##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended: December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 For the transition period from  to
 Commission file number: 1- 33208
 HANWHA SOLARONE CO., LTD.
 (Exact name of Registrant as specified in its charter)
 Not Applicable
    
    Cayman Islands(Translation of Registrants name into English)
    
    (Jurisdiction of Incorporation or Organization)
 888 Linyang Road, Qidong, Jiangsu Province 226200, Peoples Republic of China  (Address of Principal Executive Offices)
 Mr. Gareth Kung
Chief Financial Officer
Telephone: 3852-1666
Fax: 3852-1558
RM 1801, Building No. 1
Zendai Wudaokou Plaza
1199 Minsheng Road
Shanghai 200135
Peoples Republic of China  (Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredAmerican Depositary Shares 
Ordinary Shares, par value US$0.0001 per share
    
    Nasdaq Global Market
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
 Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of
the close of the period covered by the annual report.
 Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  U.S. GAAP þ
    
    International Financial Reporting
Standards as issued
by the International Accounting
Standards Board o
    
    Other o
  o o
 Yes o No þ
  Yes
o No o




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##### 



Table of Contents
 ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
    
    
    1ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    1ITEM 3 KEY INFORMATION
    
    
    1ITEM 4 INFORMATION ON THE COMPANY
    
    
    22ITEM 4A UNRESOLVED STAFF COMMENTS
    
    
    35ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    35ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    54ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    64ITEM 8 FINANCIAL INFORMATION
    
    
    66ITEM 9 THE OFFER AND LISTING
    
    
    67ITEM 10 ADDITIONAL INFORMATION
    
    
    68ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    73ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    73ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    75ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    75ITEM 15 CONTROLS AND PROCEDURES
    
    
    76ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    77ITEM 16B CODE OF ETHICS
    
    
    77ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    77ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    78ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    78ITEM 16F CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    78ITEM 16G CORPORATE GOVERNANCE
    
    
    78ITEM 17 FINANCIAL STATEMENTS
    
    
    79ITEM 18 FINANCIAL STATEMENTS
    
    
    79ITEM 19 EXHIBITS
    
    
    79Exhibit 1.3Exhibit 4.18Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 23.1




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##### Table of Contents



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




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##### Table of Contents



(1)
    
    Hanwha SolarOne U.S.A. Inc., formerly known as Solarfun Power U.S.A. Inc.;(2)
    
    Hanwha SolarOne Investment Holding Ltd., formerly known as Linyang Solar Power
Investment Holding Ltd.;(3)
    
    Hanwha SolarOne Hong Kong Limited, formerly known as Solarfun Power Hong Kong
Limited;(4)
    
    Hanwha SolarOne (Qidong) Co., Ltd., formerly known as Jiangsu Linyang Solarfun
Co., Ltd.;(5)
    
    Hanwha SolarOne Deutschland GmbH, formerly known as Solarfun Power Deutschland
GmbH;(6)
    
    Hanwha Solar Engineering Research and Development Center Co., Ltd.,
formerly known as Jiangsu Linyang Solarfun Engineering Research and Development
Center Co., Ltd.;(7)
    
    Hanwha SolarOne Technology Co., Ltd., formerly known as Jiangsu Yangguang Solar
Technology Co., Ltd.; and(8)
    
    Hanwha Solar Electric Power Engineering Co., Ltd., formerly known as
Jiangsu Linyang Solar Electric Power Engineering Co., Ltd.
  ii




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##### Table of Contents



PART I
 
 ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
  
 ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3 KEY INFORMATION
 A. Selected Financial Data
  Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(In thousands, except share and per share data)Consolidated Statement
of Operations DataNet revenues
    
    
    630,907
    
    
    
    2,395,135
    
    
    
    4,949,068
    
    
    
    3,778,316
    
    
    
    7,526,993
    
    
    
    1,140,453Cost of revenues
    
    
    (446,530
    )
    
    
    (1,997,355
    )
    
    
    (4,905,147
    )
    
    
    (3,341,936
    )
    
    
    (5,960,648
    )
    
    
    (903,128
    )Gross profit
    
    
    184,377
    
    
    
    397,780
    
    
    
    43,921
    
    
    
    436,380
    
    
    
    1,566,345
    
    
    
    237,325Operating expensesSelling expenses
    
    
    (11,883
    )
    
    
    (62,777
    )
    
    
    (87,913
    )
    
    
    (105,454
    )
    
    
    (178,057
    )
    
    
    (26,978
    )General and
administrative expenses
    
    
    (52,214
    )
    
    
    (113,756
    )
    
    
    (143,340
    )
    
    
    (180,989
    )
    
    
    (190,594
    )
    
    
    (28,878
    )Research and
development expenses
    
    
    (6,523
    )
    
    
    (27,440
    )
    
    
    (19,679
    )
    
    
    (32,025
    )
    
    
    (53,500
    )
    
    
    (8,106
    )Government grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,755
    
    
    
    2,842Total operating expenses
    
    
    (70,620
    )
    
    
    (203,973
    )
    
    
    (250,932
    )
    
    
    (318,468
    )
    
    
    (403,396
    )
    
    
    (61,120
    )Operating profit (loss)
    
    
    113,757
    
    
    
    193,807
    
    
    
    (207,011
    )
    
    
    117,912
    
    
    
    1,162,949
    
    
    
    176,205Interest expenses
    
    
    (8,402
    )
    
    
    (25,978
    )
    
    
    (103,146
    )
    
    
    (157,907
    )
    
    
    (161,677
    )
    
    
    (24,497
    )Interest income
    
    
    1,326
    
    
    
    16,244
    
    
    
    10,004
    
    
    
    5,002
    
    
    
    6,141
    
    
    
    930Exchange losses
    
    
    (4,346
    )
    
    
    (25,628
    )
    
    
    (35,230
    )
    
    
    (23,814
    )
    
    
    (89,272
    )
    
    
    (13,526
    )Changes in fair value
of derivative contracts
    
    
    (163
    )
    
    
    
    
    
    
    83,090
    
    
    
    9,594
    
    
    
    77,531
    
    
    
    11,747Changes in fair value
of conversion feature
of convertible bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,887
    )
    
    
    31,623
    
    
    
    4,791Other income
    
    
    902
    
    
    
    1,507
    
    
    
    15,018
    
    
    
    6,286
    
    
    
    24,353
    
    
    
    3690Other expenses
    
    
    (836
    )
    
    
    (9,670
    )
    
    
    (25,604
    )
    
    
    (11,835
    )
    
    
    (5,903
    )
    
    
    (894
    )Government grants
    
    
    852
    
    
    
    2,089
    
    
    
    3,480
    
    
    
    7,661
    
    
    
    9,595
    
    
    
    1,454Income (loss) before
income taxes
    
    
    103,090
    
    
    
    152,371
    
    
    
    (259,399
    )
    
    
    (120,988
    )
    
    
    1,055,340
    
    
    
    159,900Income tax
benefit/(expenses)
    
    
    3,132
    
    
    
    (7,458
    )
    
    
    (6,519
    )
    
    
    (23,928
    )
    
    
    (297,983
    )
    
    
    (45,149
    )Consolidated net income
(loss)
    
    
    106,222
    
    
    
    144,913
    
    
    
    (265,918
    )
    
    
    (144,916
    )
    
    
    757,357
    
    
    
    114,751Net (income) loss
attributable to
non-controlling
interest
    
    
    (7,527
    )
    
    
    3,124
    
    
    
    (14,573
    )
    
    
    (311
    )
    
    
    
    
    
    
    Net income (loss)
attributable to
shareholders
    
    
    98,695
    
    
    
    148,037
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    757,357
    
    
    
    114,751
  1




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##### Table of Contents



Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(In thousands, except share and per share data)Net income (loss)
attributable to
shareholders per share
Hanwha SolarOne Co.,
Ltd. Basic
    
    
    0.95
    
    
    
    0.62
    
    
    
    (1.11
    )
    
    
    (0.53
    )
    
    
    2.43
    
    
    
    0.37 Diluted
    
    
    0.74
    
    
    
    0.62
    
    
    
    (1.11
    )
    
    
    (0.53
    )
    
    
    2.36
    
    
    
    0.36Number of shares used in
computation of net
income (loss) per share Basic
    
    
    103,631,832
    
    
    
    240,054,686
    
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    311,263,308
    
    
    
    311,263,308 Diluted
    
    
    142,108,460
    
    
    
    240,054,686
    
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    357,272,605
    
    
    
    357,272,605Net income (loss) per ADS Basic
    
    
    4.76
    
    
    
    3.08
    
    
    
    (5.55
    )
    
    
    (2.65
    )
    
    
    12.17
    
    
    
    1.84 Diluted
    
    
    3.72
    
    
    
    3.08
    
    
    
    (5.55
    )
    
    
    (2.65
    )
    
    
    11.82
    
    
    
    1.79Number of ADS used in
computation of net
income (loss) per ADS Basic
    
    
    20,726,366
    
    
    
    48,010,937
    
    
    
    50,531,923
    
    
    
    54,813,552
    
    
    
    62,252,662
    
    
    
    62,252,662 Diluted
    
    
    28,421,692
    
    
    
    48,010,937
    
    
    
    50,531,923
    
    
    
    54,813,552
    
    
    
    71,454,521
    
    
    
    71,454,521
 Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)Other Financial DataGross margin
    
    
    29.2
    %
    
    
    16.6
    %
    
    
    0.9
    %
    
    
    11.5
    %
    
    
    20.8
    %
    
    
    20.8
    %Operating margin
    
    
    18.0
    %
    
    
    8.1
    %
    
    
    (4.2
    )%
    
    
    3.1
    %
    
    
    15.5
    %
    
    
    15.5
    %Net margin
    
    
    16.8
    %
    
    
    6.2
    %
    
    
    (5.7
    )%
    
    
    (3.8
    )%
    
    
    10.1
    %
    
    
    10.1
    %Net cash (used in)
provided by
operating
activities (in
thousands)
    
    
    (523,061
    )
    
    
    (1,020,603
    )
    
    
    (674,040
    )
    
    
    689,333
    
    
    
    268,438
    
    
    
    40,672Other Operating Data
 Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(MW)
    
    
    (MW)
    
    
    (MW)
    
    
    (MW)
    
    
    (MW)Amount of PV modules shipped (including PV module
processing)
    
    
    19.0
    
    
    
    78.4
    
    
    
    172.8
    
    
    
    313.4
    
    
    
    797.9
 Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(RMB/W)
    
    
    (RMB/W)
    
    
    (RMB/W)
    
    
    (RMB/W)
    
    
    (RMB/W)
    
    
    (US$/W)Average selling price of PV modules
(excluding PV module processing)
    
    
    31.75
    
    
    
    28.20
    
    
    
    26.77
    
    
    
    15.27
    
    
    
    11.58
    
    
    
    1.75
  2




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##### Table of Contents



As of December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(In thousands)Consolidated Balance
Sheet DataCash and cash equivalents
    
    
    1,137,792
    
    
    
    272,928
    
    
    
    410,901
    
    
    
    645,720
    
    
    
    1,630,777
    
    
    
    247,087Restricted cash
    
    
    33,822
    
    
    
    42,253
    
    
    
    88,137
    
    
    
    60,539
    
    
    
    100,490
    
    
    
    15,226Accounts receivable  net
    
    
    147,834
    
    
    
    430,692
    
    
    
    319,537
    
    
    
    587,488
    
    
    
    1,282,807
    
    
    
    194,365Notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    1,515Inventoriesnet
    
    
    372,504
    
    
    
    728,480
    
    
    
    731,708
    
    
    
    783,973
    
    
    
    790,773
    
    
    
    119,814Advance to suppliers 
net
    
    
    238,178
    
    
    
    640,118
    
    
    
    1,145,614
    
    
    
    540,145
    
    
    
    764,063
    
    
    
    115,767Other current assets
    
    
    75,525
    
    
    
    214,478
    
    
    
    481,749
    
    
    
    180,315
    
    
    
    255,432
    
    
    
    38,702Deferred tax assets  net
    
    
    3,400
    
    
    
    7,793
    
    
    
    62,481
    
    
    
    76,904
    
    
    
    108,370
    
    
    
    16,419Derivative contracts
    
    
    
    
    
    
    
    
    
    
    39,665
    
    
    
    7,360
    
    
    
    7,489
    
    
    
    1,135Amount due from related
parties
    
    
    153
    
    
    
    920
    
    
    
    19
    
    
    
    12,458
    
    
    
    42,819
    
    
    
    6,488Long-term prepayments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    439,617
    
    
    
    394,282
    
    
    
    59,740Fixed assets  net
    
    
    207,449
    
    
    
    702,884
    
    
    
    1,492,575
    
    
    
    1,586,283
    
    
    
    2,084,027
    
    
    
    315,762Intangible assets  net
    
    
    12,897
    
    
    
    94,282
    
    
    
    212,736
    
    
    
    208,563
    
    
    
    205,763
    
    
    
    31,176Long-term deferred
expenses
    
    
    
    
    
    
    214,385
    
    
    
    37,467
    
    
    
    33,158
    
    
    
    27,273
    
    
    
    4,132Goodwill
    
    
    
    
    
    
    
    
    
    
    134,735
    
    
    
    134,735
    
    
    
    134,735
    
    
    
    20,414Total assets
    
    
    2,230,432
    
    
    
    3,349,513
    
    
    
    5,157,324
    
    
    
    5,297,258
    
    
    
    7,839,100
    
    
    
    1,187,742Short-term bank borrowings
    
    
    379,900
    
    
    
    965,002
    
    
    
    1,098,832
    
    
    
    404,764
    
    
    
    318,919
    
    
    
    48,321Long-term bank
borrowings, current
portion
    
    
    16,000
    
    
    
    15,000
    
    
    
    30,000
    
    
    
    120,000
    
    
    
    215,000
    
    
    
    32,576Accounts payable
    
    
    51,452
    
    
    
    141,709
    
    
    
    217,026
    
    
    
    441,768
    
    
    
    478,129
    
    
    
    72,444Notes payable
    
    
    14,020
    
    
    
    
    
    
    
    39,341
    
    
    
    186,921
    
    
    
    181,265
    
    
    
    27,464Accrued expenses and
other liabilities
    
    
    33,619
    
    
    
    135,395
    
    
    
    189,028
    
    
    
    191,895
    
    
    
    404,826
    
    
    
    61,337Customer deposits
    
    
    17
    
    
    
    27,628
    
    
    
    9,494
    
    
    
    59,685
    
    
    
    33,538
    
    
    
    5,082Deferred tax liabilities
    
    
    
    
    
    
    9,038
    
    
    
    28,571
    
    
    
    26,566
    
    
    
    25,977
    
    
    
    3,936Unrecognized tax benefit
    
    
    
    
    
    
    
    
    
    
    27,385
    
    
    
    27,385
    
    
    
    143,473
    
    
    
    21,738Derivative contracts
    
    
    
    
    
    
    
    
    
    
    5,792
    
    
    
    1,148
    
    
    
    8,047
    
    
    
    1,219Amount due to related
parties
    
    
    24,486
    
    
    
    92,739
    
    
    
    39,766
    
    
    
    16,765
    
    
    
    13,183
    
    
    
    1,997Long-term bank borrowings
    
    
    15,000
    
    
    
    
    
    
    
    170,000
    
    
    
    350,000
    
    
    
    135,000
    
    
    
    20,455Convertible bonds
    
    
    
    
    
    
    
    
    
    
    1,178,969
    
    
    
    658,653
    
    
    
    687,435
    
    
    
    104,157Total liabilities
    
    
    542,066
    
    
    
    1,386,511
    
    
    
    3,034,204
    
    
    
    2,485,550
    
    
    
    2,644,792
    
    
    
    400,726Redeemable ordinary shares
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    55
    
    
    
    55
    
    
    
    8Total shareholders equity
    
    
    1,678,215
    
    
    
    1,862,582
    
    
    
    2,123,065
    
    
    
    2,811,653
    
    
    
    5,194,253
    
    
    
    787,008Total liabilities,
redeemable ordinary
shares and shareholders
equity
    
    
    2,230,432
    
    
    
    3,349,513
    
    
    
    5,157,324
    
    
    
    5,297,258
    
    
    
    7,839,100
    
    
    
    1,187,742
  3




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Exchange Rate Information
   Renminbi per U.S. Dollar Noon Buying Rate(1)PeriodEnd
    
    
    Average(2)
    
    
    Low
    
    
    High2006
    
    
    7.8041
    
    
    
    7,9579
    
    
    
    7.8041
    
    
    
    8.07022007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.2946
    
    
    
    7.81272008
    
    
    6.8225
    
    
    
    6.9193
    
    
    
    6.7800
    
    
    
    7.29462009
    
    
    6.8259
    
    
    
    6.8295
    
    
    
    6.8176
    
    
    
    6.84702010
    
    
    6.6000
    
    
    
    6.7603
    
    
    
    6.6000
    
    
    
    6.8330November 2010
    
    
    6.6670
    
    
    
    6.6538
    
    
    
    6.6630
    
    
    
    6.6892December 2010
    
    
    6.6000
    
    
    
    6.6497
    
    
    
    6.6000
    
    
    
    6.6745January 2011
    
    
    6.6017
    
    
    
    6.5964
    
    
    
    6.5809
    
    
    
    6.6364February 2011
    
    
    6.5713
    
    
    
    6.5761
    
    
    
    6.5520
    
    
    
    6.5965March 2011
    
    
    6.5483
    
    
    
    6.5645
    
    
    
    6.5483
    
    
    
    6.5743April 2011
    
    
    6.4900
    
    
    
    6.5267
    
    
    
    6.4900
    
    
    
    6.5477May 2011
(through May 27, 2011)
    
    
    6.4920
    
    
    
    6.4965
    
    
    
    6.4913
    
    
    
    6.5073
 Notes:(1)
    
    For periods prior to January 1, 2009, the exchange rates reflect the noon buying rates as reported by the Federal Reserve
Bank of New York. For periods after January 1, 2009, the exchange rates reflect the exchange rates as set forth in the H.10
statistical release of the Federal Reserve Board.(2)
    
    Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates
during the relevant period. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
   4




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D. Risk Factors
 Risks Related to Our Company and Our Industry
 Demand for our PV products has been, and may continue to be, adversely affected by
volatile market and industry trends.
  The average selling price of our PV products may continue to decrease.
  As silicon supply increases, the corresponding increase in the global supply of PV
modules may adversely affect our ability to increase or maintain our market share.
  The reduction or elimination of government subsidies and economic incentives for on-grid
solar energy applications could have a material adverse effect on our business and
prospects.
    5




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Our ability to adjust our raw material costs may be limited as a result of our entering
into multi-year supply agreements with many of our silicon and silicon wafer suppliers,
and it may be difficult for us to respond in a timely manner to rapidly changing market
conditions, which could materially and adversely affect our cost of revenues and
profitability.
   We may be subject to legal, administrative or other proceedings in connection with the
multi-year supply agreements we entered into previously and such proceedings can be both
costly and time consuming and may significantly divert the efforts and resources of our
management personnel.
   6




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Prepayments we have provided to our silicon and silicon wafer suppliers expose us to the credit risks of
such suppliers and may not be recovered, which could in turn have a material adverse effect on our
liquidity.
  Evaluating our business and prospects may be difficult because of our limited operating
history, and our past results may not be indicative of our future performance.
  Our future success substantially depends on our ability to manage our production
effectively and to reduce our manufacturing costs. Our ability to achieve such goals is
subject to a number of risks and uncertainties.
  
    
    our ability to continue to re-negotiate our existing multi-year supply
agreements;
 
    
    our ability to maintain our quality level and keep pace with changes in
technology;
 
    
    our ability to source various raw materials;
 
    
    our ability to adjust inventory levels to respond to rapidly changing market
demand;
 
    
    delays in obtaining or denial of required approvals by relevant government
authorities; and
 
    
    diversion of significant management attention and other resources to other
matters.
   7




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We depend on a limited number of customers and countries for a high percentage of our
revenue and the loss of, or a significant reduction in orders from, any of these
customers or countries, 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 local policies toward solar projects in countries where we
receive most orders;
 
    
    any adverse change in the bilateral or multilateral trade relationships between
China and the United States or European countries, particularly Germany; and
 
    
    failure of any of our significant customers to make timely payment for our
products.
    Our dependence on a limited number of suppliers for a substantial majority of
silicon-related materials may 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.
   8




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Our failure to obtain sufficient quantities of silicon-related materials in a timely
manner could disrupt our operations, prevent us from operating at full capacity or limit
our ability to expand as planned, which would reduce, and limit the growth of, our
manufacturing output and revenue.
  
    
    the terms of our silicon and silicon wafer contracts with, or purchase orders
to, our suppliers may be altered or cancelled as a result of our ongoing
re-negotiations with them;
 
    
    there are a limited number of silicon and silicon wafer suppliers, and many of
our competitors also purchase silicon-related materials from these suppliers and
may have longer and stronger relationship with these suppliers than we do;
 
    
    some of our silicon and silicon wafer suppliers do not manufacture silicon
themselves, but instead purchase their requirements from other vendors. It is
possible that these suppliers will not be able to obtain sufficient silicon or
silicon wafers to satisfy their contractual obligations to us; and
 
    
    our purchase of silicon-related materials is subject to the business risk of
our suppliers, one or more of which may go out of business for any one of a number
of reasons beyond our control in the current economic environment.
  We currently have a significant amount of debt outstanding. Our substantial indebtedness
may limit our future financing capabilities and could adversely affect our business,
financial condition and results of operations.
  
    
    making it more difficult for us to fulfill payment and other obligations under
our outstanding debt, including repayment of our long- and short-term credit
facilities should we be unable to obtain extensions for any such facilities before
they mature, as well as our obligations under our convertible bonds;
 
    
    triggering an event of default if we fail to comply with any of our payment or
other obligations contained in our debt agreements, which could result in
cross-defaults causing all or a substantial portion of our debt to become
immediately due and payable;
 
    
    reducing the availability of cash flow to fund working capital, capital
expenditures, acquisitions and other general corporate purposes, and adversely
affecting our ability to obtain additional financing for these purposes;
 
    
    potentially increasing the cost of any additional financing; and
 
    
    putting pressure on our ADS price due to concerns of our inability to repay our
debt and making it more difficult for us to conduct equity financings in the
capital markets.
   9




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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 in the world.
  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, our expansion
may be materially and adversely affected.
  
    
    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.
  Changes in international trade policies and international barriers to trade may adversely
affect our ability to export our products worldwide.
  If we are unable to compete in the highly competitive PV market, our revenue and profits
may decrease and we may lose market share.
  
    
    manufacturing capacity;
 
    
    power efficiency;
 
    
    product offerings and quality of products;
 
    
    price;
 
    
    strength of supply chain and distribution network;
 
    
    after-sales services; and
 
    
    brand name recognition.
  10




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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 also depends on our ability to make strategic acquisitions and
investments and to establish and maintain strategic alliances, and failure to do so could
have a material adverse effect on our market penetration, revenue growth and
profitability. In addition, such strategic acquisitions, alliances and investments
themselves entail significant risks that could materially and adversely affect our
business.
   11




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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 or warranty claims against us could result in adverse publicity and potentially
significant monetary damages.
    If PV technology is not suitable for widespread adoption, or sufficient demand for PV
products does not develop or takes longer to develop than we anticipated, our sales may
not continue to increase or may even decline, and our revenue and profitability would be
reduced.
  
    
    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.
  12




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One of our existing shareholders has substantial influence over our company and its
interests may not be aligned with the interests of our other shareholders.
  Existing regulations and policies governing the electricity utility industry, as well as
changes to regulations and policies affecting PV products, may adversely affect demand
for our products and materially reduce our revenue and profits.
   The lack or inaccessibility of subsidies or 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.
   13




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##### Table of Contents



We may be exposed to infringement or misappropriation claims by third parties,
particularly in jurisdictions outside China which, if determined adversely against us,
could disrupt our business and subject us to significant liability to third parties, as
well as have a material adverse effect on our financial condition and results of
operations.
  
    
    pay damage awards;
 
    
    seek licenses from third parties;
 
    
    pay ongoing royalties;
 
    
    redesign our products; or
 
    
    be restricted by injunctions,
  We may not be able to obtain sufficient patent protection on the technologies embodied in
the PV products we currently manufacture and sell, which could reduce our competitiveness
and increase our expenses.
  We depend on our key personnel, and our business and growth may be severely disrupted if
we lose their services or fail to recruit new qualified personnel.
    14




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##### Table of Contents



Any failure to achieve and maintain effective internal control could have a material
adverse effect on our business, results of operations and the market price of our ADSs.
   We have limited insurance coverage and may incur losses resulting from business
interruptions or product liability claims.
   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.
   15




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##### Table of Contents



Our business benefits from certain PRC government incentives. Expiration of, or changes
to, these incentives could have a material adverse effect on our results of operations.
    Under the EIT, we may be classified as a Resident Enterprise of the PRC. Such
classification would likely result in negative tax consequences to us and could result in
negative tax consequences to our non-PRC shareholders and ADS holders.
   16




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Fluctuations in exchange rates could adversely affect our business as well as result in
foreign currency exchange losses.
       17




---



##### Table of Contents



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.
    Uncertainties with respect to the PRC legal system could have a material adverse effect
on us.
  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.
   18




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##### Table of Contents



Restrictions on currency exchange may limit our ability to receive and use our revenue
effectively.
   PRC regulations relating to the establishment of offshore special purpose companies by
PRC residents may subject our PRC resident shareholders to personal liability and limit
our ability to acquire PRC companies or to inject capital into our PRC subsidiary, limit
our PRC subsidiarys ability to distribute profits to us, or otherwise materially and
adversely affect us.
  We face uncertainties with respect to application of the Circular on Strengthening the
Administration of Enterprise Income Tax for Share Transfer of Non-PRC Resident
Enterprises.
   19




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##### Table of Contents



Labor laws in the PRC may adversely affect our results of operations.
  We face risks related to health epidemics and other outbreaks.
  Risks Related to Our Ordinary Shares and ADSs
 The market price of our ADSs may be volatile.
   
    
    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.
  20




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##### Table of Contents



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.
  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.
    21




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##### Table of Contents



We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than under U.S. law, you may have
less protection for your shareholder rights than you would under U.S. law.
   
    
    recognize or enforce against us or our directors, judgments of courts
of the United States based on certain civil liability provisions of
U.S. securities laws; and
    
    entertain original actions brought in the Cayman Islands, based on
certain civil liability provisions of U.S. securities laws that are
penal in nature.
   You may have difficulty enforcing judgments obtained against us.
  
 ITEM 4 INFORMATION ON THE COMPANY
 A. History and Development of the Company
   22




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##### Table of Contents



http://www.hanwha-solarone.com.
  B. Business Overview
 Overview
    23




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##### Table of Contents



Our Products and Services
  Our Products
 PV Cells
  Dimensions
    
    Conversion
    
    Thickness
    
    MaximumPV Cell Type
    
    (mm×mm)
    
    Efficiency (%)
    
    (EM)
    
    Power (W)Monocrystalline silicon cell
    
    125 × 125
    
    17.3  18.3%
    
    180  200
    
    2.68  2.84156 × 156
    
    17.3  18.3%
    
    180  200
    
    4.13  4.37Multicrystalline silicon cell
    
    156 × 156
    
    15.5  17.0%
    
    180  200
    
    3.77  4.13
     PV Modules
   24




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##### Table of Contents



Dimensions
    
    
    WeightPV Module Manufactured with:
    
    (mm)
    
    
    (Kg)
    
    
    Power (W)Monocrystalline silicon
    
    
    1580 × 808 × 45
    
    
    
    14
    
    
    1601951494 × 1000 × 45
    
    
    
    17
    
    
    1702251652 × 1000 × 50
    
    
    
    21
    
    
    2002551966 × 1000 × 50
    
    
    
    26
    
    
    250300Multicrystalline silicon
    
    
    1580 × 808 × 45
    
    
    
    14
    
    
    1601951494 × 1000 × 45
    
    
    
    17
    
    
    1702251652 × 1000 × 50
    
    
    
    21
    
    
    2002551966 × 1000 × 50
    
    
    
    26
    
    
    250300
  Ingots
and Wafers
   Our Services
   Raw Materials Supply Management
   Silicon-based Raw Materials
   25




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##### Table of Contents



Other Raw Materials
  Production
     26




---



##### Table of Contents



Production Process
  
  
  27




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Quality Control and Certifications
   Capacity Expansion and Technology Upgrade Plans
    28




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##### Table of Contents



Sales and Distribution
    Year Ended December 31,2008
    
    
    2009
    
    
    2010Net
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    Net
    
    
    NetRevenues
    
    
    % of Net
    
    
    Revenues
    
    
    % of Net
    
    
    Revenues
    
    
    Revenues
    
    
    % of NetRegion
    
    (RMB)
    
    
    Revenues
    
    
    (RMB)
    
    
    Revenues
    
    
    (RMB)
    
    
    (US$)
    
    
    Revenues(In thousands, except percentages)Germany
    
    
    2,637,434
    
    
    
    53.3
    %
    
    
    2,668,477
    
    
    
    70.6
    %
    
    
    4,706,767
    
    
    
    713,146
    
    
    
    62.5
    %Spain
    
    
    1,246,305
    
    
    
    25.2
    %
    
    
    37,326
    
    
    
    1.0
    %
    
    
    131,166
    
    
    
    19,874
    
    
    
    1.7
    %PRC
    
    
    329,153
    
    
    
    6.7
    %
    
    
    177,478
    
    
    
    4.7
    %
    
    
    591,143
    
    
    
    89,567
    
    
    
    7.9
    %Italy
    
    
    119,272
    
    
    
    2.4
    %
    
    
    4,446
    
    
    
    0.1
    %
    
    
    572,420
    
    
    
    86,730
    
    
    
    7.6
    %Australia
    
    
    32,589
    
    
    
    0.6
    %
    
    
    177,637
    
    
    
    4.7
    %
    
    
    407,261
    
    
    
    61,706
    
    
    
    5.4
    %Czech Republic
    
    
    
    
    
    
    
    
    
    
    245,814
    
    
    
    6.5
    %
    
    
    165,906
    
    
    
    25,137
    
    
    
    2.2
    %USA
    
    
    5,976
    
    
    
    0.1
    %
    
    
    17,306
    
    
    
    0.5
    %
    
    
    436,747
    
    
    
    66,174
    
    
    
    5.8
    %Others
    
    
    578,339
    
    
    
    11.7
    %
    
    
    449,832
    
    
    
    11.9
    %
    
    
    515,583
    
    
    
    78,119
    
    
    
    6.9
    %Total
    
    
    4,949,068
    
    
    
    100.0
    %
    
    
    3,778,316
    
    
    
    100.0
    %
    
    
    7,526,993
    
    
    
    1,140,453
    
    
    
    100.0
    %
  Warranty
  Intellectual Property and Proprietary Rights
      29




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Competition
     Environmental Matters
  Insurance
  Regulation
  Renewable Energy Law and Other Government Directives
   30




---



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Environmental Regulations
   31




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Restriction on Foreign Businesses
  Tax
      32




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Foreign Currency Exchange
  
    
    Foreign Exchange Administration Rules (1996), as amended; and
    
    Regulations of Settlement, Sale and Payment of Foreign Exchange (1996).
   Dividend Distribution
  
    
    Wholly Foreign-Owned Enterprise Law (1986), as amended; and
    
    Wholly Foreign-Owned Enterprise Law Implementation Rules (1990), as amended.
   33




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##### Table of Contents



C. Organizational Structure
  
 Notes:(1)
    
    Formerly known as Solarfun Power U.S.A. Inc.;(2)
    
    Formerly known as Linyang Solar Power Investment Holding Ltd.;(3)
    
    Formerly known as Solarfun Power Hong Kong Limited;(4)
    
    Formerly known as Jiangsu Linyang Solarfun Co., Ltd.;(5)
    
    Formerly known as Solarfun Power Deutschland GmbH;(6)
    
    Formerly known as Jiangsu Linyang Solarfun Engineering Research and Development
Center Co., Ltd.;(7)
    
    Formerly known as Jiangsu Yangguang Solar Technology Co., Ltd.; and(8)
    
    Formerly known as Jiangsu Linyang Solar Electric Power Engineering Co., Ltd.  34




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##### Table of Contents



D. Property, Plant and Equipment
    
 ITEM 4A UNRESOLVED STAFF COMMENTS
  
 ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following discussion should be read in conjunction with the rest of this annual
report, including the consolidated financial statements and notes thereto contained
elsewhere in this annual report. The results discussed below are not necessarily
indicative of the results to be expected in any future periods.
 A. Operating Results
 Overview
    35




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##### Table of Contents



Limited Operating History
  Key Factors Affecting Our Financial Performance
  
    
    industry demand;
    
    average selling price of our PV products;
    
    price and availability of silicon and silicon wafers;
    
    manufacturing capacity; and
    
    process technologies.
  36




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##### Table of Contents



Industry Demand
   Average Selling Price of Our PV Products
   Price and Availability of Silicon and Silicon Wafers
     37




---



##### Table of Contents



Manufacturing Capacity
    Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(MW)
    
    
    (MW)
    
    
    (MW)
    
    
    (MW)
    
    
    (MW)Volume of ingots produced
    
    
    
    
    
    
    
    
    
    
    48.0
    
    
    
    154.1
    
    
    
    360.0Volume of wafer produced
    
    
    
    
    
    
    
    
    
    
    23.5
    
    
    
    164.6
    
    
    
    387.4Volume of PV cells
produced (including PV
cell processing)
    
    
    26.2
    (1)
    
    
    99.6
    (2)
    
    
    191.5
    (3)
    
    
    260.2
    (4)
    
    
    502.4
    (5)Volume of PV modules
produced (including PV
module processing)
    
    
    19.6
    
    
    
    87.2
    
    
    
    177.3
    
    
    
    342.8
    
    
    
    758.9
 Notes:(1)
    
    Of which 19.9 MW was used in our PV module production.(2)
    
    Of which 86.9 MW was used in our PV module production.(3)
    
    Of which 190.5 MW was used in our PV module production.(4)
    
    Of which 240.2 MW was used in our PV module production.(5)
    
    Of which 490.4 MW was used in our PV module production.  Process Technologies
    38




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##### Table of Contents



Net Revenues
          Cost of Revenues and Operating Expenses
 Cost of Revenues
  Year Ended December 31,2008
    
    
    2009
    
    
    2010Amount
    
    
    % of Net
    
    
    Amount
    
    
    % of Net
    
    
    Amount
    
    
    % of Net(RMB)
    
    
    Revenues
    
    
    (RMB)
    
    
    Revenues
    
    
    (RMB)
    
    
    (US$)
    
    
    Revenues(In thousands, except percentages)Cost of revenues
    
    
    (4,905,147
    )
    
    
    99.1
    %
    
    
    (3,341,936
    )
    
    
    88.5
    %
    
    
    (5,960,648
    )
    
    
    (903,128
    )
    
    
    79.2
    %Operating expenses:Selling expenses
    
    
    (87,913
    )
    
    
    1.8
    %
    
    
    (105,454
    )
    
    
    2.8
    %
    
    
    (178,057
    )
    
    
    (26,978
    )
    
    
    2.4
    %General and
administrative
expenses
    
    
    (143,340
    )
    
    
    2.9
    %
    
    
    (180,989
    )
    
    
    4.8
    %
    
    
    (190,594
    )
    
    
    (28,878
    )
    
    
    2.5
    %Research and
development
expenses
    
    
    (19,679
    )
    
    
    0.4
    %
    
    
    (32,025
    )
    
    
    0.8
    %
    
    
    (53,500
    )
    
    
    (8,106
    )
    
    
    0.7
    %Government grants
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    18,755
    
    
    
    2,842
    
    
    
    (0.2
    )%Total operating
expenses
    
    
    (250,932
    )
    
    
    5.1
    %
    
    
    (318,468
    )
    
    
    8.4
    %
    
    
    (403,396
    )
    
    
    (61,120
    )
    
    
    5.4
    %
  39




---



##### Table of Contents



Operating Expenses
  Selling Expenses
   General and Administrative Expenses
   40




---



##### Table of Contents



Research and Development Expenses
  Share-based Compensation Charges
    Taxation
 PRC Enterprise Income Tax
    41




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition
      Fixed Assets, Net
  Buildings
    
    20 yearsPlant and machinery
    
    10 yearsFurniture, fixtures and office equipment
    
    5 yearsComputer software
    
    5 yearsMotor vehicles
    
    5 yearsLeasehold improvements
    
    Over the shorter of the lease
term or their estimated useful
lives
  42




---



##### Table of Contents



Warranty Costs
  Impairment of Long-Lived Assets
  Goodwill
    43




---



##### Table of Contents



Financial Instruments  Currency Derivative Contracts and Commodity Contracts
  Share-based Compensation
     Accounting for Income Taxes and Uncertain Income Tax Positions
      44




---



##### Table of Contents



Advance to Suppliers and Long-term Prepayments
     Consolidated Results of Operations
  Year Ended December 31,2008
    
    
    2009
    
    
    2010(In RMB
    
    
    % of Net
    
    
    (In RMB
    
    
    % of Net
    
    
    (In RMB
    
    
    (In US$
    
    
    % of NetThousands)
    
    
    Revenues
    
    
    Thousands)
    
    
    Revenues
    
    
    Thousands)
    
    
    Thousands)
    
    
    RevenuesConsolidated Statement
of Operations DataNet revenues
    
    
    4,949,068
    
    
    
    100.0
    %
    
    
    3,778,316
    
    
    
    100.0
    %
    
    
    7,526,993
    
    
    
    1,140,453
    
    
    
    100.0
    %Cost of revenues
    
    
    (4,905,147
    )
    
    
    (99.1
    )%
    
    
    (3,341,936
    )
    
    
    (88.5
    )%
    
    
    (5,960,648
    )
    
    
    (903,128
    )
    
    
    (79.2
    )%Gross profit
    
    
    43,921
    
    
    
    0.9
    %
    
    
    436,380
    
    
    
    11.5
    %
    
    
    1,566,345
    
    
    
    237,325
    
    
    
    20.8
    %Operating expenses
Selling expenses
    
    
    (87,913
    )
    
    
    (1.8
    )%
    
    
    (105,454
    )
    
    
    (2.8
    )%
    
    
    (178,057
    )
    
    
    (26,978
    )
    
    
    (2.4
    )%General and
administrative
expenses
    
    
    (143,340
    )
    
    
    (2.9
    )%
    
    
    (180,989
    )
    
    
    (4.8
    )%
    
    
    (190,594
    )
    
    
    (28,878
    )
    
    
    (2.5
    )%Research and
development expenses
    
    
    (19,679
    )
    
    
    (0.4
    )%
    
    
    (32,025
    )
    
    
    (0.8
    )%
    
    
    (53,500
    )
    
    
    (8,106
    )
    
    
    (0.7
    )%Government grants
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    18,755
    
    
    
    2,842
    
    
    
    0.2
    %
  45




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##### Table of Contents



Year Ended December 31,2008
    
    
    2009
    
    
    2010(In RMB
    
    
    % of Net
    
    
    (In RMB
    
    
    % of Net
    
    
    (In RMB
    
    
    (In US$
    
    
    % of NetThousands)
    
    
    Revenues
    
    
    Thousands)
    
    
    Revenues
    
    
    Thousands)
    
    
    Thousands)
    
    
    RevenuesTotal operating
expenses
    
    
    (250,932
    )
    
    
    (5.1
    )%
    
    
    (318,468
    )
    
    
    (8.4
    )%
    
    
    (403,396
    )
    
    
    (61,120
    )
    
    
    (5.4
    )%Operating profit (loss)
    
    
    (207,011
    )
    
    
    (4.2
    )%
    
    
    117,912
    
    
    
    3.1
    %
    
    
    1,162,949
    
    
    
    176,205
    
    
    
    15.5
    %Interest expenses
    
    
    (103,146
    )
    
    
    (2.1
    )%
    
    
    (157,907
    )
    
    
    (4.2
    )%
    
    
    (161,677
    )
    
    
    (24,497
    )
    
    
    (2.1
    )%Interest income
    
    
    10,004
    
    
    
    0.2
    %
    
    
    5,002
    
    
    
    0.1
    %
    
    
    6,141
    
    
    
    930
    
    
    
    0.1
    %Exchange losses
    
    
    (35,230
    )
    
    
    (0.7
    )%
    
    
    (23,814
    )
    
    
    (0.6
    )%
    
    
    (89,272
    )
    
    
    (13,526
    )
    
    
    (1.2
    )%Changes in fair value
of derivative
contracts
    
    
    83,090
    
    
    
    1.7
    %
    
    
    9,594
    
    
    
    0.3
    %
    
    
    77,531
    
    
    
    11,747
    
    
    
    1.0
    %Changes in fair value
of conversion feature
of convertible bonds
    
    
    
    
    
    
    
    
    
    
    (73,887
    )
    
    
    (2.0
    )
    
    
    31,623
    
    
    
    4,791
    
    
    
    0.4
    %Other income
    
    
    15,018
    
    
    
    0.3
    %
    
    
    6,286
    
    
    
    0.2
    %
    
    
    24,353
    
    
    
    3,690
    
    
    
    0.3
    %Other expenses
    
    
    (25,604
    )
    
    
    (0.5
    )%
    
    
    (11,835
    )
    
    
    (0.3
    )%
    
    
    (5,903
    )
    
    
    (894
    )
    
    
    (0.1
    )%Government grants
    
    
    3,480
    
    
    
    0.1
    %
    
    
    7,661
    
    
    
    0.2
    %
    
    
    9,595
    
    
    
    1,454
    
    
    
    0.1
    %Income (loss) before
income taxes
    
    
    (259,399
    )
    
    
    (5.2
    )%
    
    
    (120,988
    )
    
    
    (3.2
    )%
    
    
    1,055,340
    
    
    
    159,900
    
    
    
    14.0
    %Income tax expenses
    
    
    (6,519
    )
    
    
    (0.1
    )%
    
    
    (23,928
    )
    
    
    (0.6
    )%
    
    
    (297,983
    )
    
    
    (45,149
    )
    
    
    (4.0
    )%Net income
attributable to
non-controlling
interest
    
    
    (14,573
    )
    
    
    (0.3
    )%
    
    
    (311
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
attributable to Hanwha
SolarOne Co., Ltd.
shareholders
    
    
    (280,491
    )
    
    
    (5.7
    )%
    
    
    (145,227
    )
    
    
    (3.8
    )%
    
    
    757,357
    
    
    
    114,751
    
    
    
    10.1
    %
 2010 Compared to 2009
 Net Revenues
  Cost of Revenues and Gross Profit
   Operating Expenses and Operating Profit
   46




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##### Table of Contents



Interest Expenses, Exchange Losses, Other Income, Changes in Fair Value of Derivative
Contracts, Changes in Fair Value of Conversion Feature of Convertible Bonds and
Government Grants
       Income Tax Expenses
  Consolidated Net Income
   47




---



##### Table of Contents



2009 Compared to 2008
 Net Revenues
  Cost of Revenues and Gross Profit
   Operating Expenses and Operating Profit (Loss)
      Interest Expenses, Exchange Losses, Other Income, Changes in Fair Value of Derivative
Contracts, Changes in Fair Value of Conversion Feature of Convertible Bonds and
Government Grants
    48




---



##### Table of Contents



Income Tax Expenses
  Consolidated Net Loss
  Inflation
  B. Liquidity and Capital Resources
  Liquidity
   Year Ended December 31,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(In thousands)Net cash (used in) provided by operating
activities
    
    
    (674,040
    )
    
    
    689,333
    
    
    
    268,438
    
    
    
    40,672Net cash used in investing activities
    
    
    (1,169,045
    )
    
    
    (324,723
    )
    
    
    (670,837
    )
    
    
    (101,642
    )Net cash provided by (used in) financing
activities
    
    
    1,981,058
    
    
    
    (129,791
    )
    
    
    1,387,456
    
    
    
    210,221Net increase in cash and cash equivalents
    
    
    137,973
    
    
    
    234,819
    
    
    
    985,057
    
    
    
    149,251
  49




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##### Table of Contents



Cash Flows from Operating Activities
   
    
    an increase of RMB695.0 million (US$105.3 million) in accounts
receivable, primarily because we granted certain of our customers
longer credit terms to enhance the competitiveness of our PV products;
    
    an increase of RMB178.7 million (US$27.1 million) in advance to
suppliers and long-term prepayments primarily as a result of increased
prepayments to our suppliers for purchases of both silicon-based and
other materials; and
    
    an increase of RMB75.1 million (US$11.4 million) in other current
assets, primarily because the increase of tax recoverable in relation
to the export tax rebates.
  
    
    an increase of RMB271.7 million in accounts receivable, primarily
because we granted our customers longer credit terms to enhance the
competitiveness of our PV products;
    
    an increase of RMB334.8 million in inventories primarily as a result
of increased purchases of silicon, silicon wafers and other raw
materials in anticipation of increased operational scale as a result
of our capacity expansion in 2009;
    
    an increase of RMB238.8 million in accounts payable, primarily due to
longer payment terms we obtained from our suppliers; and
    
    an increase of RMB301.4 million in other current assets, primarily
because we were able to receive additional cash refund of VAT tax for
our export sales by December 31, 2009.
  
    
    an increase of RMB547.5 million in advance to suppliers, primarily due
to increased prepayments to our suppliers for purchases of silicon and
silicon wafers; and
    
    an increase of RMB417.0 million in inventories primarily as a result
of increased purchases of silicon and silicon wafers.
 Cash Flows from Investing Activities
     50




---



##### Table of Contents



Cash Flows from Financing Activities
     Capital Resources and Capital Expenditures
        51




---



##### Table of Contents



Recent Accounting Pronouncements
    C. Research and Development, Patents and Licenses
     52




---



##### Table of Contents



D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  Payment Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    
    1 Year
    
    
    1 to 3 Years
    
    
    3 to 5 Years
    
    
    5 Years(In RMB thousands)Purchase obligations
relating to raw materials
    
    
    5,197,679
    
    
    
    1,848,363
    
    
    
    1,764,286
    
    
    
    1,585,030
    
    
    
    Operating lease obligations
    
    
    13,754
    
    
    
    9,141
    
    
    
    4,613
    
    
    
    
    
    
    
    Long-term debt obligations
    
    
    1,672,351
    
    
    
    269,960
    
    
    
    218,513
    
    
    
    41,628
    
    
    
    1,142,250Commitments relating to
the acquisition of
equipment
    
    
    426,394
    
    
    
    426,394
    
    
    
    
    
    
    
    
    
    
    
    Unrecognized tax benefit
    
    
    143,473
    
    
    
    143,473
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    7,453,651
    
    
    
    2,697,331
    
    
    
    1,987,412
    
    
    
    1,626,658
    
    
    
    1,142,250
 G. Safe Harbor
  
    
    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;
  53




---



##### Table of Contents




    
    our expectations regarding the scaling of our manufacturing capacity;
    
    our expectations with respect to revenue growth and profitability;
    
    our expectations with respect to our ability to secure raw materials, especially silicon and silicon wafers, in the future;
    
    competition from other manufacturers of PV products and conventional energy suppliers;
    
    our future business development, results of operations and financial condition; and
    
    future economic or capital market conditions.
   
 ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
 Directors and Executive Officers
  Name
    
    Age
    
    Position/TitleKi-Joon Hong
    
    
    61
    
    
    DirectorDong Kwan Kim
    
    
    28
    
    
    DirectorWook Jin Yoon
    
    
    53
    
    
    DirectorThomas J. Toy
    
    
    56
    
    
    Independent DirectorErnst A. Bütler
    
    
    67
    
    
    Independent DirectorYinzhang Gu
    
    
    73
    
    
    Independent DirectorDavid N. K. Wang
    
    
    65
    
    
    Independent DirectorPing Peter Xie
    
    
    48
    
    
    President and Chief Executive OfficerGareth Kung
    
    
    46
    
    
    Chief Financial OfficerSungsoo
Lee
    
    
    44
    
    
    Chief Strategy Officer/Board
Secretary
 Directors
 Mr. Ki-Joon Hong
 Mr. Dong Kwan Kim
 Mr. Wook Jin Yoon
  54




---



##### Table of Contents



Mr. Thomas J. Toy
 Mr. Ernst A. Bütler
 Mr. Yinzhang Gu
 Dr. David N.K. Wang
 Executive Officers
 Dr. Ping Peter Xie
 Mr. Gareth Kung
 Mr. Sungsoo Lee
  55




---



##### Table of Contents



B. Compensation
 Compensation
   2006 Share Option Plan
  Administration.
 Option Exercise.
 Termination of Awards.
 Share Split or Combination.
 Amendment and Termination of Plan.
  56




---



##### Table of Contents



OrdinarySharesUnderlyingOutstanding
    
    
    ExerciseName
    
    Option
    
    
    Price
    
    
    Grant Date
    
    Expiration Date(US$/share)Ki-Joon Hong
    
    
    
    
    
    
    
    
    
    
    
    Dong Kwan Kim
    
    
    
    
    
    
    
    
    
    
    
    Wook Jin Yoon
    
    
    
    
    
    
    
    
    
    
    
    Thomas J. Toy
    
    
    *
    
    
    
    1.8
    
    
    November 30, 2006
    
    November 30, 2016Verena Maria Bütler (wife of
Ernst A. Bütler)
    
    
    *
    
    
    
    1.8
    
    
    November 30, 2006
    
    November 30, 2016Yinzhang Gu
    
    
    *
    
    
    
    1.94
    
    
    August 16, 2007
    
    August 16, 2017David N.K. Wang
    
    
    
    
    
    
    
    
    
    
    
    Ping Peter Xie
    
    
    
    
    
    
    
    
    
    
    
    Gareth Kung
    
    
    
    
    
    
    
    
    
    
    
    Sungsoo Lee
    
    
    
    
    
    
    
    
    
    
    
    Directors and executive officers
    
    
    480,000Other individuals as a group
    
    
    1,767,900
    
    
    
    1.8
    
    
    November 30, 2006
    
    November 30, 2016150,000
    
    
    
    2.02
    
    
    August 16, 2007
    
    August 16, 201790,000
    
    
    
    2.06
    
    
    October 10, 2007
    
    October 10, 2017180,000
    
    
    
    2.15
    
    
    October 10, 2007
    
    October 10, 2017400,000
    
    
    
    2.58
    
    
    October 26, 2007
    
    October 26, 201750,000
    
    
    
    2.73
    
    
    November 1, 2007
    
    November 1, 2017245,500
    
    
    
    2.21
    
    
    November 27, 2007261,000
    
    
    
    5.31
    
    
    December 13, 2007
    
    December 13, 2017300,000
    
    
    
    6.016
    
    
    January 8, 2008
    
    January 8, 2018150,000
    
    
    
    3.55
    
    
    January 29, 2008
    
    January 29, 2018216,250
    
    
    
    2.15
    
    
    March 6, 2008
    
    March 6, 2018300,000
    
    
    
    2.04
    
    
    March 14, 2008
    
    March 14, 2018Total
    
    
    4,590,650
 *
    
    Upon exercise of all share options, would beneficially own 1% or less
of our ordinary shares.
    
    No outstanding share option was held by such person. 2007 Equity Incentive Plan
  Administration.
 Options.
 Restricted Stock.
 Stock Appreciation Rights.
  57




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##### Table of Contents



Performance Units and Performance Shares.
 Restricted Stock Units.
 Amendment and Termination.
  OrdinarySharesUnderlyingOutstanding
    
    
    ExerciseName
    
    Option
    
    
    Price
    
    
    Grant Date
    
    Expiration Date(US$/share)Ki-Joon Hong
    
    
    
    
    
    
    
    
    
    
    
    Dong Kwan Kim
    
    
    
    
    
    
    
    
    
    
    
    Wook Jin Yoon
    
    
    
    
    
    
    
    
    
    
    
    Thomas J. Toy
    
    
    
    
    
    
    
    
    
    
    
    Ernst A. Bütler
    
    
    
    
    
    
    
    
    
    Yinzhang Gu
    
    
    
    
    
    
    
    
    
    
    
    David N.K. Wang
    
    
    *
    
    
    
    0.880
    
    
    April 2, 2009
    
    April 2, 2019Peter Ping Xie
    
    
    *
    
    
    
    0.610
    
    
    March 17, 2009
    
    March 17, 2019*
    
    
    
    1.010
    
    
    March 17, 2009
    
    March 17, 2019*
    
    
    
    1.506
    
    
    March 4, 2010
    
    March 4, 2020Gareth Kung
    
    
    *
    
    
    
    1.278
    
    
    November 27, 2009
    
    November 27, 2019Sungsoo Lee
    
    
    
    
    
    
    
    
    
    
    
    Directors and executive officers
    
    
    2,050,000Other individuals as a group
    
    
    533,335
    
    
    
    2.820
    
    
    April 15, 2008
    
    April 15, 201825,000
    
    
    
    25,000
    
    
    May 1, 2008
    
    May 1, 201820,000
    
    
    
    4.376
    
    
    May 28, 2008
    
    May 28, 2018270,000
    
    
    
    2.420
    
    
    September 26, 2008
    
    September 26, 20181,131,000
    
    
    
    1.344
    
    
    October 16, 2008
    
    October 16, 2018180,000
    
    
    
    0.936
    
    
    October 28, 2008
    
    October 28, 201815,000
    
    
    
    1.138
    
    
    November 28, 2008
    
    November 28, 20188,000
    
    
    
    0.960
    
    
    December 29, 2008
    
    December 29, 2018149,500
    
    
    
    0.996
    
    
    January 28, 2009
    
    January 28, 201963,000
    
    
    
    1.344
    
    
    March 17, 2009
    
    March 17, 2019125,000
    
    
    
    0.900
    
    
    April 1, 2009
    
    April 1, 201920,000
    
    
    
    0.742
    
    
    April 28, 2009
    
    April 28, 201957,500
    
    
    
    1.452
    
    
    May 27, 2009
    
    May 27, 201943,750
    
    
    
    1.440
    
    
    July 28, 2009
    
    July 28, 2019770,500
    
    
    
    1.188
    
    
    September 11, 2009
    
    September 11, 2019239,500
    
    
    
    1.010
    
    
    October 29, 2009
    
    October 29, 2019625,000
    
    
    
    1.278
    
    
    November 27, 2009
    
    November 27, 20191,692,050
    
    
    
    1.372
    
    
    December 3, 2009
    
    December 3, 2019400,000
    
    
    
    1.588
    
    
    December 28, 2009
    
    December 28, 2019500,000
    
    
    
    1.480
    
    
    January 27, 2010
    
    January 27, 2020275,000
    
    
    
    1.496
    
    
    June 28, 2010
    
    June 28, 2020150,000
    
    
    
    2.488
    
    
    September 28, 2010
    
    September 28, 2020300,000
    
    
    
    2.042
    
    
    October 29, 2010
    
    October 29, 2020150,000
    
    
    
    1.800
    
    
    November 26, 2010
    
    November 26, 2020250,000
    
    
    
    1.708
    
    
    January 28, 2011
    
    January 28, 2021Total
    
    
    10,043,135
 *
    
    Upon exercise of all share options, would beneficially own 1% or less
of our ordinary shares.
    
    No outstanding share option was held by such person.  58




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##### Table of Contents



OrdinarySharesUnderlyingGrantedRestrictedName
    
    Stock Units
    
    
    Grant Date
    
    Expiration DateKi-Joon Hong
    
    
    
    
    
    
    
    Dong Kwan Kim
    
    
    
    
    
    
    
    Wook Jin Yoon
    
    
    
    
    
    
    
    Thomas J. Toy
    
    
    *
    
    
    January 1, 2009
    
    January 1, 2019*
    
    
    January 1, 2010
    
    January 1, 2020*
    
    
    January 1, 2011
    
    January 1, 2021Verena Maria Bütler (wife of Ernst A Bütler)
    
    
    *
    
    
    January 1, 2009
    
    January 1, 2019*
    
    
    January 1, 2010
    
    January 1, 2020*
    
    
    January 1, 2011
    
    January 1, 2021Yinzhang Gu
    
    
    *
    
    
    January 1, 2009
    
    January 1, 2019*
    
    
    January 1, 2010
    
    January 1, 2020*
    
    
    January 1, 2011
    
    January 1, 2021David N.K. Wang
    
    
    *
    
    
    January 1, 2010
    
    January 1, 2020*
    
    
    January 1, 2011
    
    January 1, 2021Peter Ping Xie
    
    
    *
    
    
    February 28, 2011
    
    February 28, 2021*
    
    
    February 29, 2011
    
    February 29, 2021Gareth Kung
    
    
    *
    
    
    February 28, 2011
    
    February 28, 2021*
    
    
    February 29, 2011
    
    February 29, 2021Sungsoo Lee

    
    
    
    
    
    
    
    Directors and executive officers
    
    
    11,890,620Other individuals as a group
    
    
    7,050,000
    
    
    February 28, 2011
    
    February 28, 20211,125,000
    
    
    February 29, 2011
    
    February 29, 2021Total
    
    
    20,065,620
 *
    
    Upon vesting of all restricted stock units, would beneficially own 1%
or less of our ordinary shares.
    
    No restricted stock units have been granted to such person.  59




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##### Table of Contents



C. Board Practices
 Committees of the Board of Directors
 Audit Committee
  
    
    selecting our independent auditors and pre-approving all auditing and non-auditing services permitted to be performed
by our independent auditors;
    
    reviewing with our independent auditors any audit problems or difficulties and managements response;
    
    reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the
Securities Act;
    
    discussing the annual audited financial statements with management and our independent auditors;
    
    reviewing major issues as to the adequacy of our internal control and any special audit steps adopted in light of
material control deficiencies;
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
    
    such other matters that are specifically delegated to our audit committee by our board of directors from time to time;
    
    meeting separately and periodically with management and our internal and independent auditors; and
    
    reporting regularly to our board of directors.
  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;
  60




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##### Table of Contents




    
    identifying and recommending to our board the directors to serve as members of committees;
    
    advising the board periodically with respect to significant developments in the law and
practice of corporate governance as well as our compliance with applicable laws and
regulations, and making recommendations to our board of directors on all matters of
corporate governance and on any corrective action to be taken; and
    
    monitoring compliance with our code of business conduct and ethics, including reviewing
the adequacy and effectiveness of our procedures to ensure proper compliance.
 Duties of Directors
  Terms of Directors and Executive Officers
   Employment Agreements
     D. Employees
  As of December 31,2008
    
    
    2009
    
    
    2010Manufacturing and engineering
    
    
    3,254
    
    
    
    4,465
    
    
    
    8,706General and administration
    
    
    183
    
    
    
    163
    
    
    
    240Quality control
    
    
    225
    
    
    
    339
    
    
    
    794Research and development
    
    
    126
    
    
    
    125
    
    
    
    150Purchasing and logistics
    
    
    178
    
    
    
    192
    
    
    
    295Marketing and sales
    
    
    23
    
    
    
    26
    
    
    
    56Total
    
    
    3,989
    
    
    
    5,310
    
    
    
    10,241
  61




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##### Table of Contents



E. Share Ownership
  
    
    each of our directors and executive officers; and
    
    each person known to us to own beneficially more than 5.0% of our ordinary shares.
 Shares BeneficiallyOwned(1)(2)Number
    
    
    %Directors and Executive Officers:
    
    
    
    
    
    
    Ki-Joon Hong
    
    
    
    
    
    
    Dong Kwan Kim
    
    
    
    
    
    
    Wook Jin Yoon
    
    
    
    
    
    
    Thomas J. Toy
    
    
    138,750
    
    
    
    0.03
    %Verena Maria Bütler (wife of Ernst A. Bütler)
    
    
    367,490
    
    
    
    0.09
    %Yinzhang Gu
    
    
    255,000
    
    
    
    0.06
    %David N.K. Wang
    
    
    *
    
    
    
    *
    %Ping Peter Xie
    
    
    *
    
    
    
    *
    %Gareth Kung
    
    
    *
    
    
    
    *
    %Sungsoo Lee
    
    
    
    
    
    
    All Directors and Executive Officers as a Group(3)
    
    
    1,494,890
    
    
    
    0.36
    %Major Shareholders:Hanwha Solar Holdings Co., Ltd.(4)
    
    
    209,249,448
    
    
    
    49.8
    %WHF Investment Co., Ltd(5)
    
    
    6,271,875
    
    
    
    1.49
    %
 Notes:*
    
    The person beneficially owns less than 1% of our outstanding shares.
    
    The person does not beneficially own any ordinary share or options exercisable
within 60 days of the date of this annual report.  62




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##### Table of Contents



(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 419,771,847
ordinary shares outstanding as of April 22, 2011, 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 number excludes: (i) the 9,019,611 ADSs
which were issued to facilitate our convertible bond offering in January 2008;
(ii) the 45,080,019 ordinary shares issued to Hanwha Solar at par value of
US$0.0001 per ordinary share, in connection with Hanwha Solars purchase of
36,455,089 ordinary shares of our company in September 2010; and (iii) the
174,717 ADSs which have been reserved by our company as of April 22, 2011 to
allow for the participation in the ADS program by our employees pursuant to our
equity incentive plans from time to time. We excluded those shares as we do not
believe that they will increase the number of ordinary shares considered
outstanding for the purpose of calculating beneficial ownership. Our total
outstanding ordinary shares will be 510,823,506 if those numbers mentioned
above are to be included.(3)
    
    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.(4)
    
    Held 202,844,393
ordinary shares
(excluding 45,080,019
ordinary shares issued
to Hanwha Solar at par
value of US$0.0001 per
ordinary share, in
connection with Hanwha
Solars purchase of
36,455,089 ordinary
shares of our company
in September 2010) and
1,281,011 ADSs as of
April 22, 2011. The
address of Hanwha
Solar Holdings Co.,
Ltd. is c/o Hanwha
Chemical Corporation,
Hanwha Building, 1,
Janggyo-dong, Jung-gu,
Seoul 100-797, Korea.
Hanwha Solar is a
wholly owned
subsidiary of Hanwha
Chemical.(5)
    
    WHF Investment Co.,
Ltd., a British Virgin
Islands company, is
owned by the estate of
Mr. Hanfei Wang. Mr.
Hanfei Wang, our
former director and
chief operating
officer, was the sole
director of WHF
Investment Co., Ltd.
The address of WHF
Investment Co., Ltd.
is P.O. Box 173,
Kingston Chambers,
Road Town, Tortola,
British Virgin
Islands.    63




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##### Table of Contents



ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  B. Related Party Transactions
  Private Placement
   Registration Rights
  
    
    Demand Registrations. Upon request of Hanwha Solar to effect any
registration with respect to the registrable securities it held then
outstanding having an anticipated aggregate offering price of at least
US$15 million, we shall effect registration with respect to such
registrable securities on a form other than Form F-3 (or any
comparable form for a registration for an offering in a jurisdiction
other than the United States), provided that we shall only be
obligated to effect three such registrations.
    
    Piggyback Registrations.Hanwha Solar and its permitted transferees
are entitled to piggyback registration rights, whereby they may
require us to register all or any part of the registrable securities
that they hold at the time when we register any of our ordinary
 shares.
    
    Registrations onForm F-3.We have granted Hanwha Solar and its
permitted transferees 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), for a
public offering of registrable securities with a reasonably
anticipated aggregate price to the public not less than US$10 million,
to the extent we are eligible to use such form to offer securities.
 Equity Incentive Plan
  Transactions with Certain Shareholders and Affiliated Companies
 
    
    On January 11, 2008, SolarOne Hong Kong, our 100% indirect subsidiary,
entered into a short-term loan agreement with Hong Kong Huaerli
Trading Company Limited, or Hong Kong Huaerli, a company controlled by
Mr. Yonghua Lu, our former chairman, under which Hong Kong Huaerli
agreed to loan US$9 million to SolarOne Hong Kong at an annual
interest rate of 8%. The loan was fully repaid in February 2008.
 
    
    On May 7, 2008, SolarOne Qidong entered into an equipment purchase
agreement with Linyang Electronics whereby SolarOne Qidong purchased
certain equipment from Linyang Electronics for RMB0.5 million.
 
    
    On April 12, 2008, July 8, 2008 and October 13, 2008, SolarOne Qidong
entered into four service agreements with Nantong Linyang Labor
Service Company, a company controlled by Mr. Yonghua Lu, our former
chairman, under which SolarOne Qidong agreed to pay an aggregate
amount of RMB1.8 million to Nantong Linyang Labor Service Company for
its provision of construction services.
 
    
    On September 1, 2008 and October 20, 2008, SolarOne Qidong entered
into two service agreements with Nantong Linyang Ecological Cultural
Co., Ltd., a company controlled by Mr. Yonghua Lu, our former
chairman, under which SolarOne Qidong agreed to pay an aggregate
amount of RMB0.6 million to Nantong Linyang Ecological Cultural Co.,
Ltd. for its provision of construction and labor services.
  64




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
    
    On October 30, 2008, SolarOne Qidong entered into a polysilicon
purchase agreement with Ya An Yongwang Silicon Co., Ltd., or Yongwang,
a company controlled by Hanwha Chemical, the holding company of Hanwha
Solar, under which SolarOne Qidong purchased certain polysilicon from
Yongwang for RMB8.7 million.
    
    On December 18, 2008, SolarOne Qidong entered into two service
agreements with Qidong Jiaotong Engineering Co., Ltd., under which
SolarOne Qidong agreed to pay an aggregate amount of RMB0.6 million to
Qidong Jiaotong Engineering Co., Ltd. for its provision of
construction services.
    
    On December 25, 2008, SolarOne Qidong entered into a framework supply
agreement with Linyang Electronics, under which SolarOne Qidong agreed
to purchase raw materials from Linyang Electronics in the year 2009.
    
    On February 26, 2009, SolarOne Hong Kong, our 100% indirect
subsidiary, amended a manufacturing service agreement entered into on
December 30, 2008 with Q-Cells International GmbH, or Q-cells, a
company controlled by Good Energies II LP, under which SolarOne Hong
Kong agreed to supply, using PV cells supplied by Q-Cells, on a
fixed-price basis no less than 100 MW of PV modules to Q-Cells in each
of 2009 and 2010 and granted Q-Cells International GmbH an option to
extend the agreement for one additional year. As a result, as of
December 31, 2009, the amount of manufacturing service fee due from
Q-cells under this agreement was RMB12.0 million. On December 29,
2009, all of the rights and obligations of Q-Cells under this
agreement were assigned to Q-Cells SE.
    
    On January 1 and April 3, 2009, SolarOne Qidong entered into two
facility lease agreements with Linyang Electronics. Under these
agreements, SolarOne Qidong incurred rental expenses of RMB2.3 million
in 2009.
    
    On November 16, 2009, SolarOne Qidong entered into equity transfer
agreements with Mr. Rongqiang Cui, our former independent director,
Ms. Guoyu Wang, Mr. Cuis spouse and Mr. Yongliang Gu, our
shareholder, to purchase from them a 17% equity interest in Solar
Shanghai for consideration of RMB0.85 million. Solar Shanghai became
our wholly owned subsidiary after the completion of this transaction.
    
    On December 4 and 28, 2009, SolarOne Qidong entered into two equipment
purchase agreements with Linyang Electronics whereby SolarOne Qidong
purchased certain equipment from Linyang Electronics for an aggregate
amount of RMB1.2 million.
    
    On June 30, July 2, 9 and 31, August 10 and October 22, 2009, Solar
Shanghai entered into six purchase agreements with Linyang
Electronics, under which Solar Shanghai purchased certain raw
materials from Linyang Electronics for an aggregate amount of RMB0.3
million.
    
    On February 5, 20 and 23, and April 27 and 30, 2010, SolarOne Qidong
entered into five polysilicon purchase agreement with Yongwang, under
which SolarOne Qidong purchased certain polysilicon from Yongwang for
RMB88.7 million.
    
    On January 1, 2010, SolarOne Qidong entered into a framework purchase
agreement with Linyang Electronics, under which SolarOne Qidong agreed
to purchase raw materials from Linyang Electronics in the year 2010.
    
    On January 3, 18 and 28, February 9 and March 17, 2010, SolarOne
Qidong entered into five equipment purchase agreements with Linyang
Electronics whereby SolarOne Qidong purchased certain equipment from
Linyang Electronics for an aggregate amount of RMB4.0 million.
    
    On March 25, 2010, SolarOne Qidong entered into a service agreement
with Nantong Huahong Ecological Gardening Co., Ltd., a company
controlled by Mr. Yonghua Lu, our former chairman, under which
SolarOne Qidong agreed to pay an aggregate amount of RMB0.1 million to
Nantong Linyang Ecological Gardening Co., Ltd. for its provision of
construction and labor services.
    
    In April 2010, SolarOne Qidong entered into a lease agreement with
Qidong Huahong Electronics Co., Ltd., a company controlled by Mr.
Yonghua Lu, our former chairman, for a three-year term under which the
annual rental payment is RMB1.5 million.
    
    On April 30, 2010, SolarOne Qidong entered into an equipment purchase
agreement with SMIC Energy Technology (Shanghai), or SMIC ET, a wholly
owned subsidiary of SMIC, a company where David N.K. Wang, our
independent director, serves as president and chief executive officer.
Under this agreement, SolarOne Qidong agreed to purchase a 25 MW cell
line from SMIC ET for an amount of US$4.25 million. SolarOne Qidong
also signed a human resource service agreement with a one-month term
with SMIC ET in connection with the equipment purchase agreement,
under which SMIC ET agreed to second employees to SolarOne Qidong to
manage and operate the equipment sold by SMIC ET and SolarOne Qidong
agreed to pay for those employees compensation. Pursuant to the
equipment purchase agreement, SolarOne Qidong also entered into a
lease agreement with SMIC (Shanghai) Corporation, or SMIC Shanghai, to
lease the premises and facilities where the equipment is located for a
12-month term from May 1, 2010 to April 30, 2011. Such lease agreement
was amended on April 21, 2011 to extend the term of the lease to May
21, 2011. In addition, SolarOne Qidong assumed three PV cell supply
contracts originally entered into between SMIC ET Shanghai and its
customers.
  65




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##### Table of Contents




    
    On September 13, 2010, SolarOne Qidong entered into a purchase
agreement with Hanwha Chemical, the holding company of Hanwha Solar,
under which SolarOne Qidong purchased certain raw materials from
Hanwha Chemical for an amount of RMB1.9 million (US$0.3 million).
    
    On September 15, 2010, SolarOne Qidong entered into a purchase
agreement with Yongwang under which SolarOne Qidong agreed to purchase
certain amounts of raw materials from Yongwang at a price adjusted
monthly based on the market price from October 2010 to October 2012.
    
    On October 26, 2010, SolarOne Qidong entered into a purchase agreement
with Hanwha L&C Trading (Shanghai) Co., Ltd., or Hanwha L&C, a company
affiliated with Hanwha Solar, under which SolarOne Qidong purchased
certain raw materials from Hanwha L&C for an amount of RMB1.1 million
(US$0.2 million).
    
    On January 3, 2011, we entered into a consulting service agreement
with Hanwha S&C Co., Ltd., a company affiliated with Hanwha Solar,
under which Hanwha S&C Co., Ltd. provided various consulting services
related to information strategic planning from January 3, 2011 to
March 31, 2011 for an amount of RMB1.5 million (US$0.2 million).
 C. Interests of Experts and Counsel
  
 ITEM 8 FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  Export Sales
  Legal and Administrative Proceedings
     66




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##### Table of Contents



Dividend Policy
   B. Significant Changes
  
 ITEM 9 THE OFFER AND LISTING
 A. Offering and Listing Details
    Share PriceHigh
    
    
    LowAnnually High and Low2007
    
    
    37.85
    
    
    
    8.222008
    
    
    40.19
    
    
    
    2.672009
    
    
    8.95
    
    
    
    2.272010
    
    
    13.48
    
    
    
    5.61Quarterly High and LowFirst Quarter 2009
    
    
    6.37
    
    
    
    2.27Second Quarter 2009
    
    
    8.95
    
    
    
    3.65Third Quarter 2009
    
    
    8.30
    
    
    
    4.70Fourth Quarter 2009
    
    
    8.00
    
    
    
    4.48First Quarter 2010
    
    
    10.78
    
    
    
    6.08Second Quarter 2010
    
    
    9.39
    
    
    
    5.61Third Quarter 2010
    
    
    13.48
    
    
    
    6.57Fourth Quarter 2010
    
    
    13.42
    
    
    
    8.08First Quarter 2011
    
    
    9.78
    
    
    
    6.90Monthly Highs and LowsDecember 2010
    
    
    9.09
    
    
    
    8.17January 2011
    
    
    9.78
    
    
    
    8.25February 2011
    
    
    9.65
    
    
    
    8.33March 2011
    
    
    8.75
    
    
    
    6.90April 2011
    
    
    7.69
    
    
    
    6.12May 2011
    
    
    6.73
    
    
    
    4.95June 2011 (through June 2, 2011)
    
    
    6.25
    
    
    
    6.15
  67




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##### Table of Contents



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
  C. Material Contracts
  D. Exchange Controls
 Foreign Currency Exchange
  
    
    Foreign Exchange Administration Rules (1996), as amended; and
    
    Regulations of Settlement, Sale and Payment of Foreign Exchange (1996)
   E. Taxation
 Cayman Islands Taxation
   68




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##### Table of Contents



PRC Taxation
      U.S. Federal Income Taxation
   
    
    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.
  69




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##### Table of Contents




    
    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
        70




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Taxation of Disposition of ADSs or Ordinary Shares
   Passive Foreign Investment Company
  
    
    at least 75% of its gross income is passive income; or
    
    at least 50% of the value of its assets (based on an average of the
quarterly values of the assets during a taxable year) is attributable
to assets that produce or are held for the production of passive
income.
    
    
    the excess distribution or gain will be allocated ratably over your holding period for the ADSs or ordinary shares;
    
    the amount allocated to the current taxable year, and any taxable year
prior to the first taxable year in which we became a PFIC, will be
treated as ordinary income; and
    
    the amount allocated to each other year will be subject to the highest
tax rate in effect for that year and the interest charge generally
applicable to underpayments of tax will be imposed on the resulting
tax attributable to each such year.
    71




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##### Table of Contents



de minimis
   Information Reporting and Backup Withholding and Other Reporting Requirements
    F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
   I. Subsidiary Information
   72




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##### Table of Contents



ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Exchange Risk
       Interest Rate Risk
  
 ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 A. Debt Securities
  B. Warrants and Rights
  C. Other Securities
   73




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D. American Depositary Shares
  Persons depositing or withdrawing shares must pay:
    
    For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
    
    Issuance of ADSs, including issuances
resulting from a distribution of shares or
rights or other propertyCancellation of ADSs for the purpose of
withdrawal, including if the deposit
agreement terminates$0.02 (or less) per ADS
    
    Any cash distribution to ADS holdersA fee equivalent to the fee that would be payable if
securities distributed to you had been shares and
the shares had been deposited for issuance of ADSs
    
    Distribution of securities distributed to
holders of deposited securities which are
distributed by the depositary to ADS
holders$0.02 (or less) per ADSs per calendar year
    
    Depositary servicesRegistration or transfer fees
    
    Transfer and registration of shares on our
share register to or from the name of the
depositary or its agent when you deposit
or withdraw sharesExpenses of the depositary
    
    Cable, telex and facsimile transmissions
(when expressly provided in the deposit
agreement)Converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary
or the custodian have to pay on any ADS or share
underlying an ADS, for example, stock transfer
taxes, stamp duty or withholding taxes
    
    As necessaryAny charges incurred by the depositary or its agents 
for servicing the deposited securities
    
    As necessary
    74




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PART II
 
 ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    approximately US$68.0 million to purchase or prepay for raw materials;
    
    approximately US$40.0 million to expand our manufacturing capacity;
    
    approximately US$17.9 million to acquire SolarOne Technology; and
    
    approximately US$10.0 million to invest in our research and development activities.
   
    
    approximately US95.6 million for wafer and polysilicon pre-payments;
    
    approximately US37.4 million for capital expenditure;
    
    US$19.2 million to repay loans from Hong Kong Huaerli, a company
controlled by Mr. Yonghua Lu, our former chairman, to SolarOne Hong
Kong, our 100% indirect subsidiary; and
    
    the remainder for working capital and repayment of our existing bank borrowings.
     75




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ITEM 15 CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting
     Report of Independent Registered Public Accounting Firm
 
    76




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##### Table of Contents



Changes in Internal Controls
  
 ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B CODE OF ETHICS
 http://www.hanwha-solarone.com
 
 ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
  2009
    
    
    2010
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (US$)Audit fees(1)
    
    
    7,790,000
    
    
    
    6,750,000
    
    
    
    1,022,727Audit-related fees
    
    
    
    
    
    
    
    
    
    
    Tax fees(2)
    
    
    688,000
    
    
    
    260,000
    
    
    
    39,394All other fees
    
    
    
    
    
    
    
    
    
    
    
 Notes:(1)
    
    Audit fees means the aggregate fees billed in each of the fiscal
years listed for professional services rendered by our principal
auditors. In 2009 and 2010, RMB5,500,000 and RMB5,250,000
(US$795,454), respectively, are for the audits of our annual
consolidated financial statements and our internal control over
financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley
Act of 2002. The audit fees also included RMB2,290,000 and
RMB1,500,000 (US$227,273) in 2009 and 2010, respectively, for the
services rendered in connection with our equity offerings.(2)
    
    Tax fees means the aggregated fees for services rendered in
connection with technical tax advice in 2009 and 2010.  77




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de minimus
 
 ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 ITEM 16F CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
  
 ITEM 16G CORPORATE GOVERNANCE
    78




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PART III
 
 ITEM 17 FINANCIAL STATEMENTS
  
 ITEM 18 FINANCIAL STATEMENTS
  
    
    Report of Independent Registered Public Accounting Firm
    
    Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    Consolidated Statements of Operations for the Years Ended December 31, 2008, 2009 and 2010
    
    Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2009 and 2010
    
    Consolidated Statements of Changes in Shareholders Equity for the Years Ended December 31, 2008, 2009 and 2010
    
    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 Amended and Restated Memorandum and Articles of Association 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)1.3
    *
    
    Amended and Restated Memorandum and Articles of Association of Hanwha SolarOne Co., Ltd., as adopted by
Special Resolution passed on December 18, 2006 and effective on December 26, 2006, as amended by Special
Resolution passed on February 21, 20112.1
    
    
    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)
  79




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ExhibitNumber
    
    Description of Document4.1
    
    
    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)4.2
    
    
    2007 Equity Incentive Plan (incorporated by reference to Exhibit 99.2 from our Form S-8 registration
statement (File No. 333-147644), as amended, initially filed with the Commission on November 27, 2007)4.3
    
    
    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)4.4
    
    
    Second and Restated Supply Agreement, dated May 13, 2008, between SolarOne Hong Kong Power Ltd.
and Hoku (incorporated by reference to Exhibit 4.39 from our 20-F annual report filed with the Commission
on June 27, 2008)4.5
    
    
    Investment Agreement, dated November 14, 2007, between Jiangsu Linyang Solarfun Co., Ltd. and
Management Committee of Qidong Economic Development Zone, Jiangsu Province (incorporated by
reference to Exhibit 10.35 from our F-1 registration statement (File No. 333-147627), as amended,
initially filed with the Commission on November 27, 2007)4.6
    
    
    Contract, dated October 30, 2007, between Yangguang Solar and Ald Vacuum Technologies GmbH (incorporated by
reference to Exhibit 4.41 from our 20-F annual report filed with the Commission on June 27, 2008)4.7
    
    
    State-owned Land Use Right Grant Contract, dated January 28, 2005, between Lianyungang Municipal
Administration of Land and Resources and Yangguang Solar Technology Co., Ltd. (incorporated by reference to
Exhibit 4.42 from our 20-F annual report filed with the Commission on June 27, 2008)4.8
    
    
    Equity Transfer Agreement, dated June 23, 2008, among Nantong Linyang Electric Power Investment Co.,
Ltd., Jiangsu Qitian Group Co., Ltd., Jiangsu Guangyi Technology Co., Ltd. and Jiangsu Linyang Solarfun
Co., Ltd. (incorporated by reference to Exhibit 4.43 from our 20-F/A amendment to annual report filed with
the Commission on June 30, 2008)4.9
    
    
    Equity Transfer Agreement, dated November 16, 2009, between Rongqiang Cui and Jiangsu Linyang
Solarfun Co., Ltd. (incorporated by reference to Exhibit 4.31 from our 20-F annual report, as amended,
initially filed with the Commission on May 25, 2010)4.10
    
    
    Equity Transfer Agreement, dated November 16, 2009, between Guoyu Wang and Jiangsu Linyang Solarfun
Co., Ltd. (incorporated by reference to Exhibit 4.32 from our 20-F annual report, as amended, initially
filed with the Commission on May 25, 2010)4.11
    
    
    Equipment Sales Agreement, dated April 30, 2010, between SMIC Energy Technology (Shanghai) and
Jiangsu Linyang Solarfun Co., Ltd. (incorporated by reference to Exhibit 4.33 from our 20-F annual report,
as amended, initially filed with the Commission on May 25, 2010)4.12
    
    
    Lease Agreement, dated April 3, 2009, between Jiangsu Linyang Electronics Co., Ltd. and Jiangsu Linyang
Solarfun Co., Ltd. (incorporated by reference to Exhibit 4.34 from our 20-F annual report, as amended,
initially filed with the Commission on May 25, 2010)
  80




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ExhibitNumber
    
    Description of Document4.13
    
    
    Lease Agreement, dated April 2010, between Qidong Huahong Electronics Co., Ltd. and Jiangsu Linyang
Solarfun Co., Ltd. (incorporated by reference to Exhibit 4.35 from our 20-F annual report, as amended,
initially filed with the Commission on May 25, 2010)4.14
    #
    
    Toll Manufacturing Agreement for the Production of Solar Modules between Solarfun Power Hong Kong
Limited and Q-cells International GmbH dated December 30, 2008 (incorporated by reference to Exhibit 4.36
from our 20-F annual report, as amended, initially filed with the Commission on May 25, 2010)4.15
    
    
    Shareholders Agreement between Solarfun Power Holdings Co., Ltd. and Hanwha Solar Holdings Co., Ltd. dated
September 16, 2010 (incorporated by reference to Exhibit 99.2 from Form 6-K submitted with the Commission
on November 9, 2010)4.16
    
    
    Share Purchase Agreement between Solarfun Power Holdings Co., Ltd. and Hanwha Chemical Corporation, dated
August 3, 2010 (incorporated by reference to Exhibit 99.1 from Form 6-K submitted with the Commission on
November 9, 2010)4.17
    
    
    Share Issuance and Repurchase Agreement between Solarfun Power Holdings Co., Ltd. and Hanwha Solar Holdings
Co., Ltd. dated September 16, 2010 (incorporated by reference to Exhibit 99.3 from Form 6-K submitted with
the Commission on November 9, 2010)4.18
    *
    
    Purchase Agreement between Ya An Yongwang Silicon Co., Ltd. and Jiangsu Linyang Solarfun Co., Ltd. dated
September 15, 20108.1
    *
    
    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 11, 2006)12.1
    *
    
    CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2
    *
    
    CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1
    *
    
    CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200223.1
    *
    
    Consent of Independent Registered Public Accounting Firm
 Notes:*
    
    Filed with this Annual Report on Form 20-F.#
    
    Confidential treatment has been requested. Confidential information has been redacted and separately filed with the SEC.  81




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SIGNATURE
  HANWHA SOLARONE CO., LTD./s/
Ping Peter XieName:
    Ping Peter XieTitle:
    President and Chief Executive Officer   82




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HANWHA SOLARONE CO., LTD.
 CONSOLIDATED FINANCIAL STATEMENTS
 As of December 31, 2009 and 2010

and for the years ended December 31, 2008, 2009 and 2010




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageConsolidated Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2008, 2009 and 2010
    
    
    F-4Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2009 and 2010
    
    
    F-5  F-6Consolidated Statements of Changes in Shareholders Equity for the Years Ended December 31, 2008, 2009 and 2010
    
    
    F-7Notes to the Consolidated Financial Statements
    
    
    F-8  F-54
  F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
         F-2




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
 
 CONSOLIDATED BALANCE SHEETS
 As of December 31,Note
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)ASSETSCurrent assets:Cash and cash equivalents
    
    
    
    
    645,720
    
    
    
    1,630,777
    
    
    
    247,087Restricted cash
    
    
    
    
    60,539
    
    
    
    100,490
    
    
    
    15,226Accounts receivable  net
    
    4
    
    
    587,488
    
    
    
    1,282,807
    
    
    
    194,365Notes receivable
    
    4
    
    
    
    
    
    
    10,000
    
    
    
    1,515Inventories  net
    
    5
    
    
    783,973
    
    
    
    790,773
    
    
    
    119,814Advance to suppliers  net
    
    6
    
    
    540,145
    
    
    
    764,063
    
    
    
    115,767Other current assets
    
    7
    
    
    180,315
    
    
    
    255,432
    
    
    
    38,702Deferred tax assets  net
    
    24
    
    
    63,115
    
    
    
    91,611
    
    
    
    13,880Derivative contracts
    
    17
    
    
    7,360
    
    
    
    7,489
    
    
    
    1,135Amount due from related parties
    
    25
    
    
    12,458
    
    
    
    27,819
    
    
    
    4,215Total current assets
    
    
    
    
    2,881,113
    
    
    
    4,961,261
    
    
    
    751,706Non-current assets:Long-term prepayments
    
    6
    
    
    439,617
    
    
    
    394,282
    
    
    
    59,740Amount due from related parties, non-current portion
    
    25
    
    
    
    
    
    
    15,000
    
    
    
    2,273Fixed assets  net
    
    8
    
    
    1,586,283
    
    
    
    2,084,027
    
    
    
    315,762Intangible assets  net
    
    9
    
    
    208,563
    
    
    
    205,763
    
    
    
    31,176Deferred tax assets  net
    
    24
    
    
    13,789
    
    
    
    16,759
    
    
    
    2,539Long-term deferred expenses
    
    11
    
    
    33,158
    
    
    
    27,273
    
    
    
    4,132Goodwill
    
    10
    
    
    134,735
    
    
    
    134,735
    
    
    
    20,414Total non-current assets
    
    
    
    
    2,416,145
    
    
    
    2,877,839
    
    
    
    436,036Total assets
    
    
    
    
    5,297,258
    
    
    
    7,839,100
    
    
    
    1,187,742LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term bank borrowings
    
    12
    
    
    404,764
    
    
    
    318,919
    
    
    
    48,321Long-term bank borrowings, current portion
    
    12
    
    
    120,000
    
    
    
    215,000
    
    
    
    32,576Accounts payable
    
    
    
    
    441,768
    
    
    
    478,129
    
    
    
    72,444Notes payable
    
    16
    
    
    186,921
    
    
    
    181,265
    
    
    
    27,464Accrued expenses and other liabilities
    
    13
    
    
    191,895
    
    
    
    404,826
    
    
    
    61,337Customer deposits
    
    15
    
    
    59,685
    
    
    
    33,538
    
    
    
    5,082Unrecognized tax benefit
    
    24
    
    
    27,385
    
    
    
    143,473
    
    
    
    21,738Derivative contracts
    
    17
    
    
    1,148
    
    
    
    8,047
    
    
    
    1,219Amount due to related parties
    
    25
    
    
    16,765
    
    
    
    13,183
    
    
    
    1,997Total current liabilities
    
    
    
    
    1,450,331
    
    
    
    1,796,380
    
    
    
    272,178Non-current liabilities:Long-term bank borrowings
    
    12
    
    
    350,000
    
    
    
    135,000
    
    
    
    20,455Deferred tax liabilities
    
    24
    
    
    26,566
    
    
    
    25,977
    
    
    
    3,936Convertible bonds
    
    22
    
    
    658,653
    
    
    
    687,435
    
    
    
    104,157Total non-current liabilities
    
    
    
    
    1,035,219
    
    
    
    848,412
    
    
    
    128,548Total liabilities
    
    
    
    
    2,485,550
    
    
    
    2,644,792
    
    
    
    400,726Commitments and contingencies
    
    28Redeemable ordinary shares(par value US$0.0001 per
share; 45,098,055 shares issued and outstanding at
December 31, 2009 and 2010)
    
    21
    
    
    55
    
    
    
    55
    
    
    
    8Shareholders equityOrdinary shares (par value US$0.0001 per share;
500,000,000 shares authorized; 290,708,739 shares
and 420,645,432 shares issued and outstanding at
December 31, 2009 and 2010, respectively)
    
    
    
    
    227
    
    
    
    314
    
    
    
    48Additional paid-in capital
    
    
    
    
    2,331,797
    
    
    
    3,956,953
    
    
    
    599,538Statutory reserves
    
    19
    
    
    69,564
    
    
    
    170,000
    
    
    
    25,757Retained earnings
    
    
    
    
    410,065
    
    
    
    1,066,986
    
    
    
    161,665Total shareholders equity
    
    
    
    
    2,811,653
    
    
    
    5,194,253
    
    
    
    787,008Total liabilities, redeemable ordinary
shares and shareholders equity
    
    
    
    
    5,297,258
    
    
    
    7,839,100
    
    
    
    1,187,742
   F-3




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the year ended December 31,Note
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Net revenues
    
    
    
    
    4,949,068
    
    
    
    3,778,316
    
    
    
    7,526,993
    
    
    
    1,140,453Cost of revenues
    
    
    
    
    (4,905,147
    )
    
    
    (3,341,936
    )
    
    
    (5,960,648
    )
    
    
    (903,128
    )Gross profit
    
    
    
    
    43,921
    
    
    
    436,380
    
    
    
    1,566,345
    
    
    
    237,325Operating expenses:Selling expenses
    
    
    
    
    (87,913
    )
    
    
    (105,454
    )
    
    
    (178,057
    )
    
    
    (26,978
    )General and administrative expenses
    
    
    
    
    (143,340
    )
    
    
    (180,989
    )
    
    
    (190,594
    )
    
    
    (28,878
    )Research and development expenses
    
    
    
    
    (19,679
    )
    
    
    (32,025
    )
    
    
    (53,500
    )
    
    
    (8,106
    )Government grants
    
    23
    
    
    
    
    
    
    
    
    
    
    18,755
    
    
    
    2,842Total operating expenses
    
    
    
    
    (250,932
    )
    
    
    (318,468
    )
    
    
    (403,396
    )
    
    
    (61,120
    )Operating (loss) profit
    
    
    
    
    (207,011
    )
    
    
    117,912
    
    
    
    1,162,949
    
    
    
    176,205Interest expense
    
    
    
    
    (103,146
    )
    
    
    (157,907
    )
    
    
    (161,677
    )
    
    
    (24,497
    )Interest income
    
    
    
    
    10,004
    
    
    
    5,002
    
    
    
    6,141
    
    
    
    930Exchange losses
    
    
    
    
    (35,230
    )
    
    
    (23,814
    )
    
    
    (89,272
    )
    
    
    (13,526
    )Changes in fair value of derivative contracts
    
    17
    
    
    83,090
    
    
    
    9,594
    
    
    
    77,531
    
    
    
    11,747Changes in fair value of conversion feature of
convertible bonds
    
    22
    
    
    
    
    
    
    (73,887
    )
    
    
    31,623
    
    
    
    4,791Other income
    
    
    
    
    15,018
    
    
    
    6,286
    
    
    
    24,353
    
    
    
    3,690Other expenses
    
    
    
    
    (25,604
    )
    
    
    (11,835
    )
    
    
    (5,903
    )
    
    
    (894
    )Government grants
    
    23
    
    
    3,480
    
    
    
    7,661
    
    
    
    9,595
    
    
    
    1,454(Loss) income before income taxes
    
    
    
    
    (259,399
    )
    
    
    (120,988
    )
    
    
    1,055,340
    
    
    
    159,900Income tax expenses
    
    24
    
    
    (6,519
    )
    
    
    (23,928
    )
    
    
    (297,983
    )
    
    
    (45,149
    )Consolidated net (loss) income
    
    
    
    
    (265,918
    )
    
    
    (144,916
    )
    
    
    757,357
    
    
    
    114,751Net income attributable to non-controlling interest
    
    
    
    
    (14,573
    )
    
    
    (311
    )
    
    
    
    
    
    
    Net (loss) income attributable to Hanwha SolarOne
Co., Ltd. shareholders
    
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    757,357
    
    
    
    114,751Net (loss) income attributable to Hanwha SolarOne
Co., Ltd. shareholders
per share:Basic
    
    30
    
    RMB
    (1.11
    )
    
    RMB
    (0.53
    )
    
    RMB
    2.43
    
    
    US$
    0.37Diluted
    
    30
    
    RMB
    (1.11
    )
    
    RMB
    (0.53
    )
    
    RMB
    2.36
    
    
    US$
    0.36Number of shares used in computation of net (loss)
income per share:Basic
    
    30
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    311,263,308
    
    
    
    311,263,308Diluted
    
    30
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    357,272,605
    
    
    
    357,272,605
   F-4




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the year ended December 31,Note
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Cash flows from operating activities:Consolidated net (loss) income
    
    
    
    
    (265,918
    )
    
    
    (144,916
    )
    
    
    757,357
    
    
    
    114,751Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:Unrealized (gain) loss from derivative contracts
    
    17
    
    
    (33,873
    )
    
    
    27,661
    
    
    
    6,770
    
    
    
    1,026Changes in fair value of conversion feature of convertible bonds
    
    
    
    
    
    
    
    
    73,887
    
    
    
    (31,623
    )
    
    
    (4,791
    )Loss from disposal of a subsidiary
    
    
    
    
    384
    
    
    
    
    
    
    
    
    
    
    
    Loss from disposal of fixed assets
    
    
    
    
    
    
    
    
    719
    
    
    
    957
    
    
    
    145Gain from disposal of intangible asset
    
    9
    
    
    (3,403
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of convertible bonds discount
    
    
    
    
    
    
    
    
    50,788
    
    
    
    60,405
    
    
    
    9,153Depreciation and amortization
    
    
    
    
    67,170
    
    
    
    153,174
    
    
    
    187,587
    
    
    
    28,422Amortization of long-term deferred expense
    
    
    
    
    5,145
    
    
    
    6,670
    
    
    
    7,194
    
    
    
    1,090Stock compensation expenses
    
    20
    
    
    34,826
    
    
    
    42,671
    
    
    
    31,963
    
    
    
    4,843Write-down of inventories
    
    5
    
    
    413,789
    
    
    
    282,574
    
    
    
    134,489
    
    
    
    20,377Provision for doubtful collection of accounts receivable
    
    4
    
    
    
    
    
    
    3,723
    
    
    
    
    
    
    
    Reversal of doubtful debt for accounts receivable
    
    
    
    
    
    
    
    
    
    
    
    
    (278
    )
    
    
    (42
    )Provision for doubtful collection of advances to supplier
    
    6
    
    
    41,962
    
    
    
    234,724
    
    
    
    117
    
    
    
    18Deferred tax benefit
    
    24
    
    
    (50,068
    )
    
    
    (15,792
    )
    
    
    (32,055
    )
    
    
    (4,857
    )Warranty provision
    
    14
    
    
    46,565
    
    
    
    33,728
    
    
    
    67,616
    
    
    
    10,245Warranty settlements and reversals
    
    14
    
    
    (18,887
    )
    
    
    (8,904
    )
    
    
    (9,386
    )
    
    
    (1,422
    )Unrecognized tax benefit
    
    24
    
    
    27,385
    
    
    
    
    
    
    
    116,088
    
    
    
    17,589Others
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Restricted cash
    
    
    
    
    (44,602
    )
    
    
    2,011
    
    
    
    (5,298
    )
    
    
    (803
    )Accounts receivable
    
    
    
    
    111,157
    
    
    
    (271,674
    )
    
    
    (695,041
    )
    
    
    (105,309
    )Notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    (1,515
    )Inventories
    
    
    
    
    (417,016
    )
    
    
    (334,839
    )
    
    
    (141,289
    )
    
    
    (21,407
    )Advance to suppliers and long-term prepayments
    
    
    
    
    (547,458
    )
    
    
    (68,872
    )
    
    
    (178,700
    )
    
    
    (27,076
    )Other current assets
    
    
    
    
    (97,271
    )
    
    
    301,434
    
    
    
    (75,117
    )
    
    
    (11,382
    )Amount due from related parties
    
    
    
    
    901
    
    
    
    (12,439
    )
    
    
    (30,361
    )
    
    
    (4,600
    )Accounts payable
    
    
    
    
    103,199
    
    
    
    238,804
    
    
    
    (12,252
    )
    
    
    (1,856
    )Notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    (5,656
    )
    
    
    (857
    )Accrued expenses and other liabilities
    
    
    
    
    (27,857
    )
    
    
    33,648
    
    
    
    154,680
    
    
    
    23,435Amount due to related parties
    
    
    
    
    (2,038
    )
    
    
    10,362
    
    
    
    (3,582
    )
    
    
    (543
    )Customer deposits
    
    
    
    
    (18,134
    )
    
    
    50,191
    
    
    
    (26,147
    )
    
    
    (3,962
    )Net cash (used in) provided by operating activities
    
    
    
    
    (674,040
    )
    
    
    689,333
    
    
    
    268,438
    
    
    
    40,672Cash flows from investing activities:Acquisition of fixed assets
    
    
    
    
    (849,544
    )
    
    
    (260,054
    )
    
    
    (634,506
    )
    
    
    (96,138
    )Acquisition of intangible assets
    
    
    
    
    (48,517
    )
    
    
    (438
    )
    
    
    (1,678
    )
    
    
    (254
    )Acquisition of a subsidiary
    
    
    
    
    (267,566
    )
    
    
    (89,818
    )
    
    
    
    
    
    
    Increase in restricted cash
    
    
    
    
    (1,282
    )
    
    
    25,587
    
    
    
    (34,653
    )
    
    
    (5,250
    )Disposal of affiliate
    
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    Disposal of a subsidiary
    
    
    
    
    (9,394
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from disposal of intangible assets
    
    
    
    
    6,958
    
    
    
    
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    
    
    (1,169,045
    )
    
    
    (324,723
    )
    
    
    (670,837
    )
    
    
    (101,642
    )
   F-5




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS  CONTD
 For the year ended December 31,Note
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Cash flows from financing activities:Proceeds from Share Issuance and Repurchase Agreement
with Hanwha Solar Holdings Co., Ltd.
    
    27
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    3Capital contributed by minority interest shareholder
    
    
    
    
    65,560
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from issuance of redeemable ordinary shares
    
    
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from issuance of convertible bonds
    
    
    
    
    1,178,969
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from issuance of ordinary shares to Hanwha
Solar Holdings Co., Ltd.
    
    18
    
    
    
    
    
    
    
    
    
    
    1,059,812
    
    
    
    160,578Net proceeds from issuance of ordinary shares to public
    
    18
    
    
    489,875
    
    
    
    148,994
    
    
    
    521,302
    
    
    
    78,985Dividends paid to minority shareholders
    
    
    
    
    
    
    
    
    (3,400
    )
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    
    
    12,091
    
    
    
    1,103
    
    
    
    12,166
    
    
    
    1,843Proceeds from short-term borrowings
    
    
    
    
    3,119,682
    
    
    
    1,900,675
    
    
    
    1,098,911
    
    
    
    166,502Payment of short-term borrowings
    
    
    
    
    (2,985,852
    )
    
    
    (2,594,743
    )
    
    
    (1,184,756
    )
    
    
    (179,508
    )Proceeds from long-term borrowings
    
    
    
    
    200,000
    
    
    
    300,000
    
    
    
    
    
    
    
    Payment of long-term borrowings
    
    
    
    
    (15,000
    )
    
    
    (30,000
    )
    
    
    (120,000
    )
    
    
    (18,182
    )Utilization of notes payable
    
    
    
    
    
    
    
    
    147,580
    
    
    
    
    
    
    
    Repayment of advances from related parties
    
    
    
    
    (84,299
    )
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    
    
    1,981,058
    
    
    
    (129,791
    )
    
    
    1,387,456
    
    
    
    210,221Net increase in cash and cash equivalents
    
    
    
    
    137,973
    
    
    
    234,819
    
    
    
    985,057
    
    
    
    149,251Cash and cash equivalents at the beginning of year
    
    
    
    
    272,928
    
    
    
    410,901
    
    
    
    645,720
    
    
    
    97,836Cash and cash equivalents at the end of year
    
    
    
    
    410,901
    
    
    
    645,720
    
    
    
    1,630,777
    
    
    
    247,087Supplemental disclosure of cash flow information:Interest paid
    
    
    
    
    102,440
    
    
    
    104,817
    
    
    
    89,855
    
    
    
    13,614Income tax paid
    
    
    
    
    51,273
    
    
    
    39,159
    
    
    
    160,615
    
    
    
    24,336Realized gain from derivative contracts
    
    
    
    
    49,216
    
    
    
    37,255
    
    
    
    84,301
    
    
    
    12,773Supplemental schedule of non-cash activities:Acquisition of fixed assets included in accounts payable,
accrued expenses and other liabilities
    
    
    
    
    35,904
    
    
    
    21,842
    
    
    
    48,613
    
    
    
    7,366Conversion of convertible bonds into ordinary shares
    
    
    
    
    
    
    
    
    179
    
    
    
    
    
    
    
    Transfer of unamortized debt issuance costs to equity
upon conversion of convertible bonds into ordinary shares
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
   F-6




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Hanwha SolarOne Co., Ltd.Retainedearnings
    
    
    
    
    
    
    TotalNumber of
    
    
    
    
    
    
    Additional paid-
    
    
    Statutory
    
    
    (accumulated
    
    
    Non-controlling
    
    
    shareholdersNote
    
    ordinary shares
    
    
    Ordinary shares
    
    
    in capital
    
    
    reserves
    
    
    losses)
    
    
    Interest
    
    
    equity(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (RMB000)Balance as of January 1, 2008
    
    
    
    
    241,954,744
    
    
    
    195
    
    
    
    1,601,852
    
    
    
    37,548
    
    
    
    222,987
    
    
    
    100,420
    
    
    
    1,963,002Exercise of stock options and vesting of
restricted stock units
    
    20
    
    
    1,040,590
    
    
    
    1
    
    
    
    12,090
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,091Capital contributed by non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,560
    
    
    
    65,560Disposal of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,750
    )
    
    
    (8,750
    )Purchase of subsidiary shares from
non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (167,620
    )
    
    
    (167,620
    )Settlement of stock options exercised with
shares held by depository bank
    
    
    
    
    (1,040,590
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from issuance of ordinary shares
    
    
    
    
    27,105,465
    
    
    
    18
    
    
    
    489,857
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,875Share-based compensation
    
    20
    
    
    
    
    
    
    
    
    
    
    34,825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,825Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (280,491
    )
    
    
    14,573
    
    
    
    (265,918
    )Appropriation of statutory reserves
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,090
    
    
    
    (10,090
    )
    
    
    
    
    
    
    Balance as of December 31, 2008
    
    
    
    
    269,060,209
    
    
    
    214
    
    
    
    2,138,624
    
    
    
    47,638
    
    
    
    (67,594
    )
    
    
    4,183
    
    
    
    2,123,065Adjustment to retained earnings upon adoption
of ASC 815-40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    644,812
    
    
    
    
    
    
    
    644,812Balance as of January 1, 2009
    
    
    
    
    269,060,209
    
    
    
    214
    
    
    
    2,138,624
    
    
    
    47,638
    
    
    
    577,218
    
    
    
    4,183
    
    
    
    2,767,877Exercise of stock options and vesting of
restricted stock units
    
    20
    
    
    893,760
    
    
    
    
    
    
    
    1,101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,101Settlement of stock options exercised with
shares held by depository bank
    
    
    
    
    (893,760
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of convertible bonds into ordinary
shares
    
    
    
    
    6,535
    
    
    
    
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175Share-based compensation
    
    20
    
    
    
    
    
    
    
    
    
    
    42,671
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,671Shares issued to depository bank
    
    
    
    
    2,200,000
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from issuance of ordinary shares
    
    18
    
    
    19,441,995
    
    
    
    12
    
    
    
    148,982
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,994Purchase of subsidiary shares from
non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    (1,094
    )
    
    
    (849
    )Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (145,227
    )
    
    
    311
    
    
    
    (144,916
    )Appropriation of statutory reserves
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,926
    
    
    
    (21,926
    )
    
    
    
    
    
    
    Appropriation of retained earnings to
non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,400
    )
    
    
    (3,400
    )Balance as of December 31, 2009
    
    
    
    
    290,708,739
    
    
    
    227
    
    
    
    2,331,797
    
    
    
    69,564
    
    
    
    410,065
    
    
    
    
    
    
    
    2,811,653Exercise of stock options and vesting of
restricted stock units
    
    20
    
    
    1,762,500
    
    
    
    
    
    
    
    12,166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,166Settlement of stock options exercised with
shares held by depository bank
    
    
    
    
    (1,762,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    20
    
    
    
    
    
    
    
    
    
    
    31,963
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,963Shares issued to depository bank
    
    
    
    
    1,500,000
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from issuance of ordinary shares
to Hanwha Solar Holdings Co., Ltd.
    
    18
    
    
    82,436,693
    
    
    
    55
    
    
    
    1,059,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,059,812Net proceeds from issuance of ordinary shares
to public
    
    18
    
    
    46,000,000
    
    
    
    31
    
    
    
    521,271
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    521,302Net income for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    757,357
    
    
    
    
    
    
    
    757,357Appropriation of statutory reserves
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,436
    
    
    
    (100,436
    )
    
    
    
    
    
    
    Balance as of December 31, 2010
    
    
    
    
    420,645,432
    
    
    
    314
    
    
    
    3,956,953
    
    
    
    170,000
    
    
    
    1,066,986
    
    
    
    
    
    
    
    5,194,253Balance as of December 31, 2010, in US$000
    
    
    
    
    
    
    
    
    48
    
    
    
    599,538
    
    
    
    25,757
    
    
    
    161,665
    
    
    
    
    
    
    
    787,008
   F-7




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 1. ORGANIZATION AND BASIS OF PRESENTATION
        F-8




---



##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION (CONTD)
  Date of incorporation/
    
    Place of
    
    Percentage ofestablishment/
    
    incorporation/
    
    shareholding/Name of subsidiary
    
    acquisition
    
    establishment
    
    ownership
    
    
    Principal activitiesHanwha SolarOne Investment Holding Ltd. (SolarOne Investment) (previously known as Linyang Solar Power Investment Holding Ltd.)
    
    May 17, 2006
    
    British Virgin Islands
    
    
    100
    %
    
    Investment holdingHanwha SolarOne Hong Kong Limited (SolarOne HK) (previously known as Solarfun Power Hong Kong Limited)
    
    May 16, 2007
    
    Hong Kong
    
    
    100
    %
    
    Investment holding and international procurementHanwha SolarOne U.S.A. Inc. (SolarOne USA) (previously known as Solarfun USA, Inc.)
    
    September 18, 2007
    
    United States of America
    
    
    100
    %
    
    International salesSolarOne GmbH
    
    February 14, 2008
    
    Deutschland
    
    
    100
    %
    
    International salesSolarOne Qidong
    
    August 27, 2004
    
    PRC
    
    
    100
    %
    
    Development, manufacturing and sales of photovoltaic (PV) products to overseas customersSolar Shanghai
    
    March 29, 2006
    
    PRC
    
    
    100
    %
    
    Sales of PV products to PRC customersHanwha Solar Engineering Research and Development Center Co., Ltd. (Solar R&D) (previously known as Jiangsu Linyang Solarfun
 Engineering Research and Development Center Co., Ltd.)
    
    April 9, 2007
    
    PRC
    
    
    100
    %
    
    Research and developmentSolarOne Technology
    
    July 31, 2007
    
    PRC
    
    
    100
    %
    
    Manufacturing of silicon ingotsSolar Engineering
    
    May 25, 2010
    
    PRC
    
    
    100
    %
    
    Provide construction services to build solar power systems in the PRC
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Principles of Consolidation
   F-9




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##### Table of Contents



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




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Debt Issuance Costs
  Inventories
  Fixed Assets
  Buildings
    
    20 yearsPlant and machinery
    
    10 yearsFurniture, fixtures and office equipment
    
    5 yearsComputer software
    
    5 yearsMotor vehicles
    
    5 yearsLeasehold improvements
    
    Over the shorter of the lease term or their estimated useful lives
    Intangible Assets
    F-11




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Goodwill
  Goodwill and Other Intangible Assets.
    Impairment of Long-Lived Assets
   F-12




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Fair Value of Financial Instruments
 , Derivatives and Hedging: Contracts in Entitys Own
Equity,
  As of December 31,2009
    
    
    2010Underlying share price
    
    US$
    7.63
    
    
    US$
    8.17Conversion price
    
    US$
    19.125
    
    
    US$
    19.125Time to maturity
    
    8.04 years
    
    
    7.04 yearsRisk free rate
    
    
    3.55
    %
    
    
    2.72
    %Expected volatility
    
    
    76.83
    %
    
    
    71.72
    %Comparable yield to maturity
    
    
    5.98
    %
    
    
    5.32
    %
   Financial Instruments  Embedded Foreign Currency Derivatives
 Derivatives and Hedging: Overall.
  F-13




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Financial Instruments  Foreign Currency Derivative Contracts and Commodity Contracts
   Revenue Recognition
 Revenue Recognition: Overall,
    F-14




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Revenue Recognition (contd)
 Accounting for Purchases and Sales of Inventory with the Same
Counterparty,
   Cost of Revenue
  Research and Development Costs
  Advertising Expenditures
   F-15




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Warranty Cost
  Government Grants
  Accounting for Income Taxes and Uncertain Tax Positions
 Accounting for Income Taxes.
  F-16




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Accounting for Income Taxes and Uncertain Tax Positions (contd)
 Accounting for Uncertainty in Income Taxes,
  Value-Added Tax (VAT)
  Leases
  Net Income (Loss) Per Share
 Earnings Per Share.
  F-17




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Stock Compensation
 Share-Based Payment, Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,
   Comparative Financial Statements
  1)
    
    An amount of RMB438,617,000 in advances to suppliers, net has been reclassified from current
assets to long-term prepayments in non-current assets (Note 6).
 2)
    
    An amount of RMB30,000,000 in long-term bank borrowings has been reclassified from
non-current liabilities to long-term bank borrowings, current portion in current liabilities
(Note 12).
 Recent Accounting Pronouncements
 Derivative and Hedging
(Topic 815).
 CompensationStock Compensation (Topic 718).
  F-18




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Recent Accounting Pronouncements (contd)
 Intangibles  Goodwill and
Other (ASC 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with
Zero or Negative Carrying Amounts
 Concentration of Risks
       F-19




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
 Concentration of Risks (contd)
     3. ACQUISITIONS
  4. ACCOUNTS AND NOTES RECEIVABLE
  As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Beginning balance
    
    
    2,267
    
    
    
    4,183
    
    
    
    633Provision (reversal) for doubtful debt
    
    
    3,723
    
    
    
    (278
    )
    
    
    (42
    )Written-off
    
    
    (1,807
    )
    
    
    (160
    )
    
    
    (24
    )Ending balance
    
    
    4,183
    
    
    
    3,745
    
    
    
    567
  F-20




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 4. ACCOUNTS AND NOTES RECEIVABLE (CONTD)
  5. INVENTORIES  NET
  As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Raw materials
    
    
    277,553
    
    
    
    459,480
    
    
    
    69,618Work-in-progress
    
    
    129,500
    
    
    
    25,119
    
    
    
    3,806Finished goods
    
    
    376,920
    
    
    
    306,174
    
    
    
    46,390783,973
    
    
    
    790,773
    
    
    
    119,814
  6. ADVANCE TO SUPPLIERS AND LONG-TERM PREPAYMENTS
    F-21




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 6. ADVANCE TO SUPPLIERS AND LONG-TERM PREPAYMENTS (CONTD)
   7. OTHER CURRENT ASSETS
  As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)VAT recoverable
    
    
    37,686
    
    
    
    143,044
    
    
    
    21,673Other receivables
    
    
    13,115
    
    
    
    66,807
    
    
    
    10,123Prepaid expenses
    
    
    129,514
    
    
    
    45,581
    
    
    
    6,906180,315
    
    
    
    255,432
    
    
    
    38,702
    F-22




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 7. OTHER CURRENT ASSETS (CONTD)
    Determining Whether an Arrangement Contains a Lease, Accounting for Leases.
 8. FIXED ASSETS  NET
  As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Buildings
    
    
    232,344
    
    
    
    323,228
    
    
    
    48,974Plant and machinery
    
    
    1,489,108
    
    
    
    1,725,787
    
    
    
    261,483Furniture, fixtures and office equipment
    
    
    35,059
    
    
    
    44,455
    
    
    
    6,736Computer software
    
    
    2,202
    
    
    
    4,369
    
    
    
    662Motor vehicles
    
    
    8,203
    
    
    
    10,060
    
    
    
    1,524Leasehold improvement
    
    
    
    
    
    
    4,801
    
    
    
    727Construction-in-progress
    
    
    67,086
    
    
    
    402,155
    
    
    
    60,9331,834,002
    
    
    
    2,514,855
    
    
    
    381,039Less: Accumulated depreciation
    
    
    (247,719
    )
    
    
    (430,828
    )
    
    
    (65,277
    )1,586,283
    
    
    
    2,084,027
    
    
    
    315,762
  F-23




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 8. FIXED ASSETS  NET (CONTD)
  9. INTANGIBLE ASSETS  NET
  As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Land use rightsCost
    
    
    215,062
    
    
    
    216,762
    
    
    
    32,843Less: Accumulated amortization
    
    
    (6,499
    )
    
    
    (10,999
    )
    
    
    (1,667
    )208,563
    
    
    
    205,763
    
    
    
    31,176
    10. GOODWILL
   F-24




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 11. LONG-TERM DEFERRED EXPENSES
 As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Convertible bond issuance costs (Note 22)
    
    
    31,375
    
    
    
    25,664
    
    
    
    3,888Others
    
    
    1,783
    
    
    
    1,609
    
    
    
    24433,158
    
    
    
    27,273
    
    
    
    4,132
 12. BANK BORROWINGS
 As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Total bank borrowings
    
    
    874,764
    
    
    
    668,919
    
    
    
    101,352Comprised of:Short-term
    
    
    404,764
    
    
    
    318,919
    
    
    
    48,321Long-term, current portion
    
    
    120,000
    
    
    
    215,000
    
    
    
    32,576524,764
    
    
    
    533,919
    
    
    
    80,897Long-term, non-current portion
    
    
    350,000
    
    
    
    135,000
    
    
    
    20,455874,764
    
    
    
    668,919
    
    
    
    101,352
     F-25




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 12. BANK BORROWINGS (CONTD)
  December 31, 2009
 Amount
    
    
    Secured/guaranteed by(RMB000)200,000
    
    
    Jointly guaranteed by (i) Hanwha SolarOne Co., Ltd. and (ii) the Groups factory premises and land-use rights with net book value of RMB28,138,995 and RMB6,699,211, respectively (Notes 8 and 9)87,000
    
    
    Guaranteed by SolarOne Technology280,000
    
    
    Guaranteed by SolarOne Qidong300,000
    
    
    Guaranteed by Hanwha SolarOne Co., Ltd.7,764
    
    
    Guaranteed by restricted cash of RMB7,478,800874,764
 December 31, 2010
 Amount
    
    
    Secured/guaranteed by(RMB000)92,718
    
    
    Jointly guaranteed by (i) Hanwha SolarOne Co., Ltd. and (ii) the Groups factory premises and land-use rights with net book value of RMB26,632,267 (US$4,035,192) and RMB6,518,897 (US$987,712), respectively (Notes 8 and 9)171,197
    
    
    Jointly guaranteed by Hanwha SolarOne Co., Ltd. and SolarOne Technology135,004
    
    
    Guaranteed by SolarOne Qidong270,000
    
    
    Guaranteed by Hanwha SolarOne Co., Ltd.668,919
  December 31,2010
    
    
    2010(RMB000)
    
    
    (US$000)Within 1 year
    
    
    215,000
    
    
    
    32,576Between 1 and 2 years
    
    
    135,000
    
    
    
    20,455350,000
    
    
    
    53,031
  F-26




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 13. ACCRUED EXPENSES AND OTHER LIABILITIES
  As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Accrued warranty costs (Note 14)
    
    
    73,459
    
    
    
    131,689
    
    
    
    19,953Accrued wages and other employee welfare
    
    
    35,800
    
    
    
    93,124
    
    
    
    14,110Taxes payable
    
    
    9,075
    
    
    
    78,190
    
    
    
    11,847Accrued professional service fees
    
    
    6,928
    
    
    
    27,102
    
    
    
    4,106Accrued compensation expense
    
    
    4,801
    
    
    
    22,238
    
    
    
    3,369Interest payable for convertible bonds
    
    
    19,000
    
    
    
    18,434
    
    
    
    2,793Accrued insurance expense
    
    
    6,201
    
    
    
    5,569
    
    
    
    844Accrued utilities expenses
    
    
    5,864
    
    
    
    5,473
    
    
    
    829Accrued freight, import and export related expense
    
    
    6,829
    
    
    
    4,462
    
    
    
    676Accrued sales commission
    
    
    7,644
    
    
    
    2,872
    
    
    
    435Share Issuance and Repurchase Agreement with
Hanwha Chemical (Note 27)
    
    
    
    
    
    
    21
    
    
    
    3Other accrued expenses and liabilities
    
    
    16,294
    
    
    
    15,652
    
    
    
    2,372191,895
    
    
    
    404,826
    
    
    
    61,337
 14. ACCRUED WARRANTY COSTS
  As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Beginning balance
    
    
    48,635
    
    
    
    73,459
    
    
    
    11,130Warranty provision
    
    
    33,728
    
    
    
    67,616
    
    
    
    10,245Warranty reversal
    
    
    
    
    
    
    (1,843
    )
    
    
    (279
    )Warranty claims
    
    
    (8,904
    )
    
    
    (7,543
    )
    
    
    (1,143
    )Ending balance
    
    
    73,459
    
    
    
    131,689
    
    
    
    19,953
 15. CUSTOMER DEPOSITS
   F-27




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 16. NOTES PAYABLE
  17. DERIVATIVE CONTRACTS
   Statement of operationslocation
    
    Year ended December 31,2008
    
    
    2009
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Foreign exchange derivative contracts (not designated as hedging instruments)  realized
    
    Changes in fair value of derivative contracts
    
    
    49,217
    
    
    
    37,255
    
    
    
    78,966
    
    
    
    11,965Foreign exchange derivative contracts (not designated as hedging instruments)  unrealized
    
    Changes in fair value of derivative contracts
    
    
    33,873
    
    
    
    (27,661
    )
    
    
    (9,437
    )
    
    
    (1,430
    )Commodity derivative contracts
(not designated as hedging instruments)  realized
    
    Changes in fair value of derivative contracts
    
    
    
    
    
    
    
    
    
    
    5,335
    
    
    
    808Commodity derivative contracts
(not designated as hedging instruments)  unrealized
    
    Changes in fair value of derivative contracts
    
    
    
    
    
    
    
    
    
    
    2,667
    
    
    
    404
  F-28




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 17. DERIVATIVE CONTRACTS (CONTD)
  Balance sheet location
    
    Fair value as ofDecember 31,
    
    
    December 31,2009
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Derivative assets:Foreign exchange derivative contracts(not designated as hedging instruments)
    
    Current assets:Derivative contracts
    
    
    7,360
    
    
    
    4,822
    
    
    
    731Commodity derivative contracts(not designated as hedging instruments)
    
    Current assets:Derivative contracts
    
    
    
    
    
    
    2,667
    
    
    
    404Derivative liabilities:Foreign exchange derivative contracts(not designated as hedging instruments)
    
    Current liabilities:Derivative contracts
    
    
    1,148
    
    
    
    8,047
    
    
    
    1,219
 18. ISSUANCE OF ORDINARY SHARES FROM EQUITY OFFERING
     F-29




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 18. ISSUANCE OF ORDINARY SHARES FROM EQUITY OFFERING (CONTD)
  Number of
    
    
    Number ofDate
    
    Issuance to
    
    ADSs
    
    
    ordinary shares
    
    
    Total proceeds
    
    
    Net proceeds(US$000)
    
    
    (RMB000)
    
    
    (US$000)
    
    
    (RMB000)September 2010
    
    Hanwha Solar
    
    
    *
    
    
    
    36,455,089
    
    
    
    78,171
    
    
    
    524,606
    
    
    
    76,044
    
    
    
    510,331November 2010
    
    Hanwha Solar
    
    
    *
    
    
    
    45,981,604
    
    
    
    82,767
    
    
    
    549,481
    
    
    
    82,767
    
    
    
    549,481
    
    
    
    82,436,693
    
    
    
    160,938
    
    
    
    1,074,087
    
    
    
    158,811
    
    
    
    1,059,812November 2010
    
    Public
    
    
    9,200,000
    
    
    
    46,000,000
    
    
    
    82,800
    
    
    
    549,858
    
    
    
    78,505
    
    
    
    521,3029,200,000
    
    
    
    128,436,693
    
    
    
    243,738
    
    
    
    1,623,945
    
    
    
    237,316
    
    
    
    1,581,114
 *
    
    Not applicable since the Company directly issued ordinary shares to Hanwha Solar. 19. STATUTORY RESERVES
    F-30




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 19. STATUTORY RESERVES (CONTD)
   For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)General Reserve Fund
    
    
    10,090
    
    
    
    21,926
    
    
    
    100,436
    
    
    
    15,218Enterprise Expansion Fund
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Staff Welfare and Bonus Fund
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,090
    
    
    
    21,926
    
    
    
    100,436
    
    
    
    15,218
 20. SHARE OPTION PLANS
     F-31




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 20. SHARE OPTION PLANS (CONTD)
  Weighted-Weighted-
    
    
    averageaverage
    
    
    remainingNumber of
    
    
    exercise
    
    
    contractual
    
    
    Aggregateoptions
    
    
    price
    
    
    life
    
    
    intrinsic value(US$)
    
    
    (Years)
    
    
    (US$)Outstanding, January 1, 2009
    
    
    11,384,800
    
    
    
    2.35
    
    
    
    8.22
    
    
    
    12,000Granted
    
    
    7,682,300
    
    
    
    1.17Exercised
    
    
    (175,020
    )
    
    
    0.95
    
    
    
    
    
    
    
    122,487Forfeited
    
    
    (2,907,165
    )
    
    
    2.55Expired
    
    
    Outstanding, December 31, 2009
    
    
    15,984,915
    
    
    
    1.76
    
    
    
    7.41
    
    
    
    3,147,919Granted
    
    
    1,837,500
    
    
    
    1.68Exercised
    
    
    (1,537,500
    )
    
    
    1.17
    
    
    
    
    
    
    
    1,324,179Forfeited
    
    
    (849,355
    )
    
    
    1.74Expired
    
    
    Outstanding, December 31, 2010
    
    
    15,435,560
    
    
    
    1.81
    
    
    
    6.43
    
    
    
    3,500,315Vested and expected to be
vested at December 31, 2010
    
    
    15,435,560
    
    
    
    1.81
    
    
    
    6.43
    
    
    
    3,500,315Exercisable at December 31, 2010
    
    
    7,296,552
    
    
    
    2.10
    
    
    
    6.26
    
    
    
    1,088,873
 Weighted-Number of
    
    
    average grantoptions
    
    
    date fair value(US$)Unvested, January 1, 2010
    
    
    10,499,799
    
    
    
    1.04Granted
    
    
    1,837,500
    
    
    
    1.13Vested
    
    
    (3,598,607
    )
    
    
    1.12Forfeited
    
    
    (599,684
    )
    
    
    0.86Unvested, December 31, 2010
    
    
    8,139,008
    
    
    
    1.04
    F-32




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 20. SHARE OPTION PLANS (CONTD)
     Weighted-Number of
    
    
    average grantRSUs
    
    
    date fair value(US$)Unvested, January 1, 2009
    
    
    137,498
    
    
    
    19.78Granted
    
    
    52,500
    
    
    
    5.08Vested
    
    
    (143,748
    )
    
    
    16.28Forfeited
    
    
    
    
    
    
    Unvested, December 31, 2009
    
    
    46,250
    
    
    
    13.97Granted
    
    
    45,000
    
    
    
    8.00Vested
    
    
    (51,250
    )
    
    
    13.25Forfeited
    
    
    
    
    
    
    Unvested, December 31, 2010
    
    
    40,000
    
    
    
    9.47
    F-33




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 20. SHARE OPTION PLANS (CONTD)
   Granted in 2009
    
    
    Granted in 2010Risk-free interest rate
    
    
    1.14%  3.81
    %
    
    
    0.25%  3.31
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    80
    %
    
    
    80
    %Sub-optimal early exercise factor
    
    4 times
    
    
    3-4 timesFair value of ordinary shares
    
    From US$0.74 to US$1.53
    
    
    From US$1.39 to $2.49
   For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Cost of revenues
    
    
    3,825
    
    
    
    5,808
    
    
    
    7,898
    
    
    
    1,197Selling expenses
    
    
    3,617
    
    
    
    2,252
    
    
    
    4,184
    
    
    
    634General and administrative expenses
    
    
    26,414
    
    
    
    33,252
    
    
    
    18,365
    
    
    
    2,782Research and development expenses
    
    
    970
    
    
    
    1,359
    
    
    
    1,516
    
    
    
    23034,826
    
    
    
    42,671
    
    
    
    31,963
    
    
    
    4,843
  F-34




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 21. REDEEMABLE ORDINARY SHARES
   , Accounting for Own-Share Lending Arrangements in Contemplation of
Convertible Debt Issuance or Other Financing,
  22. CONVERTIBLE BONDS
     F-35




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 22. CONVERTIBLE BONDS (CONTD)
     , Derivatives and Hedging: Contracts in Entitys Own Equity,
  23. GOVERNMENT GRANTS
   F-36




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 24. INCOME TAXES
 Current taxation
        For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Non-PRC
    
    
    5,562
    
    
    
    (468,907
    )
    
    
    (94,101
    )
    
    
    (14,258
    )PRC
    
    
    (264,961
    )
    
    
    347,919
    
    
    
    1,149,441
    
    
    
    174,158(259,399
    )
    
    
    (120,988
    )
    
    
    1,055,340
    
    
    
    159,900
  F-37




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 24. INCOME TAXES (CONTD)
 Current taxation (contd)
  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Current
    
    
    (65,940
    )
    
    
    (40,375
    )
    
    
    (330,038
    )
    
    
    (50,006
    )Deferred
    
    
    59,421
    
    
    
    16,447
    
    
    
    32,055
    
    
    
    4,857(6,519
    )
    
    
    (23,928
    )
    
    
    (297,983
    )
    
    
    (45,149
    )
  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Income tax computed at the statutory
tax rate at 25%
    
    
    64,850
    
    
    
    30,247
    
    
    
    (263,835
    )
    
    
    (39,975
    )Non-deductible expenses
    
    
    (2,804
    )
    
    
    (3,348
    )
    
    
    (13,561
    )
    
    
    (2,055
    )Tax holidays
    
    
    (32,533
    )
    
    
    28,123
    
    
    
    
    
    
    
    Preferential tax treatment
    
    
    
    
    
    
    
    
    
    
    111,247
    
    
    
    16,856Research and development expense
    
    
    1,104
    
    
    
    1,923
    
    
    
    6,165
    
    
    
    934Tax rate differences
    
    
    (24,870
    )
    
    
    (53,941
    )
    
    
    (42,864
    )
    
    
    (6,495
    )Deferred tax benefit including change in
tax rate
    
    
    2,130
    
    
    
    10,111
    
    
    
    37,390
    
    
    
    5,665Tax credit
    
    
    16,923
    
    
    
    
    
    
    
    
    
    
    
    Unrecognized tax benefit
    
    
    
    
    
    
    
    
    
    
    (116,088
    )
    
    
    (17,589
    )Changes in the valuation allowance
    
    
    (31,319
    )
    
    
    (37,043
    )
    
    
    (16,437
    )
    
    
    (2,490
    )(6,519
    )
    
    
    (23,928
    )
    
    
    (297,983
    )
    
    
    (45,149
    )
  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)Basic
    
    
    
    
    
    
    0.10
    
    
    
    
    
    
    
    Diluted
    
    
    
    
    
    
    0.10
    
    
    
    
    
    
    
    
  F-38




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 24. INCOME TAXES (CONTD)
 Deferred taxation
  As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Deferred tax assets:Current:- Tax credit
    
    
    7,569
    
    
    
    7,569
    
    
    
    1,147- Warranty provision
    
    
    11,019
    
    
    
    32,922
    
    
    
    4,988- Inventory write-off
    
    
    35,086
    
    
    
    25,617
    
    
    
    3,881- Allowance for advance to suppliers
    
    
    63,170
    
    
    
    44,991
    
    
    
    6,817- Allowance for doubtful accounts
    
    
    627
    
    
    
    936
    
    
    
    142- Idle capacity cost
    
    
    3,277
    
    
    
    
    
    
    
    - Sales cut-off
    
    
    4,354
    
    
    
    12,031
    
    
    
    1,823- Other
    
    
    2,443
    
    
    
    9,640
    
    
    
    1,460Valuation allowance
    
    
    (64,430
    )
    
    
    (42,095
    )
    
    
    (6,378
    )Net current deferred tax assets
    
    
    63,115
    
    
    
    91,611
    
    
    
    13,880Non-current:- Pre-operating expenses
    
    
    755
    
    
    
    
    
    
    
    - Tax losses
    
    
    3,592
    
    
    
    42,380
    
    
    
    6,421- Fixed assets
    
    
    13,533
    
    
    
    17,258
    
    
    
    2,615- Long-term deferred expenses
    
    
    194
    
    
    
    180
    
    
    
    27- Other
    
    
    16
    
    
    
    14
    
    
    
    2Valuation allowance
    
    
    (4,301
    )
    
    
    (43,073
    )
    
    
    (6,526
    )Net non-current deferred tax assets
    
    
    13,789
    
    
    
    16,759
    
    
    
    2,539Deferred tax liabilities:Non-current:- Land use rights
    
    
    26,566
    
    
    
    25,977
    
    
    
    3,936Non-current deferred tax liabilities
    
    
    26,566
    
    
    
    25,977
    
    
    
    3,936
   F-39




---



##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 24. INCOME TAXES (CONTD)
   Uncertain Tax Positions
   2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Beginning balance
    
    
    27,385
    
    
    
    27,385
    
    
    
    4,149Incurred during the year
    
    
    
    
    
    
    116,088
    
    
    
    17,589Ending balance
    
    
    27,385
    
    
    
    143,473
    
    
    
    21,738
   F-40




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 25. RELATED PARTY TRANSACTIONS
 Name and Relationship with Related Parties
 Name of related party
    
    Relationship with the GroupLinyang Electronics Co., Ltd. (Linyang Electronics)**
    
    Controlling owner is also a significant shareholder of the CompanyHuaerli (Nantong) Electronics Co., Ltd. (Huaerli Nantong)**
    
    Controlling owner is also a significant shareholder of the CompanyQidong Huahong Electronics Co., Ltd. (Qidong Huahong)**
    
    Controlling owner is also a significant shareholder of the CompanyNantong Huahong Ecological Gardening Co., Ltd. (Nantong Huahong)*/**
    
    Controlling owner is also a significant shareholder of the CompanyNantong Linyang Electric Power Investment Co., Ltd. (Nantong Linyang)**
    
    Controlling owner is also a significant shareholder of the CompanyHong Kong Huaerli Trading Co., Ltd. (Hong Kong Huaerli)**
    
    Controlling owner is also a significant shareholder of the CompanyShanghai Linyang Electronics Technology Co., Ltd. (Linyang Technology)**
    
    Controlling owner is also a significant shareholder of the CompanyQidong Jiaotong Engineering Co., Ltd. (Jiaotong Engineering)**
    
    Controlling owner is also a significant shareholder of the CompanyNantong Linyang Labor Service Company (Linyang Labor Service)**
    
    Controlling owner is also a significant shareholder of the CompanyQ-Cells International GmbH (QCI)**
    
    Controlling owner is also a significant shareholder of the CompanyQ-Cells SE (Q-Cells)**
    
    Controlling owner is also a significant shareholder of the CompanyYa An Yongwang Silicon Co., Ltd. (Ya An)
    
    A wholly owned subsidiary of HongKong YongWang Silicon Investment Co., Ltd., whose controlling owner is Hanwha ChemicalSMIC Energy Technology (Shanghai) Corporation (SMIC ET)
    
    A wholly owned subsidiary of Semiconductor Manufacturing International Corporation (SMIC) where David N.K. Wang, one of the Companys independent directors, serves as president and chief executive officerSemiconductor Manufacturing International (Shanghai) Corporation (SMIC Shanghai)
    
    A wholly owned subsidiary of SMIC where David N.K. Wang, one of the Companys independent directors, serves as president and chief executive officerHanwha Chemical Corporation (Hanwha Chemical)
    
    Holding company of Hanwha Solar, a significant shareholder of the CompanyHanwha L&C Trading (Shanghai) Co., Ltd. (Hanwha L&C)
    
    A wholly owned subsidiary of Hanwha Chemical, the holding company of Hanwha Solar, a significant shareholder of the Company
 *
    
    Previously known as Nantong Linyang Ecological Cultural Co., Ltd.**
    
    Subsequent to the completion of share transfer on September 16, 2010 (Note 27), these
companies ceased to be related parties to the Group.  F-41




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 25. RELATED PARTY TRANSACTIONS (CONTD)
 Significant Related Party Transactions
  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Advance paid to the related party:- Ya An
    
    
    
    
    
    
    
    
    
    
    367,619
    
    
    
    55,700- Hanwha Chemical
    
    
    
    
    
    
    
    
    
    
    7,679
    
    
    
    1,163Purchase of raw materials from:- Ya An
    
    
    7,436
    
    
    
    9,600
    
    
    
    339,122
    
    
    
    51,382- Linyang Electronics *
    
    
    39,156
    
    
    
    33,124
    
    
    
    79,187
    
    
    
    11,998- SMIC ET
    
    
    
    
    
    
    
    
    
    
    4,602
    
    
    
    697- Hanwha Chemical
    
    
    
    
    
    
    
    
    
    
    1,883
    
    
    
    285- Hanwha L&C
    
    
    
    
    
    
    
    
    
    
    1,142
    
    
    
    173- Nantong Huahong *
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    Purchase of services from:- SMIC Shanghai
    
    
    
    
    
    
    
    
    
    
    1,801
    
    
    
    273- Linyang Electronics *
    
    
    
    
    
    
    2,335
    
    
    
    680
    
    
    
    103- Qidong Huahong *
    
    
    
    
    
    
    2,800
    
    
    
    
    
    
    
    - Nantong Huahong *
    
    
    444
    
    
    
    642
    
    
    
    
    
    
    
    - Linyang Labor Service *
    
    
    1,803
    
    
    
    2,205
    
    
    
    889
    
    
    
    135Purchase of fixed assets from:- SMIC ET
    
    
    
    
    
    
    
    
    
    
    33,662
    
    
    
    5,100- Linyang Electronics *
    
    
    2,374
    
    
    
    567
    
    
    
    1,510
    
    
    
    229- Nantong Huahong *
    
    
    314
    
    
    
    
    
    
    
    990
    
    
    
    150- Jiaotong Engineering *
    
    
    615
    
    
    
    
    
    
    
    
    
    
    
    Sales of products to:- Q-Cells *
    
    
    
    
    
    
    
    
    
    
    442,832
    
    
    
    67,096- QCI *
    
    
    
    
    
    
    336,485
    
    
    
    32,924
    
    
    
    4,988Loans from:- Hong Kong Huaerli *
    
    
    64,668
    
    
    
    
    
    
    
    
    
    
    
    Loan interest:- Hong Kong Huaerli *
    
    
    1,385
    
    
    
    
    
    
    
    
    
    
    
    - Nantong Linyang *
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    Expenses incurred in relation to guarantee provided by:- Linyang Electronics *
    
    
    10,064
    
    
    
    
    
    
    
    
    
    
    
    Buildings leased from:- Linyang Electronics *
    
    
    6,084
    
    
    
    3,932
    
    
    
    2,856
    
    
    
    433- Qidong Huahong *
    
    
    
    
    
    
    
    
    
    
    1,368
    
    
    
    207- SMIC Shanghai
    
    
    
    
    
    
    
    
    
    
    1,229
    
    
    
    186Purchase of SolarOne Technology from:- Nantong Linyang *
    
    
    133,452
    
    
    
    
    
    
    
    
    
    
    
    Disposal of an associate to the related party:- Linyang Technology *
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
 *
    
    Subsequent to the completion of share transfer on September 16, 2010 (Note 27), these
companies ceased to be related parties to the Group. Therefore, the above transaction for 2010 only
included transactions from January 1, 2010 to September 16, 2010.  F-42




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 25. RELATED PARTY TRANSACTIONS (CONTD)
 Balances with Related Parties
  As of December 31,2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Amount due from related parties:- Ya An
    
    
    
    
    
    
    22,023
    
    
    
    3,337- Hanwha Chemical
    
    
    
    
    
    
    5,796
    
    
    
    878- Linyang Electronics *
    
    
    369
    
    
    
    
    
    
    
    - QCI *
    
    
    12,022
    
    
    
    
    
    
    
    - Linyang Labor Service *
    
    
    67
    
    
    
    
    
    
    
    12,458
    
    
    
    27,819
    
    
    
    4,215Amount due from related parties, non-current portion:- Ya An
    
    
    
    
    
    
    15,000
    
    
    
    2,273Amount due to related parties:- Ya An
    
    
    
    
    
    
    8,526
    
    
    
    1,292- SMIC Shanghai
    
    
    
    
    
    
    3,515
    
    
    
    532- Hanwha L&C
    
    
    
    
    
    
    1,142
    
    
    
    173- Linyang Electronics *
    
    
    15,879
    
    
    
    
    
    
    
    - Nantong Huahong *
    
    
    421
    
    
    
    
    
    
    
    - Linyang Labor Service *
    
    
    465
    
    
    
    
    
    
    
    16,765
    
    
    
    13,183
    
    
    
    1,997
 *
    
    Subsequent to the completion of share transfer on September 16, 2010 (Note 27), these companies
are ceased to be related parties to the Group. Therefore, the above balances with related parties
as of December 31, 2010 did not include the amount due from/to them.  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Weighted-average balance due from related parties:- Q-Cells
    
    
    
    
    
    
    
    
    
    
    58,941
    
    
    
    8,930- Ya An
    
    
    
    
    
    
    
    
    
    
    14,303
    
    
    
    2,167- QCI
    
    
    
    
    
    
    14,927
    
    
    
    4,628
    
    
    
    701- Hanwha Chemical
    
    
    
    
    
    
    
    
    
    
    1,159
    
    
    
    176- Linyang Labor Service
    
    
    
    
    
    
    13
    
    
    
    810
    
    
    
    123- Linyang Electronics
    
    
    5
    
    
    
    964
    
    
    
    92
    
    
    
    14- Qidong Huahong
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    4- Nantong Huahong
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    3- SMIC Shanghai
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
  F-43




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 25. RELATED PARTY TRANSACTIONS (CONTD)
 Balances with Related Parties (contd)
  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Weighted-average balance due to related parties:- Linyang Electronics
    
    
    6,107
    
    
    
    10,079
    
    
    
    19,828
    
    
    
    3,004- Ya An
    
    
    
    
    
    
    
    
    
    
    11,480
    
    
    
    1,739- QCI
    
    
    
    
    
    
    
    
    
    
    5,222
    
    
    
    791- SMIC Shanghai
    
    
    
    
    
    
    
    
    
    
    2,259
    
    
    
    342- SMIC ET
    
    
    
    
    
    
    
    
    
    
    1,616
    
    
    
    245- Linyang Labor Service
    
    
    192
    
    
    
    432
    
    
    
    1,199
    
    
    
    182- Nantong Huahong
    
    
    305
    
    
    
    318
    
    
    
    701
    
    
    
    106- Hanwha L&C
    
    
    
    
    
    
    
    
    
    
    228
    
    
    
    35- Qidong Huahong
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    24- Nantong Linyang
    
    
    15,407
    
    
    
    6,673
    
    
    
    
    
    
    
    - Hong Kong Huaerli
    
    
    14,609
    
    
    
    
    
    
    
    
    
    
    
    - Jiaotong Engineering
    
    
    244
    
    
    
    160
    
    
    
    
    
    
    
    - Others
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    
  26. EMPLOYEE DEFINED CONTRIBUTION PLAN
   F-44




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 27. SHARE ISSUANCE AND REPURCHASE AGREEMENT
   Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity,
 28. COMMITMENTS AND CONTINGENCIES
 Acquisition of machineries
   F-45




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 28. COMMITMENTS AND CONTINGENCIES (CONTD)
 Operating lease commitments
  As of December 31, 2010(RMB000)
    
    
    (US$000)Year 2011
    
    
    9,141
    
    
    
    1,385Year 2012
    
    
    3,613
    
    
    
    547Year 2013
    
    
    1,000
    
    
    
    152Year 2014 and thereafter
    
    
    
    
    
    
    Total
    
    
    13,754
    
    
    
    2,084
  Purchase of raw materials
  As of December 31, 2010(RMB000)
    
    
    (US$000)Year 2011
    
    
    1,848,363
    
    
    
    280,055Year 2012
    
    
    945,395
    
    
    
    143,242Year 2013
    
    
    818,891
    
    
    
    124,074Year 2014
    
    
    874,082
    
    
    
    132,437Year 2015
    
    
    710,948
    
    
    
    107,719Year 2016 and thereafter
    
    
    
    
    
    
    5,197,679
    
    
    
    787,527
   F-46




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 28. COMMITMENTS AND CONTINGENCIES (CONTD)
 Arbitration with LDK
   Arbitration with Sonnenzins
  29. SEGMENT REPORTING
  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Germany
    
    
    2,637,434
    
    
    
    2,668,477
    
    
    
    4,706,767
    
    
    
    713,146The PRC
    
    
    329,153
    
    
    
    177,478
    
    
    
    591,143
    
    
    
    89,567Italy
    
    
    119,272
    
    
    
    4,446
    
    
    
    572,420
    
    
    
    86,730Australia
    
    
    32,589
    
    
    
    177,637
    
    
    
    407,261
    
    
    
    61,706USA
    
    
    5,976
    
    
    
    17,306
    
    
    
    436,747
    
    
    
    66,174The Czech Republic
    
    
    
    
    
    
    245,814
    
    
    
    165,906
    
    
    
    25,137Spain
    
    
    1,246,305
    
    
    
    37,326
    
    
    
    131,166
    
    
    
    19,874Others
    
    
    578,339
    
    
    
    449,832
    
    
    
    515,583
    
    
    
    78,119Total net revenue
    
    
    4,949,068
    
    
    
    3,778,316
    
    
    
    7,526,993
    
    
    
    1,140,453
   F-47




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 29. SEGMENT REPORTING (CONTD)
  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Customer A
    
    
    1,099,736
    
    
    
    1,562,883
    
    
    
    2,526,512
    
    
    
    382,805
 30. INCOME (LOSS) PER SHARE
  For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Numerator:Income (loss) attributable to ordinary shareholders  basic
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    757,357
    
    
    
    114,751Interest expense of convertible bonds and change in fair
value of conversion feature of convertible bonds
    
    
    
    
    
    
    
    
    
    
    87,357
    
    
    
    13,236Income (loss) attributable to ordinary shareholders  diluted
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    844,714
    
    
    
    127,987Denominator:Number of shares outstanding, opening
    
    
    240,599,244
    
    
    
    268,745,299
    
    
    
    289,087,589
    
    
    
    289,087,589Weighted-average number of shares issued during the year
    
    
    11,293,944
    
    
    
    4,826,493
    
    
    
    21,236,348
    
    
    
    21,236,348Conversion of convertible bonds
    
    
    
    
    
    
    4,630
    
    
    
    
    
    
    
    New ordinary shares issued in connection with exercise of
options and vesting of RSUs
    
    
    766,426
    
    
    
    491,338
    
    
    
    939,371
    
    
    
    939,371Weighted-average number of shares outstanding  basic
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    311,263,308
    
    
    
    311,263,308Stock options and RSUs granted in connection with the stock
option plan
    
    
    
    
    
    
    
    
    
    
    917,778
    
    
    
    917,778Shares to be issued upon the conversion of convertible bonds
    
    
    
    
    
    
    
    
    
    
    45,091,519
    
    
    
    45,091,519Weighted-average number of shares outstanding  diluted
    
    
    252,659,614
    
    
    
    274,067,760
    
    
    
    357,272,605
    
    
    
    357,272,605Basic net income (loss) per share
    
    RMB
    (1.11
    )
    
    RMB
    (0.53
    )
    
    RMB
    2.43
    
    
    US$
    0.37Diluted net income (loss) per share
    
    RMB
    (1.11
    )
    
    RMB
    (0.53
    )
    
    RMB
    2.36
    
    
    US$
    0.36
    F-48




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 31. FAIR VALUE MEASUREMENTS
 Fair Value Measurements,
        Risk-free interest rate
    
    
    2.72
    %Time to maturity
    
    7.04 yearsExpected volatility
    
    
    80
    %Comparable yield to maturity
    
    
    5.32
    %Fair value of ordinary shares
    
    US$
    1.634
  F-49




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 31. FAIR VALUE MEASUREMENTS (CONTD)
  Fair value measurements at December 31, 2010 using:Quoted prices in
    
    
    Significantactive markets
    
    
    other
    
    
    Significantfor identical
    
    
    observable
    
    
    unobservableassets
    
    
    inputs
    
    
    inputs
    
    
    Total fair value at(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    December 31, 2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Cash and cash equivalents-Time deposit
    
    
    1,630,777
    
    
    
    
    
    
    
    
    
    
    
    1,630,777
    
    
    
    247,087- Restricted cash
    
    
    100,490
    
    
    
    
    
    
    
    
    
    
    
    100,490
    
    
    
    15,226Foreign
currency/commodity
derivatives- Financial assets
    
    
    
    
    
    
    7,489
    
    
    
    
    
    
    
    7,489
    
    
    
    1,135- Financial liabilities
    
    
    
    
    
    
    8,047
    
    
    
    
    
    
    
    8,047
    
    
    
    1,219Conversion option of
convertible bonds
    
    
    
    
    
    
    
    
    
    
    277,566
    
    
    
    277,566
    
    
    
    42,055
  Conversion option ofconvertible bonds(RMB000)Balance as of January 1, 2009
    
    
    235,311Conversion of convertible bonds
    
    
    (9
    )Realized or unrealized loss
    
    
    73,887Net purchases, issuances and settlements
    
    
    Transfers in and/or out of Level 3
    
    
    Balance as of December 31, 2009
    
    
    309,189Realized or unrealized gain
    
    
    (31,623
    )Net purchases, issuances and settlements
    
    
    Transfers in and/or out of Level 3
    
    
    Balance as of December 31, 2010
    
    
    277,566
  32. SUBSEQUENT EVENTS
   F-50




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 32. SUBSEQUENT EVENTS (CONTD)
  33. ADDITIONAL FINANCIAL INFORMATION OF THE COMPANY
  Balance Sheets
 As of December 31,Note
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)ASSETSCurrent assets:Cash and cash equivalents
    
    
    
    
    5,593
    
    
    
    27,809
    
    
    
    4,213Other receivables
    
    
    
    
    3,187
    
    
    
    3,465
    
    
    
    525Deferred expenses
    
    
    
    
    106
    
    
    
    294
    
    
    
    45Amount due from subsidiaries
    
    b
    
    
    2,728,948
    
    
    
    4,196,861
    
    
    
    635,888Derivative contracts
    
    
    
    
    5,878
    
    
    
    
    
    
    
    Total current assets
    
    
    
    
    2,743,712
    
    
    
    4,228,429
    
    
    
    640,671Non-current assets:Long-term deferred expenses
    
    c
    
    
    31,397
    
    
    
    25,687
    
    
    
    3,892Investment in subsidiaries
    
    a
    
    
    723,257
    
    
    
    1,679,959
    
    
    
    254,539Total non-current assets
    
    
    
    
    754,654
    
    
    
    1,705,646
    
    
    
    258,431Total assets
    
    
    
    
    3,498,366
    
    
    
    5,934,075
    
    
    
    899,102LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Other payables
    
    d
    
    
    21,467
    
    
    
    20,828
    
    
    
    3,156Derivative contracts
    
    
    
    
    
    
    
    
    8,047
    
    
    
    1,219Amount due to subsidiaries
    
    b
    
    
    6,538
    
    
    
    23,457
    
    
    
    3,554Total current liabilities
    
    
    
    
    28,005
    
    
    
    52,332
    
    
    
    7,929Non-current liabilities:Convertible bonds
    
    
    
    
    658,653
    
    
    
    687,435
    
    
    
    104,157Total non-current liabilities
    
    
    
    
    658,653
    
    
    
    687,435
    
    
    
    104,157Total liabilities
    
    
    
    
    686,658
    
    
    
    739,767
    
    
    
    112,086
  F-51




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 33. ADDITIONAL FINANCIAL INFORMATION OF THE COMPANY (CONTD)
 As of December 31,Note
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (US$000)Redeemable ordinary shares(par value
US$0.0001 per share; 45,098,055
shares issued and outstanding at
December 31, 2009 and 2010)
    
    
    
    
    
    
    55
    
    
    
    55
    
    
    
    8Shareholders equityOrdinary shares (par value
US$0.0001 per share; 500,000,000
shares authorized; 290,708,739 shares
and 420,645,432 shares issued and
outstanding at December 31, 2009 and
2010, respectively)
    
    
    
    
    
    
    227
    
    
    
    314
    
    
    
    48Additional paid-in capital
    
    
    
    
    
    
    2,331,797
    
    
    
    3,956,953
    
    
    
    599,538Retained earnings
    
    
    
    
    
    
    479,629
    
    
    
    1,236,986
    
    
    
    187,422Total shareholders equity
    
    
    
    
    
    
    2,811,653
    
    
    
    5,194,253
    
    
    
    787,008Total liabilities,
redeemable ordinary
shares and shareholders
equity
    
    
    
    
    
    
    3,498,366
    
    
    
    5,934,075
    
    
    
    899,102
 Statements of Operations
 For the year ended December 31,Note
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Net revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating expenses
    
    
    
    
    
    
    (11,548
    )
    
    
    (22,969
    )
    
    
    (7,822
    )
    
    
    (1,185
    )Operating loss
    
    
    
    
    
    
    (11,548
    )
    
    
    (22,969
    )
    
    
    (7,822
    )
    
    
    (1,185
    )Share of (loss) profit from subsidiaries
    
    
    
    
    
    
    (232,412
    )
    
    
    21,254
    
    
    
    924,740
    
    
    
    140,112Interest income
    
    
    
    
    
    
    23
    
    
    
    4
    
    
    
    5
    
    
    
    1Interest expense
    
    
    
    
    
    
    (43,397
    )
    
    
    (98,066
    )
    
    
    (118,980
    )
    
    
    (18,027
    )Changes in fair value of derivative contracts
    
    
    
    
    
    
    71,673
    
    
    
    30,506
    
    
    
    7,082
    
    
    
    1,073Changes in fair value of conversion feature
of convertible bonds
    
    
    
    
    
    
    
    
    
    
    (73,887
    )
    
    
    31,623
    
    
    
    4,791Exchange losses
    
    
    
    
    
    
    (64,830
    )
    
    
    (2,069
    )
    
    
    (79,291
    )
    
    
    (12,014
    )Income (loss) before tax
    
    
    
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    757,357
    
    
    
    114,751Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    757,357
    
    
    
    114,751Net income (loss) attributable to Hanwha
SolarOne Co., Ltd. shareholders
    
    
    
    
    
    
    (280,491
    )
    
    
    (145,227
    )
    
    
    757,357
    
    
    
    114,751
  F-52




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 33. ADDITIONAL FINANCIAL INFORMATION OF THE COMPANY (CONTD)
 Statements of Cash Flows
 For the year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010(RMB000)
    
    
    (RMB000)
    
    
    (RMB000)
    
    
    (US$000)Net cash used in operating activities
    
    
    (19,326
    )
    
    
    (6,401
    )
    
    
    (9,913
    )
    
    
    (1,502
    )Net cash used in investing activities
    
    
    (1,642,640
    )
    
    
    (134,059
    )
    
    
    (1,602,242
    )
    
    
    (242,764
    )Net cash provided by financing activities
    
    
    1,665,486
    
    
    
    135,920
    
    
    
    1,634,371
    
    
    
    247,632Net increase (decrease) in cash and cash equivalents
    
    
    3,520
    
    
    
    (4,540
    )
    
    
    22,216
    
    
    
    3,366Cash and cash equivalents at the beginning of year
    
    
    6,613
    
    
    
    10,133
    
    
    
    5,593
    
    
    
    847Cash and cash equivalents at the end of year
    
    
    10,133
    
    
    
    5,593
    
    
    
    27,809
    
    
    
    4,213
 Notes to the Financial Statements of the Company
   Investments-Equity Method and Joint Ventures.
       F-53




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##### Table of Contents



HANWHA SOLARONE CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 33. ADDITIONAL FINANCIAL INFORMATION OF THE COMPANY (CONTD)
 Notes to the Financial Statements of the Company (contd)
          F-54