
)


(355,654
)


1,519,318Accounts receivable


(1,299,079
)


(402,208
)


(53,876,699
)Amounts due from related parties


(3,941,319
)


(16,984,917
)


(16,306,266
)Advances to suppliers


(2,584,264
)


(2,469,789
)


(1,742,545
)Other current assets


(45,092
)


(316,269
)


214,999Accounts payable


2,811,156



(2,888,641
)


2,026,184Advances from suppliers and customers


2,244,762



(1,607,870
)


1,198,017Amounts due to related parties


798,227



(1,786,340
)


16,392,265Accrued warranty costs


166,819



275,746



2,817,725Other current liabilities


208,369



538,263



2,113,377Income tax payables


114,081



(256,834
)


(112,184
)Interest payables


33,710



(33,710
)


262,500Deferred taxes


(10,507
)


168,049



(959,255
)Net cash used in operating activities


(3,401,204
)


(26,606,238
)


(40,865,959
)Investing activities:Investment in subsidiaries


(3,468,291
)


(46,800,000
)


(20,460,000
)Net cash used in investing activities


(3,468,291
)


(46,800,000
)


(20,460,000
)Financing activities:Proceeds from short-term borrowings


1,300,000



(1,300,000
)


Proceeds from issuance of convertible notes


8,100,000



3,650,000



75,000,000Issuance cost paid on convertible notes


(69,685
)


(571,315
)


(2,970,138
)Proceeds from issuance of common shares, net off issuance costs
    net of issuance costs






83,323,942



Proceeds from exercise of stock options










151,823Net cash provided by financing activities


9,330,315



85,102,627



72,181,685Effect of exchange rate changes


201,741



121,661



(4,789,309
)Net increase in cash and cash equivalents


2,662,561



11,818,050



6,066,417Cash and cash equivalents at the beginning of the year


1,864,632



4,527,193



16,345,243Cash and cash equivalents at the end of the year


4,527,193



16,345,243



22,411,660Supplemental disclosure of cash flow information:Interest paid


(3,349
)


(876,362
)


(58,814
)Income taxes paid


(28,584
)






(98,681
)Supplemental schedule of non-cash activities:Issuance cost included in other payable


571,315







(381,496
)Conversion of debt to equity






10,162,215



Provision for FIN 48 uncertain tax positions recorded upon
    adoption










612,199  F-33




---



##### Table of Contents



SIGNATURES
  Form 20-F
    By:
    /s/  Shawn
    (Xiaohua) Qu   Title:
    Chairman, President and
    Chief Executive Officer