##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended: December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 For the transition period from  to
 Commission file number: 1- 33208
 SOLARFUN POWER
HOLDINGS CO., LTD.
 (Exact name of Registrant as specified in its charter)
 Not Applicable
    
    Cayman Islands(Translation of Registrants name into English)
    
    (Jurisdiction of Incorporation or Organization)
 888 Linyang Road, Qidong, Jiangsu Province 226200, Peoples Republic of China  (Address of Principal Executive Offices)
 Mr. Gareth Kung
Chief Financial Officer
Telephone: 8621-26022872
E-mail: Gareth.Kung@solarfun-power.com
Fax: 8621- 26022889
26th Fl. BM Tower
218 Wusong Road
Shanghai 200080
Peoples Republic of China  (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 RegisteredAmerican Depositary Shares 
Ordinary Shares, par value US$0.0001 per share
    
    Nasdaq Global Market
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
 Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of
the close of the period covered by the annual report.
 Yes o No þ
 o þ
 þ o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  U.S. GAAP þ
    
    International Financial Reporting Standards as issued
by the International Accounting Standards Board o
    
    Other o
  o o
 o þ
  Yes o No o




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##### 



Table of Contents
 ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
    
    
    1ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    1ITEM 3 KEY INFORMATION
    
    
    1ITEM 4 INFORMATION ON THE COMPANY
    
    
    30ITEM 4A UNRESOLVED STAFF COMMENTS
    
    
    44ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    44ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    69ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    83ITEM 8 FINANCIAL INFORMATION
    
    
    87ITEM 9 THE OFFER AND LISTING
    
    
    88ITEM 10 ADDITIONAL INFORMATION
    
    
    89ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    95ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    96ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    97ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    97ITEM 15 CONTROLS AND PROCEDURES
    
    
    99ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    101ITEM 16B CODE OF ETHICS
    
    
    101ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    101ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    101ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    101ITEM 16F CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    102ITEM 16G CORPORATE GOVERNANCE
    
    
    102ITEM 17 FINANCIAL STATEMENTS
    
    
    102ITEM 18 FINANCIAL STATEMENTS
    
    
    102ITEM 19 EXHIBITS
    
    
    102Exhibit 4.31Exhibit 4.32Exhibit 4.33Exhibit 4.34Exhibit 4.35Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 23.1




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INTRODUCTION
  
    
    ADRsare to the American depositary receipts that evidence our ADSs;
 
    
    ADSsare to our American depositary shares, each of which represents five ordinary
 shares;
 
    
    Chinaor the PRCare to the Peoples Republic of China, excluding, for the purpose of
this annual report only, Taiwan and the special administrative regions of Hong Kong and Macau;
 
    
    conversion efficiencyare to the ability of photovoltaic, or PV, products to convert
sunlight into electricity, and conversion efficiency rates are commonly used in the PV
industry to measure the percentage of light energy from the sun that is actually converted
into electricity;
 
    
    cost per wattand price per wattare to the method by which the cost and price of PV
products, respectively, are commonly measured in the PV industry. A PV product is priced based
on the number of watts of electricity it can generate;
 
    
    GWare to gigawatt, representing 1,000,000,000 watts, a unit of power-generating capacity
or consumption;
 
    
    MWare to megawatt, representing 1,000,000 watts, a unit of power-generating capacity or
consumption. In this annual report, it is assumed that, based on a yield rate of 95%, 420,000
125mm x 125mm or 280,000 156mm x 156mm silicon wafers are required to produce PV products
capable of generating 1 MW, that each 125mm x 125mm and 156mm x 156mm PV cell generates 2.4 W
and 3.7 W of power, respectively, and that each PV module contains 72 125mm x 125mm PV cells
or 54 156mm x 156mm PV cells;
 
    
    PVare to photovoltaic. The photovoltaic effect is a process by which sunlight is
converted into electricity;
 
    
    RMBand Renminbiare to the legal currency of China;
 
    
    series A convertible preference sharesare to our series A convertible preference shares,
par value US$0.0001 per share;
 
    
    sharesor ordinary sharesare to our ordinary shares, par value US$0.0001 per share.
For the purpose of computing and reporting our outstanding ordinary shares and our basic or
diluted earnings per share, the 9,019,611 ADSs we issued to facilitate the convertible bond
offering are not considered outstanding;
 
    
    Ware to watt, a unit of power-generating capacity or consumption; and
 
    
    US$and U.S. dollarsare to the legal currency of the United States.
    1




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2




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PART I
 
 ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
  
 ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3 KEY INFORMATION
 A. Selected Financial Data
  Year Ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(In thousands, except share and per share data)Consolidated
Statement of
Operations DataNet revenues
    
    
    166,178
    
    
    
    630,907
    
    
    
    2,395,135
    
    
    
    4,949,068
    
    
    
    3,778,316
    
    
    
    553,527Cost of revenues
    
    
    (139,903
    )
    
    
    (446,530
    )
    
    
    (1,997,355
    )
    
    
    (4,905,147
    )
    
    
    (3,341,936
    )
    
    
    (489,596
    )Gross profit
    
    
    26,275
    
    
    
    184,377
    
    
    
    397,780
    
    
    
    43,921
    
    
    
    436,380
    
    
    
    63,931Operating expensesSelling expenses
    
    
    (5,258
    )
    
    
    (11,883
    )
    
    
    (62,777
    )
    
    
    (87,913
    )
    
    
    (105,454
    )
    
    
    (15,449
    )General and administrative expenses
    
    
    (4,112
    )
    
    
    (52,214
    )
    
    
    (113,756
    )
    
    
    (143,340
    )
    
    
    (180,989
    )
    
    
    (26,515
    )Research and development expenses
    
    
    (750
    )
    
    
    (6,523
    )
    
    
    (27,440
    )
    
    
    (19,679
    )
    
    
    (32,025
    )
    
    
    (4,692
    )Total operating expenses
    
    
    (10,120
    )
    
    
    (70,620
    )
    
    
    (203,973
    )
    
    
    (250,932
    )
    
    
    (318,468
    )
    
    
    (46,656
    )Operating profit (loss)
    
    
    16,155
    
    
    
    113,757
    
    
    
    193,807
    
    
    
    (207,011
    )
    
    
    117,912
    
    
    
    17,275Interest expenses
    
    
    (123
    )
    
    
    (8,402
    )
    
    
    (25,978
    )
    
    
    (103,146
    )
    
    
    (157,907
    )
    
    
    (23,134
    )Interest income
    
    
    95
    
    
    
    1,326
    
    
    
    16,244
    
    
    
    10,004
    
    
    
    5,002
    
    
    
    733Exchange losses
    
    
    (1,768
    )
    
    
    (4,346
    )
    
    
    (25,628
    )
    
    
    (35,230
    )
    
    
    (23,814
    )
    
    
    (3,489
    )Changes in fair value of
derivative contracts
    
    
    
    
    
    
    (163
    )
    
    
    
    
    
    
    83,090
    
    
    
    9,594
    
    
    
    1,406Changes in fair value of
conversion feature of convertible
bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,887
    )
    
    
    (10,825
    )Other income
    
    
    215
    
    
    
    902
    
    
    
    1,507
    
    
    
    15,018
    
    
    
    6,286
    
    
    
    921Other expenses
    
    
    (260
    )
    
    
    (836
    )
    
    
    (9,670
    )
    
    
    (25,604
    )
    
    
    (11,835
    )
    
    
    (1,734
    )Government grants
    
    
    
    
    
    
    852
    
    
    
    2,089
    
    
    
    3,480
    
    
    
    7,661
    
    
    
    1,122Income (loss) before income taxes
    
    
    14,314
    
    
    
    103,090
    
    
    
    152,371
    
    
    
    (259,399
    )
    
    
    (120,988
    )
    
    
    (17,725
    )Income tax expenses
    
    
    96
    
    
    
    3,132
    
    
    
    (7,458
    )
    
    
    (6,519
    )
    
    
    (23,928
    )
    
    
    (3,505
    )Net income (loss) attributable to
shareholders
    
    
    14,410
    
    
    
    98,695
    
    
    
    148,037
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    (21,276
    )
  1




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Year Ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(In thousands, except share and per share data)Net income
(loss) attributable to
shareholders per share
Solarfun Power Holdings
Co., Ltd. Basic
    
    
    0.26
    
    
    
    0.95
    
    
    
    0.62
    
    
    
    (1.11
    )
    
    
    (0.53
    )
    
    
    (0.08
    ) Diluted
    
    
    0.22
    
    
    
    0.74
    
    
    
    0.62
    
    
    
    (1.11
    )
    
    
    (0.53
    )
    
    
    (0.08
    )Number of shares used in
computation of net
income (loss) per share Basic
    
    
    54,511,540
    
    
    
    103,631,832
    
    
    
    240,054,686
    
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    274,067,760 Diluted
    
    
    66,366,469
    
    
    
    142,108,460
    
    
    
    240,054,686
    
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    274,067,760Net income (loss) per ADS Basic
    
    
    1.32
    
    
    
    4.76
    
    
    
    3.08
    
    
    
    (5.55
    )
    
    
    (2.65
    )
    
    
    (0.39
    ) Diluted
    
    
    1.09
    
    
    
    3.72
    
    
    
    3.08
    
    
    
    (5.55
    )
    
    
    (2.65
    )
    
    
    (0.39
    )Number of ADS used in
computation of net
income (loss) per ADS Basic
    
    
    10,902,308
    
    
    
    20,726,366
    
    
    
    48,010,937
    
    
    
    50,531,923
    
    
    
    54,813,552
    
    
    
    54,813,552 Diluted
    
    
    13,273,294
    
    
    
    28,421,692
    
    
    
    48,010,937
    
    
    
    50,531,923
    
    
    
    54,813,552
    
    
    
    54,813,552
  2




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Year Ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)Other Financial DataGross margin
    
    
    15.8
    %
    
    
    29.2
    %
    
    
    16.6
    %
    
    
    0.9
    %
    
    
    11.5
    %
    
    
    11.5
    %Operating margin
    
    
    9.7
    %
    
    
    18.0
    %
    
    
    8.1
    %
    
    
    (4.2
    )%
    
    
    3.1
    %
    
    
    3.1
    %Net margin
    
    
    8.7
    %
    
    
    16.8
    %
    
    
    6.2
    %
    
    
    (5.7
    )%
    
    
    (3.8
    )%
    
    
    (3.8
    )%Net cash (used in)
provided by
operating
activities (in
thousands)
    
    
    (76,582
    )
    
    
    (523,061
    )
    
    
    (1,020,603
    )
    
    
    (674,040
    )
    
    
    689,333
    
    
    
    100,988Other Operating Data
 Year Ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(MW)
    
    
    (MW)
    
    
    (MW)
    
    
    (MW)
    
    
    (MW)Amount of PV
modules shipped
(including PV
module processing)
    
    
    
    
    
    
    19.0
    
    
    
    78.4
    
    
    
    172.8
    
    
    
    313.4
 Year Ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(RMB/W)
    
    
    (RMB/W)
    
    
    (RMB/W)
    
    
    (RMB/W)
    
    
    (RMB/W)
    
    
    (US$/W)Average selling
price of PV modules
(excluding PV
module processing)
    
    
    32.34
    
    
    
    31.75
    
    
    
    28.20
    
    
    
    26.77
    
    
    
    15.27
    
    
    
    2.24
  3




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As of December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(In thousands)Consolidated Balance Sheet DataCash and cash equivalents
    
    
    7,054
    
    
    
    1,137,792
    
    
    
    272,928
    
    
    
    410,901
    
    
    
    645,720
    
    
    
    94,599Restricted cash
    
    
    22,229
    
    
    
    33,822
    
    
    
    42,253
    
    
    
    88,137
    
    
    
    60,539
    
    
    
    8,869Accounts receivable  net
    
    
    
    
    
    
    147,834
    
    
    
    430,692
    
    
    
    319,537
    
    
    
    587,488
    
    
    
    86,066Inventories-net
    
    
    76,819
    
    
    
    372,504
    
    
    
    728,480
    
    
    
    731,708
    
    
    
    783,973
    
    
    
    114,853Advance to suppliers  net
    
    
    61,312
    
    
    
    238,178
    
    
    
    640,118
    
    
    
    1,145,614
    
    
    
    979,762
    
    
    
    143,536Other current assets
    
    
    20,705
    
    
    
    75,525
    
    
    
    214,478
    
    
    
    481,749
    
    
    
    180,315
    
    
    
    26,416Deferred tax assets  net
    
    
    96
    
    
    
    3,400
    
    
    
    7,793
    
    
    
    62,481
    
    
    
    76,904
    
    
    
    11,266Derivative contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,665
    
    
    
    7,360
    
    
    
    1,078Amount due from related parties
    
    
    
    
    
    
    153
    
    
    
    920
    
    
    
    19
    
    
    
    12,458
    
    
    
    1,825Fixed assets  net
    
    
    55,146
    
    
    
    207,449
    
    
    
    702,884
    
    
    
    1,492,575
    
    
    
    1,586,283
    
    
    
    232,392Intangible asset  net
    
    
    
    
    
    
    12,897
    
    
    
    94,282
    
    
    
    212,736
    
    
    
    208,563
    
    
    
    30,555Long-term deferred expenses
    
    
    
    
    
    
    
    
    
    
    214,385
    
    
    
    37,444
    
    
    
    33,135
    
    
    
    4,854Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,735
    
    
    
    134,735
    
    
    
    19,739Total assets
    
    
    243,361
    
    
    
    2,230,432
    
    
    
    3,349,513
    
    
    
    5,157,301
    
    
    
    5,297,235
    
    
    
    776,048Short-term bank borrowings
    
    
    20,000
    
    
    
    379,900
    
    
    
    965,002
    
    
    
    1,098,832
    
    
    
    404,764
    
    
    
    59,298Long-term bank borrowings, current
portion
    
    
    
    
    
    
    16,000
    
    
    
    15,000
    
    
    
    30,000
    
    
    
    90,000
    
    
    
    13,185Accounts payable
    
    
    18,794
    
    
    
    51,452
    
    
    
    141,709
    
    
    
    217,026
    
    
    
    441,768
    
    
    
    64,719Notes payable
    
    
    20,000
    
    
    
    14,020
    
    
    
    
    
    
    
    39,341
    
    
    
    186,921
    
    
    
    27,384Accrued expenses and other liabilities
    
    
    22,920
    
    
    
    33,619
    
    
    
    135,395
    
    
    
    189,028
    
    
    
    191,895
    
    
    
    28,113Customer deposits
    
    
    55,319
    
    
    
    17
    
    
    
    27,628
    
    
    
    9,494
    
    
    
    59,685
    
    
    
    8,744Deferred tax liabilities
    
    
    
    
    
    
    
    
    
    
    9,038
    
    
    
    28,571
    
    
    
    26,566
    
    
    
    3,892Unrecognized tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,385
    
    
    
    27,385
    
    
    
    4,012Derivative contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,792
    
    
    
    1,148
    
    
    
    168Amount due to related parties
    
    
    32,658
    
    
    
    24,486
    
    
    
    92,739
    
    
    
    39,766
    
    
    
    16,765
    
    
    
    2,456Long-term bank borrowings
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    170,000
    
    
    
    380,000
    
    
    
    55,670Convertible bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,178,969
    
    
    
    658,653
    
    
    
    96,493Redeemable ordinary shares (par value
US$0.0001 per share; 45,098,055
shares issued and outstanding as of
December 31, 2008 and 2009)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    32
    
    
    
    5Total shareholders equity
    
    
    73,670
    
    
    
    1,678,215
    
    
    
    1,862,582
    
    
    
    2,123,065
    
    
    
    2,811,653
    
    
    
    411,909Total liabilities, mezzanine equity
and shareholders equity
    
    
    243,361
    
    
    
    2,230,432
    
    
    
    3,349,513
    
    
    
    5,157,301
    
    
    
    5,297,235
    
    
    
    776,048
 Exchange Rate Information
   4




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Renminbi per U.S. Dollar Noon Buying Rate(1)PeriodEnd
    
    
    Average(2)
    
    
    Low
    
    
    High2005
    
    
    8.0702
    
    
    
    8.1826
    
    
    
    8.0702
    
    
    
    8.27652006
    
    
    7.8041
    
    
    
    7,9579
    
    
    
    7.8041
    
    
    
    8.07022007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.2946
    
    
    
    7.81272008
    
    
    6.8225
    
    
    
    6.9193
    
    
    
    6.7800
    
    
    
    7.29462009
    
    
    6.8259
    
    
    
    6.8295
    
    
    
    6.8176
    
    
    
    6.8470November 2009
    
    
    6.8265
    
    
    
    6.8271
    
    
    
    6.8255
    
    
    
    6.8300December 2009
    
    
    6.8259
    
    
    
    6.8275
    
    
    
    6.8244
    
    
    
    6.8299January 2010
    
    
    6.8268
    
    
    
    6.8269
    
    
    
    6.8258
    
    
    
    6.8295February 2010
    
    
    6.8258
    
    
    
    6.8285
    
    
    
    6.8260
    
    
    
    6.8330March 2010
    
    
    6.8258
    
    
    
    6.8262
    
    
    
    6.8254
    
    
    
    6.8270April 2010
    
    
    6.8247
    
    
    
    6.8256
    
    
    
    6.8229
    
    
    
    6.8275May 2010 (through
May 21, 2010)
    
    
    6.8262
    
    
    
    6.8267
    
    
    
    6.8245
    
    
    
    6.8285
 Notes:(1)
    
    For periods prior to January 1, 2009, the exchange rates reflect the noon buying rates as
reported by the Federal Reserve Bank of New York. For periods after January 1, 2009, the
exchange rates reflect the exchange rates as set forth in the H.10 statistical release of the
Federal Reserve Board.(2)
    
    Annual averages are calculated from month-end rates. Monthly averages are calculated using
the average of the daily rates during the relevant period. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Risks Related to Our Company and Our Industry
 Demand for our PV products has been, and may continue to be, adversely affected by the current
economic and credit environment.
   5




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##### Table of Contents



As silicon supply increases, the corresponding increase in the global supply of PV modules may
cause substantial downward pressure on the price of PV products and reduce our revenues and net
income.
  Our ability to adjust our raw material costs may be limited as a result of our entering into
multi-year supply agreements with many of our silicon and silicon wafer suppliers, and it may be
difficult for us to respond in a timely manner to rapidly changing market conditions, which could
materially and adversely affect our cost of revenues and profitability.
   6




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##### Table of Contents



Prepayments we have provided to our silicon and silicon wafer suppliers expose us to the credit
risks of such suppliers and may increase our costs and expenses, which could in turn have a
material adverse effect on our liquidity.
   7




---



##### Table of Contents



The average selling price of our PV products may continue to decrease.
  Evaluating our business and prospects may be difficult because of our limited operating history,
and our past results may not be indicative of our future performance.
  Our future success substantially depends on our ability to manage our production effectively and to
reduce our manufacturing costs. Our ability to achieve such goals is subject to a number of risks
and uncertainties.
  
    
    our ability to re-negotiate our existing multi-year supply agreements;
 
    
    our ability to maintain our quality level and keep pace with changes in technology;
 
    
    our ability to adjust inventory levels to respond to rapidly changing market demand;
 
    
    delays in obtaining or denial of required approvals by relevant government authorities; and
 
    
    diversion of significant management attention and other resources to other matters.
  8




---



##### Table of Contents



We depend on a limited number of customers for a high percentage of our revenue and the loss of, or
a significant reduction in orders from, any of these customers, if not immediately replaced, would
significantly reduce our revenue and decrease our profitability.
  
    
    reduction, delay or cancellation of orders from one or more of our significant customers;
 
    
    selection by one or more of our significant distributor customers of our competitors
products;
 
    
    loss of one or more of our significant customers and our failure to identify additional or
replacement customers;
 
    
    any adverse change in the bilateral or multilateral trade relationships between China and
European countries, particularly Germany; and
 
    
    failure of any of our significant customers to make timely payment for our products.
     9




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##### Table of Contents



Our dependence on a limited number of suppliers for a substantial majority of silicon and silicon
wafers could prevent us from delivering our products in a timely manner to our customers in the
required quantities, which could result in order cancellations, decreased revenue and loss of
market share.
  Until mid-2008, there was an industry-wide shortage of silicon and silicon wafers. If we again
experience an industry-wide shortage of silicon and silicon wafers, our failure to obtain
sufficient quantities of silicon and silicon wafers in a timely manner could disrupt our
operations, prevent us from operating at full capacity or limit our ability to expand as planned,
which would reduce, and limit the growth of, our manufacturing output and revenue.
  
    
    the terms of our silicon and silicon wafer contracts with, or purchase orders to, our
suppliers may be altered or cancelled as a result of our ongoing re-negotiations with them;
 
    
    there are a limited number of silicon and silicon wafer suppliers, and many of our
competitors also purchase silicon and silicon wafers from these suppliers;
 
    
    our competitors may have longer and stronger relationship with these suppliers than we do;
 
    
    some of our silicon and silicon wafer suppliers do not manufacture silicon themselves, but
instead purchase their requirements from other vendors. It is possible that these suppliers
will not be able to obtain sufficient silicon or silicon wafers to satisfy their contractual
obligations to us;
  10




---



##### Table of Contents




    
    we do not have a long history with our silicon and silicon wafer suppliers and there can be
no assurance that they will be able to meet our production needs consistently or on a timely
basis; and
 
    
    our purchase of silicon and silicon wafers is subject to the business risk of our
suppliers, one or more of which may go out of business for any one of a number of reasons
beyond our control in the current economic environment.
  We currently have a significant amount of debt outstanding. Our substantial indebtedness may limit
our future financing capabilities and could adversely affect our business, financial condition and
results of operations.
  
    
    making it more difficult for us to fulfill payment and other obligations under our
outstanding debt, including repayment of our long- and short-term credit facilities should we
be unable to obtain extensions for any such facilities before they mature, as well as our
obligations under our convertible bonds;
 
    
    triggering an event of default if we fail to comply with any of our payment or other
obligations contained in our debt agreements, which could result in cross-defaults causing all
or a substantial portion of our debt to become immediately due and payable;
 
    
    reducing the availability of cash flow to fund working capital, capital expenditures,
acquisitions and other general corporate purposes, and adversely affecting our ability to
obtain additional financing for these purposes;
 
    
    potentially increasing the cost of any additional financing; and
 
    
    putting pressure on our ADS price due to concerns of our inability to repay our debt and
making it more difficult for us to conduct equity financings in the capital markets.
   11




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##### Table of Contents



We require a significant amount of cash to fund our operations as well as meet future capital
requirements. If we cannot obtain additional capital when we need it, our growth prospects and
future profitability may be materially and adversely affected.
  
    
    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.
  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.
  
    
    fluctuations in currency exchange rates of the U.S. dollar, Euro and other foreign
currencies against the Renminbi;
 
    
    difficulty in engaging and retaining distributors and agents who are knowledgeable about,
and can function effectively in, overseas markets;
 
    
    increased costs associated with maintaining marketing and sales activities in various
countries;
 
    
    difficulty and costs relating to compliance with different commercial and legal
requirements in the jurisdictions in which we offer our products;
 
    
    inability to obtain, maintain or enforce intellectual property rights; 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.
   12




---



##### Table of Contents



If we are unable to compete in the highly competitive PV market, our revenue and profits may
decrease and we may lose market share.
  
    
    manufacturing capacity;
 
    
    power efficiency;
 
    
    range and quality of products;
 
    
    price;
 
    
    strength of supply chain and distribution network;
 
    
    after-sales inquiry; and
 
    
    brand image.
   Our profitability depends on our ability to respond to rapid market changes in the PV industry,
including by developing new technologies and offering additional products and services.
   13




---



##### Table of Contents



Our future success also depends on our ability to make strategic acquisitions and investments and
to establish and maintain strategic alliances, and failure to do so could have a material adverse
effect on our market penetration, revenue growth and profitability. In addition, such strategic
acquisitions, alliances and investments themselves entail significant risks that could materially
and adversely affect our business.
    14




---



##### Table of Contents



Problems with product quality or product performance could result in a decrease in customers and
revenue, unexpected expenses and loss of market share. In addition, product liability claims
against us could result in adverse publicity and potentially significant monetary damages.
    If PV technology is not suitable for widespread adoption, or sufficient demand for PV products does
not develop or takes longer to develop than we anticipated, our sales may not continue to increase
or may even decline, and our revenue and profitability would be reduced.
   15




---



##### Table of Contents




    
    cost-effectiveness of PV products compared to conventional and other non-solar energy
sources and products;
 
    
    performance and reliability of PV products compared to conventional and other non-solar
energy sources and products;
 
    
    availability of government subsidies and incentives to support the development of the PV
industry or other energy resource industries;
 
    
    success of other alternative energy generation technologies, such as fuel cells, wind power
and biomass;
 
    
    fluctuations in economic and market conditions that affect the viability of conventional
and non-solar alternative energy sources, such as increases or decreases in the prices of oil
and other fossil fuels;
 
    
    capital expenditures by end users of PV products, which tend to decrease when the overall
economy slows down; and
 
    
    deregulation of the electric power industry and the broader energy industry.
 Existing regulations and policies governing the electricity utility industry, as well as changes to
these regulations and policies, may adversely affect demand for our products and materially reduce
our revenue and profits.
   The reduction or elimination of government subsidies and economic incentives for on-grid solar
energy applications could have a materially adverse effect on our business and prospects.
   16




---



##### Table of Contents



The lack or inaccessibility of financing for off-grid solar energy applications could cause our
sales to decline.
  Our failure to protect our intellectual property rights may undermine our competitive position, and
litigation to protect our intellectual property rights may be costly.
   17




---



##### Table of Contents



We may be exposed to infringement or misappropriation claims by third parties, particularly in
jurisdictions outside China which, if determined adversely against us, could disrupt our business
and subject us to significant liability to third parties, as well as have a material adverse effect
on our financial condition and results of operations.
  
    
    pay damage awards;
 
    
    seek licenses from third parties;
 
    
    pay ongoing royalties;
 
    
    redesign our products; or
 
    
    be restricted by injunctions,
  We may not be able to obtain sufficient patent protection on the technologies embodied in the PV
products we currently manufacture and sell, which could reduce our competitiveness and increase our
expenses.
   18




---



##### Table of Contents



We depend on our key personnel, and our business and growth may be severely disrupted if we lose
their services.
   Any failure to achieve and maintain effective internal control could have a material adverse
effect on our business, results of operations and the market price of our ADSs.
   19




---



##### Table of Contents



We have limited insurance coverage and may incur losses resulting from product liability claims or
business interruptions.
   Any environmental claims or failure to comply with any present or future environmental regulations
may require us to spend additional funds and may materially and adversely affect our financial
condition and results of operations.
   20




---



##### Table of Contents



Our business benefits from certain PRC government incentives. Expiration of, or changes to, these
incentives could have a material adverse effect on our results of operations.
    21




---



##### Table of Contents



Under the EIT, we may be classified as a Resident Enterprise of the PRC. Such classification
would likely result in negative tax consequences to us and could result in negative tax
consequences to our non-PRC enterprise shareholders and ADS holders.
   Fluctuations in exchange rates could adversely affect our business as well as result in foreign
currency exchange losses.
   22




---



##### Table of Contents



Two of our existing shareholders have substantial influence over our company and their interests
may not be aligned with the interests of our other shareholders.
  Risks Related to Doing Business in China
 Adverse changes in political and economic policies of the PRC government could have a material
adverse effect on the overall economic growth of China, which could reduce the demand for our
products and materially and adversely affect our competitive position.
  
    
    the amount of government involvement;
 
    
    the level of development;
 
    
    the growth rate;
 
    
    the control of foreign exchange; and
 
    
    the allocation of resources.
  23




---



##### Table of Contents



Uncertainties with respect to the PRC legal system could have a material adverse effect on us.
   24




---



##### Table of Contents



Limitations on the ability of our operating subsidiary to pay dividends or other distributions to
us could have a material adverse effect on our ability to conduct our business.
  Restrictions on currency exchange may limit our ability to receive and use our revenue effectively.
   PRC regulations relating to the establishment of offshore special purpose companies by PRC
residents may subject our PRC resident shareholders to personal liability and limit our ability to
acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiarys
ability to distribute profits to us, or otherwise materially and adversely affect us.
   25




---



##### Table of Contents



New labor laws in the PRC may adversely affect our results of operations.
  We face risks related to health epidemics and other outbreaks.
  Risks Related to Our Ordinary Shares and ADSs
 The market price of our ADSs may be volatile.
   26




---



##### Table of Contents




    
    announcements of technological or competitive developments;
 
    
    regulatory developments in our target markets affecting us, our customers or our
competitors;
 
    
    announcements regarding patent litigation or the issuance of patents to us or our
competitors;
 
    
    announcements of studies and reports relating to the conversion efficiencies of our
products or those of our competitors;
 
    
    actual or anticipated fluctuations in our quarterly operating results;
 
    
    changes in financial estimates or other material comments by securities analysts relating
to us, our competitors or our industry in general;
 
    
    announcements by other companies in our industry relating to their operations, strategic
initiatives, financial condition or financial performance or to our industry in general;
 
    
    announcements of acquisitions or consolidations involving industry competitors or industry
suppliers;
 
    
    changes in the economic performance or market valuations of other PV technology companies;
 
    
    addition or departure of our executive officers and key research personnel; and
 
    
    sales or perceived sales of additional ordinary shares or ADSs.
  Our articles of association contain anti-takeover provisions that could have a material adverse
effect on the rights of holders of our ordinary shares and ADSs.
   27




---



##### Table of Contents



Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise
those rights.
  You may be subject to limitations on transfers of your ADSs.
  Your right to participate in any future rights offerings may be limited, which may cause dilution
to your holdings, and you may not receive distributions with respect to the underlying ordinary
shares if it is impractical to make them available to you.
   28




---



##### Table of Contents



We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than under U.S. law, you may have less
protection for your shareholder rights than you would under U.S. law.
   
    
    recognize or enforce against us or our directors, judgments of courts of the United States
based on certain civil liability provisions of U.S. securities laws; and
 
    
    entertain original actions brought in the Cayman Islands, based on certain civil liability
provisions of U.S. securities laws that are penal in nature.
   You may have difficulty enforcing judgments obtained against us.
   29




---



##### Table of Contents



ITEM 4 INFORMATION ON THE COMPANY
 A. History and Development of the Company
   www.solarfun.com.cn.
   30




---



##### Table of Contents



B. Business Overview
 Overview
    Our Products and Services
  Our Products
 PV Cells
  Dimensions
    
    
    Conversion
    
    
    Thickness
    
    
    MaximumPV Cell Type
    
    (mm×mm)
    
    
    Efficiency (%)
    
    
    (EM)
    
    
    Power (W)Monocrystalline silicon cell
    
    
    125 × 125
    
    
    
    16.5  17.8
    %
    
    
    180  200
    
    
    
    2.46  2.78156 × 156
    
    
    
    16.5  17.8
    %
    
    
    180  200
    
    
    
    3.90  4.21Multicrystalline silicon cell
    
    
    125 × 125
    
    
    
    15.3  16.3
    %
    
    
    180  200
    
    
    
    2.38  2.54156 × 156
    
    
    
    15.3  16.3
    %
    
    
    180  200
    
    
    
    3.69  3.93
    31




---



##### Table of Contents



PV Modules
   Dimensions
    
    
    WeightPV Module Manufactured with:
    
    (mm)
    
    
    (Kg)
    
    
    Power (W)Monocrystalline silicon
    
    
    1580 × 808 × 45
    
    
    
    15
    
    
    
    150  1901494 × 1000 × 45
    
    
    
    18
    
    
    
    170  2201652 × 1000 × 50
    
    
    
    22
    
    
    
    200  245Multicrystalline silicon
    
    
    1580 × 808 × 45
    
    
    
    15
    
    
    
    155  1901494 × 1000 × 45
    
    
    
    18
    
    
    
    170  2201652 × 1000 × 50
    
    
    
    22
    
    
    
    200  245
  Ingots
    32




---



##### Table of Contents



Our Services
   Raw Materials Supply Management
   Silicon-based Raw Materials
    33




---



##### Table of Contents



Other Raw Materials
  Production
   34




---



##### Table of Contents



Production Process
  
  35




---



##### Table of Contents



Quality Control and Certifications
    36




---



##### Table of Contents



Capacity Expansion and Technology Upgrade Plans
   Sales and Distribution
     37




---



##### Table of Contents



Year Ended December 31,2007
    
    
    2008
    
    
    2009Net
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    Net
    
    
    NetRevenues
    
    
    % of Net
    
    
    Revenues
    
    
    % of Net
    
    
    Revenues
    
    
    Revenues
    
    
    % of NetRegion
    
    (RMB)
    
    
    Revenues
    
    
    (RMB)
    
    
    Revenues
    
    
    (RMB)
    
    
    (US$)
    
    
    Revenues(In thousands, except percentages)Germany
    
    
    1,195,788
    
    
    
    49.9
    %
    
    
    2,637,434
    
    
    
    53.3
    %
    
    
    2,668,477
    
    
    
    390,934
    
    
    
    70.6
    %Spain
    
    
    584,525
    
    
    
    24.4
    %
    
    
    1,246,305
    
    
    
    25.2
    %
    
    
    37,326
    
    
    
    5,468
    
    
    
    1.0
    %PRC
    
    
    200,615
    
    
    
    8.4
    %
    
    
    329,153
    
    
    
    6.6
    %
    
    
    177,478
    
    
    
    26,001
    
    
    
    4.7
    %Italy
    
    
    92,900
    
    
    
    3.9
    %
    
    
    119,272
    
    
    
    2.4
    %
    
    
    4,446
    
    
    
    651
    
    
    
    0.1
    %Czech Republic
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245,814
    
    
    
    36,012
    
    
    
    6.5
    %Others
    
    
    321,307
    
    
    
    13.4
    %
    
    
    616,904
    
    
    
    12.5
    %
    
    
    644,775
    
    
    
    94,461
    
    
    
    17.1
    %Total
    
    
    2,395,135
    
    
    
    100.0
    %
    
    
    4,949,068
    
    
    
    100.0
    %
    
    
    3,778,316
    
    
    
    553,527
    
    
    
    100.0
    %
  Warranty
  Intellectual Property and Proprietary Rights
     38




---



##### Table of Contents



Competition
     Environmental Matters
   39




---



##### Table of Contents



Insurance
  Regulation
  Renewable Energy Law and Other Government Directives
     th
  40




---



##### Table of Contents



Environmental Regulations
  Restriction on Foreign Businesses
  Tax
   41




---



##### Table of Contents



Foreign Currency Exchange
  
    
    Foreign Exchange Administration Rules (1996), as amended; and
    
    Regulations of Settlement, Sale and Payment of Foreign Exchange (1996).
    42




---



##### Table of Contents



Dividend Distribution
  
    
    Wholly Foreign-Owned Enterprise Law (1986), as amended; and
    
    Wholly Foreign-Owned Enterprise Law Implementation Rules (1990), as amended.
  C. Organizational Structure
  
  (1)
    
    Jiangsu Linyang Solarfun Engineering Research and Development Center Co., Ltd. was formerly
named Nantong Linyang Solarfun Engineering Research and Development Center Co., Ltd. It
changed its name on April 9, 2007.  43




---



##### Table of Contents



D. Property, Plant and Equipment
    
 ITEM 4A UNRESOLVED STAFF COMMENTS
  
 ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following discussion should be read in conjunction with the rest of this annual report,
including the consolidated financial statements and notes thereto contained elsewhere in this
annual report. The results discussed below are not necessarily indicative of the results to be
expected in any future periods.
 A. Operating Results
 Overview
   44




---



##### Table of Contents



Limited Operating History
   45




---



##### Table of Contents



Key Factors Affecting Our Financial Performance
  
    
    industry demand;
    
    average selling price of our PV products;
    
    price and availability of silicon and silicon wafers;
    
    manufacturing capacity; and
    
    process technologies.
 Industry Demand
  Average Selling Price of Our PV Products
    46




---



##### Table of Contents



Price and Availability of Silicon and Silicon Wafers
    Manufacturing Capacity
    47




---



##### Table of Contents



Year Ended December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(MW)
    
    
    (MW)
    
    
    (MW)
    
    
    (MW)
    
    
    (MW)Amount of ingots produced
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48.0
    
    
    
    154.1Amount of wafer produced
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.5
    
    
    
    164.6Amount of PV cells
produced (including PV
cell processing)
    
    
    1.0
    (1)
    
    
    26.2
    (2)
    
    
    99.6
    (3)
    
    
    191.5
    (4)
    
    
    260.2
    (5)Amount of PV modules
produced (including PV
module processing)
    
    
    5.5
    
    
    
    19.6
    
    
    
    87.2
    
    
    
    177.3
    
    
    
    342.8
  (1)
    
    Of which 0.9 MW was used in our PV module production.(2)
    
    Of which 19.9 MW was used in our PV module production.(3)
    
    Of which 86.9 MW was used in our PV module production.(4)
    
    Of which 190.5 MW was used in our PV module production.(5)
    
    Of which 240.2 MW was used in our PV module production.  Process Technologies
   Net Revenues
     48




---



##### Table of Contents



Cost of Revenues and Operating Expenses
 Cost of Revenues
  Year Ended December 31,2007
    
    
    2008
    
    
    2009Amount
    
    
    % of Net
    
    
    Amount
    
    
    % of Net
    
    
    Amount
    
    
    % of Net(RMB)
    
    
    Revenues
    
    
    (RMB)
    
    
    Revenues
    
    
    (RMB)
    
    
    (US$)
    
    
    Revenues(In thousands, except percentages)Cost of revenues
    
    
    (1,997,355
    )
    
    
    83.4
    %
    
    
    (4,905,147
    )
    
    
    99.1
    %
    
    
    (3,341,936
    )
    
    
    (489,596
    )
    
    
    88.5
    %Operating expenses:Selling expenses
    
    
    (62,777
    )
    
    
    2.6
    %
    
    
    (87,913
    )
    
    
    1.8
    %
    
    
    (105,454
    )
    
    
    (15,449
    )
    
    
    2.8
    %General and
administrative
expenses
    
    
    (113,756
    )
    
    
    4.8
    %
    
    
    (143,340
    )
    
    
    2.9
    %
    
    
    (180,989
    )
    
    
    (26,515
    )
    
    
    4.8
    %Research and
development
expenses
    
    
    (27,440
    )
    
    
    1.1
    %
    
    
    (19,679
    )
    
    
    0.4
    %
    
    
    (32,025
    )
    
    
    (4,692
    )
    
    
    0.8
    %Total
    
    
    (203,973
    )
    
    
    8.5
    %
    
    
    (250,932
    )
    
    
    5.1
    %
    
    
    (318,468
    )
    
    
    (46,656
    )
    
    
    8.4
    %
  49




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##### Table of Contents



Operating Expenses
  Selling Expenses
   50




---



##### Table of Contents



General and Administrative Expenses
  Research and Development Expenses
  Share Compensation Expenses
     51




---



##### Table of Contents



Taxation
 PRC Enterprise Income Tax
      52




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition
       53




---



##### Table of Contents



Fixed Assets, Net
  Buildings
    
    20 yearsPlant and machinery
    
    10 yearsFurniture, fixtures and office equipment
    
    5 yearsComputer software
    
    5 yearsMotor vehicles
    
    5 years
    Warranty Costs
  Impairment of Long-Lived Assets
   54




---



##### Table of Contents



Goodwill
    Financial Instruments  Currency Derivative Contracts
  Share-based Compensation
     55




---



##### Table of Contents



Accounting for Income Taxes and Uncertain Income Tax Positions
    Advance to Suppliers
   56




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##### Table of Contents



Consolidated Results of Operations
  Year Ended December 31,2007
    
    
    2008
    
    
    2009(In RMB
    
    
    % of Net
    
    
    (In RMB
    
    
    % of Net
    
    
    (In RMB
    
    
    (In US$
    
    
    % of NetThousands)
    
    
    Revenues
    
    
    Thousands)
    
    
    Revenues
    
    
    Thousands)
    
    
    Thousands)
    
    
    RevenuesConsolidated Statement
of Operations DataNet revenues
    
    
    2,395,135
    
    
    
    100.0
    %
    
    
    4,949,068
    
    
    
    100.0
    %
    
    
    3,778,316
    
    
    
    553,527
    
    
    
    100.0
    %Cost of revenues
    
    
    (1,997,355
    )
    
    
    (83.4
    )%
    
    
    (4,905,147
    )
    
    
    (99.1
    )%
    
    
    (3,341,936
    )
    
    
    (489,596
    )
    
    
    88.5
    %Gross profit
    
    
    397,780
    
    
    
    16.6
    %
    
    
    43,921
    
    
    
    0.9
    %
    
    
    436,380
    
    
    
    63,931
    
    
    
    11.5
    %Operating expensesSelling expenses
    
    
    (62,777
    )
    
    
    (2.6
    )%
    
    
    (87,913
    )
    
    
    (1.8
    )%
    
    
    (105,454
    )
    
    
    (15,449
    )
    
    
    (2.8
    )%General and
administrative expenses
    
    
    (113,756
    )
    
    
    (4.8
    )%
    
    
    (143,340
    )
    
    
    (2.9
    )%
    
    
    (180,989
    )
    
    
    (26,515
    )
    
    
    (4.8
    )%Research and
development expenses
    
    
    (27,440
    )
    
    
    (1.1
    )%
    
    
    (19,679
    )
    
    
    (0.4
    )%
    
    
    (32,025
    )
    
    
    (4,692
    )
    
    
    (0.8
    )%Total operating expenses
    
    
    (203,973
    )
    
    
    (8.5
    )%
    
    
    (250,932
    )
    
    
    (5.1
    )%
    
    
    (318,468
    )
    
    
    (46,656
    )
    
    
    (8.4
    )%Operating profit (loss)
    
    
    193,807
    
    
    
    8.1
    %
    
    
    (207,011
    )
    
    
    (4.2
    )%
    
    
    117,912
    
    
    
    17,275
    
    
    
    3.1
    %Interest expenses
    
    
    (25,978
    )
    
    
    (1.1
    )%
    
    
    (103,146
    )
    
    
    (2.1
    )%
    
    
    (157,907
    )
    
    
    (23,134
    )
    
    
    (4.2
    )%Interest income
    
    
    16,244
    
    
    
    0.7
    %
    
    
    10,004
    
    
    
    0.2
    %
    
    
    5,002
    
    
    
    733
    
    
    
    0.1
    %Exchange losses
    
    
    (25,628
    )
    
    
    (1.1
    )%
    
    
    (35,230
    )
    
    
    (0.7
    )%
    
    
    (23,814
    )
    
    
    (3,489
    )
    
    
    (0.6
    )%Changes in fair value
of derivative contracts
    
    
    
    
    
    
    
    
    
    
    83,090
    
    
    
    1.7
    %
    
    
    9,594
    
    
    
    1,406
    
    
    
    0.3
    %Changes in fair value
of conversion feature
of convertible bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,887
    )
    
    
    (10,825
    )
    
    
    (2.0
    )%Other income
    
    
    1,507
    
    
    
    0.1
    %
    
    
    15,018
    
    
    
    0.3
    %
    
    
    6,286
    
    
    
    921
    
    
    
    0.2
    %Other expenses
    
    
    (9,670
    )
    
    
    (0.4
    )%
    
    
    (25,604
    )
    
    
    (0.5
    )%
    
    
    (11,835
    )
    
    
    (1,734
    )
    
    
    (0.3
    )%Government grants
    
    
    2,089
    
    
    
    0.1
    %
    
    
    3,480
    
    
    
    
    
    
    
    7,661
    
    
    
    1,122
    
    
    
    0.2
    %Income (loss) before
income taxes
    
    
    152,371
    
    
    
    6.4
    %
    
    
    (259,399
    )
    
    
    (5.3
    )%
    
    
    (120,988
    )
    
    
    (17,725
    )
    
    
    (3.2
    )%Income tax expenses
    
    
    (7,458
    )
    
    
    (0.3
    )%
    
    
    (6,519
    )
    
    
    (0.1
    )%
    
    
    (23,928
    )
    
    
    (3,505
    )
    
    
    (0.6
    )%Net income (loss)
attributable to
non-controlling
interest
    
    
    3,124
    
    
    
    0.1
    %
    
    
    (14,573
    )
    
    
    (0.3
    )%
    
    
    (311
    )
    
    
    (46
    )
    
    
    Net income (loss)
attributable to
Solarfun Power Holdings
Co., Ltd. shareholders
    
    
    148,037
    
    
    
    6.2
    %
    
    
    (280,491
    )
    
    
    (5.7
    )%
    
    
    (145,227
    )
    
    
    (21,276
    )
    
    
    (3.8
    )%
 2009 Compared to 2008
 Net Revenues
   57




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##### Table of Contents



Cost of Revenues and Gross Profit
   Operating Expenses and Operating Profit
      Interest Expenses, Exchange Losses, Other Income (Expenses), Changes in Fair Value of Derivative
Contracts, Changes in Fair Value of Conversion Feature of Convertible Bonds and Government Grants
   58




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##### Table of Contents



Income Tax Expenses
  Consolidated Net Loss
  2008 Compared to 2007
 Net Revenues
   59




---



##### Table of Contents



Cost of Revenues and Gross Profit
   Operating Expenses and Operating Profit
      Interest Expenses, Exchange Losses, Other Income (Expenses), Changes in Fair Value of Derivative
Contracts and Government Grants
   60




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##### Table of Contents



Income Tax Expenses
  Consolidated Net Income (Loss)
  Inflation
  B. Liquidity and Capital Resources
   61




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##### Table of Contents



Liquidity
   Year Ended December 31,2007
    
    
    2008
    
    
    2009(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(In thousands)Net cash (used in) provided by
operating activities
    
    
    (1,020,603
    )
    
    
    (674,040
    )
    
    
    689,333
    
    
    
    100,988Net cash used in investing activities
    
    
    (538,465
    )
    
    
    (1,169,045
    )
    
    
    (324,723
    )
    
    
    (47,572
    )Net cash provided by (used in)
financing activities
    
    
    694,204
    
    
    
    1,981,058
    
    
    
    (129,791
    )
    
    
    (19,014
    )Net (decrease) increase in cash and
cash equivalents
    
    
    (864,864
    )
    
    
    137,973
    
    
    
    234,819
    
    
    
    34,402
 Cash Flows from Operating Activities
   
    
    an increase of RMB271.7 million (US$39.8 million) in accounts receivable, primarily because
we granted our customers longer credit terms to enhance the competitiveness of our PV
products;
    
    an increase of RMB334.8 million (US$49.1 million) in inventories primarily as a result of
increased purchases of silicon, silicon wafers and other raw materials in anticipation of
increased operational scale as a result of our capacity expansion in 2009;
    
    an increase of RMB238.8 million (US$35.0 million) in accounts payable, primarily due to
longer payment terms we obtained from our suppliers; and
    
    an increase of RMB215.1 million (US$31.5 million) in other current assets, primarily
because we were able to receive additional cash refund of VAT tax for our export sales by
December 31, 2009.
  62




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##### Table of Contents




    
    an increase of RMB547.5 million in advances to suppliers, primarily due to increased
prepayments to our suppliers for purchases of silicon and silicon wafers; and
    
    an increase of RMB417.0 million in inventories primarily as a result of increased purchases
of silicon and silicon wafers.
  
    
    an increase of RMB398.2 million in advances to suppliers, primarily due to increased
prepayments to our suppliers for purchases of silicon and silicon wafers;
    
    an increase of RMB359.3 million in inventories principally as a result of increased
purchases of silicon and silicon wafers;
    
    an increase of RMB290.6 million in accounts receivable, primarily due to increased sales on
credit in 2007; and
    
    an increase of RMB170.0 million in prepaid rent associated with the supply agreement we
entered into with E-mei in June 2006, under which we agreed to make prepayments of
RMB220.0 million to secure exclusive rights to purchase the silicon products to be produced by
E-meis future manufacturing facility at a discount to the prevailing market price for five
years starting from the completion of the facility.
 Cash Flows from Investing Activities
     63




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##### Table of Contents



Cash Flows from Financing Activities
     Capital Resources and Capital Expenditures
     64




---



##### Table of Contents



Recent Accounting Pronouncements
    65




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##### Table of Contents



C. Research and Development, Patents and Licenses
      66




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##### Table of Contents



D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  Payment Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    
    1 Year
    
    
    1 to 3 Years
    
    
    3 to 5 Years
    
    
    5 Years(In RMB thousands)Purchase obligations
relating to raw materials
    
    
    7,182,732
    
    
    
    2,814,859
    
    
    
    1,331,952
    
    
    
    1,443,858
    
    
    
    1,592,063Operating lease obligations
    
    
    5,502
    
    
    
    3,451
    
    
    
    2,051
    
    
    
    
    
    
    
    Total
    
    
    7,188,234
    
    
    
    2,818,310
    
    
    
    1,334,003
    
    
    
    1,443,858
    
    
    
    1,592,063
 G. Safe Harbor
  
    
    our expectation with respect to our ability to re-negotiate the terms of our multi-year
supply agreements;
    
    our expectations regarding the worldwide demand for electricity and the market for solar
energy;
    
    our beliefs regarding the effects of environmental regulation, lack of infrastructure
reliability and long-term fossil fuel supply constraints;
  67




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##### Table of Contents




    
    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 energy;
    
    our beliefs regarding the acceleration of adoption of solar technologies;
    
    our expectations with respect to advancements in our technologies;
    
    our beliefs regarding the competitiveness of our solar products;
    
    our expectations regarding the scaling of our manufacturing capacity;
    
    our expectations with respect to revenue growth and profitability;
    
    our expectations with respect to our ability to secure raw materials, especially silicon
and silicon wafers, in the future;
    
    competition from other manufacturers of PV products and conventional energy suppliers;
    
    our future business development, results of operations and financial condition; and
    
    future economic or capital market conditions.
    68




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##### Table of Contents



ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
 Directors and Executive Officers
  Name
    
    
    Age

    
    
    Position/TitleYonghua Lu
    
    
    45
    
    
    ChairmanJohn Breckenridge
    
    
    48
    
    
    DirectorThomas J. Toy
    
    
    54
    
    
    Independent DirectorErnst A. Bütler
    
    
    65
    
    
    Independent DirectorTerry McCarthy
    
    
    65
    
    
    Independent DirectorYinzhang Gu
    
    
    70
    
    
    Independent DirectorDavid N.K. Wang
    
    
    62
    
    
    Independent DirectorRongqiang Cui
    
    
    67
    
    
    Independent DirectorPing Peter Xie
    
    
    45
    
    
    PresidentGareth Kung
    
    
    45
    
    
    Chief Financial OfficerZhoumiao Gao
    
    
    42
    
    
    Senior Vice President of Operations
 Directors
 Mr. Yonghua Lu
 Mr. John Breckenridge
 Mr. Thomas J. Toy
  69




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##### Table of Contents



Mr. Ernst A. Bütler
 Mr. Terry McCarthy
 Mr. Yinzhang Gu
 Dr. David N.K. Wang
  70




---



##### Table of Contents



Mr. Rongqiang Cui
 Executive Officers
 Dr. Ping Peter Xie
 Mr. Gareth Kung
 Mr. Zhoumiao Gao
  71




---



##### Table of Contents



B. Compensation
 Compensation
   2006 Share Option Plan
  Administration.
 Option Exercise.
 Termination of Awards.
 Share Split or Combination.
 Amendment and Termination of Plan.
  72




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##### Table of Contents



OrdinarySharesUnderlyingOutstanding
    
    
    ExerciseName
    
    Option
    
    
    Price
    
    
    Grant Date
    
    Expiration Date(US$/share)Yonghua Lu
    
    
    
    
    
    
    
    
    
    
    
    John Breckenridge
    
    
    
    
    
    
    
    
    
    
    
    Thomas J. Toy
    
    
    *
    
    
    
    1.8
    
    
    November 30, 2006
    
    November 30, 2016Verena Maria Bütler (wife of Ernst A.
Bütler)
    
    
    *
    
    
    
    1.8
    
    
    November 30, 2006
    
    November 30, 2016Terry McCarthy
    
    
    *
    
    
    
    1.8
    
    
    November 30, 2006
    
    November 30, 2016Yinzhang Gu
    
    
    *
    
    
    
    1.94
    
    
    August 16, 2007
    
    August 16, 2017David N.K. Wang
    
    
    
    
    
    
    
    
    
    
    
    Rongqiang Cui
    
    
    
    
    
    
    
    
    
    
    
    Ping Peter Xie
    
    
    
    
    
    
    
    
    
    
    
    Gareth Kung
    
    
    
    
    
    
    
    
    
    
    
    Zhoumiao Gao
    
    
    *
    
    
    
    2.15
    
    
    October 10, 2007
    
    October 10, 2017Directors and executive officers as a group
    
    
    900,000Other individuals as a group
    
    
    1,993,900
    
    
    
    1.8
    
    
    November 30, 2006
    
    November 30, 2016150,000
    
    
    
    2.02
    
    
    August 16, 2007
    
    August 16, 2017150,000
    
    
    
    2.06
    
    
    October 10, 2007
    
    October 10, 2017300,000
    
    
    
    2.58
    
    
    October 26, 2007
    
    October 26, 2017100,000
    
    
    
    2.58
    
    
    October 26, 2007
    
    October 26, 201750,000
    
    
    
    2.73
    
    
    November 1, 2007
    
    November 1, 2017260,000
    
    
    
    2.21
    
    
    November 27, 2007160,000
    
    
    
    5.31
    
    
    December 13, 2007
    
    December 13, 2017125,000
    
    
    
    5.31
    
    
    December 13, 2007
    
    December 13, 2017300,000
    
    
    
    6.016
    
    
    January 8, 2008
    
    January 8, 2018200,000
    
    
    
    3.55
    
    
    January 29, 2008
    
    January 29, 2018230,000
    
    
    
    2.15
    
    
    March 6, 2008
    
    March 6, 2018300,000
    
    
    
    2.04
    
    
    March 14, 2008
    
    March 14, 2018Total
    
    
    5,218,900
 *
    
    Upon exercise of all share options, would beneficially own 1% or less of our ordinary shares.
    
    No outstanding share option was held by such person. 2007 Equity Incentive Plan
  Administration.
  73




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##### Table of Contents



Options.
 Restricted Stock.
 Stock Appreciation Rights.
 Performance Units and Performance Shares.
 Restricted Stock Units.
 Amendment and Termination.
  74




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##### Table of Contents



OrdinarySharesUnderlyingOutstanding
    
    
    ExerciseName
    
    Option
    
    
    Price
    
    
    Grant Date
    
    Expiration Date(US$/share)Yonghua Lu
    
    
    
    
    
    
    
    
    
    
    
    John Breckenridge
    
    
    
    
    
    
    
    
    
    
    
    Thomas J. Toy
    
    
    
    
    
    
    
    
    
    
    
    Ernst A. Bütler
    
    
    
    
    
    
    
    
    
    
    
    Terry McCarthy
    
    
    *
    
    
    
    2.686
    
    
    May 1, 2008
    
    May 1, 2018Yinzhang Gu
    
    
    
    
    
    
    
    
    
    
    
    David N.K. Wang
    
    
    *
    
    
    
    0.880
    
    
    April 2, 2009
    
    April 2, 2019Rongqiang Cui
    
    
    *
    
    
    
    0.880
    
    
    April 2, 2009
    
    April 2, 2019Peter Ping Xie
    
    
    *
    
    
    
    0.610
    
    
    March 17, 2009
    
    March 17, 20191.010
    
    
    March 17, 2009
    
    March 17, 20191.506
    
    
    March 4, 2010
    
    March 4, 2020Gareth Kung
    
    
    *
    
    
    
    1.278
    
    
    November 27, 2009
    
    November 27, 2019Zhoumiao Gao
    
    
    *
    
    
    
    1.344
    
    
    October 16, 2008
    
    October 16, 20181.188
    
    
    September 11, 2009
    
    September 11, 2019Directors and executive officers
    
    
    2,735,000Other individuals as a group
    
    
    533,335
    
    
    
    2.820
    
    
    April 15, 2008
    
    April 15, 201820,000
    
    
    
    2.770
    
    
    April 28, 2008
    
    April 28, 201820,000
    
    
    
    4.376
    
    
    May 28, 2008
    
    May 28, 201820,000
    
    
    
    2.502
    
    
    July 28, 2008
    
    July 28, 2018300,000
    
    
    
    2.420
    
    
    September 26, 2008
    
    September 26, 20181,266,820
    
    
    
    1.344
    
    
    October 16, 2008
    
    October 16, 2018180,000
    
    
    
    0.936
    
    
    October 28, 2008
    
    October 28, 201820,000
    
    
    
    1.138
    
    
    November 28, 2008
    
    November 28, 201820,000
    
    
    
    0.960
    
    
    December 29, 2008
    
    December 29, 2018200,000
    
    
    
    0.996
    
    
    January 28, 2009
    
    January 28, 201971,000
    
    
    
    1.344
    
    
    March 17, 2009
    
    March 17, 2019200,000
    
    
    
    0.900
    
    
    April 1, 2009
    
    April 1, 201920,000
    
    
    
    0.742
    
    
    April 28, 2009
    
    April 28, 201970,000
    
    
    
    1.452
    
    
    May 27, 2009
    
    May 27, 2019150,000
    
    
    
    1.440
    
    
    July 28, 2009
    
    July 28, 2019940,000
    
    
    
    1.188
    
    
    September 11, 2009
    
    September 11, 2019250,000
    
    
    
    1.010
    
    
    October 29, 2009
    
    October 29, 2019625,000
    
    
    
    1.278
    
    
    November 27, 2009
    
    November 27, 20191,944,300
    
    
    
    1.372
    
    
    December 3, 2009
    
    December 3, 2019400,000
    
    
    
    1.588
    
    
    December 28, 2009
    
    December 28, 2019500,000
    
    
    
    1.480
    
    
    January 27, 2010
    
    January 27, 2020200,000
    
    
    
    1.392
    
    
    March 26, 2010
    
    March 26, 2020Total
    
    
    10,685,455
 *
    
    Upon exercise of all share options, would beneficially own 1% or less of our ordinary shares.
    
    No outstanding share option was held by such person.  75




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##### Table of Contents



OrdinarySharesUnderlyingGrantedRestrictedName
    
    Stock Units
    
    
    Grant Date
    
    Expiration DateYonghua Lu
    
    
    
    
    
    
    
    John Breckenridge
    
    
    
    
    
    
    
    Thomas J. Toy
    
    
    *
    
    
    November 30, 2007
    
    November 30, 2017January 1, 2008
    
    January 1, 2018January 1, 2009
    
    January 1, 2019January 1, 2010
    
    January 1, 2020Verena Maria Bütler (wife of Ernst A Bütler)
    
    
    *
    
    
    November 30, 2007
    
    November 30, 2017January 1, 2008
    
    January 1, 2018January 1, 2009
    
    January 1, 2019January 1, 2010
    
    January 1, 2020Terry McCarthy
    
    
    *
    
    
    November 30, 2007
    
    November 30, 2017May 1, 2008
    
    May 1, 2018January 1, 2008
    
    January 1, 2018January 1, 2009
    
    January 1, 2019January 1, 2010
    
    January 1, 2020Yinzhang Gu
    
    
    *
    
    
    January 1, 2008
    
    January 1, 2018*
    
    
    January 1, 2009
    
    January 1, 2019*
    
    
    January 1, 2010
    
    January 1, 2020David N.K. Wang
    
    
    37,500
    
    
    January 1, 2010
    
    January 1, 2020Rongqiang Cui
    
    
    37,500
    
    
    January 1, 2010
    
    January 1, 2020Directors and executive officers
    
    
    849,970Other individuals as a group
    
    
    37,500
    
    
    January 1, 2009
    
    January 1, 2019Total
    
    
    887,470
 *
    
    Upon vesting of all restricted stock units, would beneficially own 1% or less of our ordinary shares.
    
    No restricted stock units have been granted to such person. C. Board Practices
 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 control 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 our board of directors.
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Compensation Committee
  
    
    approving and overseeing the compensation package for our executive officers;
    
    reviewing and making recommendations to our board of directors 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
    
    reviewing periodically and making recommendations to our board of directors regarding any
long-term incentive compensation or equity plans, programs or similar arrangements, annual
bonuses, employee pension and welfare benefit plans.
 Corporate Governance and Nominating Committee
  
    
    identifying and recommending nominees for election or re-election to our board of
directors, or for appointment to fill any vacancy;
    
    reviewing annually with our board of directors its current composition in light of the
characteristics of independence, age, skills, experience and availability of service to us;
    
    identifying and recommending to our board the directors to serve as members of 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 our board of directors 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.
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Duties of Directors
  Terms of Directors and Executive Officers
   Employment Agreements
     D. Employees
  As of December 31,2007
    
    
    2008
    
    
    2009Manufacturing and engineering
    
    
    1,618
    
    
    
    3,254
    
    
    
    4,465General and administration
    
    
    96
    
    
    
    183
    
    
    
    163Quality control
    
    
    158
    
    
    
    225
    
    
    
    339Research and development
    
    
    84
    
    
    
    126
    
    
    
    125Purchasing and logistics
    
    
    84
    
    
    
    178
    
    
    
    192Marketing and sales
    
    
    29
    
    
    
    23
    
    
    
    26Total
    
    
    2,069
    
    
    
    3,989
    
    
    
    5,310
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79




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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 ordinary shares.
 Shares BeneficiallyOwned(1)(2)Number
    
    
    %Directors and Executive Officers:Yonghua Lu(3)
    
    
    38,634,750
    
    
    
    13.29
    %John Breckenridge
    
    
    
    
    
    
    Thomas J. Toy
    
    
    276,240
    
    
    
    0.095
    %Verena Maria Bütler (wife of Ernst A. Bütler)
    
    
    366,238
    
    
    
    0.126
    %Terry McCarthy
    
    
    163,750
    
    
    
    0.056
    %Yinzhang Gu
    
    
    206,250
    
    
    
    0.071
    %David N.K. Wang
    
    
    *
    
    
    
    *
    %Rongqiang Cui(4)
    
    
    332,125
    
    
    
    0.114
    %Ping Peter Xie
    
    
    *
    
    
    
    *
    %Gareth Kung
    
    
    
    
    
    
    Zhoumiao Gao
    
    
    *
    
    
    
    *
    %All Directors and Executive Officers as a Group(5)
    
    
    41,225,603
    
    
    
    14.18
    %Major Shareholders:Good Energies II LP(6)
    
    
    88,178,005
    
    
    
    30.33
    %Yonghua Solar Power Investment Holding Ltd(7)
    
    
    38,634,750
    
    
    
    13.29
    %Citigroup Venture Capital International Growth Partnership, L.P.(8)
    
    
    15,209,191
    
    
    
    5.23
    %LC Fund III, L.P.(9)
    
    
    4,327,341
    
    
    
    1.49
    %WHF Investment Co., Ltd(10)
    
    
    6,271,875
    
    
    
    2.16
    %Citigroup Venture Capital International Co-Investment, L.P.(11)
    
    
    829,960
    
    
    
    0.29
    %
 Notes
 *
    
    The person beneficially owns less than 1% of our outstanding shares.
    
    The person does not beneficially own any ordinary share or options exercisable within 60 days of the date of this
annual report.(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 number of ordinary shares outstanding in calculating the percentages for each listed
person includes the ordinary shares underlying options exercisable by such person within
60 days of the date of this annual report on Form 20-F. Percentage of beneficial ownership of
each listed person is based on 290,708,739 ordinary shares outstanding as of April 30, 2010,
as well as the ordinary shares underlying share options exercisable by such person within
60 days of the date of this annual report on Form 20-F. This does not include the 9,019,611
ADSs issued pursuant to the offering of our ADSs in January 2008 as we do not believe that
such transaction will increase the number of ordinary shares considered outstanding for the
purpose of calculating beneficial ownership as a result of our arrangement with an affiliate
of Morgan Stanley. Our total outstanding ordinary shares will be 335,806,794 if the 9,019,611
ADSs are to be included.(3)
    
    Owns Yonghua Solar Power Investment Holding Ltd., a British Virgin Islands company, which
held 38,634,750 ordinary shares in our company as of April 30, 2010. Mr. Lu is the sole
director of Yonghua Solar Power Investment Holding Ltd. and has the right to cast the vote for
such company regarding all matters of our company requiring shareholder approval. Mr. Lus
business address is 888 Linyang Road, Qidong, Jiangsu Province, 226200, Peoples Republic of
China.(4)
    
    Owns Yongqiang Solar Power Investment Holding Ltd., a British Virgin Islands company, which
held 50,175 ADSs in our company as of April 30, 2010. Mr. Cui is the sole director of
Yongqiang Solar Power Investment Holding Ltd. and has the right to cast the vote for such
company regarding all matters of our company requiring shareholder approval. Mr. Cuis
business address is 888 Linyang Road, Qidong, Jiangsu Province, 226200, Peoples Republic of
China.
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(5)
    
    Includes ordinary shares held by all of our directors and senior executive officers as a
group, as well as the ordinary shares underlying share options held by such directors and
senior executive officers exercisable within 60 days of the date of this annual report on Form
20-F. Except Mr. Yonghua Lu, each of our directors and senior executive officers beneficially
owns less than 1% of our ordinary shares.(6)
    
    Held 81,772,950 ordinary shares and 1,281,011 ADSs as of April 30, 2010. This includes the
1,000,000 ADSs purchased by Good Energies II LP as part of the offering of our ADSs in
January 2008. If these 1,000,000 ADSs are not to be taken into account, Good Energies II LP
would hold 81,772,950 ordinary shares and 1,281,011 ADSs in our company. On December 31, 2007,
Good Energies Investments (Jersey) Limited transferred its 15,027,312 ordinary shares in our
company to its affiliate Good Energies II LP acting by its general partner Good Energies
General Partner Jersey Limited. The directors of Good Energies General Partner Jersey Limited
are Mr. John Barrett, Mr. Paul Bradshaw, Mr. John Drury, Mr. Fintan Kennedy, Mr. John Hammill
and Mr. Gert-Jan Pieters. The address of each of Good Energies II LP and Good Energies General
Partner Jersey Limited is 3rd Floor, Britannic House, 9 Hope Street, St Helier, Jersey JE2
3NS, the Channel Islands. We have been informed that voting and investment control over
securities directly owned by Good Energies II LP acting by its general partner Good Energies
General Partner Jersey Limited is held by Cofra Jersey Limited, which wholly owns Good
Energies General Partner Jersey Limited and by Good Energies AG, Good Energies Inc. and Good
Energies (UK) LLP, acting by its managing member Good Energies Investments (Jersey) Limited,
which have been appointed as joint investment managers of Good Energies II LP pursuant to a
management agreement with Good Energies General Partner Jersey Limited. The address of Good
Energies AG is Grafenauweg 4, Zug CH 6301, Switzerland. The address
of Good Energies Inc. is 1114 Avenue of the Americas, Suite 2802, New York, NY 10036, USA.
The business address of each of Good Energies (UK) LLP and Good Energies Investments (Jersey)
Limited is Fifth Floor 29 Farm Street, London, W1J 5RL, England.(7)
    
    Yonghua Solar Power Investment Holding Ltd., a British Virgin Islands company, is owned by
Mr. Yonghua Lu. Mr. Lu is the sole director of Yonghua Solar Power Investment Holding Ltd. The
address of Yonghua Solar Power Investment Holding Ltd. is PO Box 173, Kingston Chambers, Road
Town, Tortola, British Virgin Islands.(8)
    
    Held one ordinary share and 3,041,838 ADSs as of April 30, 2010. The address of Citigroup
Venture Capital International Growth Partnership, L.P. is c/o Citigroup Venture Capital
International Partnership G.P. Limited, 26 New Street, St. Helier, Jersey, Channel Islands JE4
8PP. We have been informed that voting and investment control over our shares held by
Citigroup Venture Capital International Growth Partnership, L.P. is held by the four directors
of its general partner, Citigroup Venture Capital International Partnership G.P. Limited, a
company formed in Jersey, Channel Islands, who are Dipak Kumar Rastogi, Susan Johnson, Michael
Richardson and Deryk Haithwaite. Citigroup Venture Capital International Partnership G.P.
Limited is a wholly owned Citigroup subsidiary.(9)
    
    Held one ordinary share and 865,468 ADSs as of April 30, 2010. The address of LC Fund III,
L.P. is c/o Legend Capital Limited, 10th Floor, Tower A, Raycom Info. Tech Center, No. 2
Kexueyuan Nanlu, Haidian District, Beijing, 100080, Peoples Republic of China. We have been
informed that voting and investment control over our shares held by LC Fund III, L.P. is held
by Mr. Chuanzhi Liu, Mr. Linan Zhu, Mr. John Huan Zhao, Mr. Hao Chen, Mr. Nengguang Wang and
Mr. Xiangyu Ouyang, the partners and investment committee members of LC Fund III, L.P.(10)
    
    WHF Investment Co., Ltd., a British Virgin Islands company, is owned by the estate of
Mr. Hanfei Wang. Mr. Hanfei Wang, our former director and chief operating officer, was the
sole director of WHF Investment Co., Ltd. Mr. Hanfei Wang died of natural causes on July 14,
2008. The address of WHF Investment Co., Ltd. is PO Box 173, Kingston Chambers, Road Town,
Tortola, British Virgin Islands.(11)
    
    Held 165,992 ADSs as of April 30, 2010. The address of Citigroup Venture Capital
International Co-Investment, L.P. is c/o Citigroup Venture Capital International Partnership
G.P. Limited, 26 New Street, St. Helier, Jersey, Channel Islands JE4 8PP. We have been
informed that voting and investment control over our shares held by Citigroup Venture Capital
International Co-Investment, L.P. is held by the four directors of its general partner,
Citigroup Venture Capital International Partnership G.P. Limited, a company formed in Jersey,
Channel Islands, who are Dipak Kumar Rastogi, Susan Johnson, Michael Richardson and Deryk
Haithwaite. Citigroup Venture Capital International Partnership G.P. Limited is a wholly owned
Citigroup subsidiary.
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
    
    the entry into any agreements that would have a value or potential liability in excess of
5% of our net assets or is otherwise likely to be material to us;
 
    
    any change in the nature or scope of our business;
 
    
    any joint ventures, strategic alliances, partnerships or similar arrangements with a third
party;
 
    
    any recapitalization, merger, asset swap, share sale or transfer of substantially all of
the intellectual properties rights or other assets, or any other extraordinary transaction;
 
    
    any change to our articles of association; and
 
    
    entry into any agreement or understanding to do any of the foregoing.
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ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  B. Related Party Transactions
  Series A Convertible Preference Shares
  Registration Rights
  
    
    Demand Registrations.Upon request of any of the non-individual holders of our ordinary
 shares which were converted from our series A convertible preference shares, we shall effect
registration with respect to the registrable securities held by such holders on a form other
than Form F-3 (or any comparable form for a registration for an offering in a jurisdiction
other than the United States), provided that we shall only be obligated to effect three such
registrations.
 
    
    Piggyback Registrations.The holders of our ordinary shares which were converted from our
series A convertible preference shares and their permitted transferees are entitled to
piggyback registration rights, whereby they may require us to register all or any part of
the registrable securities that they hold at the time when we register any of our ordinary
 shares.
 
    
    Registrations onForm F-3.We have granted the holders of our ordinary shares which were
converted from our series A convertible preference shares and their permitted transferees of
the registrable securities the right to an unlimited number of registrations under Form F-3
(or any comparable form for a registration in a jurisdiction other than the United States) to
the extent we are eligible to use such form to offer securities.
 Equity Incentive Plan
  Transactions with Certain Shareholders
 
    
    On March 8, 2007, Linyang China and Qidong Jiaotong Engineer Co., Ltd., a company
controlled by Mr. Yonghua Lu, our chairman, entered into a construction service agreement
whereby Qidong Jiaotong Engineer Co., Ltd. provided construction services to Linyang China
for RMB1.3 million.
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
    
    On March 16, 2007, Linyang China entered into a sales agreement with Qitian Group, a
company which then held a 20% interest in Yangguang Solar, under which Linyang China agreed to
supply certain products to Qitian Group for RMB4.0 million.
 
    
    In April 2007, Linyang China paid RMB1.2 million for equipment purchases from Linyang
Electronics, a company controlled by Mr. Yonghua Lu, our chairman.
 
    
    On June 19, 2007, Yangguang Solar entered into a loan agreement with Nantong Linyang, a
company controlled by Mr. Yonghua Lu, our chairman, under which Nantong Linyang agreed to loan
RMB7.0 million to Yangguang Solar at an annual interest rate of 5.85%. The loan was fully
repaid in June 2008.
 
    
    On June 19, 2007, Yangguang Solar entered into a loan agreement with Qitian Group, under
which Qitian Group agreed to loan RMB3.0 million to Yangguang Solar at an annual interest rate
of 5.85%. This loan was fully repaid in June 2008.
 
    
    On July 31, 2007, we entered into a share transfer agreement with Nantong Linyang and
Qitian Group, to acquire 52% of equity ownership of Yangguang Solar for a consideration of
RMB51.2 million. Nantong Linyang continues to own an 18% interest in Yangguang Solar. On June
23, 2008, Linyang China entered into an agreement to acquire the remaining 48% equity interest
in Yangguang Solar from Nantong Linyang, for an aggregate consideration of approximately
RMB355.9 million.
 
    
    On August 28, 2007, Yangguang Solar entered into a loan agreement with Qitian Group, under
which Qitian Group agreed to loan RMB1.3 million to Yangguang Solar at an annual interest rate
of 5.85%. This loan was fully repaid in June 2008.
 
    
    In October 2007, Linyang China entered into an agreement with Linyang Electronics, under
which Linyang China agreed to pay a guarantee fee with an annual rate of 2.0% of the total
bank borrowings guaranteed by Linyang Electronics. In 2008, we have incurred RMB10.1 million
for the bank borrowings guaranteed by Linyang Electronics.
 
    
    On December 26, 2007, Linyang China entered into a supply agreement with Linyang
Electronics, under which Linyang China purchased raw materials from Linyang Electronics for
RMB23.7 million.
 
    
    On December 29, 2007, Solarfun Hong Kong entered into a loan agreement with Hong Kong
Huaerli Trading Company Limited, or Hong Kong Huaerli, a company controlled by Mr. Yonghua Lu,
our chairman, under which Hong Kong Huaerli agreed to loan US$10 million to Solarfun Hong Kong
at an annual interest rate of 8%. The loan was fully repaid in February 2008.
 
    
    On January 8, 2007, April 10, 2007, November 1, 2007, November 23, 2007 and January 11,
2008, Linyang China entered into six facility lease agreements with Linyang Electronics.
Linyang China incurred rental expenses of RMB1.2 million and RMB2.4 million in 2007 and 2008,
respectively.
 
    
    On January 11, 2008, Solarfun Hong Kong, our 100% indirect subsidiary, entered into a
short-term loan agreement with Hong Kong Huaerli, under which Hong Kong Huaerli agreed to loan
US$9 million to Solarfun Hong Kong at an annual interest rate of 8%. The loan was fully repaid
in February 2008.
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
    
    On May 7, 2008, Linyang China entered into an equipment purchase agreement with Linyang
Electronics whereby Linyang China purchased certain equipment from Linyang Electronics for
RMB0.5 million.
 
    
    On April 12, 2008, July 8, 2008 and October 13, 2008, Linyang China entered into four
service agreements with Nantong Linyang Labor Service Company, a company controlled by Mr.
Yonghua Lu, our chairman, under which Linyang China agreed to pay an aggregate amount of
RMB1.8 million to Nantong Linyang Labor Service Company for its provision of construction
services.
 
    
    On September 1, 2008 and October 20, 2008, Linyang China entered into two service
agreements with Nantong Linyang Ecological Cultural Co., Ltd., a company controlled by Mr.
Yonghua Lu, our chairman, under which Linyang China agreed to pay an aggregate amount of
RMB0.6 million to Nantong Linyang Ecological Cultural Co., Ltd. for its provision of
construction and labor services.
 
    
    On October 30, 2008, Linyang China entered into a polysilicon purchase agreement with Ya An
Yongwang Silicon Co., Ltd., a company controlled by Mr. Yonghua Lu, our chairman, under which
Linyang China purchased certain polysilicon from Ya An Yongwang Silicon Co., Ltd. for RMB8.7
million.
 
    
    On December 18, 2008, Linyang China entered into two service agreements with Qidong
Jiaotong Engineering Co., Ltd., under which Linyang China agreed to pay an aggregate amount of
RMB0.6 million to Qidong Jiaotong Engineering Co., Ltd. for its provision of construction
services.
 
    
    On December 25, 2008, Linyang China entered into a framework supply agreement with Linyang
Electronics, under which Linyang China agreed to purchase raw materials from Linyang
Electronics in the year 2009.
 
    
    On February 26, 2009, Solarfun Hong Kong, our 100% indirect subsidiary, amended a
manufacturing service agreement entered into on December 30, 2008 with Q-Cells International
GmbH, or Q-cells, a company controlled by Good Energies II LP, under which Solarfun Hong Kong
agreed to supply, using PV cells supplied by Q-Cells, on a fixed-price basis no less than 100
MW of PV modules to Q-Cells in each of 2009 and 2010 and granted Q-Cells International GmbH an
option to extend the agreement for one additional year. As a result, as of December 31, 2009,
the amount of manufacturing service fee due from Q-cells under this agreement was RMB12.0
million. On December 29, 2009, all of the rights and obligations of Q-Cells under this
agreement were assigned to Q-Cells SE.
 
    
    On January 1 and April 3, 2009, Linyang China entered into two facility lease agreements
with Linyang Electronics. Under these agreements, Linyang China incurred rental expenses of
RMB2 million (US$0.3 million) in 2009.
 
    
    On November 16, 2009, Linyang China entered into equity transfer agreements with Mr.
Rongqiang Cui, our independent director, Ms. Guoyu Wang, Mr. Cuis spouse and Mr. Yongliang
Gu, our shareholder, to purchase from them a 17% equity interest in Shanghai Linyang for
consideration of RMB0.85 million (US$0.1 million). Shanghai Linyang became our wholly owned
subsidiary after the completion of this transaction.
 
    
    On December 4 and 28, 2009, Linyang China entered into two equipment purchase agreements
with Linyang Electronics whereby Linyang China purchased certain equipment from Linyang
Electronics for an aggregate amount of RMB1.2 million (US$0.2 million).
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
    
    On June 30, July 2, 9 and 31, August 10 and October 22, 2009, Shanghai Linyang entered into
six purchase agreements with Linyang Electronics, under which Shanghai Linyang purchased
certain raw materials from Linyang Electronics for an aggregate amount of RMB0.3 million
(US$0.04 million).
 
    
    On February 5, 20 and 23, and April 27 and 30, 2010, Linyang China entered into five
polysilicon purchase agreement with Ya An Yongwang Silicon Co., Ltd., under which Linyang
China purchased certain polysilicon from Ya An Yongwang Silicon Co., Ltd. for RMB88.7 million
(US$13.0 million).
 
    
    On January 1, 2010, Linyang China entered into a framework purchase agreement with Linyang
Electronics, under which Linyang China agreed to purchase raw materials from Linyang
Electronics in the year 2010.
 
    
    On January 3, 18 and 28, February 9 and March 17, 2010, Linyang China entered into five
equipment purchase agreements with Linyang Electronics whereby Linyang China purchased certain
equipment from Linyang Electronics for an aggregate amount of RMB4.0 million (US$0.6 million).
 
    
    On March 25, 2010, Linyang China entered into a service agreement with Nantong Huahong
Ecological Gardening Co., Ltd., a company controlled by Mr. Yonghua Lu, our chairman, under
which Linyang China agreed to pay an aggregate amount of RMB0.1 million (US$0.01 million) to
Nantong Linyang Ecological Gardening Co., Ltd. for its provision of construction and labor
services.
 
    
    In April 2010, Linyang China entered into a lease agreement with Qidong Huahong Electronics
Co., Ltd., a company controlled by Mr. Yonghua Lu, for a three-year term under which the
annual rental payment is RMB1.5 million (US$0.2 million).
 
    
    On April 30, 2010, Linyang China entered into an equipment purchase agreement with SMIC
Energy Technology (Shanghai), or SMIC ET, a wholly owned subsidiary of
SMIC, a company where David N.K. Wang, our independent
director, serves as president and chief executive officer. Under this agreement, Linyang China
agreed to purchase a 25 MW cell line from SMIC ET for an amount of US$4.25 million. Linyang China
also signed a human resource service agreement with a one-month term
with SMIC ET in connection
with the equipment purchase agreement, under which SMIC ET agreed to second employees to Linyang
China to manage and operate the equipment sold by SMIC ET and Linyang China agreed to pay for
those employees compensation. Pursuant to the equipment purchase agreement, Linyang China
also entered into a lease agreement with SMIC (Shanghai) Corporation, or SMIC Shanghai, to
lease the premises and facilities where the equipment is located for a 12-month term from May
1, 2010 to April 30, 2011. In
addition, Linyang China assumed three PV cell supply contracts originally entered into between
SMIC ET Shanghai and its customers.
 C. Interests of Experts and Counsel
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ITEM 8 FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  Legal and Administrative Proceedings
     Dividend Policy
   B.
    
    Significant Changes
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ITEM 9 THE OFFER AND LISTING
 A. Offering and Listing Details
    Share PriceHigh
    
    
    LowAnnually High and Low2007
    
    
    35.96
    
    
    
    8.282008
    
    
    37.64
    
    
    
    2.682009
    
    
    8.48
    
    
    
    2.30Quarterly High and LowFirst Quarter 2007
    
    
    16.45
    
    
    
    10.29Second Quarter 2007
    
    
    17.68
    
    
    
    8.28Third Quarter 2007
    
    
    14.64
    
    
    
    9.10Fourth Quarter 2007
    
    
    35.96
    
    
    
    10.26First Quarter 2008
    
    
    37.64
    
    
    
    8.97Second Quarter 2008
    
    
    26.50
    
    
    
    12.31Third Quarter 2008
    
    
    19.99
    
    
    
    10.20Fourth Quarter 2008
    
    
    11.57
    
    
    
    2.68First Quarter 2009
    
    
    6.12
    
    
    
    2.30Second Quarter 2009
    
    
    8.48
    
    
    
    3.71Third Quarter 2009
    
    
    7.98
    
    
    
    4.79Fourth Quarter 2009
    
    
    7.94
    
    
    
    4.60First Quarter 2010
    
    
    10.42
    
    
    
    6.33Monthly Highs and LowsNovember 2009
    
    
    6.81
    
    
    
    4.60December 2009
    
    
    7.94
    
    
    
    6.84January 2010
    
    
    10.42
    
    
    
    7.08February 2010
    
    
    7.94
    
    
    
    6.42March 2010
    
    
    7.85
    
    
    
    6.33April 2010
    
    
    9.23
    
    
    
    7.73May 2010
(through May 24, 2010)
    
    
    9.00
    
    
    
    5.98
 B. Plan of Distribution
  C. Markets
  D. Selling Shareholders
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E. Dilution
  F. Expenses of the Issue
  
 ITEM 10 ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
  C. Material Contracts
  D. Exchange Controls
 Foreign Currency Exchange
  
    
    Foreign Exchange Administration Rules (1996), as amended; and
 
    
    Regulations of Settlement, Sale and Payment of Foreign Exchange (1996)
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E. Taxation
 Cayman Islands Taxation
  PRC Taxation
     U.S. Federal Income Taxation
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
    
    certain financial institutions;
 
    
    insurance companies;
 
    
    broker dealers;
 
    
    U.S. expatriates;
 
    
    traders that elect to mark-to-market;
 
    
    tax-exempt entities;
 
    
    persons liable for alternative minimum tax;
 
    
    persons whose functional currency is not the U.S. dollar;
 
    
    persons holding an ADS or ordinary share as part of a straddle, hedging, conversion or
integrated transaction; or
 
    
    persons that actually or constructively own 10% or more of our voting stock.
  
    
    a citizen or resident of the United States;
 
    
    a corporation (or other entity taxable as a corporation for U.S. federal income tax
purposes) organized under the laws of the United States, any state in the United States 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 primary supervision of a court within the United States
and one or more U.S. persons have the authority to control all substantial decisions of the
trust or (2) was in existence on August 20, 1996, was treated as a U.S. person under the U.S.
Internal Revenue Code of 1986, as amended, on the previous day and has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
    91




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Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares
        92




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Taxation of Disposition of ADSs or Ordinary 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 excess distribution or gain will be allocated ratably over your holding period for the
ADSs or ordinary 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.
  93




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##### Table of Contents



de minimis
   Information Reporting and Backup Withholding and Other Reporting Requirements
   94




---



##### Table of Contents



F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
   I. Subsidiary Information
  
 ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Exchange Risk
   95




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Interest Rate Risk
  
 ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 A. Debt Securities
  B. Warrants and Rights
  C. Other Securities
  D. American Depositary Shares
   96




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Persons depositing or withdrawing shares must pay:
    
    For:$5.00 (or less) per 100 ADSs (or portion of 100
ADSs)
    
    Issuance of ADSs, including issuances
resulting from a distribution of shares or
rights or other propertyCancellation of ADSs for the purpose of
withdrawal, including if the deposit agreement
terminates$0.02 (or less) per ADS
    
    Any cash distribution to ADS holdersA fee equivalent to the fee that would be payable
if securities distributed to you had been shares
and the shares had been deposited for issuance of
ADSs
    
    Distribution of securities distributed to
holders of deposited securities which are
distributed by the depositary to ADS holders$0.02 (or less) per ADSs per calendar year
    
    Depositary servicesRegistration or transfer fees
    
    Transfer and registration of shares on our
share register to or from the name of the
depositary or its agent when you deposit or
withdraw sharesExpenses of the depositary
    
    Cable, telex and facsimile transmissions
(when expressly provided in the deposit
agreement)Converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary
or the custodian have to pay on any ADS or share
underlying an ADS, for example, stock transfer
taxes, stamp duty or withholding taxes
    
    As necessaryAny charges incurred by the depositary or its agents 
for servicing the deposited securities
    
    As necessary
   PART II
 
 ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    97




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
    
    approximately US$68 million to purchase or prepay for raw materials;
 
    
    approximately US$40 million to expand our manufacturing capacity;
 
    
    approximately US$17.9 million to acquire Yangguang Solar; and
 
    
    approximately US$10 million to invest in our research and development activities.
   
    
    approximately US95.6 million for wafer and polysilicon pre-payments;
 
    
    approximately US37.4 million for capital expenditure;
 
    
    US$19.2 million to repay loans from Hong Kong Huaerli, a company controlled by Mr. Yonghua
Lu, our chairman, to Solarfun Hong Kong, our 100% indirect subsidiary; and
 
    
    the remainder for working capital and repayment of our existing bank borrowings.
     98




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ITEM 15 CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting
     Attestation Report of the Registered Public Accounting Firm
 
   99




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Changes in Internal Controls
   100




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ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B CODE OF ETHICS
  
 ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Year Ended December 31,2007
    
    
    2008
    
    
    2009(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)Audit fees
    
    
    7,854,600
    
    
    
    6,820,000
    
    
    
    5,500,000
    
    
    
    805,755Audit-related fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    
    
    
    
    688,000
    
    
    
    100,792All other fees(1)
    
    
    1,458,920
    
    
    
    1,700,000
    
    
    
    2,290,000
    
    
    
    335,487
 Notes:(1)
    
    All other fees means the aggregate fees for services rendered in connection with our
public offering in 2006 and our convertible bond offering and continuous ADS offering in 2008. de minimus
 
 ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
   101




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ITEM 16F CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
  
 ITEM 16G CORPORATE GOVERNANCE
  PART III
 
 ITEM 17 FINANCIAL STATEMENTS
  
 ITEM 18 FINANCIAL STATEMENTS
  
    
    Report of Independent Registered Public Accounting Firm
 
    
    Consolidated Balance Sheets as of December 31, 2008 and 2009
 
    
    Consolidated Statements of Operations for the Years Ended December 31, 2007, 2008 and 2009
 
    
    Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2008 and 2009
 
    
    Consolidated Statements of Changes in Shareholders Equity for the Years Ended December 31,
2007, 2008 and 2009
 
    
    Notes to the Consolidated Financial Statements
 
 ITEM 19 EXHIBITS
  ExhibitNumber
    
    Description of Document1.1
    
    
    Memorandum and Articles of Association of Solarfun Power Holdings Co.,
Ltd. (incorporated by reference to Exhibit 3.1 from our F-1 registration
statement (File No. 333-139258), as amended, initially filed with the
Commission on December 11, 2006)1.2
    
    
    Form of Second Amended and Restated Memorandum and Articles of Solarfun
Power Holdings Co., Ltd. (incorporated by reference to Exhibit 3.2 from
our F-1 registration statement (File No. 333-139258), as amended,
initially filed with the Commission on December 11, 2006)2.1
    
    
    Specimen Certificate for Ordinary Shares of Solarfun Power Holdings Co.,
Ltd. (incorporated by reference to Exhibit 4.2 from our F-1 registration
statement (File No. 333-139258), as amended, initially filed with the
Commission on December 11, 2006)
  102




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ExhibitNumber
    
    Description of Document2.2
    
    
    Form of American Depositary Receipt of Solarfun Power Holdings Co., Ltd.
(incorporated by reference to Exhibit 4.1 from our F-1 registration
statement (File No. 333-139258), as amended, initially filed with the
Commission on December 11, 2006)2.3
    
    
    Form of Deposit Agreement Form of Deposit Agreement, among Solarfun Power
Holdings Co., Ltd., the depositary and owners and holders of the American
Depositary Shares (incorporated by reference to Exhibit 4.3 from our F-1
registration statement (File No. 333-139258), as amended, initially filed
with the Commission on December 11, 2006)4.1
    
    
    Share Purchase Agreement, dated June 6, 2006, in respect of the issue of
series A convertible preference shares of Solarfun Power Holdings Co.,
Ltd. (incorporated by reference to Exhibit 4.4 from our F-1 registration
statement (File No. 333-139258), as amended, initially filed with the
Commission on December 11, 2006)4.2
    
    
    Shareholders Agreement, dated June 27, 2006, among Solarfun Power Holdings
Co., Ltd. and other parties therein (incorporated by reference to Exhibit
4.5 from our F-1 registration statement (File No. 333-139258), as amended,
initially filed with the Commission on December 11, 2006)4.3
    
    
    Registration Rights Agreement, dated June 27, 2006, among Solarfun Power
Holdings Co., Ltd. and other parties therein (incorporated by reference to
Exhibit 4.6 from our F-1 registration statement (File No. 333-139258), as
amended, initially filed with the Commission on December 11, 2006)4.4
    
    
    Agreement Concerning the Limitations on Post-IPO Sale of Shares, dated
June 20, 2006, among certain holders of ordinary shares (incorporated by
reference to Exhibit 4.7 from our F-1 registration statement (File No.
333-139258), as amended, initially filed with the Commission on December
11, 2006)4.5
    
    
    Second Shareholders Agreement, dated December 4, 2007, among Solarfun
Power Holding Co., Ltd. and the other parties therein (incorporated by
reference to Exhibit 4.8 from our F-1 registration statement (File No.
333-147627), as amended, initially filed with the Commission on November
27, 2007)4.6
    
    
    The First Amendment to Lock-up Agreement, dated 2007, among Solarfun Power
Holding Co., Ltd. and other parties therein (incorporated by reference to
Exhibit 4.9 from our F-1 registration statement (File No. 333-147627), as
amended, initially filed with the Commission on November 27, 2007)4.7
    
    
    Amendment to Lock-up Agreement, dated December 4, 2007, among Yonghua Lu,
Good Energies Investment (Jersey) Limited and other parties therein
(incorporated by reference to Exhibit 4.10 from our F-1 registration
statement (File No. 333-147627), as amended, initially filed with the
Commission on November 27, 2007)4.8
    
    
    2006 Share Incentive Plan (incorporated by reference to Exhibit 10.1 from
our F-1 registration statement (File No. 333-139258), as amended,
initially filed with the Commission on December 11, 2006)4.9
    
    
    2007 Equity Incentive Plan (incorporated by reference to Exhibit 99.2 from
our Form S-8 registration statement (File No. 333-147644), as amended,
initially filed with the Commission on November 27, 2007)
  103




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ExhibitNumber
    
    Description of Document4.10
    
    
    Form of Employment Agreement between Solarfun Power Holdings Co., Ltd. and
a Senior Executive Officer of the Registrant (incorporated by reference to
Exhibit 10.2 from our F-1 registration statement (File No. 333-139258), as
amended, initially filed with the Commission on December 11, 2006)4.11
    
    
    Silicon Supply Agreement, dated June 2, 2006, and Amendments No. 1, No. 2
and No. 3 thereto, dated June 9, 2006, October 8, 2006 and November 17,
2006, respectively, between Jiangsu Linyang Solarfun Co., Ltd. and E-mei
(incorporated by reference to Exhibit 10.8 from our F-1 registration
statement (File No. 333-139258), as amended, initially filed with the
Commission on December 11, 2006)4.12
    
    
    Sales Agreement, dated June 10, 2006, between Jiangsu Linyang Solarfun
Co., Ltd. and Social Capital, S.L. (incorporated by reference to Exhibit
10.9 from our F-1 registration statement (File No. 333-139258), as
amended, initially filed with the Commission on December 11, 2006)4.13
    
    
    Sales Contract, dated November 19, 2006, between Jiangsu Linyang Solarfun
Co., Ltd. and Scatec AS (incorporated by reference to Exhibit 10.10 from
our F-1 registration statement (File No. 333-139258), as amended,
initially filed with the Commission on December 11, 2006)4.14
    
    
    Sales Contract, dated November 19, 2006, between Jiangsu Linyang Solarfun
Co., Ltd. and Scatec AS (incorporated by reference to Exhibit 10.11 from
our F-1 registration statement (File No. 333-139258), as amended,
initially filed with the Commission on December 11, 2006)4.15
    
    
    Agreement of Transfer of Land Use Rights, dated April 8, 2006, between
Jiangsu Linyang Solarfun Co., Ltd. and Qidong Huahong Electronics Co.,
Ltd. (incorporated by reference to Exhibit 10.12 from our F-1 registration
statement (File No. 333-139258), as amended, initially filed with the
Commission on December 11, 2006)4.16
    
    
    Summary of Share Transfer Agreements, dated May 27, 2006 and effective as
of June 2, 2006, between Linyang Solar Power Investment Holding Ltd. and
the shareholders of Jiangsu Linyang Solarfun Co., Ltd. (incorporated by
reference to Exhibit 10.13 from our F-1 registration statement (File No.
333-139258), as amended, initially filed with the Commission on December
11, 2006)4.17
    
    
    Share Transfer Agreement, dated June 9, 2006, among Linyang Solar Power
Investment Holding Ltd. and various other parties (incorporated by
reference to Exhibit 10.14 from our F-1 registration statement (File No.
333-139258), as amended, initially filed with the Commission on December
11, 2006)4.18
    
    
    Share Issue and Transfer Agreement, dated June 12, 2006, among Solarfun
Power Holdings Co., Ltd., Linyang Solar Power Investment Holding Ltd. and
various other parties (incorporated by reference to Exhibit 10.15 from our
F-1 registration statement (File No. 333-139258), as amended, initially
filed with the Commission on December 11, 2006)4.19
    
    
    Deed of Share Transfer, effective as of July 15, 2006, among Linyang Solar
Power Investment Holding Ltd. and various other parties (incorporated by
reference to Exhibit 10.16 from our F-1 registration statement (File No.
333-139258), as amended, initially filed with the Commission on December
11, 2006)
  104




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ExhibitNumber
    
    Description of Document4.20
    
    
    Management Consulting Service Agreement, dated November 18, 2006, between
Jiangsu Linyang Solarfun Co., Ltd. and Hony Capital II, L.P. (incorporated
by reference to Exhibit 10.17 from our F-1 registration statement (File
No. 333-139258), as amended, initially filed with the Commission on
December 11, 2006)4.21
    
    
    Bid Invitation and Letter of Acceptance for Shanghai Chongming Qianwei
Village 960 KW Solar PV Power Generation Model Project, dated September
28, 2006 and November 9, 2006, respectively (incorporated by reference to
Exhibit 10.18 from our F-1 registration statement (File No. 333-139258),
as amended, initially filed with the Commission on December 11, 2006)4.22
    
    
    Letter of Acceptance for Qitian Group 74 KW On-Grid Application System
Project, dated September 12, 2006 (incorporated by reference to Exhibit
10.19 from our F-1 registration statement (File No. 333-139258), as
amended, initially filed with the Commission on December 11, 2006)4.23
    
    
    Contract between Jiangsu Linyang Solarfun Co., Ltd. and ISC Konstanz,
dated September 5, 2006 (incorporated by reference to Exhibit 10.20 from
our F-1 registration statement (File No. 333-139258), as amended,
initially filed with the Commission on December 11, 2006)4.24
    
    
    Share Transfer Agreement, dated July 31, 2007, among Nantong Linyang,
Lianyungang Suyuan Group Co., Ltd. and Jiangsu Linyang Solarfun Co., Ltd.
(incorporated by reference to Exhibit 10.31 from our F-1 registration
statement (File No. 333-147627), as amended, initially filed with the
Commission on November 27, 2007)4.25
    
    
    Contract of Purchase between Schüco International KG and Jiangsu Linyang
Solarfun Co., Ltd. (incorporated by reference to Exhibit 10.33 from our
F-1 registration statement (File No. 333-147627), as amended, initially
filed with the Commission on November 27, 2007)4.26
    
    
    Second and Restated Supply Agreement, dated May 13, 2008, between Solarfun
Hong Kong Power Ltd. and Hoku (Exhibit 4.39 from our 20-F annual report filed with
the Commission on June 27, 2008)4.27
    
    
    Investment Agreement, dated November 14, 2007, between Jiangsu Linyang
Solarfun Co., Ltd. and Management Committee of Qidong Economic Development
Zone, Jiangsu Province (incorporated by reference to Exhibit 10.35 from
our F-1 registration statement (File No. 333-147627), as amended,
initially filed with the Commission on November 27, 2007)4.28
    
    
    Contract, dated October 30, 2007, between Yangguang Solar and Ald Vacuum
Technologies GmbH (Exhibit 4.41 from our 20-F annual report filed with the
Commission on June 27, 2008)4.29
    
    
    State-owned Land Use Right Grant Contract, dated January 28, 2005, between
Lianyungang Municipal Administration of Land and Resources and Yangguang
Solar Technology Co., Ltd. (Exhibit 4.42 from our 20-F annual report filed
with the Commission on June 27, 2008)
  105




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ExhibitNumber
    
    Description of Document4.30
    
    

Equity
Transfer Agreement, dated June 23, 2008, among Nantong Linyang
Electric Power Investment Co., Ltd., Jiangsu Qitian Group Co., Ltd.,
Jiangsu Guangyi Technology Co., Ltd. and Jiangsu Linyang Solarfun Co., Ltd. (Exhibit 4.43 from our
20-F/A amendment to annual report filed with the Commission on June 30,
2008)4.31
    *
    
    Equity Transfer Agreement, dated November 16, 2009, between Rongqiang Cui
and Jiangsu Linyang Solarfun Co., Ltd.4.32
    *
    
    Equity Transfer Agreement, dated November 16, 2009, between Guoyu Wang and
Jiangsu Linyang Solarfun Co., Ltd.4.33
    *
    
    Equipment Sales Agreement, dated April 30, 2010, between SMIC Energy
Technology (Shanghai) and Jiangsu Linyang Solarfun Co., Ltd.4.34
    *
    
    Lease Agreement, dated April 3, 2009, between Jiangsu Linyang Electronics Co., Ltd. and
Jiangsu Linyang Solarfun Co., Ltd.4.35
    *
    
    Lease Agreement, dated April 2010, between Qidong Huahong Electronics Co., Ltd. and
Jiangsu Linyang Solarfun Co., Ltd.8.1
    *
    
    Subsidiaries of Solarfun Power Holdings Co., Ltd.11.1
    
    
    Code of Business Conduct and Ethics of Solarfun Power Holdings Co.,
Ltd.(incorporated by reference to Exhibit 99.1 from our F-1 registration
statement (File No. 333-139258), as amended, initially filed with the
Commission on December 5, 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 and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 200223.1
    *
    
    Consent of Independent Registered Public Accounting Firm
 Notes:*
    
    Filed with this Annual Report on Form 20-F  106




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SIGNATURE
  SOLARFUN POWER HOLDINGS CO., LTD./s/ Ping Peter XieName:
    Ping Peter XieTitle:
    President   107




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SOLARFUN POWER HOLDINGS CO., LTD.
 CONSOLIDATED FINANCIAL STATEMENTS
 As of December 31, 2008 and 2009  and for the years ended December 31, 2007, 2008 and 2009




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageConsolidated Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2008 and 2009
    
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2007, 2008 and 2009
    
    
    F-4Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2008 and 2009
    
    
    F-5  6Consolidated Statements of Changes in Shareholders Equity for the Years Ended December
31, 2007, 2008 and 2009
    
    
    F-7Notes to the Consolidated Financial Statements
    
    
    F-8  50
  - F-1 -




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
   - F-2 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
 
 CONSOLIDATED BALANCE SHEETS
 As of December 31,Note
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)ASSETSCurrent assets:Cash and cash equivalents
    
    
    
    
    
    
    410,901
    
    
    
    645,720
    
    
    
    94,599Restricted cash
    
    
    
    
    
    
    88,137
    
    
    
    60,539
    
    
    
    8,869Accounts receivable  net
    
    
    4
    
    
    
    319,537
    
    
    
    587,488
    
    
    
    86,066Inventories  net
    
    
    5
    
    
    
    731,708
    
    
    
    783,973
    
    
    
    114,853Advance to suppliers  net
    
    
    6
    
    
    
    1,145,614
    
    
    
    979,762
    
    
    
    143,536Other current assets
    
    
    7
    
    
    
    481,749
    
    
    
    180,315
    
    
    
    26,416Deferred tax assets  net
    
    
    24
    
    
    
    57,992
    
    
    
    63,115
    
    
    
    9,246Derivative contracts
    
    
    17
    
    
    
    39,665
    
    
    
    7,360
    
    
    
    1,078Amount due from related parties
    
    
    25
    
    
    
    19
    
    
    
    12,458
    
    
    
    1,825Total current assets
    
    
    
    
    
    
    3,275,322
    
    
    
    3,320,730
    
    
    
    486,488Non-current assets:Fixed assets  net
    
    
    8
    
    
    
    1,492,575
    
    
    
    1,586,283
    
    
    
    232,392Intangible assets  net
    
    
    9
    
    
    
    212,736
    
    
    
    208,563
    
    
    
    30,555Deferred tax assets  net
    
    
    24
    
    
    
    4,489
    
    
    
    13,789
    
    
    
    2,020Long-term deferred expenses
    
    
    11
    
    
    
    37,444
    
    
    
    33,135
    
    
    
    4,854Goodwill
    
    
    10
    
    
    
    134,735
    
    
    
    134,735
    
    
    
    19,739Total non-current assets
    
    
    
    
    
    
    1,881,979
    
    
    
    1,976,505
    
    
    
    289,560Total assets
    
    
    
    
    
    
    5,157,301
    
    
    
    5,297,235
    
    
    
    776,048LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term bank borrowings
    
    
    12
    
    
    
    1,098,832
    
    
    
    404,764
    
    
    
    59,298Long-term bank borrowings, current portion
    
    
    12
    
    
    
    30,000
    
    
    
    90,000
    
    
    
    13,185Accounts payable
    
    
    
    
    
    
    217,026
    
    
    
    441,768
    
    
    
    64,719Notes payable
    
    
    16
    
    
    
    39,341
    
    
    
    186,921
    
    
    
    27,384Accrued expenses and other liabilities
    
    
    13
    
    
    
    189,028
    
    
    
    191,895
    
    
    
    28,113Customer deposits
    
    
    15
    
    
    
    9,494
    
    
    
    59,685
    
    
    
    8,744Deferred tax liabilities
    
    
    24
    
    
    
    1,416
    
    
    
    
    
    
    
    Unrecognized tax benefit
    
    
    24
    
    
    
    27,385
    
    
    
    27,385
    
    
    
    4,012Derivative contracts
    
    
    17
    
    
    
    5,792
    
    
    
    1,148
    
    
    
    168Amount due to related parties
    
    
    25
    
    
    
    39,766
    
    
    
    16,765
    
    
    
    2,456Total current liabilities
    
    
    
    
    
    
    1,658,080
    
    
    
    1,420,331
    
    
    
    208,079Non-current liabilities:Long-term bank borrowings
    
    
    12
    
    
    
    170,000
    
    
    
    380,000
    
    
    
    55,670Deferred tax liability
    
    
    24
    
    
    
    27,155
    
    
    
    26,566
    
    
    
    3,892Convertible bonds
    
    
    22
    
    
    
    1,178,969
    
    
    
    658,653
    
    
    
    96,493Total non-current liabilities
    
    
    
    
    
    
    1,376,124
    
    
    
    1,065,219
    
    
    
    156,055Commitments and contingencies
    
    
    27Redeemable ordinary shares(par value US$0.0001 per share; 45,098,055
shares issued and outstanding at December 31, 2008 and 2009)
    
    
    21
    
    
    
    32
    
    
    
    32
    
    
    
    5Shareholders equitySolarfun Power Holdings Co., Ltd. shareholders equity:Ordinary shares (par value US$0.0001 per share; 500,000,000 and
500,000,000 shares authorized; 269,060,209 shares and 290,708,739
shares issued and outstanding at December 31, 2008 and 2009,
respectively)
    
    
    
    
    
    
    214
    
    
    
    227
    
    
    
    33Additional paid-in capital
    
    
    
    
    
    
    2,138,624
    
    
    
    2,331,797
    
    
    
    341,610Statutory reserves
    
    
    19
    
    
    
    47,638
    
    
    
    69,564
    
    
    
    10,191(Accumulated deficit) retained earnings
    
    
    
    
    
    
    (67,594
    )
    
    
    410,065
    
    
    
    60,075Total Solarfun Power Holdings Co., Ltd. shareholders equity
    
    
    
    
    
    
    2,118,882
    
    
    
    2,811,653
    
    
    
    411,909Non-controlling interest
    
    
    
    
    
    
    4,183
    
    
    
    
    
    
    
    Total shareholders equity
    
    
    
    
    
    
    2,123,065
    
    
    
    2,811,653
    
    
    
    411,909Total liabilities, mezzanine equity and shareholders equity
    
    
    
    
    
    
    5,157,301
    
    
    
    5,297,235
    
    
    
    776,048
   - F-3 -




---



##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the year ended December 31,Note
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Net revenues
    
    
    
    
    
    
    2,395,135
    
    
    
    4,949,068
    
    
    
    3,778,316
    
    
    
    553,527Cost of revenues
    
    
    
    
    
    
    (1,997,355
    )
    
    
    (4,905,147
    )
    
    
    (3,341,936
    )
    
    
    (489,596
    )Gross profit
    
    
    
    
    
    
    397,780
    
    
    
    43,921
    
    
    
    436,380
    
    
    
    63,931Operating expenses:Selling expenses
    
    
    
    
    
    
    (62,777
    )
    
    
    (87,913
    )
    
    
    (105,454
    )
    
    
    (15,449
    )General and administrative expenses
    
    
    
    
    
    
    (113,756
    )
    
    
    (143,340
    )
    
    
    (180,989
    )
    
    
    (26,515
    )Research and development expenses
    
    
    
    
    
    
    (27,440
    )
    
    
    (19,679
    )
    
    
    (32,025
    )
    
    
    (4,692
    )Total operating expenses
    
    
    
    
    
    
    (203,973
    )
    
    
    (250,932
    )
    
    
    (318,468
    )
    
    
    (46,656
    )Operating profit (loss)
    
    
    
    
    
    
    193,807
    
    
    
    (207,011
    )
    
    
    117,912
    
    
    
    17,275Interest expense
    
    
    
    
    
    
    (25,978
    )
    
    
    (103,146
    )
    
    
    (157,907
    )
    
    
    (23,134
    )Interest income
    
    
    
    
    
    
    16,244
    
    
    
    10,004
    
    
    
    5,002
    
    
    
    733Exchange losses
    
    
    
    
    
    
    (25,628
    )
    
    
    (35,230
    )
    
    
    (23,814
    )
    
    
    (3,489
    )Changes in fair value of derivative contracts
    
    
    17
    
    
    
    
    
    
    
    83,090
    
    
    
    9,594
    
    
    
    1,406Changes in fair value of conversion feature of
convertible bonds
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    (73,887
    )
    
    
    (10,825
    )Other income
    
    
    
    
    
    
    1,507
    
    
    
    15,018
    
    
    
    6,286
    
    
    
    921Other expenses
    
    
    
    
    
    
    (9,670
    )
    
    
    (25,604
    )
    
    
    (11,835
    )
    
    
    (1,734
    )Government grants
    
    
    23
    
    
    
    2,089
    
    
    
    3,480
    
    
    
    7,661
    
    
    
    1,122Income (loss) before income taxes
    
    
    
    
    
    
    152,371
    
    
    
    (259,399
    )
    
    
    (120,988
    )
    
    
    (17,725
    )Income tax expenses
    
    
    24
    
    
    
    (7,458
    )
    
    
    (6,519
    )
    
    
    (23,928
    )
    
    
    (3,505
    )Consolidated net income (loss)
    
    
    
    
    
    
    144,913
    
    
    
    (265,918
    )
    
    
    (144,916
    )
    
    
    (21,230
    )Net income (loss) attributable to non-controlling interest
    
    
    
    
    
    
    3,124
    
    
    
    (14,573
    )
    
    
    (311
    )
    
    
    (46
    )Net income (loss) attributable to Solarfun
Power Holdings Co., Ltd. shareholders
    
    
    
    
    
    
    148,037
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    (21,276
    )Net income (loss) attributable to Solarfun
Power Holdings Co., Ltd. shareholders
per share:Basic
    
    
    30
    
    
    RMB
    0.62
    
    
    RMB
    (1.11
    )
    
    RMB
    (0.53
    )
    
    US$
    (0.08
    )Diluted
    
    
    30
    
    
    RMB
    0.62
    
    
    RMB
    (1.11
    )
    
    RMB
    (0.53
    )
    
    US$
    (0.08
    )Number of shares used in computation of net income (loss)
per share:Basic
    
    
    30
    
    
    
    240,054,686
    
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    274,067,760Diluted
    
    
    30
    
    
    
    240,054,686
    
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    274,067,760
   - F-4 -




---



##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the year ended December 31,Note
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Cash flows from operating activities:Consolidated net income (loss)
    
    
    
    
    
    
    144,913
    
    
    
    (265,918
    )
    
    
    (144,916
    )
    
    
    (21,230
    )Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:Unrealized loss from derivative contracts
    
    
    17
    
    
    
    
    
    
    
    (33,873
    )
    
    
    27,661
    
    
    
    4,052Changes in fair value of conversion feature of convertible bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,887
    
    
    
    10,825Loss from disposal of a subsidiary
    
    
    
    
    
    
    
    
    
    
    384
    
    
    
    
    
    
    
    Loss from disposal of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    719
    
    
    
    105Gain from disposal of intangible asset
    
    
    9
    
    
    
    
    
    
    
    (3,403
    )
    
    
    
    
    
    
    Amortization of convertible bonds discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,788
    
    
    
    7,440Depreciation and amortization
    
    
    
    
    
    
    27,686
    
    
    
    67,170
    
    
    
    153,174
    
    
    
    22,440Amortization of long-term deferred expense
    
    
    
    
    
    
    
    
    
    
    5,145
    
    
    
    6,670
    
    
    
    977Stock compensation expense
    
    
    20
    
    
    
    29,640
    
    
    
    34,826
    
    
    
    42,671
    
    
    
    6,251Write-down of inventories
    
    
    5
    
    
    
    815
    
    
    
    413,789
    
    
    
    282,574
    
    
    
    41,397Provision for doubtful collection of account receivables
    
    
    4
    
    
    
    2,070
    
    
    
    
    
    
    
    3,723
    
    
    
    545Provision for doubtful collection of supplier advances
    
    
    6
    
    
    
    
    
    
    
    41,962
    
    
    
    234,724
    
    
    
    34,387Deferred tax benefit
    
    
    24
    
    
    
    (700
    )
    
    
    (50,068
    )
    
    
    (15,792
    )
    
    
    (2,314
    )Warranty provision
    
    
    14
    
    
    
    23,109
    
    
    
    27,678
    
    
    
    24,824
    
    
    
    3,637Warranty reversal
    
    
    14
    
    
    
    (1,520
    )
    
    
    
    
    
    
    
    
    
    
    Unrecognized tax benefit
    
    
    
    
    
    
    
    
    
    
    27,385
    
    
    
    
    
    
    
    Others
    
    
    
    
    
    
    6
    
    
    
    2
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Restricted cash
    
    
    
    
    
    
    (12,968
    )
    
    
    (44,602
    )
    
    
    2,011
    
    
    
    295Accounts receivable
    
    
    
    
    
    
    (290,604
    )
    
    
    111,157
    
    
    
    (271,674
    )
    
    
    (39,800
    )Inventories
    
    
    
    
    
    
    (359,298
    )
    
    
    (417,016
    )
    
    
    (334,839
    )
    
    
    (49,054
    )Advance to suppliers
    
    
    
    
    
    
    (398,163
    )
    
    
    (547,458
    )
    
    
    (68,872
    )
    
    
    (10,090
    )Prepaid rent
    
    
    
    
    
    
    (170,000
    )
    
    
    
    
    
    
    
    
    
    
    Prepaid expenses
    
    
    
    
    
    
    
    
    
    
    (50,000
    )
    
    
    86,375
    
    
    
    12,654Other current assets
    
    
    
    
    
    
    (138,823
    )
    
    
    (47,271
    )
    
    
    215,059
    
    
    
    31,508Amount due from related parties
    
    
    
    
    
    
    (188
    )
    
    
    901
    
    
    
    (12,439
    )
    
    
    (1,822
    )Accounts payable
    
    
    
    
    
    
    80,094
    
    
    
    103,199
    
    
    
    238,804
    
    
    
    34,985Accrued expenses and other liabilities
    
    
    
    
    
    
    39,668
    
    
    
    (27,857
    )
    
    
    33,648
    
    
    
    4,929Amount due to related parties
    
    
    
    
    
    
    (23,951
    )
    
    
    (2,038
    )
    
    
    10,362
    
    
    
    1,518Customer deposits
    
    
    
    
    
    
    27,611
    
    
    
    (18,134
    )
    
    
    50,191
    
    
    
    7,353Net cash (used in) provided by operating activities
    
    
    
    
    
    
    (1,020,603
    )
    
    
    (674,040
    )
    
    
    689,333
    
    
    
    100,988Cash flows from investing activities:Acquisition of fixed assets
    
    
    
    
    
    
    (494,984
    )
    
    
    (849,544
    )
    
    
    (260,054
    )
    
    
    (38,098
    )Acquisition of intangible assets
    
    
    
    
    
    
    
    
    
    
    (48,517
    )
    
    
    (438
    )
    
    
    (64
    )Acquisition of a subsidiary
    
    
    
    
    
    
    (48,018
    )
    
    
    (267,566
    )
    
    
    (89,818
    )
    
    
    (13,159
    )Restricted cash
    
    
    
    
    
    
    4,537
    
    
    
    (1,282
    )
    
    
    25,587
    
    
    
    3,749Disposal of affiliate
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    Disposal of a subsidiary
    
    
    
    
    
    
    
    
    
    
    (9,394
    )
    
    
    
    
    
    
    Proceeds from disposal of intangible assets
    
    
    
    
    
    
    
    
    
    
    6,958
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    
    
    
    
    (538,465
    )
    
    
    (1,169,045
    )
    
    
    (324,723
    )
    
    
    (47,572
    )
   - F-5 -




---



##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS  CONTD
 For the year ended December 31,Note
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Cash flows from financing activities:Capital contributed by minority interest shareholder
    
    
    
    
    
    
    57,800
    
    
    
    65,560
    
    
    
    
    
    
    
    Net proceeds from issuance of redeemable ordinary shares
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    Net proceeds from issuance of convertible bonds
    
    
    
    
    
    
    
    
    
    
    1,178,969
    
    
    
    Net proceeds from issuance of ordinary shares
    
    
    18
    
    
    
    
    
    
    
    489,875
    
    
    
    148,994
    
    
    
    21,828Dividends paid to minority shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,400
    )
    
    
    (498
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    6,690
    
    
    
    12,091
    
    
    
    1,103
    
    
    
    162Proceeds from short-term borrowings
    
    
    
    
    
    
    1,570,106
    
    
    
    3,119,682
    
    
    
    1,900,675
    
    
    
    278,450Payment of short-term borrowings
    
    
    
    
    
    
    (985,005
    )
    
    
    (2,985,852
    )
    
    
    (2,594,743
    )
    
    
    (380,132
    )Proceeds from long-term borrowings
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    300,000
    
    
    
    43,950Payment of long-term borrowings
    
    
    
    
    
    
    (16,000
    )
    
    
    (15,000
    )
    
    
    (30,000
    )
    
    
    (4,395
    )Utilization of notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147,580
    
    
    
    21,621Payment of notes payable
    
    
    
    
    
    
    (14,020
    )
    
    
    
    
    
    
    
    
    
    
    Advances from related parties
    
    
    
    
    
    
    74,633
    
    
    
    
    
    
    
    
    
    
    
    Repayment of advances from related parties
    
    
    
    
    
    
    
    
    
    
    (84,299
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    
    
    
    
    694,204
    
    
    
    1,981,058
    
    
    
    (129,791
    )
    
    
    (19,014
    )Net (decrease) increase in cash and cash equivalents
    
    
    
    
    
    
    (864,864
    )
    
    
    137,973
    
    
    
    234,819
    
    
    
    34,402Cash and cash equivalents at the beginning of year
    
    
    
    
    
    
    1,137,792
    
    
    
    272,928
    
    
    
    410,901
    
    
    
    60,197Cash and cash equivalents at the end of year
    
    
    
    
    
    
    272,928
    
    
    
    410,901
    
    
    
    645,720
    
    
    
    94,599Supplemental disclosure of cash flow information:Interest paid
    
    
    
    
    
    
    31,372
    
    
    
    102,440
    
    
    
    156,143
    
    
    
    22,875Income tax paid
    
    
    
    
    
    
    3,728
    
    
    
    51,273
    
    
    
    39,159
    
    
    
    5,737Realized gain from derivative contracts
    
    
    
    
    
    
    
    
    
    
    49,216
    
    
    
    37,255
    
    
    
    5,458Supplemental schedule of non-cash activities:Acquisition of fixed assets included in accounts payable,
accrued expenses and other liabilities
    
    
    
    
    
    
    24,212
    
    
    
    35,904
    
    
    
    21,842
    
    
    
    3,200Conversion of convertible bonds into ordinary shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    179
    
    
    
    26Transfer of unamortized debt issuance costs to equity
upon conversion of convertible bonds into ordinary shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (1
    )
   - F-6 -




---



##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Solarfun Power Holdings Co., Ltd.Retainedearnings
    
    
    
    
    
    
    TotalNumber of
    
    
    
    
    
    
    Additional paid-
    
    
    Statutory
    
    
    (Accumulated
    
    
    Non controlling
    
    
    shareholdersNote
    
    
    ordinary shares
    
    
    Ordinary shares
    
    
    in capital
    
    
    reserves
    
    
    losses)
    
    
    Interest
    
    
    equity(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (RMB000)Balance as of December 31, 2007
    
    
    
    
    
    
    239,994,754
    
    
    
    193
    
    
    
    1,565,524
    
    
    
    16,024
    
    
    
    96,474
    
    
    
    10,151
    
    
    
    1,688,366Exercise of stock option and vesting of
restricted stock units
    
    
    20
    
    
    
    604,490
    
    
    
    1
    
    
    
    6,689
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,690Capital contributed by non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,800
    
    
    
    57,800Share-based compensation
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    29,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,640Shares issued to depository bank
    
    
    
    
    
    
    1,355,500
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of associated company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,593
    
    
    
    35,593Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,037
    
    
    
    (3,124
    )
    
    
    144,913Appropriation of statutory reserves
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,524
    
    
    
    (21,524
    )
    
    
    
    
    
    
    Balance as of December 31, 2007
    
    
    
    
    
    
    241,954,744
    
    
    
    195
    
    
    
    1,601,852
    
    
    
    37,548
    
    
    
    222,987
    
    
    
    100,420
    
    
    
    1,963,002Exercise of stock option and vesting of
restricted stock units
    
    
    20
    
    
    
    1,040,590
    
    
    
    1
    
    
    
    12,090
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,091Capital contributed by non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,560
    
    
    
    65,560Disposal of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,750
    )
    
    
    (8,750
    )Purchase of subsidiary shares from non
controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (167,620
    )
    
    
    (167,620
    )Settlement of stock options exercised with
shares held by depository bank
    
    
    
    
    
    
    (1,040,590
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from issuance of common stock
from additional equity offering
    
    
    18
    
    
    
    27,105,465
    
    
    
    18
    
    
    
    489,857
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,875Share-based compensation
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    34,825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,825Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (280,491
    )
    
    
    14,573
    
    
    
    (265,918
    )Appropriation of statutory reserves
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,090
    
    
    
    (10,090
    )
    
    
    
    
    
    
    Balance as of December 31, 2008
    
    
    
    
    
    
    269,060,209
    
    
    
    214
    
    
    
    2,138,624
    
    
    
    47,638
    
    
    
    (67,594
    )
    
    
    4,183
    
    
    
    2,123,065Adjustment to retained earnings upon
adoption of ASC 815-40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    644,812
    
    
    
    
    
    
    
    644,812Balance as of January 1, 2009
    
    
    
    
    
    
    269,060,209
    
    
    
    214
    
    
    
    2,138,624
    
    
    
    47,638
    
    
    
    577,218
    
    
    
    4,183
    
    
    
    2,767,877Exercise of stock options and
vesting of restricted stock units
    
    
    20
    
    
    
    893,760
    
    
    
    
    
    
    
    1,101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,101Settlement of stock option exercised
with shares held by depository bank
    
    
    
    
    
    
    (893,760
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of convertible bonds
into ordinary shares
    
    
    
    
    
    
    6,535
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174Share-based compensation
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    42,671
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,671Shares issued to depository bank
    
    
    
    
    
    
    2,200,000
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from issuance of
common shares
    
    
    19
    
    
    
    19,441,995
    
    
    
    12
    
    
    
    148,982
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,994Purchase of subsidiary shares from
non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    (1,094
    )
    
    
    (849
    )Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (145,227
    )
    
    
    311
    
    
    
    (144,916
    )Appropriation of statutory reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,926
    
    
    
    (21,926
    )
    
    
    
    
    
    
    Appropriation of retained earnings to
non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,400
    )
    
    
    (3,400
    )Balance as of December 31, 2009
    
    
    
    
    
    
    290,708,739
    
    
    
    227
    
    
    
    2,331,797
    
    
    
    69,564
    
    
    
    410,065
    
    
    
    
    
    
    
    2,811,653Balance as of December 31, 2009, in US$000
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    341,610
    
    
    
    10,191
    
    
    
    60,075
    
    
    
    
    
    
    
    411,909
   - F-7 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 1. ORGANIZATION AND BASIS OF PRESENTATION
          - F-8 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 1. ORGANIZATION AND BASIS OF PRESENTATION (CONTD)
  Date of incorporation/
    
    Place of
    
    Percentage ofestablishment/
    
    incorporation/
    
    shareholding/Name of subsidiary
    
    acquisition
    
    establishment
    
    ownership
    
    
    Principal activitiesLinyang Solar Power Investment Holding Ltd. (Linyang Solar Power)
    
    May 17, 2006
    
    British Virgin Islands
    
    
    100
    %
    
    Investment holdingSolarfun Power Hong Kong Limited (Solarfun HK)
    
    May 16, 2007
    
    Hong Kong
    
    
    100
    %
    
    Investment holding and international procurementSolarfun USA, Inc. (Solarfun USA)
    
    September 18,
2007
    
    United States of America
    
    
    100
    %
    
    International salesSolarfun Power Deutschland GmbH (Solarfun Deutschland)
    
    February 14, 2008
    
    Deutschland
    
    
    100
    %
    
    International salesJiangsu Linyang Solarfun Co., Ltd. (Linyang Solarfun)
    
    August 27, 2004
    
    The Peoples Republic of China (the PRC)
    
    
    100
    %
    
    Development, manufacturing and sales of photovoltaic (PV) products to overseas customersShanghai Linyang Solar Technology Co., Ltd. (Shanghai Linyang)
    
    March 29, 2006
    
    The PRC
    
    
    100
    %
    
    Sales of PV products to PRC customersJiangsu Linyang Solarfun Engineering Research and Development Center Co., Ltd. (Linyang R&D)
    
    April 9, 2007
    
    The PRC
    
    
    100
    %
    
    Research and developmentJiangsu Yangguang Solar Technology Co., Ltd. (Yangguang Solar)
    
    July 31, 2007
    
    The PRC
    
    
    100
    %
    
    Manufacturing of silicon ingots
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Principles of Consolidation
  Investments
 The
Equity Method of Accounting for Investments in Common Stock
   - F-9 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Foreign Currency
 Foreign Currency Translation
 Convenience Translation
  Use of Estimates
  Cash and Cash Equivalents
  Restricted Cash
  Accounts Receivable
   - F-10 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Debt Issuance Costs
  Inventories
  Fixed Assets
  Buildings
    
    20 yearsPlant and machinery
    
    10 yearsFurniture, fixtures and office equipment
    
    5 yearsComputer software
    
    5 yearsMotor vehicles
    
    5 years
    Intangible Assets
    - F-11 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Goodwill
  Goodwill and Other
Intangible Assets
    Impairment of Long-Lived Assets
  Fair Value of Financial Instruments
 , Derivatives and Hedging: Contracts in Entitys Own Equity
   - F-12 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Financial Instruments  Embedded Foreign Currency Derivatives
 Derivatives and
Hedging: Overall
 Financial Instruments  Foreign Currency Derivative Contracts
   Revenue Recognition
 Revenue Recognition: Overall
   - F-13 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Revenue Recognition (Contd)
  Accounting for Purchases and Sales of Inventory with the Same Counterparty
  Cost of Revenue
  Research and Development Costs
  Advertising Expenditures
   - F-14 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Warranty Cost
  Government Grants
  Accounting for Income Taxes and Uncertain Tax Positions
 Accounting for Income Taxes
 Accounting for Uncertainty in Income
Taxes
    - F-15 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Value-Added Tax (VAT)
  Leases
  Net Income (Loss) Per Share
 Earnings Per Share
 Stock Compensation
 Share-Based
Payment Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services
    - F-16 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Comparative Financial Statements
  Recent Accounting Pronouncements
 Multiple-Deliverable Revenue Arrangements Revenue Recognition: Multiple-Element Arrangements
 Accounting for Own-Share Lending Arrangements in
Contemplation of Convertible Debt Issuance or Other Financing Debt: Debt with Conversion and Other Options
 Fair Value Measurements and
Disclosures: Improving Disclosures about Fair Value Measurements
  - F-17 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Concentration of Risks
         - F-18 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Concentration of Risks (contd)
   3. ACQUISITIONS
   RMB000
    
    
    US$000Net assets acquired:Fixed assets
    
    
    17,685
    
    
    
    2,592Intangible assets
    
    
    82,324
    
    
    
    12,066Deferred tax assets
    
    
    3,792
    
    
    
    556Current assets
    
    
    3,907
    
    
    
    573Cash and bank balances
    
    
    3,233
    
    
    
    474Current liabilities
    
    
    (14,979
    )
    
    
    (2,196
    )Deferred tax liabilities
    
    
    (9,118
    )
    
    
    (1,336
    )Minority interest
    
    
    (35,593
    )
    
    
    (5,217
    )51,251
    
    
    
    7,512Cash paid
    
    
    51,251
    
    
    
    7,512
  - F-19 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 3. ACQUISITIONS (CONTD)
  RMB000
    
    
    US$000Fixed assets
    
    
    162,313
    
    
    
    23,791Intangible assets
    
    
    96,657
    
    
    
    14,167Deferred tax assets
    
    
    3,843
    
    
    
    563Current assets
    
    
    157,295
    
    
    
    23,055Current liabilities
    
    
    (90,386
    )
    
    
    (13,248
    )Non-current liabilities
    
    
    (88,800
    )
    
    
    (13,015
    )Deferred tax liabilities
    
    
    (19,125
    )
    
    
    (2,803
    )Goodwill
    
    
    134,735
    
    
    
    19,749356,532
    
    
    
    52,259Cash consideration (Note a)
    
    
    355,872
    
    
    
    52,162Cost of acquisition
    
    
    660
    
    
    
    97Total purchase consideration
    
    
    356,532
    
    
    
    52,259
   4. ACCOUNTS RECEIVABLE
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Beginning balance
    
    
    2,619
    
    
    
    2,267
    
    
    
    332Provision for doubtful debt
    
    
    
    
    
    
    3,723
    
    
    
    546Written-off
    
    
    (352
    )
    
    
    (1,807
    )
    
    
    (265
    )Ending balance
    
    
    2,267
    
    
    
    4,183
    
    
    
    613
  - F-20 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 5. INVENTORIES  NET
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Raw materials
    
    
    488,582
    
    
    
    277,553
    
    
    
    40,662Work-in-progress
    
    
    56,498
    
    
    
    129,500
    
    
    
    18,972Finished goods
    
    
    186,628
    
    
    
    376,920
    
    
    
    55,219731,708
    
    
    
    783,973
    
    
    
    114,853
  6. ADVANCE TO SUPPLIERS
  7. OTHER CURRENT ASSETS
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)VAT recoverable
    
    
    141,868
    
    
    
    37,686
    
    
    
    5,521Other receivables
    
    
    123,989
    
    
    
    13,115
    
    
    
    1,921Prepaid expenses
    
    
    215,892
    
    
    
    129,514
    
    
    
    18,974481,749
    
    
    
    180,315
    
    
    
    26,416
   - F-21 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 7. OTHER CURRENT ASSETS (CONTD)
     Determining Whether an Arrangement Contains a Lease Accounting for Leases
  - F-22 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 8. FIXED ASSETS  NET
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Buildings
    
    
    190,933
    
    
    
    232,344
    
    
    
    34,039Plant and machinery
    
    
    881,210
    
    
    
    1,489,108
    
    
    
    218,155Furniture, fixtures and office equipment
    
    
    23,769
    
    
    
    35,059
    
    
    
    5,136Computer software
    
    
    1,764
    
    
    
    2,202
    
    
    
    323Motor vehicles
    
    
    7,542
    
    
    
    8,203
    
    
    
    1,202Construction-in-progress
    
    
    485,877
    
    
    
    67,086
    
    
    
    9,8281,591,095
    
    
    
    1,834,002
    
    
    
    268,683Less: Accumulated depreciation
    
    
    (98,520
    )
    
    
    (247,719
    )
    
    
    (36,291
    )1,492,575
    
    
    
    1,586,283
    
    
    
    232,392
  9. INTANGIBLE ASSETS  NET
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Land use rightsCost
    
    
    219,253
    
    
    
    215,062
    
    
    
    31,507Less: Land use rights disposal
    
    
    (3,555
    )
    
    
    
    
    
    
    Less: Accumulated amortization
    
    
    (2,962
    )
    
    
    (6,499
    )
    
    
    (952
    )212,736
    
    
    
    208,563
    
    
    
    30,555
  (Note 12).
   - F-23 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 10. GOODWILL
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Beginning balance
    
    
    
    
    
    
    134,735
    
    
    
    19,739Goodwill acquired during the year
    
    
    134,735
    
    
    
    
    
    
    
    Ending balance
    
    
    134,735
    
    
    
    134,735
    
    
    
    19,739
 11. LONG-TERM DEFERRED EXPENSES
 As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Convertible bond issuance costs (Note 22)
    
    
    36,871
    
    
    
    31,375
    
    
    
    4,596Others
    
    
    573
    
    
    
    1,760
    
    
    
    25837,444
    
    
    
    33,135
    
    
    
    4,854
 12. BANK BORROWINGS
 As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Total bank borrowings
    
    
    1,298,832
    
    
    
    874,764
    
    
    
    128,153Comprised of:Short-term
    
    
    1,098,832
    
    
    
    404,764
    
    
    
    59,298Long-term, current portion
    
    
    30,000
    
    
    
    90,000
    
    
    
    13,1851,128,832
    
    
    
    494,764
    
    
    
    72,483Long-term, non-current portion
    
    
    170,000
    
    
    
    380,000
    
    
    
    55,6701,298,832
    
    
    
    874,764
    
    
    
    128,153
   - F-24 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 12. BANK BORROWINGS (CONTD)
   December 31, 2008
 Amount
    
    
    Secured/guaranteed by(RMB000)430,000
    
    
    Jointly guaranteed by (i) Solarfun Power Holdings Co., Ltd. and
(ii) the Groups factory premises and land-use rights with net
book value of RMB29,645,723 and RMB6,835,475, respectively (Note
9)160,832
    
    
    Guaranteed by Solarfun Power Holdings Co., Ltd.73,000
    
    
    Guaranteed by Yangguang Solar550,000
    
    
    Guaranteed by Linyang Solarfun30,000
    
    
    Jointly guaranteed by (i) Linyang Solarfun (ii) Letter of credit
provided by the Groups customer which amounted to RMB30,000,000
(US$4,397,215)55,000
    
    
    Guaranteed by letter of credit provided by the Groups customer
which amounted to RMB50,000000 (US$7,328,692)1,298,832
 December 31, 2009
 Amount
    
    
    Secured/guaranteed by(RMB000)200,000
    
    
    Jointly guaranteed by (i) Solarfun Power Holdings Co., Ltd. and
(ii) the Groups factory premises and land-use rights with net
book value of RMB28,138,995 (US$4,122,386) and RMB6,699,211
(US$981,440), respectively (Note 9)87,000
    
    
    Guaranteed by Yangguang Solar280,000
    
    
    Guaranteed by Linyang Solarfun300,000
    
    
    Guaranteed by Solarfun Power Holdings Co., Ltd.7,764
    
    
    Guaranteed by restricted cash of RMB7,478,800 (US$1,095,650)874,764
  - F-25 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 12. BANK BORROWINGS (CONTD)
  December 31,2009
    
    
    2009(RMB000)
    
    
    (US$000)Within 1 year
    
    
    90,000
    
    
    
    13,185Within 1-2 years
    
    
    80,000
    
    
    
    11,720Within 2-3 years
    
    
    300,000
    
    
    
    43,950470,000
    
    
    
    68,855
  13. ACCRUED EXPENSES AND OTHER LIABILITIES
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Consideration payable*
    
    
    55,605
    
    
    
    
    
    
    
    Accrued warranty costs (Note 14)
    
    
    48,635
    
    
    
    73,459
    
    
    
    10,762Accrued wages
    
    
    23,947
    
    
    
    33,699
    
    
    
    4,937Interest payable for convertible bonds
    
    
    19,246
    
    
    
    19,000
    
    
    
    2,784Income tax payable
    
    
    6,306
    
    
    
    7,149
    
    
    
    1,047Accrued professional service fees
    
    
    7,958
    
    
    
    6,928
    
    
    
    1,015Accrued land estate tax
    
    
    7,534
    
    
    
    733
    
    
    
    107VAT payable
    
    
    1,779
    
    
    
    1,193
    
    
    
    175Accrued interest expenses for bank borrowings
    
    
    1,339
    
    
    
    1,105
    
    
    
    162Accrued insurance expense
    
    
    
    
    
    
    6,201
    
    
    
    908Accrued freight expense
    
    
    187
    
    
    
    3,666
    
    
    
    537Accrued compensation expense
    
    
    
    
    
    
    4,801
    
    
    
    703Accrued import and export expense
    
    
    1,009
    
    
    
    3,163
    
    
    
    463Accrued processing cost
    
    
    
    
    
    
    1,234
    
    
    
    181Accrued sales commission
    
    
    
    
    
    
    7,644
    
    
    
    1,120Accrued utilities expenses
    
    
    2,627
    
    
    
    5,864
    
    
    
    859Other accrued expenses
    
    
    12,094
    
    
    
    14,257
    
    
    
    2,089Other liabilities
    
    
    762
    
    
    
    1,799
    
    
    
    264189,028
    
    
    
    191,895
    
    
    
    28,113
 *
    
    Consideration payable relates to the remaining balance of the purchase consideration for the
acquisition of the remaining 48% equity interest in Yangguang Solar in the year 2008, which was
fully paid in April 2009.  - F-26 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 14. ACCRUED WARRANTY COSTS
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Beginning balance
    
    
    20,957
    
    
    
    48,635
    
    
    
    7,125Warranty provision
    
    
    46,565
    
    
    
    33,728
    
    
    
    4,941Warranty claims paid
    
    
    (18,887
    )
    
    
    (8,904
    )
    
    
    (1,304
    )Ending balance
    
    
    48,635
    
    
    
    73,459
    
    
    
    10,762
 15. CUSTOMER DEPOSITS
  16. NOTES PAYABLE
  17. DERIVATIVE CONTRACTS
   Statement of operations
    
    Year endedlocation
    
    December 31, 2009(RMB000)
    
    
    (US$000)Foreign exchange derivative contracts 
(not designated as hedging instruments)
    
    Changes in fair value of derivative contracts
    
    
    9,594
    
    
    
    1,406
  - F-27 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 17. DERIVATIVE CONTRACTS (CONTD)
  Fair value as ofBalance sheet location
    
    December 31, 2009(RMB000)
    
    
    (US$000)Derivative assets:Foreign exchange derivative contracts
(not designated as hedging instruments)
    
    Current assets: Derivative contracts
    
    
    7,360
    
    
    
    1,078Derivative liabilities:Foreign exchange derivative contracts 
(not designated as hedging instruments)
    
    Current liabilities:  Derivative contracts
    
    
    1,148
    
    
    
    168
 18. ISSUANCE OF ORDINARY SHARES FROM ADDITIONAL EQUITY OFFERING
   19. STATUTORY RESERVES
   - F-28 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 19. STATUTORY RESERVES (CONTD)
   For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)General Reserve Fund
    
    
    21,524
    
    
    
    10,090
    
    
    
    21,926
    
    
    
    3,212Enterprise Expansion Fund
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Staff Welfare and Bonus Fund
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,524
    
    
    
    10,090
    
    
    
    21,926
    
    
    
    3,212
 20. SHARE OPTION PLANS
     - F-29 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 20. SHARE OPTION PLANS (CONTD)
  Weighted-Weighted-
    
    
    averageaverage
    
    
    remainingNumber of
    
    
    exercise
    
    
    contractual
    
    
    Aggregateoptions
    
    
    price
    
    
    life
    
    
    intrinsic value(US$)
    
    
    (Years)
    
    
    (US$)Outstanding, January 1, 2008
    
    
    8,105,500
    
    
    
    2.48
    
    
    
    8.92
    
    
    
    32,827,275Granted
    
    
    5,687,900
    
    
    
    2.12Exercised
    
    
    (915,600
    )
    
    
    1.86
    
    
    
    
    
    
    
    2,350,166Forfeited/Cancelled
    
    
    (1,493,000
    )
    
    
    2.44Outstanding, December 31, 2008
    
    
    11,384,800
    
    
    
    2.35
    
    
    
    8.22
    
    
    
    12,000Granted
    
    
    7,682,300
    
    
    
    1.17Exercised
    
    
    (175,020
    )
    
    
    0.95
    
    
    
    
    
    
    
    122,487Forfeited
    
    
    (2,907,165
    )
    
    
    2.55Outstanding, December 31, 2009
    
    
    15,984,915
    
    
    
    1.76
    
    
    
    7.41
    
    
    
    3,147,919Vested and expected to be
vested at December 31, 2009
    
    
    15,984,915
    
    
    
    1.76
    
    
    
    7.41
    
    
    
    3,147,919Exercisable at December 31, 2009
    
    
    5,485,116
    
    
    
    2.28
    
    
    
    7.20
    
    
    
    403,521
      - F-30 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 20. SHARE OPTION PLANS (CONTD)
   Weighted-Number of
    
    
    average grantRSUs
    
    
    date fair value(US$)Unvested, January 1, 2008
    
    
    39,996
    
    
    
    16.35Granted
    
    
    122,500
    
    
    
    20.06Vested
    
    
    (24,998
    )
    
    
    15.69Forfeited/Cancelled
    
    
    
    
    
    
    Unvested, December 31, 2008
    
    
    137,498
    
    
    
    19.78Granted
    
    
    52,500
    
    
    
    5.08Vested
    
    
    (143,748
    )
    
    
    16.28Forfeited
    
    
    
    
    
    
    Unvested, December 31, 2009
    
    
    46,250
    
    
    
    13.97
     - F-31 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 20. SHARE OPTION PLANS (CONTD)
  Granted in 2008
    
    
    Granted in 2009Risk-free interest rate
    
    
    2.12% - 4.03%
    
    
    
    1.14% - 3.81%Expected dividend yield
    
    
    0%
    
    
    
    0%Expected volatility
    
    
    75% - 80%
    
    
    
    80%Sub-optimal early exercise factor
    
    4 times
    
    
    4 timesFair value of options at grant date per share
    
    From US$0.69 to US$4.19
    
    
    From US$0.15 to US$1.08
   For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Cost of revenue
    
    
    3,200
    
    
    
    3,825
    
    
    
    5,808
    
    
    
    851Selling expenses
    
    
    905
    
    
    
    3,617
    
    
    
    2,252
    
    
    
    330General and administrative expenses
    
    
    24,489
    
    
    
    26,414
    
    
    
    33,252
    
    
    
    4,871Research and development expenses
    
    
    1,046
    
    
    
    969
    
    
    
    1,359
    
    
    
    19929,640
    
    
    
    34,825
    
    
    
    42,671
    
    
    
    6,251
  - F-32 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 21. REDEEMABLE ORDINARY SHARES
   22. CONVERTIBLE BONDS
        - F-33 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 22. CONVERTIBLE BONDS (CONTD)
  , Derivatives and Hedging: Contracts in Entitys Own
Equity
  23. GOVERNMENT GRANTS
  24. INCOME TAXES
 Current taxation
    - F-34 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 24. INCOME TAXES (CONTD)
 Current taxation (contd)
      For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Non-PRC
    
    
    (59,395
    )
    
    
    5,562
    
    
    
    (468,907
    )
    
    
    (68,695
    )PRC
    
    
    211,766
    
    
    
    (264,961
    )
    
    
    347,919
    
    
    
    50,970152,371
    
    
    
    (259,399
    )
    
    
    (120,988
    )
    
    
    (17,725
    )
  - F-35 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 24. INCOME TAXES (CONTD)
 Current taxation (contd)
  For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Current
    
    
    (8,158
    )
    
    
    (65,940
    )
    
    
    (40,375
    )
    
    
    (5,915
    )Deferred
    
    
    700
    
    
    
    59,421
    
    
    
    16,447
    
    
    
    2,410(7,458
    )
    
    
    (6,519
    )
    
    
    (23,928
    )
    
    
    (3,505
    )
  For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Income tax computed at the statutory
tax rate at 33% for 2007 and 25% for
2008 and 2009
    
    
    (50,282
    )
    
    
    64,850
    
    
    
    30,247
    
    
    
    4,431Non-deductible expenses
    
    
    (1,600
    )
    
    
    (2,804
    )
    
    
    (3,348
    )
    
    
    (490
    )Tax holidays
    
    
    51,708
    
    
    
    (32,533
    )
    
    
    28,123
    
    
    
    4,120Research & development expense
    
    
    
    
    
    
    1,104
    
    
    
    1,923
    
    
    
    282Preferential tax rate
    
    
    13,018
    
    
    
    
    
    
    
    
    
    
    
    Tax rate differences
    
    
    (19,601
    )
    
    
    (24,870
    )
    
    
    (53,941
    )
    
    
    (7,902
    )Deferred tax benefit including change in
tax rate
    
    
    355
    
    
    
    2,130
    
    
    
    10,111
    
    
    
    1,481Tax credit
    
    
    
    
    
    
    16,923
    
    
    
    
    
    
    
    Changes in the valuation allowance
    
    
    (1,056
    )
    
    
    (31,319
    )
    
    
    (37,043
    )
    
    
    (5,427
    )(7,458
    )
    
    
    (6,519
    )
    
    
    (23,928
    )
    
    
    (3,505
    )
  For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)Basic
    
    
    0.22
    
    
    
    (0.13
    )
    
    
    0.10
    
    
    
    0.02Diluted
    
    
    0.22
    
    
    
    (0.13
    )
    
    
    0.10
    
    
    
    0.02
  - F-36 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 24. INCOME TAXES (CONTD)
 Deferred taxation
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Deferred tax assets:Current:- Tax credit
    
    
    7,569
    
    
    
    7,569
    
    
    
    1,109- Warranty provision
    
    
    6,079
    
    
    
    11,019
    
    
    
    1,614- Inventory write-off
    
    
    63,890
    
    
    
    35,086
    
    
    
    5,140- Allowance for advances to supplier
    
    
    5,245
    
    
    
    63,170
    
    
    
    9,254- Allowance for doubtful accounts
    
    
    284
    
    
    
    627
    
    
    
    92- Idle capacity cost
    
    
    187
    
    
    
    3,277
    
    
    
    480- Other
    
    
    128
    
    
    
    6,797
    
    
    
    996Valuation allowance
    
    
    (25,390
    )
    
    
    (64,430
    )
    
    
    (9,439
    )Net current deferred tax assets
    
    
    57,992
    
    
    
    63,115
    
    
    
    9,246Non-current:- Pre-operating expenses
    
    
    1,047
    
    
    
    755
    
    
    
    111- Tax losses
    
    
    999
    
    
    
    3,592
    
    
    
    526- Fixed assets
    
    
    9,886
    
    
    
    13,533
    
    
    
    1,983- Long-term deferred expense
    
    
    258
    
    
    
    194
    
    
    
    28- Other
    
    
    35
    
    
    
    16
    
    
    
    2Valuation allowance
    
    
    (7,736
    )
    
    
    (4,301
    )
    
    
    (630
    )Net non-current deferred tax assets
    
    
    4,489
    
    
    
    13,789
    
    
    
    2,020Deferred tax liabilities:Current:- Other
    
    
    1,416
    
    
    
    
    
    
    
    Current deferred tax liabilities
    
    
    1,416
    
    
    
    
    
    
    
    Non-current:- Land use rights
    
    
    27,155
    
    
    
    26,566
    
    
    
    3,892Non-current deferred tax liabilities
    
    
    27,155
    
    
    
    26,566
    
    
    
    3,892
   - F-37 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 24. INCOME TAXES (CONTD)
   ASC 740-10 Implementation
  2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Beginning balance
    
    
    
    
    
    
    27,385
    
    
    
    4,012Incurred during the year
    
    
    27,385
    
    
    
    
    
    
    
    Ending balance
    
    
    27,385
    
    
    
    27,385
    
    
    
    4,012
   - F-38 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 25. RELATED PARTY TRANSACTIONS
 Name and Relationship with Related Parties
 Name of related party
    
    Relationship with the GroupLinyang Electronics Co., Ltd. (Linyang Electronics)
    
    Controlling owner is also a significant shareholder of the CompanyHuaerli (Nantong) Electronics Co., Ltd. (Huaerli Nantong)
    
    Controlling owner is also a significant shareholder of the CompanyQidong Huahong Electronics Co., Ltd. (Qidong Huahong)
    
    Controlling owner is also a significant shareholder of the CompanyNantong Huahong Ecological Gardening Co., Ltd. (Nantong Huahong)*
    
    Controlling owner is also a significant shareholder of the CompanyNantong Linyang Electric Power Investment Co., Ltd. (Nantong Linyang)
    
    Controlling owner is also a significant shareholder of the CompanyHong Kong Huaerli Trading Co., Ltd. (Hong Kong Huaerli)
    
    Controlling owner is also a significant shareholder of the CompanyShanghai Linyang Electronics Technology Co., Ltd. (Linyang Technology)
    
    Controlling owner is also a significant shareholder of the CompanyQidong Jiaotong Engineering Co., Ltd. (Jiaotong Engineering)
    
    Controlling owner is also a significant shareholder of the CompanyNantong Linyang Labor Service Company (Linyang Labor Service)
    
    Controlling owner is also a significant shareholder of the CompanyYa An Yongwang Silicon Co., Ltd. (Ya An)
    
    Controlling owner is also a significant shareholder of the CompanyQ-Cells International GmbH (Q-Cells)
    
    Controlling owner is also a significant shareholder of the CompanyJiangsu Qitian Group Co., Ltd. (Qitian Group)**
    
    Shareholder of a subsidiary of the Company
 *
    
    Prior name: Nantong Linyang Ecological Cultural Co., Ltd. (Linyang Ecological)**
    
    Subsequent to the acquisition of Yangguang Solars minority interests in year 2008, this
company no longer is a related party to the Group. 
  - F-39 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 
 25. RELATED PARTY TRANSACTIONS (CONTD)
 Significant Related Party Transactions
  For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Purchase of raw materials from:- Linyang Electronics
    
    
    24,355
    
    
    
    39,156
    
    
    
    33,124
    
    
    
    4,853- Ya An
    
    
    
    
    
    
    7,436
    
    
    
    9,600
    
    
    
    1,406- Nantong Huahong
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    - Jiaotong Engineering
    
    
    297
    
    
    
    
    
    
    
    
    
    
    
    Purchase of services from:- Linyang Electronics
    
    
    
    
    
    
    
    
    
    
    2,335
    
    
    
    342- Qidong Huahong
    
    
    
    
    
    
    
    
    
    
    2,800
    
    
    
    410- Nantong Huahong
    
    
    
    
    
    
    444
    
    
    
    642
    
    
    
    94- Linyang Labor Service
    
    
    
    
    
    
    1,803
    
    
    
    2,205
    
    
    
    323Purchase of fixed assets and land use rights from:- Linyang Electronics
    
    
    1,207
    
    
    
    2,374
    
    
    
    567
    
    
    
    83- Jiaotong Engineering
    
    
    681
    
    
    
    615
    
    
    
    
    
    
    
    - Nantong Huahong
    
    
    
    
    
    
    314
    
    
    
    
    
    
    
    Sales to:- Q-Cells
    
    
    
    
    
    
    
    
    
    
    336,485
    
    
    
    49,295Loans from:- Hong Kong Huaerli
    
    
    73,046
    
    
    
    64,668
    
    
    
    
    
    
    
    - Nantong Linyang
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    - Qitian Group
    
    
    4,253
    
    
    
    
    
    
    
    
    
    
    
    Loan interest:- Hong Kong Huaerli
    
    
    
    
    
    
    1,385
    
    
    
    
    
    
    
    - Nantong Linyang
    
    
    221
    
    
    
    137
    
    
    
    
    
    
    
    Expenses incurred in relation to guarantee provided by:- Linyang Electronics
    
    
    6,717
    
    
    
    10,064
    
    
    
    
    
    
    
    Factory leased from:- Linyang Electronics
    
    
    1,234
    
    
    
    6,084
    
    
    
    3,932
    
    
    
    576Purchase of Yangguang Solar from:- Nantong Linyang
    
    
    
    
    
    
    133,452
    
    
    
    
    
    
    
    Disposal of an associate to the related party:- Linyang Technology
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    Advance paid to the related party:- Linyang Labor Service
    
    
    
    
    
    
    309
    
    
    
    
    
    
    
    - Linyang Electronics
    
    
    6,326
    
    
    
    9,026
    
    
    
    6,043
    
    
    
    885- Nantong Huahong
    
    
    800
    
    
    
    
    
    
    
    
    
    
    
    
  - F-40 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 25. RELATED PARTY TRANSACTIONS (CONTD)
 Balances with Related Parties
  As of December 31,2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    RMB000)
    
    
    (US$000)Amount due from related parties:- Linyang Electronics
    
    
    19
    
    
    
    369
    
    
    
    54- Q-Cells
    
    
    
    
    
    
    12,022
    
    
    
    1,761- Linyang Labor Service
    
    
    
    
    
    
    67
    
    
    
    1019
    
    
    
    12,458
    
    
    
    1,825Amount due to related parties:- Linyang Electronics
    
    
    4,098
    
    
    
    15,879
    
    
    
    2,326- Nantong Linyang
    
    
    33,363
    
    
    
    
    
    
    
    - Nantong Huahong
    
    
    668
    
    
    
    421
    
    
    
    62- Jiaotong Engineering
    
    
    679
    
    
    
    
    
    
    
    - Others
    
    
    958
    
    
    
    465
    
    
    
    6839,766
    
    
    
    16,765
    
    
    
    2,456
   For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Weighted-average balance due from related parties:- Linyang Electronics
    
    
    
    
    
    
    5
    
    
    
    964
    
    
    
    141- Q-Cells
    
    
    
    
    
    
    
    
    
    
    14,927
    
    
    
    2,187- Linyang Labor Service
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    2
 For the year ended December 312007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Weighted-average balance due to related parties:- Linyang Electronics
    
    
    3,192
    
    
    
    6,107
    
    
    
    10,079
    
    
    
    1,477- Nantong Linyang
    
    
    2,844
    
    
    
    15,407
    
    
    
    6,673
    
    
    
    978- Nantong Huahong
    
    
    65
    
    
    
    305
    
    
    
    318
    
    
    
    47- Hong Kong Huaerli
    
    
    14,609
    
    
    
    14,609
    
    
    
    
    
    
    
    - Qidong Huahong
    
    
    4,850
    
    
    
    
    
    
    
    
    
    
    
    - Qitian Group
    
    
    1,244
    
    
    
    
    
    
    
    
    
    
    
    - Jiaotong Engineering
    
    
    207
    
    
    
    244
    
    
    
    160
    
    
    
    23- Others
    
    
    19
    
    
    
    130
    
    
    
    432
    
    
    
    63
   - F-41 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 26. EMPLOYEE DEFINED CONTRIBUTION PLAN
  27. COMMITMENTS AND CONTINGENCIES
 Acquisition of machineries
  Operating lease commitments
  As of December 31, 2009(RMB000)
    
    
    (US$000)Year 2010
    
    
    3,451
    
    
    
    506Year 2011
    
    
    2,008
    
    
    
    294Year 2012
    
    
    43
    
    
    
    6Year 2013
    
    
    
    
    
    
    Year 2014
    
    
    
    
    
    
    Total
    
    
    5,502
    
    
    
    806
   - F-42 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 27. COMMITMENTS AND CONTINGENCIES (CONTD)
 Purchase of raw materials
  As of December 31, 2009(RMB000)
    
    
    (US$000)Year 2010
    
    
    2,814,859
    
    
    
    412,379Year 2011
    
    
    623,303
    
    
    
    91,314Year 2012
    
    
    708,649
    
    
    
    103,818Year 2013
    
    
    793,864
    
    
    
    116,302Year 2014
    
    
    649,994
    
    
    
    95,225Year 2015 and thereafter
    
    
    1,592,063
    
    
    
    233,2387,182,732
    
    
    
    1,052,276
  Income Taxes
  28. SEGMENT REPORTING
  For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Germany
    
    
    1,195,788
    
    
    
    2,637,434
    
    
    
    2,668,477
    
    
    
    390,934Spain
    
    
    584,525
    
    
    
    1,246,305
    
    
    
    37,326
    
    
    
    5,468The PRC
    
    
    200,615
    
    
    
    329,153
    
    
    
    177,478
    
    
    
    26,001Italy
    
    
    92,900
    
    
    
    119,272
    
    
    
    4,446
    
    
    
    651The Czech Republic
    
    
    
    
    
    
    
    
    
    
    245,814
    
    
    
    36,012Others
    
    
    321,307
    
    
    
    616,904
    
    
    
    644,775
    
    
    
    94,461Total net revenue
    
    
    2,395,135
    
    
    
    4,949,068
    
    
    
    3,778,316
    
    
    
    553,527
  - F-43 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 28. SEGMENT REPORTING (CONTD)
  29. MAJOR CUSTOMERS
  For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Customer A
    
    
    *
    
    
    
    1,099,736
    
    
    
    1,562,883
    
    
    
    228,964Customer B
    
    
    300,742
    
    
    
    *
    
    
    
    *
    
    
    
    *
 *
    
    Less than 10% 30. INCOME (LOSS) PER SHARE
  For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Numerator:Income (loss) attributable to ordinary shareholders
    
    
    148,036
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    (21,276
    )Denominator:Number of shares outstanding, opening
    
    
    239,994,754
    
    
    
    240,599,244
    
    
    
    268,745,299
    
    
    
    268,745,299Weighted-average number of shares issued during the year
    
    
    
    
    
    
    11,293,944
    
    
    
    4,826,493
    
    
    
    4,826,493Conversion of convertible bonds
    
    
    
    
    
    
    
    
    
    
    4,630
    
    
    
    4,630New ordinary shares issued in connection with exercise
of options and vesting of RSUs
    
    
    59,932
    
    
    
    766,426
    
    
    
    491,338
    
    
    
    491,338Weighted-average number of shares outstanding  basic
    
    
    240,054,686
    
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    274,067,760Weighted-average number of shares outstanding  diluted
    
    
    240,054,686
    
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    274,067,760Basic net income (loss) per share
    
    RMB
    0.62
    
    
    RMB
    (1.11
    )
    
    RMB
    (0.53
    )
    
    USD
    (0.08
    )Diluted net income (loss) per share
    
    RMB
    0.62
    
    
    RMB
    (1.11
    )
    
    RMB
    (0.53
    )
    
    USD
    (0.08
    )
    - F-44 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 31. FAIR VALUE MEASUREMENT
 Fair Value Measurements
  Level 1 
    Observable inputs that reflect quoted prices (unadjusted) for identical assets or
liabilities in active marketsLevel 2 
    Include other inputs that are directly or indirectly observable in the marketplaceLevel 3 
    Unobservable inputs which are supported by little or no market activity
    Fair value measurement at December 31, 2009 UsingQuoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    unobservableAssets
    
    
    Inputs
    
    
    Inputs
    
    
    Total Fair Value at(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    December 31, 2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Cash and cash equivalents- Time deposit
    
    
    675,720
    
    
    
    
    
    
    
    
    
    
    
    675,720
    
    
    
    94,599Foreign currency derivative- Financial assets
    
    
    
    
    
    
    7,360
    
    
    
    
    
    
    
    7,360
    
    
    
    1,078- Financial liabilities
    
    
    
    
    
    
    1,148
    
    
    
    
    
    
    
    1,148
    
    
    
    168Conversion option of
convertible Bonds
    
    
    
    
    
    
    
    
    
    
    309,189
    
    
    
    309,189
    
    
    
    45,296
  - F-45 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 31. FAIR VALUE MEASUREMENT (CONTD)
  Conversion option of convertiblebonds(RMB000)
    
    
    (US$000)Balance as of January 1, 2009
    
    
    235,311
    
    
    
    34,472Conversion of convertible bonds
    
    
    (9
    )
    
    
    (1
    )Realized or unrealized loss
    
    
    73,887
    
    
    
    10,825Balance as of December 31, 2009
    
    
    309,189
    
    
    
    45,296The amount of total loss for the period
included in statements of operations
    
    
    73,887
    
    
    
    10,825
  32. SUBSEQUENT EVENTS
   - F-46 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 33. ADDITIONAL FINANCIAL INFORMATION OF THE COMPANY
  Balance Sheets
 As of December 31,Note
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)ASSETSCurrent assets:Cash and cash equivalents
    
    
    
    
    10,133
    
    
    
    5,593
    
    
    
    819Other receivables
    
    
    
    
    1,773
    
    
    
    3,187
    
    
    
    467Deferred expenses
    
    
    
    
    1,863
    
    
    
    106
    
    
    
    15Amount due from subsidiaries
    
    b
    
    
    2,594,889
    
    
    
    2,728,948
    
    
    
    399,794Financial assets
    
    
    
    
    33,787
    
    
    
    5,878
    
    
    
    861Total current assets
    
    
    
    
    2,642,445
    
    
    
    2,743,712
    
    
    
    401,956Non-current assets:Long-term deferred expenses
    
    c
    
    
    36,871
    
    
    
    31,375
    
    
    
    4,596Investment in subsidiaries
    
    a
    
    
    659,087
    
    
    
    723,257
    
    
    
    105,958Total non-current assets
    
    
    
    
    695,958
    
    
    
    754,632
    
    
    
    110,554Total assets
    
    
    
    
    3,338,403
    
    
    
    3,498,344
    
    
    
    512,510LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Other payables
    
    d
    
    
    19,805
    
    
    
    21,468
    
    
    
    3,146Amount due to subsidiaries
    
    b
    
    
    20,715
    
    
    
    6,538
    
    
    
    958Total current liabilities
    
    
    
    
    40,520
    
    
    
    28,006
    
    
    
    4,104Non-current liabilities:Convertible bonds
    
    
    
    
    1,178,969
    
    
    
    658,653
    
    
    
    96,493Total non-current liabilities
    
    
    
    
    1,178,969
    
    
    
    658,653
    
    
    
    96,493Total liabilities
    
    
    
    
    1,219,489
    
    
    
    686,659
    
    
    
    100,597
  - F-47 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 33. ADDITIONAL FINANCIAL INFORMATION OF THE COMPANY (CONTD)
 As of December 31,Note
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Redeemable ordinary shares(par value US$0.0001 per share; 45,098,055
shares issued and outstanding at December 31, 2008 and December 31,
2009)
    
    
    
    
    32
    
    
    
    32
    
    
    
    5Shareholders equityOrdinary shares (par value US$0.0001 per share; 500,000,000 and
500,000,000 shares authorized; 269,060,209 shares and 290,708,739 shares issued and outstanding at December 31, 2008 and 2009,
respectively)
    
    
    
    
    214
    
    
    
    227
    
    
    
    33Additional paid-in capital
    
    
    
    
    2,138,624
    
    
    
    2,331,797
    
    
    
    341,610(Accumulated deficit) retained earnings
    
    
    
    
    (19,956
    )
    
    
    479,629
    
    
    
    70,266Total shareholders equity
    
    
    
    
    2,118,882
    
    
    
    2,811,653
    
    
    
    411,909Total liabilities, mezzanine equity and shareholders equity
    
    
    
    
    3,338,403
    
    
    
    3,498,344
    
    
    
    512,510
 Statements of Operations
 For the year ended December 31,Note
    
    2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Net revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating expenses
    
    
    
    
    (11,842
    )
    
    
    (11,548
    )
    
    
    (22,969
    )
    
    
    (3,365
    )Operating loss
    
    
    
    
    (11,842
    )
    
    
    (11,548
    )
    
    
    (22,969
    )
    
    
    (3,365
    )Share of profit (loss) from subsidiaries
    
    
    
    
    215,826
    
    
    
    (232,412
    )
    
    
    21,254
    
    
    
    3,114Interest income
    
    
    
    
    13,757
    
    
    
    23
    
    
    
    4
    
    
    
    1Interest expense
    
    
    
    
    
    
    
    
    (43,397
    )
    
    
    (98,066
    )
    
    
    (14,367
    )Change in fair value of derivative contracts
    
    
    
    
    
    
    
    
    71,673
    
    
    
    30,506
    
    
    
    4,469Changes in fair value of conversion feature
of convertible bonds
    
    
    
    
    
    
    
    
    
    
    
    
    (73,887
    )
    
    
    (10,824
    )Exchange losses
    
    
    
    
    (69,704
    )
    
    
    (64,830
    )
    
    
    (2,069
    )
    
    
    (304
    )Income (loss) before tax
    
    
    
    
    148,037
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    (21,276
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    
    
    148,037
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    (21,276
    )Net income (loss) attributable to Solarfun
Power Holdings Co., Ltd. shareholders
    
    
    
    
    148,037
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    (21,276
    )
  - F-48 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 33. ADDITIONAL FINANCIAL INFORMATION OF THE COMPANY (CONTD)
 Statements of Cash Flows
 For the year ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2009(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Net cash used in operating activities
    
    
    (9,787
    )
    
    
    (19,326
    )
    
    
    (6,401
    )
    
    
    (938
    )Net cash used in investing activities
    
    
    (1,070,996
    )
    
    
    (1,642,640
    )
    
    
    (134,059
    )
    
    
    (19,640
    )Net cash provided by financing activities
    
    
    6,690
    
    
    
    1,665,486
    
    
    
    135,920
    
    
    
    19,912Net (decrease) increase in cash and cash equivalents
    
    
    (1,074,093
    )
    
    
    3,520
    
    
    
    (4,540
    )
    
    
    (666
    )Cash and cash equivalents at the beginning of year
    
    
    1,080,706
    
    
    
    6,613
    
    
    
    10,133
    
    
    
    1,485Cash and cash equivalents at the end of year
    
    
    6,613
    
    
    
    10,133
    
    
    
    5,593
    
    
    
    819
 Notes to the Financial Statements of the Company
   Investments-Equity Method and Joint Ventures
       - F-49 -




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##### Table of Contents



SOLARFUN POWER HOLDINGS CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 33. ADDITIONAL FINANCIAL INFORMATION OF THE COMPANY (CONTD)
 Notes to the Financial Statements of the Company (contd)
           - F-50 -