##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, DC 20549
 Form 20-F
  o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
    12(g)  OF THE SECURITIES EXCHANGE ACT OF 1934ORþ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended:
    December 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          toORo

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934   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)   666 Linyang Road, Qidong, Jiangsu Province 226200,
    Peoples Republic of China
 (Address of Principal Executive
    Offices)
  Securities registered or to be registered pursuant to
    Section 12(b) of the Act:
  Title of Each Class

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
  Number of outstanding shares of each of the issuers
    classes of capital or common stock as of December 31,
    2007:
  241,954,744
    Ordinary Shares, par value US$0.0001 per share
     o þ
  o þ
  þ o
  Rule 12b-2
 o þ o
  o þ
  Rule 12b-2 o þ




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##### 





Table of
    Contents
   
 ITEM 1.


IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISORS


2ITEM 2.


OFFER STATISTICS AND EXPECTED TIMETABLE


2ITEM 3.


KEY INFORMATION


2ITEM 4.


INFORMATION ON THE COMPANY


28ITEM 4A.


UNRESOLVED STAFF COMMENTS


43ITEM 5.


OPERATING AND FINANCIAL REVIEW AND PROSPECTS


43ITEM 6.


DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


66ITEM 7.


MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS


79ITEM 8.


FINANCIAL INFORMATION


83ITEM 9.


THE OFFER AND LISTING


84ITEM 10.


ADDITIONAL INFORMATION


85ITEM 11.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


90ITEM 12.


DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES


91ITEM 13.


DEFAULTS, DIVIDEND ARREARAGES AND
    DELINQUENCIES


91ITEM 14.


MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
    HOLDERS AND USE OF PROCEEDS


91ITEM 15.


CONTROLS AND PROCEDURES


92ITEM 16A.


AUDIT COMMITTEE FINANCIAL EXPERT


95ITEM 16B.


CODE OF ETHICS


95ITEM 16C.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


95ITEM 16D.


EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
    COMMITTEES


95ITEM 16E.


PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
    AFFILIATED PURCHASERS


95ITEM 17.


FINANCIAL STATEMENTS


95ITEM 18.


FINANCIAL STATEMENTS


95ITEM 19.


EXHIBITS


96EX-4.39 SECOND AND RESTATED SUPPLY AGREEMENTEX-4.41 CONTRACTEX-4.42 STATE-OWNED LAND USE RIGHT GRANT CONTRACTEX-8.1 SUBSIDIARIES OF SOLARFUN POWER HOLDINGS CO., LTD.EX-12.1 CEO CERTIFCATIONEX-12.2 CFO CERTIFICATIONEX-13.1 CEO AND CFO CERTIFICATION




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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 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$0.0001 per share; and
    US$ and U.S. dollars are to
    the legal currency of the United States.  Form 20-F
    Form 20-F
   1




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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  Form 20-F. Form 20-F.
  Period fromAugust 27, 2004(Inception) toDecember 31,


Year Ended December 31,2004


2005


2006


2007(RMB)


(RMB)


(RMB)


(RMB)


(US$)(In thousands, except share and per share data)Consolidated Statement of Income DataNet revenuesPhotovoltaic modules






165,636



604,317



2,209,514



302,897Raw materials














127,726



17,510Photovoltaic cells






542



7,182



52,019



7,131Photovoltaic modules processing














5,876



806Photovoltaic cells processing










19,408







Total net revenues






166,178



630,907



2,395,135



328,344Cost of revenuesPhotovoltaic modules






(139,481
)


(434,493
)


(1,835,886
)


(251,677
)Raw materials














(110,123
)


(15,097
)Photovoltaic cells






(422
)


(5,983
)


(49,332
)


(6,763
)Photovoltaic modules processing














(2,014
)


(276
)Photovoltaic cells processing










(6,054
)






Total cost of revenues






(139,903
)


(446,530
)


(1,997,355
)


(273,813
)   2




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Period fromAugust 27, 2004(Inception) toDecember 31,


Year Ended December 31,2004


2005


2006


2007(RMB)


(RMB)


(RMB)


(RMB)


(US$)(In thousands, except share and per share data)Gross profit






26,275



184,377



397,780



54,531Operating expensesSelling expenses






(5,258
)


(11,883
)


(62,777
)


(8,606
)General and administrative expenses


(629
)


(4,112
)


(52,214
)


(113,756
)


(15,595
)Research and development expenses






(750
)


(6,523
)


(27,440
)


(3,761
)Total operating expenses


(629
)


(10,120
)


(70,620
)


(203,973
)


(27,962
)Operating (loss) profit


(629
)


16,155



113,757



193,807



26,569Interest expenses






(123
)


(8,402
)


(25,978
)


(3,561
)Interest income


22



95



1,326



16,244



2,227Exchange losses






(1,768
)


(4,346
)


(25,628
)


(3,513
)Other income






215



902



1,507



206Other expenses






(260
)


(836
)


(9,670
)


(1,326
)Changes in fair value of embedded foreign currency derivative










(163
)






Government grant










852



2,089



286(Loss) income before income taxes and minority interest


(607
)


14,314



103,090



152,371



20,888Income tax benefit (expense)






96



3,132



(7,458
)


(1,022
)Minority interest










(301
)


3,124



428Net (loss) income


(607
)


14,410



105,921



148,037



20,294Net (loss) income attributable to ordinary shareholders


(607
)


14,410



98,695



148,037



20,294Net (loss) income per share Basic


(0.01
)


0.26



0.95



0.62



0.08 Diluted


(0.01
)


0.22



0.74



0.62



0.08Number of shares used in computation of net income per share Basic


51,994,399



54,511,540



103,631,832



240,054,686



240,054,686 Diluted


51,994,399



66,366,469



142,108,460



240,054,686



240,054,686Net (loss) income per ADS Basic


(0.05
)


1.32



4.76



3.08



0.42 Diluted


(0.05
)


1.09



3.72



3.08



0.42Number of ADS used in computation of net income per ADS Basic


10,398,880



10,902,308



20,726,366



48,010,937



48,010,937 Diluted


10,398,880



13,273,294



28,421,692



48,010,937



48,010,937   3




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Period fromAugust 27, 2004(Inception) toDecember 31,


Year Ended December 31,2004


2005


2006


2007(RMB)


(RMB)


(RMB)


(RMB)


(US$)(In thousands, except margin and other operating data)Other Financial DataGross margin






15.8
%


29.2
%


16.6
%Operating margin






9.7
%


18.0
%


8.1
%Net margin






8.7
%


16.8
%


6.2
%Net cash used in operating activities


(8,180
)


(76,582
)


(523,061
)


(1,019,148
)


(139,713
)Other Operating DataAmount of PV cells produced (including PV cell processing)(in MW)






1.0
(1)


26.2
(2)


99.6
(3)Amount of PV modules produced (in MW):






5.5



19.6



87.2Average selling price (in RMB/W):PV
    cells(4)






25.80



27.03



21.12PV modules






32.34



31.75



28.20     Notes:
  (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)
    
    All sales contracts for PV cells are denominated in Renminbi. 4




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As of December 31,2004


2005


2006


2007(RMB)


(RMB)


(RMB)


(RMB)


(US$)(In thousands)Consolidated Balance Sheet DataCash and cash equivalents


3,525



7,054



1,137,792



272,928



37,415Restricted cash






22,229



33,822



42,253



5,792Accounts receivable (net of allowance for doubtful accounts of
    RMB Nil, RMB Nil, RMB11,323,000 and RMB2,619,000 (US$359,000) as
    of December 31, 2004, 2005, 2006 and 2007, respectively)










147,834



430,692



59,043Inventories-net


4,511



76,819



372,504



728,480



99,866Advance to suppliers


4,850



61,312



238,178



640,118



87,752Other current assets


762



20,705



75,525



214,478



29,402Amount due from related parties


18,000







153



920



126Fixed
    assets-net


292



55,146



207,449



702,884



96,357Intangible
    assets-net










12,897



94,282



12,925Total assets


31,940



243,361



2,230,432



3,349,513



459,177Short-term bank borrowings






20,000



379,900



965,002



132,290Long-term bank borrowings, current portion










16,000



15,000



2,056Accounts payable


2,221



18,794



51,452



141,709



19,426Notes payable






20,000



14,020







Accrued expenses and other liabilities


301



22,920



33,619



135,395



18,562Customer deposits






55,319



17



27,628



3,788Amount due to related parties


25



32,658



24,486



92,739



12,713Total current liabilities


2,547



169,691



527,066



1,377,473



188,835Long-term bank borrowings










15,000







Minority interests










10,151



100,420



13,766Total shareholders equity


29,393



73,670



1,678,215



1,862,582



255,337Total liabilities and shareholders equity


31,940



243,361



2,230,432



3,349,513



459,177   Exchange
    Rate Information
  Form 20-F Form 20-F
 5




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Renminbi per U.S. Dollar Noon Buying RatePeriod End


Average(1)


Low


High2003


8.2767



8.2771



8.2765



8.28002004


8.2765



8.2768



8.2764



8.27742005


8.0702



8.1826



8.0702



8.27652006


7.8041



7.9723



7.8041



8.07022007


7.2946



7.6072



7.2946



7.81272008January


7.1818



7.2405



7.1818



7.2946February


7.1115



7.1644



7.1100



7.1973March


7.0120



7.0722



7.0105



7.1110April


6.9870



6.9997



6.9840



7.0185May


6.9400



6.9725



6.9377



7.0000June (through June 26, 2008)


6.8630



6.9034



6.8630



6.9633     Notes:
  (1)
    
    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
  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.
   6




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Our
    future success substantially depends on our ability to further
    expand both our manufacturing capacity and output, which is
    subject to significant risks and uncertainties. If we fail to
    achieve this further expansion, we may be unable to grow our
    business and revenue, reduce our costs per watt, maintain our
    competitive position or improve our profitability.
    
    the need for additional funding to purchase and prepay for raw
    materials or to build manufacturing facilities, which we may be
    unable to obtain on reasonable terms or at all;
    delays and cost overruns as a result of a number of factors,
    many of which may be beyond our control, such as increases in
    raw materials prices and problems with equipment vendors;
    the inability to obtain or delays in obtaining required
    approvals by relevant government authorities;
    diversion of significant management attention and other
    resources; and
    failure to execute our expansion plan effectively.      We
    acquired an early stage ingot plant. We may not be successful in
    operating this new plant and expenditures required to ramp up
    its capacity may strain our capital resources. Furthermore, any
    shortfall in supply of polysilicon to that plant may have a
    material adverse effect on our results of operations and our
    future business prospects.
     7




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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.     8




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We are
    currently experiencing an industry-wide shortage of silicon
    wafers. The prices that we pay for silicon wafers have increased
    in the past and we expect prices may continue to increase in the
    future, which may materially and adversely affect our revenue
    growth and decrease our gross profit margins and
    profitability.
       9




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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.
   10




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Our
    ability to adjust our materials costs may be limited as a result
    of entering into prepaid, fixed-price arrangements with our
    suppliers, and it therefore may be difficult for us to respond
    appropriately in a timely manner to market conditions, which
    could materially and adversely affect our revenue
    and profitability.
    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.   11




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We
    face risks associated with the marketing, distribution and sale
    of our PV products internationally, and if we are unable to
    effectively manage these risks, they could impair our ability to
    expand our business abroad.
    
    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.    If we
    are unable to compete in the highly competitive PV market, our
    revenue and profits may decrease.
    
    manufacturing capacity;
    power efficiency;
    range and quality of products;
    price;
    strength of supply chain and distribution network;
    after-sales inquiry; and
    brand image.   12




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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.
        Our
    future success depends in part 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.
   13




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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.
  10-year 25-year
     14




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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.
    
    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.
     15




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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.
      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.
   16




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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.
    We
    depend on our key personnel, and our business and growth may be
    severely disrupted if we lose their services.
   17




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Our
    recent changes in chief executive officer and chief financial
    officer and resignation of our principal accounting officer may
    have an adverse effect on the overall operations of our company
    and the functioning of our financial controls and
    reporting.
      Any
    failure to achieve and maintain effective internal controls
    could have a material adverse effect on our business, results of
    operations and the market price of our ADSs.
     18




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We
    have limited insurance coverage and we are subject to the risk
    of damage due to fires or explosions because some materials we
    use in our manufacturing processes are highly
    flammable.
      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.
     19




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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.
        Under
    the EIT Law, 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.
     20




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Fluctuations
    in exchange rates could adversely affect our business as well as
    result in foreign currency exchange losses.
         21




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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.
    If we
    grant employee share options and other share-based compensation
    in the future, our net income could be adversely
    affected.
    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. 22




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Uncertainties
    with respect to the PRC legal system could have a material
    adverse effect on us.
    We
    rely principally on dividends and other distributions on equity
    paid by our operating subsidiary to fund cash and financing
    requirements, and 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.
   23




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Restrictions
    on currency exchange may limit our ability to receive and use
    our revenue effectively.
      Recent
    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.
   24




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##### Table of Contents



We
    face risks related to health epidemics and other
    outbreaks.
    Risks
    Related to Our Ordinary Shares and ADSs
  The
    market price for our ADSs may be volatile.
      
    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.   25




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##### Table of Contents



Substantial
    future sales or perceived sales of our ADSs or ordinary shares
    in the public market could cause the price of our ADSs to
    decline.
  lock-up
  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.
    Holders
    of ADSs have fewer rights than shareholders and must act through
    the depositary to exercise those rights.
   26




---



##### Table of Contents



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.
      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.
      
    to recognize or enforce against us judgments of courts of the
    United States based on certain civil liability provisions of
    U.S. securities laws; and
    to impose liabilities against us, in original actions brought in
    the Cayman Islands, based on certain civil liability provisions
    of U.S. securities laws that are penal in nature. 27




---



##### Table of Contents



ITEM 4.
    INFORMATION
    ON THE COMPANY  A.  History
    and Development of the Company
    (86-513) 8330-7688 (86-513) 8311-0367.
  www.solarfun.com.cn. The
    information contained on our website does not constitute a part
    of this annual report.
  B.
    Business
    Overview  Overview
   28




---



##### Table of Contents



Acquisition
    of Yangguang Solar
          Our
    Products and Services
   29




---



##### Table of Contents



Year Ended December 31,2005


2006


2007Net


% of Net


Net


% of Net


Net


% of NetProducts and Services

Revenue


Revenue


Revenue


Revenue


Revenue


Revenue(RMB)





(RMB)





(RMB)(In thousands, except percentages)Photovoltaic cells


542



0.3
%


7,182



1.1
%


52,019



2.2
%Photovoltaic modules


165,636



99.7
%


604,317



95.8
%


2,209,514



92.3
%Photovoltaic modules processing


















5,876



0.2
%Photovoltaic cells processing










19,408



3.1
%






Raw materials


















127,726



5.3
%   Our
    Products
  PV
    Cells
    Dimensions


Conversion


Thickness


MaximumPV Cell Type

(mm×mm)


Efficiency (%)


(EM)


Power (W)Monocrystalline silicon cell


125 × 125



15.0 - 17.2
%


200 - 220



2.23 - 2.56156 × 156



15.0 - 16.8
%


200 - 220



3.60 - 4.03Multicrystalline silicon cell


125 × 125



14.5 - 16.0
%


200 - 220



2.19 - 2.50156 × 156



14.5 - 15.8
%


200 - 220



3.41 - 3.85       PV
    Modules
      Dimensions


WeightPV Module Manufactured with:

(mm)


(Kg)


Power (W)Monocrystalline silicon


1580 × 808 × 45



15



160 - 1851494 × 1000 ×45



18



190 - 210Multicrystalline silicon


1580 × 808 × 45



15



155 - 1801494 × 1000 ×45



18



185 - 205  30




---



##### Table of Contents



Ingots
    Raw
    Materials
    Our
    Services
        Raw
    Materials Supply Management
     31




---



##### Table of Contents



Silicon-based
    Raw Materials
  5-inch 6-inch 8-inch
  E-mei E-mei
    E-mei, E-meis E-mei
     32




---



##### Table of Contents



Other
    Raw Materials
    Production
   33




---



##### Table of Contents



Production
    Process
    
    
 34




---



##### Table of Contents



Quality
    Control and Certifications
      Capacity
    Expansion and Technology Upgrade Plans
      As of December 31,2007

2008PV cell production lines completed or under construction


8



12Annual PV cell production capacity including lines under
    construction
    (in MW)(1)(2)


240



360
(3)  35




---



##### Table of Contents



Notes:
  (1)
    
    Maximum manufacturing capacity assuming 24 hours of
    operation per day for 350 days per year.(2)
    
    Excludes capacity of Sichuan Jiayang.(3)
    
    We expect our manufacturing capacity to reach 360 MW by
    July 2008.      Sales and
    Distribution
      Year Ended December 31,2005


2006


2007Net


% of Net


Net


% of Net


Net


% of NetRevenue


Revenue


Revenue


Revenue


Revenue


Revenue(RMB)





(RMB)





(RMB)(In thousands, except percentages)Solar Projekt Energysystem GmbH


13,140



7.9
%


70,409



11.2
%


300,742



12.6
%S.E. Project S.R.L










203,133



32.2
%


*



*Social Capital S.L










175,939



27.9
%


*



*Suntaics


84,438



50.8
%


54,856



8.7
%


*



*     *
    
    Less than 10%   36




---



##### Table of Contents



Year Ended December 31,2005


2006


2007Net


% of Net


Net


% of Net


Net


% of NetRegion

Revenue


Revenue


Revenue


Revenue


Revenue


Revenue(RMB)





(RMB)





(RMB)(In thousands, except percentages)Germany


126,555



76.2
%


197,728



31.4
%


1,195,788



49.9
%Spain










179,139



28.4
%


584,525



24.4
%PRC


33,667



20.2
%


36,219



5.7
%


200,615



8.4
%Italy


5,946



3.6
%


204,715



32.4
%


92,900



3.9
%Others


10







13,106



2.1
%


321,307



13.4
%Total


166,178



100.0
%


630,907



100.0
%


2,395,135



100.0
%     Warranty
  10-year 25-year
  Intellectual
    Property and Proprietary Rights
         37




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##### Table of Contents



Competition
          Environmental
    Matters
    Insurance
   38




---



##### Table of Contents



Regulation
    Renewable
    Energy Law and Other Government Directives
          Environmental
    Regulations
    Restriction
    on Foreign Businesses
    Tax
   39




---



##### Table of Contents



Foreign
    Currency Exchange
    
    Foreign Exchange Administration Rules (1996), as
    amended; and
    Regulations of Settlement, Sale and Payment of Foreign Exchange
    (1996).   40




---



##### Table of Contents



and/or
  Dividend
    Distribution
    
    Wholly Foreign-Owned Enterprise Law (1986), as amended; and
    Wholly Foreign-Owned Enterprise Law Implementation Rules (1990),
    as amended.   41




---



##### Table of Contents



C.
    Organizational
    Structure    
   (1)
    
    The other shareholders of Shanghai Linyang are three
    individuals: Mr. Yongliang Gu, Mr. Rongqiang Cui, and
    Mr. Cuis spouse. Mr. Gu and Mr. Cui are our
    shareholders.(2)
    
    The other shareholders of Sichuan Jiayang are Sichuan
    Jianengjia, which holds a 30% equity interest, and a member of
    Sichuan Jiayangs management team, Mr. Wei Gu, who
    holds a 15% equity interest on behalf of Mr. Yonghua Lu,
    our chairman and chief executive officer, pursuant to an
    entrustment agreement entered into in November 2006. Under this
    entrustment agreement, Mr. Lu provided RMB3.0 million
    (US$0.4 million) to Mr. Gu to acquire the 15% equity
    interest in Sichuan Jiayang. Under the entrustment agreement,
    all the rights enjoyed by Mr. Gu as the holder of record of
    the 15% equity interest in Sichuan Jiayang, including economic
    rights, belong to Mr. Lu. Mr. Gu may only exercise
    rights relating to this equity interest in Sichuan Jiayang, such
    as voting and transfer rights, pursuant to written instructions
    from Mr. Lu. Mr. Lu also has the right to transfer all
    or a portion of the 15% equity interest to the management of
    Sichuan Jiayang or other third parties. This entrustment
    arrangement was originally contemplated at the time of
    establishment of Sichuan Jiayang, but was not formalized in
    writing until November 2006, and was meant to serve as a
    transitional step in advance of potentially fully transferring
    these equity interests to Mr. Gu and other members of
    Sichuan Jiayangs management team as performance
    incentives. We are currently in the process of liquidating
    Sichuan Jiayang. 42




---



##### Table of Contents



(3)
    
    Jiangsu Linyang Solarfun Engineering Research and Development
    Center Co., Ltd. is formerly named Nantong Linyang Solarfun
    Engineering Research and Development Center Co., Ltd. It changed
    its name on April 9, 2007.(4)
    
    The other shareholders of Yangguang Solar are Jiangsu Qitian
    Group Co., Ltd. (Suyuan Group was renamed as Jiangsu Qitian
    Group Co., Ltd. on July 27, 2007), which holds a 20% equity
    interest, Nantong Linyang, which holds an 18% equity interest,
    and Jiangsu Guanyi Technology Co., Ltd., which holds a 10%
    equity interest. On June 23, 2008, we entered into an
    agreement to acquire the remaining 48% equity interest in
    Yangguang Solar from Nantong Linyang (as to 18%), Qitian Group
    (as to 20%), and Jiangsu Guangyi (as to 10%) for an aggregate
    consideration of approximately RMB355 million
    (US$48.7 million). Upon the completion of the latest
    acquisition, Yangguang Solar will become our 100% owned
    subsidiary.  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
     43




---



##### Table of Contents



Limited
    Operating History
    Key
    Factors Affecting Our Financial Performance
    
    availability and price of silicon wafers;
    average selling price of our PV products;
    manufacturing capacity;
    process technologies; and
    industry demand. 44




---



##### Table of Contents



Availability
    and Price of Silicon and Silicon Wafers
        
    a supply agreement entered into in July 2007 with a non-PRC
    supplier which has agreed to deliver to us 178 MW of ingots
    and wafers during the period from July 2007 to June 2014;
    a supply agreement entered into with LDK, a wafer manufacturer
    located in Jiangxi Province, China, under which LDK will provide
    37 MW of silicon wafers from July 2007 to June 2008.
    Furthermore, in October 2007, we entered into a supply agreement
    with LDK under which LDK has agreed to deliver to us
    multicrystalline silicon wafers with a value of approximately
    RMB2 billion during the period from early 2008 to
    2010; and
    a supply agreement with Hoku, under which Hoku agreed to deliver
    to us polysilicon with a value of approximately
    US$384 million beginning no later than 2009 and continuing
    over an ten-year period.  E-mei, E-meis E-mei
 45




---



##### Table of Contents



Average
    Selling Price of Our PV Products
         46




---



##### Table of Contents



Manufacturing
    Capacity
        Process
    Technologies
      Industry
    Demand
    Net
    Revenue
   47




---



##### Table of Contents



Year Ended December 31,2005


2006


2007% of Net





% of Net





% of NetAmount


Revenue


Amount


Revenue


Amount


Revenue(RMB)





(RMB)





(RMB)


(US$)(In thousands, except percentages)Net revenues:Photovoltaic modules


165,636



99.7
%


604,317



95.8
%


2,209,514



302,897



92.3
%Raw materials


















127,726



17,510



5.3
%Photovoltaic cells


542



0.3
%


7,182



1.1
%


52,019



7,131



2.2
%Photovoltaic modules processing


















5,876



806



0.2
%Photovoltaic cells processing










19,408



3.1
%










Total


166,178



100.0
%


630,907



100.0
%


2,395,135



328,344



100.0
%            48




---



##### Table of Contents



Costs of
    Revenue and Operating Expenses
  Cost
    of Revenue
    Year Ended December 31,2005


2006


2007% of Net





% of Net





% of NetAmount


Revenue


Amount


Revenue


Amount


Revenue(RMB)





(RMB)





(RMB)


(US$)(In thousands, except percentages)Cost of revenues


(139,903
)


84.2
%


(446,530
)


70.8
%


(1,997,355
)


(273,813
)


83.4
%Operating expenses:Selling expenses


(5,258
)


3.2
%


(11,883
)


1.9
%


(62,777
)


(8,606
)


2.6
%General and administrative expenses


(4,112
)


2.5
%


(52,214
)(1)


8.3
%


(113,756
)


(15,595
)


4.7
%Research and development expenses


(750
)


0.4
%


(6,523
)


1.0
%


(27,440
)


(3,761
)


1.1
%Total


(10,120
)


6.1
%


(70,620
)


11.2
%


(203,973
)


(27,962
)


8.5
%     Notes:
  (1)
    
    In 2006, we recorded a share compensation charge of
    RMB10.3 million, which related to a sale of our ordinary
    shares to Linyang Electronics, a company controlled by our
    chairman, at less than fair market value by other shareholders
    of our company, a share compensation charge of
    RMB12.1 million as a result of the issuance of
    series A convertible preference shares to Good Energies
    Investments (Jersey) Limited and a share compensation charge of
    RMB2.9 million which related to stock options granted on
    November 30, 2006 under our companys employee stock
    option plan.         49




---



##### Table of Contents



Operating
    Expenses
    Selling
    Expenses
    10-year 25-year
  General
    and Administrative Expenses
    Research
    and Development Expenses
   50




---



##### Table of Contents



Share
    Compensation Expenses
        Taxation
  PRC
    Enterprise Income Tax
     51




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
    Revenue
    Recognition
    and/or free-on-board
     52




---



##### Table of Contents



above-noted
    Fixed
    Assets, Net
    Buildings


20 yearsPlant and machinery


10 yearsFurniture, fixtures and office equipment


5 yearsComputer software


5 yearsMotor vehicles


5 years         Warranty
    Costs
  10-year 25-year 10-year 25-year
 53




---



##### Table of Contents



Impairment
    of Long-Lived Assets
    Financial
    Instruments  Embedded Foreign Currency
    Derivative
      Share
    Based Compensation
  No. 96-18
    Accounting
    for Uncertain Income Tax Positions
   54




---



##### Table of Contents



and/or
    Advance
    to Suppliers
    Impairment
    of Long-Lived Assets
   55




---



##### Table of Contents



Consolidated
    Results of Operations
    Year Ended December 31,2005


2006


2007(In RMB


% of Net


(In RMB


% of Net


(In RMB


(In US$


% of NetThousands)


Revenue


Thousands)


Revenue


Thousands)


Thousands)


RevenueConsolidated Statement of Income DataNet revenuesPhotovoltaic modules


165,636



99.7
%


604,317



95.8
%


2,209,514



302,897



92.3
%Raw materials


















127,726



17,510



5.3
%Photovoltaic cells


542



0.3
%


7,182



1.1
%


52,019



7,131



2.2
%Photovoltaic modules processing


















5,876



806



0.2
%Photovoltaic cells processing










19,408



3.1
%










Total net revenues


166,178



100.0
%


630,907



100.0
%


2,395,135



328,344



100.0
%Cost of revenuesPhotovoltaic modules


(139,481
)


(83.9
)%


(434,493
)


(68.9
)%


(1,835,886
)


(251,677
)


(76.7
)%Raw materials


















(110,123
)


(15,097
)


(4.5
)%Photovoltaic cells


(422
)


(0.3
)%


(5,983
)


(0.9
)%


(49,332
)


(6,763
)


(2.1
)%Photovoltaic modules processing


















(2,014
)


(276
)


(0.1
)%Photovoltaic cells processing










(6,054
)


(1.0
)%










Total cost of revenues


(139,903
)


(84.2
)%


(446,530
)


(70.8
)%


(1,997,355
)


(273,813
)


(83.4
)%Gross profit


26,275



15.8
%


184,377



29.2
%


397,780



54,531



16.6
%Operating expensesSelling expenses


(5,258
)


(3.2
)%


(11,883
)


(1.9
)%


(62,777
)


(8,606
)


(2.6
)%General and administrative expenses


(4,112
)


(2.5
)%


(52,214
)


(8.3
)%


(113,756
)


(15,595
)


(4.8
)%Research and development expenses


(750
)


(0.5
)%


(6,523
)


(1.0
)%


(27,440
)


(3,761
)


(1.1
)%Total operating expenses


(10,120
)


(6.1
)%


(70,620
)


(11.2
)%


(203,973
)


(27,962
)


(8.5
)%Operating profit


16,155



9.7
%


113,757



18.0
%


193,807



26,569



8.1
%Interest expenses


(123
)


(0.1
)%


(8,402
)


(1.3
)%


(25,978
)


(3,561
)


(1.1
)%Interest income


95



0.1
%


1,326



0.2
%


16,244



2,227



0.7
%Exchange losses


(1,768
)


(1.1
)%


(4,346
)


(0.7
)%


(25,628
)


(3,513
)


(1.1
)%Other income


215



0.1
%


902



0.1
%


1,507



206



0.1
%Other expenses


(260
)


(0.1
)%


(836
)


(0.1
)%


(9,670
)


(1,326
)


(0.4
)%Changes in fair value of embedded foreign currency derivative










(163
)














Government grant










852



0.1
%


2,089



286



0.1
%Income before income taxes and minority interest


14,314



8.6
%


103,090



16.3
%


152,371



20,888



6.4
%Income tax benefit (expense)


96



0.1
%


3,132



0.5
%


(7,458
)


(1,022
)


(0.3
)%Minority interests










(301
)






3,124



428



0.1
%Net income


14,410



8.7
%


105,921



16.8
%


148,037



20,294



6.2
%Dividend on Series A redeemable convertible preferred shares










(7,226
)


(1.1
)%










Net income attributable to ordinary shareholders


14,410



8.7
%


98,695



15.7
%


148,037



20,294



6.2
%  56




---



##### Table of Contents



2007
    Compared to 2006
  Net
    Revenues
    Cost of
    Revenues and Gross Profit
      Operating
    Expenses and Operating Profit
       57




---



##### Table of Contents



Interest
    Income (Expenses), Exchange Losses and Other Income
    (Expenses)
    Income
    Tax Benefit (Expenses)
    Net
    Income
    2006
    Compared to 2005
    Net
    Revenue
   58




---



##### Table of Contents



Cost of
    Revenue and Gross Profit
    Operating
    Expenses and Operating Profit
           59




---



##### Table of Contents



Interest
    Income (Expenses), Exchange Losses and Other Income
    (Expenses)
    Income
    Tax Benefit
    Net
    Income
    B.
    Liquidity
    and Capital Resources    Liquidity
      Year Ended December 31,2005


2006


2007(RMB)


(RMB)


(RMB)


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


(76,582
)


(523,061
)


(1,019,148
)


(139,713
)Net cash used in investing activities


(37,464
)


(190,047
)


(538,465
)


(73,817
)Net cash generated from financing activities


117,575



1,843,846



708,224



97,089Net increase (decrease) in cash and cash equivalents


3,529



1,130,738



(864,864
)


(118,562
)   Net Cash
    Used in Operating Activities
   60




---



##### Table of Contents




    an increase of RMB398.2 million (US$54.6 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 (US$49.3 million) in
    inventories principally as a result of increased purchases of
    silicon and silicon wafers;
    an increase of RMB279.8 million (US$38.4 million) in
    accounts receivable, primarily due to increased sales on credit
    in 2007; and
    an increase of RMB170.0 million (US$23.3 million) in
    prepaid rental expenses 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 (US$30.2 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.    
    an increase of RMB295.7 million in inventories principally
    as a result of increased purchases of silicon and silicon wafers;
    an increase of RMB176.9 million in advances to suppliers,
    primarily due to increased prepayments to our suppliers for
    purchases of silicon and silicon wafers;
    an increase of RMB159.2 million in accounts receivable,
    primarily due to increased sales on credit in the fourth quarter
    of 2006; and
    a decrease of RMB55.3 million in deposits received from
    customers, primarily due to our provision of more preferential
    credit terms to our customers.    
    an increase of RMB72.3 million in inventories principally
    as a result of an increase of RMB60.5 million in the
    purchase of raw materials;
    an increase of RMB56.5 million in advances to suppliers;
    an increase of RMB55.3 million in deposits received from
    customers;
    an increase of RMB22.2 million in restricted cash relating
    to customer deposits; and
    an increase of RMB16.6 million in accounts payable mainly
    due to raw materials purchases. 61




---



##### Table of Contents



Net Cash
    Used in Investing Activities
          Net Cash
    Generated from Financing Activities
          Capital
    Resources and Capital Expenditures
       62




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Recently
    Accounting Pronouncements
      No. 95-3
     63




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##### Table of Contents



C.
    Research
    and Development          D.
    Trend
    Information    E.
    Off-Balance
    Sheet Arrangements   64




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##### Table of Contents



F.
    Tabular
    Disclosure of Contractual Obligations    Payment Due by PeriodLess Than


1 to 3


3 to 5


More ThanTotal


1 Year


Years


Years


5 Years(In thousands of RMB)Purchase obligations relating to machinery and equipment


637,638



637,638











Purchase of land use right


26,772



26,772











Purchase obligations relating to raw materials


8,805,130



2,545,547



2,584,266



1,749,715



1,925,602Operating lease obligations


37,887



31,492



4,344



2,051



Total


9,452,350



3,186,372



2,588,610



1,751,766



1,925,602   G.
    Safe
    Harbor  Form 20-F
  
    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;
    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 increased revenue growth and
    our ability to achieve profitability resulting from increases in
    our production volumes;
    our expectations with respect to our ability to secure raw
    materials, especially silicon wafers, in the future;
    our future business development, results of operations and
    financial condition; and
    competition from other manufacturers of PV products and
    conventional energy suppliers. 65




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Form 20-F
  Form 20-F Form 20-F. Form 20-F
  ITEM 6.
    DIRECTORS,
    SENIOR MANAGEMENT AND EMPLOYEES  A.
    Directors
    and Senior Management  Directors
    and Executive Officers
    Name

Age

Position/TitleYonghua Lu


44


ChairmanHenricus Johannes Petrus Hoskens


44


Chief Executive OfficerHanfei Wang


43


Director and Chief Operating OfficerSven Michael Hansen


43


DirectorTerry McCarthy


64


Independent DirectorErnst A. Bütler


64


Independent DirectorThomas J. Toy


53


Independent DirectorYinzhang Gu


69


Independent DirectorPhilip Comberg


40


Independent DirectorJohan van Splunter


63


Independent DirectorAmy Jing Liu


36


Chief Financial OfficerJianping Zhang


42


Vice PresidentPaul W. Combs


56


Vice PresidentYuting Wang


67


Chief Engineer   Directors
  Mr. Yonghua Lu 15-month 20-month
 66




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##### Table of Contents



Mr. Hanfei Wang
  Dr. Sven Michael Hansen
  Mr. Terry McCarthy partner-in-charge
  Mr. Ernst A. Bütler
  Mr. Thomas J. Toy
 67




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##### Table of Contents



Mr. Yinzhang Gu
  Dr. Philip Comberg
  Mr. Johan van Splunter
  Executive
    Officers
  Mr. Henricus Johannes Petrus Hoskens
  Ms. Amy Jing Liu
  Mr. Jianping Zhang
  Mr. Paul W. Combs
 68




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##### Table of Contents



Mr. Yuting Wang
  B.
    Compensation
    of Directors and Executive Officers  Compensation
      2006 Share
    Option Plan
    Administration.
  Option Exercise.
  Termination of Awards.
  Share Split or Combination.
  Amendment and Termination of Plan.
 69




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##### Table of Contents



OrdinarySharesUnderlyingOutstanding


ExerciseName

Option


Price


Grant Date

Expiration Date(US$/share)Terry McCarthy


120,000



1.80


November 30, 2006

November 29, 2016Thomas J. Toy


120,000



1.80


November 30, 2006

November 29, 2016Verena Maria Bütler (wife of Ernst A. Bütler)


180,000



1.80


November 30, 2006

November 29, 2016Kevin
    Wei(1)


0



1.80


November 30, 2006

March 31, 2008Jianping Zhang


300,000



1.80


November 30, 2006

November 29, 2016Fei
    Yun(1)


0



1.80


November 30, 2006

Ru
    Cai(1)


0



1.80


November 30, 2006

Haiyang Yuan


450,000



2.02


August 16, 2007

November 29, 2016Paul W. Combs


150,000



2.02


August 16, 2007

November 29, 2016100,000



2.58


October 26, 2007

November 29, 201650,000



2.73


November 1, 2007

November 29, 2016Yinzhang Gu


180,000



1.94


August 16, 2007

November 29, 2016Amy Jing Liu


500,000



2.58


October 26, 2007

November 29, 2016200,000



5.31


December 13, 2007

November 29, 2016Philip Comberg


300,000



6.016


January 8, 2008

November 29, 2016Johan van Splunter


300,000



2.040


March 14, 2008

November 29, 2016Other employees as a group


2,443,235



1.80


November 30, 2006

November 29, 2016150,000



2.44


March 19, 2007

November 29, 2016528,000



2.87


May 10, 2007

November 29, 2016100,000



2.11


June 28, 2007

November 29, 2016100,000



2.14


October 10, 2007

November 29, 2016300,000



2.15


October 10, 2007

November 29, 2016100,000



2.06


October 10, 2007

November 29, 2016300,000



2.73


November 1, 2007

November 29, 2016260,000



2.21


November 27, 2007

November 29, 2016240,000



5.31


December 13, 2007

November 29, 2016400,000



6.746


December 27, 2007

November 29, 2016300,000



3.55


January 29, 2008

November 29, 2016230,000



2.15


March 6, 2008

November 29, 2016Total


8,401,235       (1)
    
    Mr. Kevin C. Wei was our chief financial officer between
    July 2006 and October 2007 and Ms. Ru Cai was our principal
    accounting officer between August 2006 and October 2007.
    Mr. Fei Yun was our director of technology between
    September 2006 and November 2007.(2)
    
    2,368,665 options, including options held by Mr. Wei,
    Ms. Cai and Mr. Yun, were cancelled due to the
    resignation of these employees. 70




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##### Table of Contents



2007
    Equity Incentive Plan
    Administration.
  Options.
  Restricted Stock.
  Stock Appreciation Rights.
  Performance Units and Performance
    Shares.
  Restricted Stock Units.
  Amendment and Termination.
 71




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##### Table of Contents



OrdinarySharesUnderlyingOutstanding


ExerciseName

Option


Price


Grant Date

Expiration Date(US$/share)Henricus Johannes Petrus Hoskens


800,000



2.82


April 15, 2008

August 21, 2017Terry McCarthy


25,000



2.686


May 1, 2008

August 21, 2017Other employees as a group


20,000



2.77


April 28, 2008

August 21, 201740,000



4.376


May 26, 2008

August 21, 2017Total


885,000     OrdinarySharesUnderlyingOutstandingRestrictedName

Stock Units


Grant Date

Expiration DateTerry McCarthy


49,995


December 1, 2007

August 21, 201720,833


May 1, 2008

August 21, 201737,500


January 1, 2008

August 21, 2017Thomas J. Toy


49,995


December 1, 2007

August 21, 201737,500


January 1, 2008

August 21, 2017Verena Maria Bütler (wife of Ernst A Bütler)


49,995


December 1, 2007

August 21, 201737,500


January 1, 2008

August 21, 2017Yinzhang Gu


37,500


January 1, 2008

August 21, 2017Philip Comberg


37,500


January 1, 2008

August 21, 2017Henricus Johannes Petrus Hoskens


400,000


April 15, 2008

August 21, 2017Total


758,318   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; 72




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##### Table of Contents




    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.    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; 73




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##### Table of Contents




    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.  Duties
    of Directors
      
    convening shareholders annual general meetings and
    reporting its work to shareholders at such meetings;
    declaring dividends and distributions;
    appointing officers and determining the term of office of
    officers;
    exercising the borrowing powers of our company and mortgaging
    the property of our company; and
    approving the transfer of shares of our company, including the
    registering of such shares in our share register.  Terms
    of Directors and Executive Officers
    Employment
    Agreements
         74




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##### Table of Contents



D.
    Employees    As of December 31,2005


2006


2007Manufacturing and engineering


169



535



1,618General and administration


30



65



96Quality control


17



41



158Research and development


11



49



84Purchasing and logistics


6



31



84Marketing and sales


8



15



29Total


241



736



2,069              75




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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 Beneficially Owned(1)(2)Number


%Directors and Executive Officers:Yonghua Lu(3)


38,634,750



15.95
%Hanfei Wang(4)


6,271,875



2.59
%Yuting Wang(5)


501,750



0.21
%Terry McCarthy


134,985



0.06
%Verena Maria Bütler (wife of Ernst A. Bütler)


109,995



0.05
%Thomas J. Toy


49,995



0.02
%All Directors and Executive Officers as a Group(6)


45,730,350



18.88
%Major Shareholders:Good Energies II LP(7)


88,178,005



36.39
%Yonghua Solar Power Investment Holding Ltd(8)


38,634,750



15.95
%Citigroup Venture Capital International GrowthPartnership, L. P.(9)


20,935,242



8.64
%LC Fund III, L. P.(10)


9,467,206



3.91
%WHF Investment Co., Ltd(11)


6,271,875



2.59
%Hony Capital II, L.P.(12)


5,943,915



2.45
%Citigroup Venture Capital International Co-Investment, L.P.(13)


1,142,434



0.47
%     Notes
  (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 241,954,744 ordinary shares outstanding as of
    June 2, 2008, 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
    287,052,799 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 June 2, 2008. 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 666 Linyang Road, Qidong,
    Jiangsu Province, 226200, Peoples Republic of China.(4)
    
    Owns WHF Investment Co., Ltd, a British Virgin Islands company,
    which held 6,271,875 ordinary shares in our company as of
    June 2, 2008. Mr. Wang is the sole director of WHF
    Investment Co., Ltd. and has the right to cast the vote for such
    company regarding all matters of our company requiring
    shareholder approval. 76




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##### Table of Contents



Mr. Wangs business address is 666 Linyang Road,
    Qidong, Jiangsu Province, 226200, Peoples Republic of
    China.(5)
    
    Owns YongGuan Solar Power Investment Holding Ltd., a British
    Virgin Islands company, which held 501,750 ordinary shares in
    our company as of June 2, 2008. Mr. Wang is the sole
    director of YongGuan 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. Wangs business address is 666 Linyang Road,
    Qidong, Jiangsu Province, 226200, Peoples Republic of
    China.(6)
    
    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 and Mr. Hanfei Wang, each of our
    directors and senior executive officers beneficially owns less
    than 1% of our ordinary shares.(7)
    
    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 83,17,005 ordinary
    shares 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.(8)
    
    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.(9)
    
    Held 20,935,242 ordinary shares as of June 2, 2008. 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.(10)
    
    Held 9,467,205 ordinary shares as of June 2, 2008. 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.(11)
    
    WHF Investment Co., Ltd., a British Virgin Islands company, is
    owned by Mr. Hanfei Wang. Mr. Wang is the sole
    director of WHF Investment Co., Ltd.. The address of WHF
    Investment Co., Ltd. is PO Box 173, Kingston Chambers,
    Road Town, Tortola, British Virgin Islands. 77




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##### Table of Contents



(12)
    
    Held 5,943,915 ordinary shares as of June 2, 2008 through
    its wholly-owned subsidiary Brilliant Orient International
    Limited, a British Virgin Islands company. The address of Hony
    Capital II, L. P. is 7th Floor, Tower A, Raycom Info Tech Park,
    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 Hony
    Capital II, L.P. is held by its five-seat investment committee.
    Among the five representatives of such committee, three of them,
    Mr. Chuanzhi Liu, Mr. Linan Zhu and Mr. John Huan
    Zhao, are nominees of Hony Capital II, L.P.s general
    partner, Hony Capital II, GP Limited, a company incorporated in
    the Cayman Islands, and the other two representatives are
    nominees of The Goldman Sachs Group, Inc. and Sun Hung Kai
    Properties Limited, which are two of the limited partners of
    Hony Capital II, L.P. On November 18, 2006, Linyang China
    entered into a management consulting service agreement with Hony
    Capital II, L.P. under which, for a period of one year, Hony
    Capital II, L.P. agreed to provide certain management consulting
    services to Linyang China and to second Ms. Xihong Deng,
    managing director of Hony Capital II, GP Limited, the general
    partner of Hony Capital II, L.P., to our company to serve as
    executive vice president in charge of international business
    development. Linyang China agreed to pay an aggregate of
    RMB4 million to Hony Capital II, L.P. as consideration for
    these services under this agreement. Ms. Deng recently
    resigned as a member of our board of directors and as vice
    president in charge of international sales.(15)
    
    Held 1,142,434 ordinary shares as of June 2, 2008. 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.  and/or lock-up
    
    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; 78




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##### Table of Contents




    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.    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 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 on
    Form 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.  Post-Offering
    Lock-Up
  lock-up
 79




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##### Table of Contents



lock-up lock-up lock-up lock-up lock-up lock-up lock-up lock-up lock-up lock-up
  Equity
    Incentive Plan
    Transactions
    with Certain Shareholders
  
    Linyang Electronics made advances to Linyang China in an
    aggregate amount of RMB119.4 million in 2005. We repaid
    RMB89.1 million and RMB30.2 million of these amounts
    in 2005 and 2006, respectively. Linyang Electronics paid certain
    operating expenses of RMB0.7 million and
    RMB0.5 million on behalf of Linyang China in 2005 and 2006
    respectively, and Linyang China repaid RMB0.06 million and
    RMB0.2 million in the same period. As of December 31,
    2005, the amount due to Linyang Electronics was approximately
    RMB30.9 million. The amount due to Linyang Electronics was
    unsecured, interest-free and had no fixed terms of repayment. In
    2006, Linyang Electronics and Linyang Agricultural Development
    (Nantong) Co., Ltd., a company in which the shareholder, our
    chairman, Mr. Yonghua Lu, had a beneficial interest as an
    equity holder, made cash advances to Linyang China of
    RMB105.9 million and RMB9.0 million, respectively,
    both of which were fully repaid in the same period. In 2006,
    Linyang Electronics paid approximately RMB0.5 million of
    operating expenses on behalf of Linyang China,
    RMB0.2 million of which have been subsequently reimbursed
    by Linyang China. In addition, Linyang China purchased silicon
    wafers and other materials from Linyang Electronics in the
    amount of RMB2.6 million in 2006, out of which
    RMB1.0 million has been paid by Linyang China in the same
    period. The purchase was made according to the published prices
    and conditions offered by Linyang Electronics to its customers.
    As of December 31, 2006, the amount due to Linyang
    Electronics was approximately RMB2.6 million, which was
    unsecured, interest-free and had no stated terms of repayment.
    The amount due to Linyang Electronics was fully repaid in
    January 2007. In October and November 2006, Linyang China
    entered into entrusted loan agreements with Linyang Electronics
    under which Linyang Electronics lent to Linyang China an
    aggregate of RMB80.0 million through a third party PRC
    bank, all of which have been subsequently reimbursed by Linyang
    China. Under current PRC laws and regulations, PRC companies
    other than licensed financial institutions are not permitted to
    make loans to each other directly. As a result, companies
    commonly use indirect entrusted loan arrangements under which
    funds are first deposited by the lending company with a PRC
    commercial bank, and the PRC commercial bank then loans the
    corresponding amount of funds to the borrower pursuant to the
    instruction of the lending company. As the principal and
    interest of the loan are repaid to the bank, the bank makes
    corresponding repayments to the lending company after deducting
    service fees. 80




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##### Table of Contents




    In September 2006, Sichuan Jiayang entered into a PV module
    purchase agreement with Linyang Electronics in the amount of
    RMB0.3 million. The purchase was made according to the
    published prices and conditions offered by Linyang Electronics
    to its customers. As of December 31, 2006, the amount due
    to Linyang Electronics was RMB0.3 million. The amount due
    to Linyang Electronics was fully repaid in January 2007.
    Linyang China entered into a number of agreements with Huaerli
    (Nantong) to purchase silicon and silicon wafers in the
    aggregate amounts of RMB15.9 million and
    RMB23.8 million, respectively, in 2005 and 2006. The
    purchase was made according to the published prices and
    conditions offered by Huaerli (Nantong) to its customers. As of
    December 31, 2005 and 2006, the amount due to Huaerli
    (Nantong) under these purchase agreements was approximately
    RMB1.7 million and nil, respectively. The amount due to
    Huaerli (Nantong) was unsecured, interest-free and repayable on
    demand. In 2006, Huaerli (Nantong) paid approximately
    RMB7.6 million of operating expenses on behalf of Linyang
    China, all of which have been subsequently reimbursed by Linyang
    China in the same period.
    In 2005, Huaerli (Nantong) made advances to Linyang China of
    RMB27.0 million, which was subsequently repaid by Linyang
    China in the same period.
    As of December 31, 2005, for nil consideration, Linyang
    Electronics had pledged RMB10.0 million to a commercial
    bank for notes payable granted to Linyang China of
    RMB10.0 million.
    In 2005, Linyang China paid RMB81,000 for raw material purchases
    from Linyang Electronics according to the published prices and
    conditions offered by Linyang Electronics to its customers.
    In 2005 and the three months ended March 31, 2006, Qidong
    Huahong granted to Linyang China the use of a parcel of land
    with a total area of 24,671 square meters for nil
    consideration. As a result, in 2005 and the three months ended
    March 31, 2006, we recorded a rental charge of RMB70,000
    and RMB23,000, respectively, based on the fair value of the
    rental cost incurred by Qidong Huahong and a corresponding
    credit to additional paid-in capital. In April 2006, Qidong
    Huahong entered into a Land Use Rights Transfer Agreement to
    transfer the use rights of this land until December 23,
    2054 to Linyang China for consideration of RMB4.6 million.
    The full price of the contract has been paid. In November 2006,
    Qidong Huahong entered into two Land Use Rights Transfer
    Agreements to transfer the use rights of two parcels of land
    with a total area of 36,841 square meters and a manufactory
    facility for a consideration of RMB21.9 million.
    On August 30, 2004 and March 16, 2005, Linyang China
    entered into two facility lease agreements with Qidong Huahong.
    Linyang China incurred rental expenses of RMB25,000 in the
    period from August 27, 2004 to December 31, 2004 and
    RMB58,000 in 2005. The rental agreements were entered into with
    reference to market rental rates. The amounts due to Qidong
    Huahong under this agreement were RMB25,000, RMB83,000 and nil
    as of December 31, 2004, December 31, 2005 and
    December 31, 2006, respectively. These amounts were
    unsecured, interest-free and payable on demand. In November
    2005, the parties entered into a new agreement to terminate the
    above two leases.
    In 2006, Nantong Linyang Ecological Cultural Co., Ltd., a
    company controlled by our chairman, paid approximately
    RMB0.1 million of operating expenses on behalf of Linyang
    China, all of which have been subsequently reimbursed by Linyang
    China.
    In September 2006, Linyang China entered into a PV module sales
    agreement with Linyang Electronics, a company controlled by our
    chairman. The amount for 20 modules was RMB0.15 million.
    The sale was made according to the published prices and
    conditions offered by Linyang China to its customers. As of
    December 31, 2006, the amount due from Linyang Technology
    was RMB0.15 million. The amount due from Linyang Technology
    was fully repaid in March 2007.
    On June 2, 2006, Linyang BVI agreed to pay
    US$6.6 million to Linyang Electronics for the purchase of
    the equity interests held by Linyang Electronics in Linyang
    China and made such payment in August 2006. The price of the
    transfer was based on the estimated net asset value of Linyang
    China. This transaction was accounted for as a recapitalization. 81




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
    On November 18, 2006, Linyang China entered into a
    management consulting service agreement with Hony Capital II,
    L.P. under which, for a period of one year, Hony Capital II,
    L.P. agreed to provide certain management consulting services to
    Linyang China and to second Ms. Xihong Deng, managing
    director of Hony Capital II, GP Limited, the general partner of
    Hony Capital II, L.P., to our company to serve as executive vice
    president in charge of international business development.
    Linyang China agreed to pay an aggregate of RMB4 million to
    Hony Capital II, L.P. as consideration for these services under
    this agreement. Such management consulting fees were paid by
    Linyang China in 2007.
    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, of which
    RMB0.8 million (US$0.1 million) was paid in December
    2007 and RMB0.3 million was paid in January 2008.
    In April 2007, Linyang China paid RMB1.2 million
    (US$0.2 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 under which Nantong Linyang
    agreed to loan RMB7.0 million (US$1.0 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, our 52% indirect
    subsidiary, entered into a loan agreement with Qitian Group, a
    company which currently holds a 20% interest in Yangguang Solar,
    under which Qitian Group agreed to loan RMB3.0 million
    (US$0.4 million) to Yangguang Solar at an annual interest
    rate of 5.85%. This loan was fully repaid in June 2008.
    In July 2007, Linyang China entered into an agreement with
    Linyang Electronics, a company controlled by Mr. Yonghua
    Lu, our chairman, 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. As of
    December 31, 2007, we have accrued RMB6.7 million
    (US$0.9 million) for the bank borrowings guaranteed by
    Linyang Electronics of RMB940.0 million
    (US$128.9 million).
    On July 31, 2007, we entered into a share transfer
    agreement with Nantong Linyang, a company controlled by
    Mr. Yonghua Lu, our chairman, 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 August 28, 2007, Yangguang Solar, our 52% indirect
    subsidiary, entered into a loan agreement with Qitian Group, a
    company which currently holds a 20% interest in Yangguang Solar,
    under which Qitian Group agreed to loan RMB1.3 million
    (US$0.2 million) to Yangguang Solar at an annual interest
    rate of 5.85%. This loan is currently outstanding and is due on
    December 31, 2008.
    On December 26, 2007, Linyang China and Linyang
    Electronics, a company controlled by Mr. Yonghua Lu, our
    chairman, entered into a supply agreement whereby Linyang China
    purchased raw materials from Linyang Electronics for
    RMB23.7 million (US$3.2 million).
    On December 29, 2007, Solarfun Power Hong Kong Limited, our
    100% indirect subsidiary, 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 Power Hong Kong Limited at an annual interest rate of
    8%. The loan was fully repaid in February 2008.
    On January 11, 2008, Solarfun Power Hong Kong Limited, our
    100% indirect subsidiary, entered into a short-term loan
    agreement with Hong Kong Huaerli, a company controlled by
    Mr. Yonghua Lu, our chairman, under which Hong Kong Huaerli
    agreed to loan US$9 million to Solarfun Power Hong Kong
    Limited at an annual interest rate of 8%. The loan was fully
    repaid in February 2008. 82




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
    As of December 31, 2007, of Linyang Chinas total bank
    borrowings, RMB497.7 million (US$68.2 million) was
    guaranteed by Linyang Electronics, RMB60.0 million
    (US$8.2 million) was jointly guaranteed by Linyang
    Electronics and Huaerli (Nantong), RMB20.0 million
    (US$2.7 million) was guaranteed by Huaerli (Nantong),
    RMB278.7 million (US$38.2 million) was jointly
    guaranteed by Linyang Electronics and Qidong Huahong, a company
    in which Mr. Yonghua Lu, our chairman, and his wife have
    financial interests, and RMB103.6 million
    (US$14.2 million) was guaranteed by Linyang Electronics and
    Solarfun Power Holdings Co., Ltd..
    On March 16, 2007, Linyang China entered into a sales
    agreement with Qitian Group under which Linyang China agreed to
    supply certain products to Qitian Group for RMB4.0 million
    (US$0.5 million).
    On January 8, 2007, October 29, 2007,
    November 19, 2007 and January 2, 2008, Linyang China
    entered into five facility lease agreements with Linyang
    Electronics. Linyang China incurred rental expenses of
    RMB1.2 million in 2007. The amount due to Linyang
    Electronics under these agreements was RMB1 million as of
    December 31, 2007.
    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 June 23, 2008, Linyang China entered into an agreement
    to acquired the remaining 48% equity interest in Yangguang Solar
    from Nantong Linyang, a company 70% owned by Yonghua Lu, our
    chairman (as to 18%), Qitian Group (as to 20%) and Jiangsu
    Guangyi (as to 10%) for an aggregate consideration of
    approximately RMB355 million US$48.7 million).  C.
    Interests
    of Experts and Counsel    ITEM 8.
    FINANCIAL
    INFORMATION  A.
    Consolidated
    Statements and Other Financial Information    Legal and
    Administrative Proceedings
     83




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Dividend
    Policy
        B.
    Significant
    Changes.    ITEM 9.
    THE
    OFFER AND LISTING  A.
    Offering
    and Listing Details.        Share PriceHigh


LowQuarterly High and LowFourth Quarter 2006 (from December 20, 2006)


12.50



9.90First Quarter 2007


17.10



10.21Second Quarter 2007


17.69



8.22Third Quarter 2007


15.74



8.68Fourth Quarter 2007


37.85



9.90First Quarter 2008


37.64



8.97Monthly Highs and LowsDecember 2007


37.85



16.05January 2008


37.64



16.11February 2008


18.29



11.64March 2008


13.36



8.97April 2008


15.70



12.31May 2008


26.50



13.07June 2008 (through June 26, 2008)


21.40



18.96  84




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B.
    Plan
    of Distribution    C.
    Markets    D.
    Selling
    Shareholders    E.
    Dilution    F.
    Expenses
    of the Issue    ITEM 10.
    ADDITIONAL
    INFORMATION  A.
    Share
    Capital    B.
    Memorandum
    and Articles of Association  No. 333-139258),
  C.
    Material
    Contracts  Form 20-F.
  D.
    Exchange
    Controls  Foreign
    Currency Exchange
    
    Foreign Exchange Administration Rules (1996), as
    amended; and
    Regulations of Settlement, Sale and Payment of Foreign Exchange
    (1996)    and/or
 85




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E.
    Taxation  Cayman
    Islands Taxation
    PRC
    Taxation
            U.S.
    Federal Income Taxation
   86




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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.        Taxation
    of Dividends and Other Distributions on the ADSs or Ordinary
    Shares
   87




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Taxation
    of Disposition of ADSs or Ordinary Shares
    Passive
    Foreign Investment Company
  non-U.S. corporation
  
    at least 75% of its gross income is passive income; or 88




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
    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.      de minimis
   89




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Information
    Reporting and Backup Withholding
  Form W-9.
    F.
    Dividends
    and Paying Agents    G.
    Statement
    by Experts    H.
    Documents
    on Display  Form 20-F 1-800-SEC-0330
  Form 20-F.
  I.
    Subsidiary
    Information    ITEM 11.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Foreign
    Exchange Risk
   90




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Interest
    Rate Risk
    ITEM 12.
    DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES    PART II
  ITEM 13.
    DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUENCIES    ITEM 14.
    MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS    Form F-1 333-139258)
    
    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.  Form F-1 333-147627).
 91




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##### Table of Contents




    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 Power Hong Kong Limited, our 100% indirect
    subsidiary; and
    the remainder for working capital and repayment of our existing
    bank borrowings.    ITEM 15.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Rule 13a-15(e)
  Managements
    Annual Report on Internal Control Over Financial
    Reporting.
  Rule 13a-15(f)
       92




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Changes
    in Internal Controls
  Form 20-F,
 93




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTNG FIRM
                       94




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##### Table of Contents



ITEM 16A.
    AUDIT
    COMMITTEE FINANCIAL EXPERT  Form 20-F.
  ITEM 16B.
    CODE
    OF ETHICS  Form 20-F, www.solarfun.com.cn
  ITEM 16C.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    Year Ended December 31,2005

2006

2007(RMB)

(RMB)

(RMB)

(US$)Audit fees






1,560,000



7,854,600



1,076,769All other fees(1)






13,114,990



1,458,920



200,000     Notes
  (1)
    
    All other fees means the aggregate fees for services
    rendered in connection with our public offering in 2006 and our
    convertible note offering in 2008.    ITEM 16D.
    EXEMPTIONS
    FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES    ITEM 16E.
    PURCHASES
    OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS.    PART III
  ITEM 17.
    FINANCIAL
    STATEMENTS    ITEM 18.
    FINANCIAL
    STATEMENTS  Form 20-F,
  
    Report of Independent Registered Public Accounting Firm
    Consolidated Balance Sheets as of December 31, 2006 and 2007
    Consolidated Statements of Operations for the Years Ended
    December 31, 2005, 2006 and 2007 95




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
    Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2005, 2006 and 2007
    Consolidated Statements of Changes in Shareholders Equity
    for the Years Ended December 31, 2005, 2006 and 2007
    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)2
.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 as of 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 as of 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 as of 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 as of 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 Lockup 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 Lockup Agreement, dated as of 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) 96




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##### Table of Contents



ExhibitNumber

Description of Document4
.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

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
.10

Silicon Supply Agreement, dated as of November 11, 2006,
    between Jiangsu Linyang Solarfun Co., Ltd. and Jiangxi LDK Solar
    Hi-Tech Co., Ltd. (incorporated by reference to
    Exhibit 10.3 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 Cooperation Agreement, dated as of
    November 14, 2006, between Jiangsu Linyang Solarfun Co.,
    Ltd and Jiangxi LDK Solar Hi-Tech Co., Ltd. (incorporated by
    reference to Exhibit 10.4 from our F-1 registration
    statement (File
    No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.12

Silicon Supply Agreement, dated as of July 6, 2006, between
    Jiangsu Linyang Solarfun Co., Ltd. and ReneSola Co., Ltd.
    (incorporated by reference to Exhibit 10.5 from our F-1
    registration statement
    (File No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.13

Silicon Supply Agreement, dated as of March 26, 2006,
    between Jiangsu Linyang Solarfun Co., Ltd. and ReneSola Co.,
    Ltd. (incorporated by reference to Exhibit 10.6 from our
    F-1 registration statement
    (File No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.14

Silicon Supply Agreement, dated as of October 8, 2006,
    between Jiangsu Linyang Solarfun Co., Ltd. and
    E-mei
    Semiconductor Material Factory (incorporated by reference to
    Exhibit 10.7 from our F-1 registration statement (File
    No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.15

Silicon Supply Agreement, dated as of June 2, 2006, and
    Amendments No. 1, No. 2 and No. 3 thereto, dated
    as of June 9, 2006, October 8, 2006 and
    November 17, 2006, respectively, between Jiangsu Linyang
    Solarfun Co., Ltd. and
    E-mei
    Semiconductor Material Factory (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
.16

Sales Agreement, dated as of 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
.17

Sales Contract, dated as of 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
.18

Sales Contract, dated as of 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
.19

Agreement of Transfer of Land Use Rights, dated as of
    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
.20

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
.21

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) 97




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##### Table of Contents



ExhibitNumber

Description of Document4
.22

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
.23

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)4
.24

Management Consulting Service Agreement, dated as of
    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
.25

Bid Invitation and Letter of Acceptance for Shanghai Chongming
    Qianwei Village 960kW 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
.26

Letter of Acceptance for Qitian Group 74KW 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
.27

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
.28

Entrusted Loan Contract, dated as of October 13, 2006,
    among Jiangsu Linyang Electronics Co., Ltd., Bank of China Co.,
    Ltd., Qidong Subbranch and Jiangsu Linyang Solarfun Co., Ltd.
    (incorporated by reference to Exhibit 10.21 from our F-1
    registration statement (File
    No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.29

Entrusted Loan Contract, dated as of October 18, 2006,
    among Jiangsu Linyang Electronics Co., Ltd., Bank of China Co.,
    Ltd., Qidong Subbranch and Jiangsu Linyang Solarfun Co., Ltd.
    (incorporated by reference to Exhibit 10.22 from our F-1
    registration statement (File
    No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.30

Entrusted Loan Contract, dated as of October 25, 2006,
    among Jiangsu Linyang Electronics Co., Ltd., Bank of China Co.,
    Ltd., Qidong Subbranch and Jiangsu Linyang Solarfun Co., Ltd.
    (incorporated by reference to Exhibit 10.23 from our F-1
    registration statement (File
    No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.31

Entrusted Loan Contract, dated as of November 20, 2006,
    among Jiangsu Linyang Electronics Co., Ltd., Bank of China Co.,
    Ltd., Qidong Subbranch and Jiangsu Linyang Solarfun Co., Ltd.
    (incorporated by reference to Exhibit 10.24 from our F-1
    registration statement (File
    No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.32

Silicon Purchase Agreement, dated as of May 15, 2005,
    between Jiangsu Linyang Solarfun Co., Ltd. and Huaerli (Nantong)
    Electronics Co., Ltd. (incorporated by reference to
    Exhibit 10.25 from our F-1 registration statement (File
    No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.33

Silicon Purchase Agreement, dated as of January 12, 2006,
    between Jiangsu Linyang Solarfun Co., Ltd. and Huaerli (Nantong)
    Electronics Co., Ltd. (incorporated by reference to
    Exhibit 10.26 from our F-1 registration statement (File
    No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.34

Silicon Purchase Agreement, dated as of July 2, 2006,
    between Jiangsu Linyang Solarfun Co., Ltd. and Huaerli (Nantong)
    Electronics Co., Ltd. (incorporated by reference to
    Exhibit 10.27 from our F-1 registration statement (File
    No. 333-139258),
    as amended, initially filed with the Commission on
    December 11, 2006)4
.35

Silicon Purchase Agreement, dated as of January 8, 2007,
    between Jiangsu Linyang Solarfun Co., Ltd. and Shanghai Jiu Jing
    Electronic Material Co., Ltd. 98




---



##### Table of Contents



ExhibitNumber

Description of Document4
.36

Silicon Purchase Agreement, dated as of March 6, 2007,
    between Jiangsu Linyang Solarfun Co., Ltd. and Jiangxi LDK Solar
    Hi-Tech Co., Ltd.4
.37

Share Transfer Agreement, dated as of July 31, 2007, among
    Nantong Linyang Electrics Investment Co., Ltd., 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
.38

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
.39*

Second and Restated Supply Agreement, date as of May 13,
    2008 between Solarfun Power Hong Kong Limited and Hoku
    Scientific, Inc.4
.40

Investment Agreement, dated as of 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
.41*

Contract, dated as of October 30, 2007, between Yangguang
    Solar and Ald Vacuum Technologies GmbH4
.42*

State-owned Land Use Right Grant Contract, dated as of
    January 28, 2005, between Lianyungang Municipal
    Administration of Land and Resources and Yangguang Solar
    Technology Co., Ltd.4
.43**

Equity Transfer Agreement, dated as of June 23, 2008, among
    Nantong Linyang, Qitian Group, Jiangsu Guangyi and Linyang China8
.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     Notes:
  *
    
    Filed with this Annual Report on
    Form 20-F**
    
    To be filed either as an amendment or as an exhibit to a report
    filed pursuant to the Securities Exchange Act of 1934 of the
    Registrant and incorporated by reference into this Registration
    Statement. 99




---



##### Table of Contents



SIGNATURE
  Form 20-F
    Henricus
    Johannes Petrus Hoskens
   Title:
    Chief Executive Officer   100




---



##### 



SOLARFUN
    POWER HOLDINGS CO., LTD.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
 PageConsolidated Financial StatementsReports of Independent Registered Public
    Accounting Firm


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


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


F-4Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2005, 2006 and 2007


F-5Consolidated Statements of Changes in
    Shareholders Equity for the Years Ended December 31,
    2005, 2006 and 2007


F-6Notes to the Consolidated Financial Statements


F-7   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTNG FIRM               Shanghai, The Peoples Republic of China   F-2




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  CONSOLIDATED
    BALANCE SHEETS
  As of December 31,Note

2006


2007


2007(RMB000)


(RMB000)


(US$000)ASSETSCurrent assets:Cash and cash equivalents




1,137,792



272,928



37,415Restricted cash




33,822



42,253



5,792Accounts receivable (net of allowance for doubtful accounts of
    RMB11,323,000 and RMB2,619,000 (US$359,000) as of
    December 31, 2006 and 2007, respectively)

4


147,834



430,692



59,043Inventories  net

5


372,504



728,480



99,866Advance to suppliers

6


238,178



640,118



87,752Other current assets

7


75,525



214,478



29,402Deferred tax assets

22


3,142



3,026



415Amount due from related parties

23


153



920



126Amount due from shareholders

23


578







Total current assets




2,009,528



2,332,895



319,811Non-current assets:Fixed assets  net

8


207,449



702,884



96,357Intangible assets  net

9


12,897



94,282



12,925Deferred tax assets

22


258



4,767



653Long-term deferred expenses

10






214,385



29,390Investment

11


300



300



41Total non-current assets




220,904



1,016,618



139,366Total assets




2,230,432



3,349,513



459,177LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term bank borrowings

12


379,900



965,002



132,290Long-term bank borrowings, current portion

12


16,000



15,000



2,056Accounts payable




51,452



141,709



19,426Notes payable

16


14,020







Accrued expenses and other liabilities

13


33,619



135,395



18,562Customer deposits

15


17



27,628



3,788Amount due to related parties

23


24,486



92,739



12,713Amount due to shareholders

23


7,572







Total current liabilities




527,066



1,377,473



188,835Non-current liabilities:Long-term bank borrowings

12


15,000







Deferred tax liability

22






9,038



1,239Total non-current liability




15,000



9,038



1,239Commitments and contingencies

25Minority interests




10,151



100,420



13,766Shareholders EquityOrdinary shares (par value US$0.0001 per share; 400,000,000 and
    500,000,000 shares authorized; 239,994,754 shares and
    241,954,744 shares issued and outstanding at
    December 31, 2006 and 2007, respectively)




193



195



27Additional paid-in capital




1,565,524



1,601,852



219,594Statutory reserves

18


16,024



37,548



5,147Retained earnings




96,474



222,987



30,569Total shareholders equity




1,678,215



1,862,582



255,337Total liabilities and shareholders equity




2,230,432



3,349,513



459,177    F-3




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##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  CONSOLIDATED
    STATEMENTS OF INCOME
  For the year ended December 31,Note


2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Net revenues:Photovoltaic modules






165,636



604,317



2,209,514



302,897Raw materials














127,726



17,510Photovoltaic cells






542



7,182



52,019



7,131Photovoltaic modules processing














5,876



806Photovoltaic cells processing










19,408







Total net revenues






166,178



630,907



2,395,135



328,344Cost of revenues:Photovoltaic modules






(139,481
)


(434,493
)


(1,835,886
)


(251,677
)Raw materials














(110,123
)


(15,097
)Photovoltaic cells






(422
)


(5,983
)


(49,332
)


(6,763
)Photovoltaic modules processing














(2,014
)


(276
)Photovoltaic cells processing










(6,054
)






Total cost of revenue






(139,903
)


(446,530
)


(1,997,355
)


(273,813
)Gross profit






26,275



184,377



397,780



54,531Operating expenses:Selling expenses






(5,258
)


(11,883
)


(62,777
)


(8,606
)General and administrative expenses


19



(4,112
)


(52,214
)


(113,756
)


(15,595
)Research and development expenses






(750
)


(6,523
)


(27,440
)


(3,761
)Total operating expenses






(10,120
)


(70,620
)


(203,973
)


(27,962
)Operating profit






16,155



113,757



193,807



26,569Interest expenses






(123
)


(8,402
)


(25,978
)


(3,561
)Interest income






95



1,326



16,244



2,227Exchange losses






(1,768
)


(4,346
)


(25,628
)


(3,513
)Other income






215



902



1,507



206Other expenses






(260
)


(836
)


(9,670
)


(1,326
)Changes in fair value of embedded foreign currency derivative


13







(163
)






Government grant


21







852



2,089



286Income before income taxes and minority interest






14,314



103,090



152,371



20,888Income tax benefit (expense)


22



96



3,132



(7,458
)


(1,022
)Minority interest










(301
)


3,124



428Net income






14,410



105,921



148,037



20,294Net income attributable to ordinary shareholders






14,410



98,695



148,037



20,294Net income per share:Basic


28



RMB0.26



RMB0.95



RMB0.62


US$
0.08Diluted


28



RMB0.22



RMB0.74



RMB0.62


US$
0.08Number of shares used in computation of net income per
    share:Basic


28



54,511,540



103,631,832



240,054,686



240,054,686Diluted


28



66,366,469



142,108,460



240,054,686



240,054,686    F-4




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##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  For the Year Ended December 31,Note

2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Cash flows from operating activities:Net income




14,410



105,921



148,037



20,294Adjustments to reconcile net income to net cash used in
    operating activities:Minority interest








301



(3,124
)


(428
)Depreciation and amortization




781



6,562



27,686



3,795Inventories write down












815



112Stock compensation expenses

19,20


501



25,307



29,640



4,063Provision for doubtful receivables

4






11,323



2,070



284Write off of accounts receivables

4










(10,774
)


(1,477
)Deferred tax benefit

22


(96
)


(3,304
)


(700
)


(96
)Warranty provision

14


1,520



6,030



23,109



3,168Warranty reversal

14










(1,520
)


(208
)Others




70



197



15,481



2,122Changes in operating assets and liabilities:Restricted cash




(22,229
)


(11,593
)


(12,968
)


(1,779
)Accounts receivable








(159,157
)


(279,830
)


(38,361
)Inventories




(72,308
)


(295,685
)


(359,298
)


(49,255
)Advance to suppliers




(56,462
)


(176,866
)


(398,163
)


(54,583
)Prepaid rent












(170,000
)


(23,305
)Other current assets




(19,943
)


(54,820
)


(138,823
)


(19,031
)Amount due from related parties








28,889



(188
)


(26
)Accounts payable




16,573



26,678



80,094



10,980Accrued expenses and other liabilities




2,928



22,458



39,668



5,438Amount due to related parties




2,354







(23,951
)


(3,283
)Customer deposits




55,319



(55,302
)


27,611



3,785Net cash used in operating activities




(76,582
)


(523,061
)


(1,005,128
)


(137,791
)Cash flows from investing activities:Acquisition of fixed assets




(37,464
)


(177,872
)


(494,984
)


(67,856
)Restricted cash












4,537



622Acquisition of intangible assets








(12,988
)






Acquisition of a subsidiary

3










(48,018
)


(6,583
)Investment in affiliate








(300
)






Proceeds from disposal of fixed assets








1,113







Net cash used in investing activities




(37,464
)


(190,047
)


(538,465
)


(73,817
)Cash flows from financing activities:Capital contributed by minority interest shareholder








9,850



57,800



7,924Net proceeds from issuance of preference shares








420,028







Net proceeds from issuance of ordinary shares




29,296



1,060,515







Proceeds from exercise of stock options












6,690



917Proceeds from short-term borrowings




20,000



475,720



1,570,106



215,242Payment of short-term borrowings








(99,820
)


(985,005
)


(135,032
)Payment of long-term borrowings












(16,000
)


(2,193
)Proceeds from long-term borrowings








15,000







Utilization of notes payables




20,000











Payment of notes payables












(14,020
)


(1,922
)Dividends paid to preference shareholders








(7,226
)






Repayment of advances to related parties




18,000











Advances from related parties




146,400



114,900



74,633



10,231Repayment of advances from related parties




(116,121
)


(145,121
)






Net cash provided by financing activities




117,575



1,843,846



694,204



95,167Effect of changes in exchange rate on cash












(15,475
)


(2,121
)Net increase (decrease) in cash and cash equivalents




3,529



1,130,738



(864,864
)


(118,562
)Cash and cash equivalents at the beginning of year




3,525



7,054



1,137,792



155,977Cash and cash equivalents at the end of year




7,054



1,137,792



272,928



37,415Supplemental disclosure of cash flow information:Interest paid




123



8,048



31,372



4,301Income tax paid












3,728



511Supplemental schedule of non-cash activities:Acquisition of fixed assets included in account payable, accrued
    expenses and other liabilities




18,171







24,212



3,319Expense paid by a shareholder on behalf of the Group

23


70











   F-5




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##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  CONSOLIDATED
    STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
  Number of





Additional





Retained





TotalOrdinary


Ordinary


Paid-In


Statutory


Earnings


Put


ShareholdersNote


Shares


Shares


Capital


Reserves


(Deficits)


Options


Equity(RMB000)


(RMB000)


(RMB000)


(RMB000)


(RMB000)


(RMB000)Balance as of December 31, 2004






50,175,000



42



29,958







(607
)






29,393Stock compensation expenses


19











501















501Expenses paid on behalf of the Group by a shareholder


23











70















70Proceeds from issuance of common stock






50,175,000



42



29,254















29,296Net income for the year






















14,410







14,410Appropriation of statutory reserves


18















1,496



(1,496
)






Balance as of December 31, 2005






100,350,000



84



59,783



1,496



12,307







73,670Stock compensation expenses


19











22,425















22,425Share-based compensation


20











2,882















2,882Acquisition of put option


17























668



668Exercise of put option


17























(668
)


(668
)Net proceeds from issuance of common stock upon IPO






60,000,000



47



1,060,468















1,060,515Conversion of preference shares


17



79,644,754



62



419,966















420,028Net income for the year






















105,921







105,921Cumulative dividends  preference shares


17



















(7,226
)






(7,226
)Appropriation of statutory reserves


18















14,528



(14,528
)






Balance as of December 31, 2006






239,994,754



193



1,565,524



16,024



96,474







1,678,215Exercise of stock option


20



604,490



1



6,689















6,690Share-based compensation


20











29,640















29,640Shares issued to depository bank


28



1,355,500



1



(1
)














Net income






















148,037







148,037Appropriation of statutory reserves


18















21,524



(21,524
)






Balance as of December 31, 2007






241,954,744



195



1,601,852



37,548



222,987







1,862,582Balance as of December 31, 2007, in US$000










27



219,594



5,147



30,569







255,337    F-6




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
  AS OF DECEMBER 31, 2006 AND 2007 AND
 FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31,
    2007
  1.
    ORGANIZATION
    AND BASIS OF PRESENTATION            Date ofincorporation/

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 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


83
%

Sales of PV products to PRC customersSichuan Leshan Jiayang New Energy Co., Ltd. (Sichuan
    Leshan Jiayang)

April 22, 2006

The PRC


55
%

DormantJiangsu 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


52
%

Manufacturing of silicon ingots     *
    
    Date of acquisition F-7




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Basis
    of Presentation
    Principles
    of Consolidation
    Investments
  The Equity Method of Accounting for
    Investments in Common Stock
    Foreign
    Currency
  Foreign Currency Translation
  Convenience
    Translation
    Use of
    Estimates
    Cash
    and Cash Equivalents
   F-8




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Restricted
    Cash
    Accounts
    Receivable
    Inventories
  work-in-progress
  Fixed
    Assets
    Buildings


20 yearsPlant and machinery


10 yearsFurniture, fixtures and office equipment


5 yearsComputer software


5 yearsMotor vehicles


5 years         Intangible
    Asset
  Land use
    rights
   F-9




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Impairment
    of Long-Lived Assets
    Fair
    Value of Financial Instruments
      Financial
    Instruments  Embedded Foreign Currency
    Derivative
    Revenue
    Recognition
    and/or free-on-board
   F-10




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  No. 04-13, Accounting for Purchases and Sales of Inventory with
    the Same Counterparty
    Cost
    of Revenue
    Research
    and Development Costs
    Advertising
    Expenditure
    Warranty
    Cost
  5-year 10-year 25-year 5-year 10-year 25-year
  Government
    Grant
   F-11




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Income
    Taxes
  Accounting for Income
    Taxes
  Accounting for Uncertainty in Income Taxes an
    Interpretation of FASB Statement No. 109
  and/or
    Value-Added
    Tax (VAT)
    Leases
    Net
    Income Per Share
  Earnings Per Share
 F-12




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock
    Compensation
  Share-Based
    Payment No. 96-18 Accounting for Equity Instruments That Are Issued to
    Other Than Employees for Acquiring, or in Conjunction with
    Selling, Goods or Services
      Comparative
    Financial Statements
    Recent
    Accounting Pronouncements
  Fair Value Measurements
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115
  Business Combinations No. 95-3, Recognition of Liabilities in Connection with a
    Purchase Business Combination
 F-13




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities  an amendment of FASB Statement
    No. 133
  The Hierarchy of Generally Accepted Accounting
    Principles
  Concentration
    of Risks
  Concentration
    of credit risk
       F-14




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Concentration
    of customers
    Concentration
    of suppliers
    Current
    vulnerability due to certain other concentrations
         F-15




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  3.
    ACQUISITION
    OF ASSETS    RMB000


US$000Net assets acquired:Property, plant and equipment


17,685



2,424Intangible assets


82,324



11,285Deferred tax assets


3,792



520Current assets


3,907



536Cash and bank balances


3,233



443Current liabilities


(14,979
)


(2,053
)Deferred tax liability


(9,118
)


(1,250
)Minority interest


(35,593
)


(4,879
)51,251



7,026Cash paid


51,251



7,026       4.
    ACCOUNTS
    RECEIVABLE    As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Beginning balance






11,323



1,552Provision for doubtful debt


11,323



2,070



284Written-off






(10,774
)


(1,477
)Ending Balance


11,323



2,619



359  F-16




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    INVENTORIES 
    NET    As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Raw materials


295,087



299,059



40,997Work-in-progress


56,921



237,486



32,557Finished goods


20,496



191,935



26,312372,504



728,480



99,866     6.
    ADVANCE
    TO SUPPLIERS    7.
    OTHER
    CURRENT ASSETS    As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)VAT recoverable


48,773



132,901



18,219Other receivables


21,908



52,192



7,155Prepaid expenses


4,844



29,385



4,02875,525



214,478



29,402    F-17




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    E-Mei (E-Mei)(Note 10).
  8.
    FIXED
    ASSETS  NET    As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Buildings


37,913



87,040



11,932Plant and machinery


87,204



398,938



54,689Furniture, fixtures and office equipment


3,218



7,074



970Computer software


196



584



80Motor vehicles


2,224



4,966



681Construction-in-progress


83,949



238,268



32,664214,704



736,870



101,016Less: Accumulated depreciation


(7,255
)


(33,986
)


(4,659
)207,449



702,884



96,357     9.
    INTANGIBLE
    ASSETS  NET    As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Land use rightsCost


12,988



95,328



13,068Less: Accumulated amortization


(91
)


(1,046
)


(143
)12,897



94,282



12,925      F-18




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      10.
    LONG-TERM
    DEFERRED EXPENSES  As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Convertible bond issuance costs (Note 29)






44,385



6,085Prepaid rental expenses






170,000



23,305



214,385



29,390   E-Mei, E-Mei E-Meis
  E-Mei E-Mei. E-mei
  No. 01-8, Determining Whether an Arrangement Contains a
    Lease Accounting
    for Leases E-mei
    11.
    INVESTMENT   F-19




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  12.
    BANK
    BORROWINGS  As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Total bank borrowings


410,900



980,002



134,346Comprised of:Short-term


379,900



965,002



132,290Long-term, current portion


16,000



15,000



2,056395,900



980,002



134,346Long-term, non-current portion


15,000







410,900



980,002



134,346       December 31,
    2006
  Amount

Secured/Guaranteed by(RMB000)60,000

Jointly guaranteed by (i) Linyang Electronics, a company
    whose controlling owner is also a significant shareholder of the
    Company, (ii) Qidong Huahong Electronics Co., Ltd., a company
    whose controlling owner is also a significant shareholder of the
    Company, and (iv) the Groups land use right of
    RMB4,695,000 (Note 9)59,900

Jointly guaranteed by (i) Linyang Electronics, a company
    whose controlling owner is also a significant shareholder of the
    Company, (ii) Qidong Huahong Electronics Co., Ltd., companies
    whose controlling owner is also a significant shareholder of the
    Company20,000

Jointly guaranteed by Linyang Electronics, a significant
    shareholder of the Company and his spouse.271,000

Guaranteed by Linyang Electronics Co., Ltd.410,900  F-20




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31,
    2007
  Amount

Secured/Guaranteed by(RMB000)20,000

Guaranteed by Huaerli (Nantong) Electronics Co., Ltd., a company
    whose controlling owner is also a significant shareholder of the
    Company.278,668

Jointly guaranteed by (i) Linyang Electronics Co., Ltd., a
    company whose controlling owner is also a significant
    shareholder of the Company, (ii) a significant shareholder of
    the Company together with his spouse, (iii) Qidong Huahong
    Electronics Co., Ltd., a company whose controlling owner is also
    a significant shareholder of the Company, and (iv) the
    Groups land use right of RMB4,595,937 (US$630,046)(Note 9)103,600

Jointly guaranteed by (i) Linyang Electronics Co., Ltd., (ii)
    Solarfun Power Holdings Co., Ltd.60,000

Jointly guaranteed by (i) Linyang Electronics Co., Ltd., (ii)
    Huaerli (Nantong) Electronics Co., Ltd.497,734

Guaranteed by Linyang Electronics Co., Ltd.20,000

Jointly guaranteed by a significant shareholder of the Company
    and land use rights of RMB19,805,901(US$2,715,146)980,002       13.
    ACCRUED
    EXPENSES AND OTHER LIABILITIES    As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Payables relating to issuance of convertible bonds






44,385



6,085Accrued warranty costs (Note 14)


7,550



20,957



2,873Accrued wages






16,098



2,207Accrued professional service fees


16,311



13,204



1,810Accrued fixed asset purchase






8,781



1,204Accrued processing cost






4,812



660Accrued land estate tax






4,800



658Income tax payable






4,430



607Accrued sales commission






3,015



413Accrued interest expenses






2,186



300VAT payable






1,941



266Embedded foreign currency derivatives


163







Other accrued expenses


5,369



7,352



1,008Other liabilities


4,226



3,434



47133,619



135,395



18,562  F-21




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    14.
    ACCRUED
    WARRANTY COSTS    As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Beginning balance


1,520



7,550



1,035Warranty provision


6,030



23,109



3,168Reversal of expired warranty accrual






(1,520
)


(208
)Warranty claims paid






(8,182
)


(1,122
)Ending balance


7,550



20,957



2,873   15.
    CUSTOMER
    DEPOSITS    16.
    NOTES PAYABLE    17.
    SERIES A
    REDEEMABLE CONVERTIBLE PREFERENCE SHARES     F-22




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        18.
    STATUTORY
    RESERVES      For the year ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)General Reserve Fund


1,496



13,779



21,524



2,951Enterprise Expansion Fund






749







Staff Welfare and Bonus Fund














1,496



14,528



21,524



2,951   19.
    STOCK
    COMPENSATION EXPENSE   F-23




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        20.
    SHARE
    OPTION PLANS      WeightedWeighted


averageaverage


remaining


AggregateNumber of


exercise


contractual


intrinsicoptions


price


life


value(US$)


(Years)


(US$)Outstanding, January 1, 2006






Granted


8,012,998



1.80Exercised






Forfeited/Cancelled






Outstanding, December 31, 2006


8,012,998



1.80Granted


4,905,667



2.96Exercised


(504,500
)


1.80







2,223,455Forfeited


(4,308,665
)


1.83Outstanding, December 31, 2007


8,105,500



2.48



8.92



32,827,275Vested and expected to be vested at December 31, 2007


8,105,500



1.81



8.92



8,420,480Exercisable at December 31, 2007


1,279,500



1.82



8.92



6,026,445  F-24




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                  WeightedaverageNumber of


grant dateRSUs


fair value(US$)Unvested, January 1, 2007






Granted


59,994



16.35Vested


(19,998
)


16.35Forfeited/Cancelled






Unvested, December 31, 2007


39,996



16.35    F-25




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Granted in 2006

Granted in 2007Risk-free interest rate

4.40%

3.85% - 5.05%Expected life (years)

5.24 - 6.25 years

5.25 - 6.29 yearsExpected dividend yield



Expected volatility

73%

65% - 86%Fair value of options at grant date per share

From US$1.76 to US$1.85

From US$1.32 to US$4.87       For the year ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Cost of revenue






123



3,200



439Selling expenses






19



905



124General and administrative expenses






2,223



24,489



3,357Research and development expenses






517



1,046



143



2,882



29,640



4,063   21.
    GOVERNMENT
    GRANT   F-26




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    22.
    INCOME
    TAXES  Current
    Taxation
                For the year ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Cayman Islands






(28,234
)


(58,851
)


(8,068
)The PRC


14,314



131,324



211,222



28,95614,314



103,090



152,371



20,888     For the year ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Current






(172
)


(8,158
)


(1,118
)Deferred


96



3,304



700



9696



3,132



(7,458
)


(1,022
)  F-27




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Year Ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Income tax computed at the statutory tax rate at 33%


(4,723
)


(34,020
)


(50,282
)


(6,893
)Non-deductible expenses


(884
)


(4,337
)


(1,600
)


(219
)Tax holidays


4,424



39,636



51,708



7,088Preferential tax rate


983



8,808



13,018



1,785Tax rate differences






(10,049
)


(19,601
)


(2,687
)Deferred tax benefit including change in tax law


96



3,304



355



49Changes in the valuation allowance


200



(210
)


(1,056
)


(145
)96



3,132



(7,458
)


(1,022
)     For the year ended December 31,2005


2006


2007


2007(RMB)


(RMB)


(RMB)


(US$)Basic


0.10



0.47



0.22



0.03Diluted


0.08



0.34



0.22



0.03        F-28




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Deferred
    taxation
    As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Deferred tax assets:Current:- Warranty provision


820



2,620



359- Social welfare provision


367







- Provision for inventory






79



11- Allowance for doubtful accounts


1,262



327



45- Stock compensation expenses


693







Net current deferred tax assets


3,142



3,026



415Non-Current:- Pre-operating expenses






1,340



184- Tax losses


210



936



128- Fixed assets


258



6,576



901- Long-term deferred expense






260



36- Other






35



5Valuation allowance


(210
)


(4,380
)


(601
)Net non-current deferred tax assets


258



4,767



653Deferred tax liabilities:Non-Current:- Land use rights






9,038



1,239      F-29




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    FIN 48
    Implementation
    and/or
  23.
    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
    CompanyNantong Linyang Intelligent Equipment Co., Ltd.
    (Intelligent Equipment)

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
    CompanyLinyang Agricultural Development (Nantong) Co., Ltd.
    (Linyang Agricultural)

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
    CompanyJiangsu Qitian Group Co., Ltd. (Qitian Group)

Shareholder of a subsidiary of the Company  F-30




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Significant
    Related Party Transactions
    For the year ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Purchase of raw materials from:- Linyang Electronics


81



2,631



24,355



3,339- Jiaotong Engineering










297



41- Huerli Nantong


15,864



23,762







Purchase of fixed assets and land use rights from:- Qidong Huahong






26,460







- Linyang Electronics










1,207



165- Jiaotong Engineering










681



93Advances from:- Linyang Electronics


129,400



105,900







- Huerli Nantong


35,000











- Linyang Agricultural






9,000







Loans from:- Hong Kong Huaerli










73,046



10,014- Nantong Linyang










7,000



960- Qitian Group










4,253



583Expenses incurred in relation to guarantee provided by- Linyang Electronics










6,717



921Factory leased from- Linyang Electronics










1,234



169          F-31




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Balances
    with Related Parties
    As of December 31,2006


2007


2007(RMB000)


(RMB000)


(US$000)Amount due from related parties:- Others


153



920



126- Weighted average balances


153



230



32Amount due to related parties:- Hong Kong Huaerli






73,046



10,014- Linyang Electronics


2,590



7,378



1,011- Nantong Linyang






7,221



990- Qitian Group






3,452



473- Qidong Huahong


21,896







- Others






1,642



22524,486



92,739



12,713     For the year ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)- Hong Kong Huaerli










14,609



2,003- Linyang Electronics


21,950



2,590



3,192



438- Nantong Linyang










2,844



390- Qitian Group










1,244



171- Qidong Huahong


60



21,896



4,850



665- Others


6,385







291



40       24.
    EMPLOYEE
    DEFINED CONTRIBUTION PLAN   F-32




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  25.
    COMMITMENTS
    AND CONTINGENCIES  Outstanding
    Capital Contribution
    Acquisition
    of machineries
    Operating
    lease commitments
    For the year endedDecember 31, 2007(RMB000)


(US$000)Within 1 year


31,492



4,317Within 1-2 years


2,184



299Within 2-3 years


2,160



296Within 3-4 years


2,008



275Within 4-5 years


43



6Total


37,887



5,193     Purchase
    of raw materials
    For the year endedDecember 31, 2007(RMB000)


(US$000)Within 1 year


2,545,547



348,963Within 1-2 years


1,471,239



201,689Within 2-3 years


1,113,027



152,582Over 3 years


3,675,317



503,8418,805,130



1,207,075   Purchase
    of land use right
   F-33




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the year endedDecember 31, 2007(RMB000)

(US$000)Within 1 year


26,772



3,670   Guarantees
    and indemnification
    Guarantors
    Accounting and Disclosure Requirements for Guarantees, Including
    Indirect Guarantees of Indebtedness of Others,
  Income
    Taxes
    26.
    SEGMENT
    REPORTING    For the year ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Germany


126,555



197,728



1,195,788



163,928Spain






179,139



584,525



80,131The PRC


33,667



36,219



200,615



27,502Italy


5,946



204,715



92,900



12,735Others


10



13,106



321,307



44,048Total net revenue


166,178



630,907



2,395,135



328,344    F-34




---



##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  27.
    MAJOR
    CUSTOMERS    For the year ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Solar Projekt Energysystem GmbH


13,140



70,409



300,742



41,228S.E. Project S.R.L.






203,133



*



*Social Capital S.L.






175,939



*



*Suntaics


84,438



54,856



*



*     *
    
    Less than 10%  28.
    INCOME
    PER SHARE    For the year ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Numerator:Net income


14,410



105,921



148,036



20,294Dividends allocated to Preference Shareholders






(7,226
)






Income attributable to ordinary shareholders


14,410



98,695



148,036



20,294Denominator:Number of shares outstanding, opening


50,175,000



100,350,000



239,994,754



239,994,754Retroactive adjustment for bonus element in rights offering(i)


1,819,399











Weighted average number of shares issued during the year


2,517,141











New ordinary shares issued from IPO






1,972,603







Conversion of Preference Share






1,309,229







New ordinary shares issued in connection with exercise of
    options and vesting of RSUs










59,932



59,932Weighted average number of shares outstanding  basic


54,511,540



103,631,832



240,054,686



240,054,686Weighted average number of partially paid share subscriptions


11,854,929











Effect of Preference Shares






38,476,628







Weighted average number of shares outstanding  diluted


66,366,469



142,108,460



240,054,686



240,054,686Basic net income per share


RMB 0.26



RMB 0.95



RMB 0.62


US $
0.08Diluted net income per share


RMB 0.22



RMB 0.74



RMB 0.62


US $
0.08     (i)
    
    On July 12, 2005, Linyang Solarfun issued a rights offering
    to its then existing ordinary shareholders. Since the
    subscription price was less than the fair value of the shares,
    as determined based on an independent appraisal performed by
    Censere Holdings Limited, the rights offering is deemed to
    contain a bonus element similar to a stock dividend and is
    accounted for as such. Accordingly, the basic and diluted
    earnings per share are adjusted retroactively for the bonus
    element of the right offering for all periods presented. In
    addition, ordinary shares which were not fully paid for until
    December 12, 2005 were included in the computation of
    diluted income per share using the treasury stock method. F-35




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##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     29.
    SUBSEQUENT
    EVENTS    Disposal
    of Leshan Jiayang
    Issuance
    of Convertible Bonds and Sale of ADSs
        Establishment
    of Solarfun Deutschland
   F-36




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##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Purchase
    Contracts
    Acquisition
    of Yangguang Solar
    30.
    ADDITIONAL
    FINANCIAL INFORMATION OF THE COMPANY   F-37




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##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Balance
    Sheets
  As of December 31,Note


2006


2007


2007(RMB000)


(RMB000)


(US$000)ASSETSCurrent assets:Cash and cash equivalents






1,080,706



6,613



907Other receivables






9,644



2,290



314Deferred expenses


c



4,216



1,902



260Amount due from subsidiaries


b



18,742



1,015,353



139,192Amount due from shareholders


b



578







Total current assets






1,113,886



1,026,158



140,673Non-current assets:Long-term deferred expenses


c







44,385



6,085Investment in subsidiaries


a



608,914



856,675



117,440Total non-current assets






608,914



901,060



123,525Total assets






1,722,800



1,927,218



264,198LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Other payables






16,311



48,414



6,637Amount due to shareholders


b



7,572







Amount due to subsidiaries


b



20,702



16,222



2,224Total current liabilities






44,585



64,636



8,861Shareholders EquityOrdinary shares (par value US$0.0001 per share; 400,000,000 and
    500,000,000 shares authorized; 239,994,754 shares and
    241,954,744 shares issued and outstanding at
    December 31, 2006 and 2007, respectively)






193



195



27Additional paid-in capital






1,565,524



1,601,852



219,594Retained earnings






112,498



260,535



35,716Total shareholders equity






1,678,215



1,862,582



255,337Total liabilities and shareholders equity






1,722,800



1,927,218



264,198  F-38




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##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Statements
    of Income
  For the year ended December 31,Note


2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Net revenue


















Cost of revenue


















Gross loss


















Operating expenses










(24,755
)


(11,842
)


(1,623
)Operating loss










(24,755
)


(11,842
)


(1,623
)Share of profit from subsidiaries


a



14,410



134,164



215,826



29,587Interest income










107



13,757



1,886Exchange loss










(3,595
)


(69,704
)


(9,556
)Income before tax






14,410



105,921



148,037



20,294Income tax expense


















Net income






14,410



105,921



148,037



20,294Net income attributable to ordinary shareholders






14,410



98,695



148,037



20,294   Statements
    of Cash Flows
  For the Year Ended December 31,2005


2006


2007


2007(RMB000)


(RMB000)


(RMB000)


(US$000)Cash flows from operating activities










(9,787
)


(1,342
)Net cash used in investing activities


(29,296
)


(593,980
)


(1,070,996
)


(146,820
)Net cash provided by financing activities


29,296



1,674,686



6,690



917Net increase(decrease) in cash and cash equivalents






1,080,706



(1,074,093
)


(147,245
)Cash and cash equivalents at the beginning of year










1,080,706



148,152Cash and cash equivalents at the end of year






1,080,706



6,613



907   Notes
    to the Financial Statements of the Company
  (a)
    Basis of presentation    The Equity Method of Accounting for
    Investments in Common Stock
   F-39




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##### Table of Contents



SOLARFUN
    POWER HOLDINGS CO., LTD.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (b)
    Related party transactions and balances        (c)
    Deferred expenses and long-term deferred expenses    (d)
    Commitments    (e)
    Foreign currencies   F-40